Exhibit 5(c)
CLASS III SHARES
FORM OF DISTRIBUTION AGREEMENT
AGREEMENT, made this ____ day of April, 2003, between XXXXXXX XXXXX
VARIABLE SERIES FUNDS, INC., a corporation organized under the laws of Maryland
(the "Company"), and FAM DISTRIBUTORS, INC., a Delaware corporation ("FAMD");
W I T N E S S E T H:
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended to date (the "Investment Company Act"), as a diversified
open-end investment company and it is affirmatively in the interest of the
Company to offer its shares for sale continuously to the separate accounts (the
"Separate Accounts") of insurance companies (the "Insurance Companies") pursuant
to a currently effective prospectus (the "Prospectus") under the Securities Act
of 1933 (the "Securities Act"); and
WHEREAS, the Company comprises seventeen separate funds (the "Funds"), each
of which pursues its own investment objective through separate investment
policies, and may in the future comprise one or more additional funds; and
WHEREAS, FAMD is a securities firm engaged in the business of selling
shares of investment companies either directly to purchasers or through other
securities dealers; and
WHEREAS, the Company and FAMD wish to enter into an agreement with each
other with respect to the continuous offering to the Insurance Companies for
their Separate Accounts of shares of the Class III Common Stock, par value $.10
per share, of each Fund (the "Class III Shares"), in order to promote the growth
of the Funds and facilitate the distribution of their Class III Shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of FAMD. The Company hereby appoints FAMD as the
principal underwriter and distributor of the Funds to sell their Class III
Shares to the Insurance Companies for their Separate Accounts and FAMD hereby
accepts such appointment. The Company, during the term of this Agreement, shall
sell its Class III Shares to FAMD upon the terms and conditions set forth below.
Section 2. Exclusive Nature of Duties. FAMD shall be the exclusive
representative of the Company to act as principal underwriter and distributor of
the Class III Shares.
Section 3. Purchase of Class III Shares from the Company.
(a) The Company will offer its Class III Shares and FAMD shall have the
right to buy from the Company the Class III Shares needed, but not more than the
Class III Shares needed (except for clerical errors in transmission) to fill
unconditional orders for the Class III Shares placed with FAMD by the Insurance
Companies for their Separate Accounts. The price which FAMD shall pay for the
Class III Shares so purchased from the Company shall be the net asset value per
share, determined as set forth in Section 3(c) hereof.
(b) The Class III Shares are to be resold by FAMD to the Insurance
Companies for their Separate Accounts at the net asset value per share.
(c) The net asset value of the Class III Shares shall be determined as of
fifteen minutes following the close of trading on each day the New York Stock
Exchange is open for business, in accordance with the method set forth in the
Prospectus of the Company and guidelines established by the Board of Directors
of the Company. The Company may also cause the net asset value of the Class III
Shares to be determined in substantially the same manner or estimated in such
manner and as of such other hour or hours as may from time to time be agreed
upon in writing by the Company and FAMD. All payments to the Company hereunder
shall be made in the manner set forth in Section 3(e).
(d) The Company shall have the right to suspend the sale of the Class III
Shares at times when redemption of any Class III Shares is suspended pursuant to
the condition set forth in Section 4(b) hereof. The Company shall also have the
right to suspend the sale of the Class III Shares if trading on the New York
Stock Exchange shall have been suspended, if a banking moratorium shall have
been declared by Federal or New York authorities, or if there shall have been
some other extraordinary event which, in the judgment of the Company, makes it
impracticable to sell Class III Shares.
(e) The Company, or any agent of the Company designated in writing by the
Company, shall be promptly advised of all purchase orders for the Class III
Shares received by FAMD. The Company (or its agent) will confirm orders upon
their receipt, will make appropriate book entries and, upon receipt by the
Company (or its agent) of payment therefor, will deliver deposit receipts or
certificates for such Class III Shares pursuant to the instructions of FAMD.
Payment shall be made to the Company in New York Clearing House funds. FAMD
agrees to cause such payment and such instructions to be delivered promptly to
the Company (or its agent).
Section 4. Repurchase or Redemption of Class III Shares by the Company.
(a) Any of the outstanding Class III Shares may be tendered for redemption
at any time, and the Company agrees to repurchase or redeem any such Class III
Shares so tendered in accordance with its obligations as set forth in Article
VII of its Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the Prospectus of the
Company. The price to be paid to redeem or repurchase Class III Shares shall be
equal to the net asset value per share calculated in accordance with the
provisions of Section 3(c) hereof. All payments by the Company hereunder shall
be made in the manner set forth below.
The Company shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of FAMD in New York Clearing
House funds on or before the third business day subsequent to its having
received the notice of redemption in proper form.
(b) Redemption of Class III Shares of a Fund or payment therefor may be
suspended for any period during which trading on the New York Stock Exchange is
restricted as determined by the Securities and Exchange Commission or such
Exchange is closed (other than customary weekend and holiday closings), for any
period during which an emergency exists as defined by the Securities and
Exchange Commission as a result of which disposal of securities or determination
of the net asset value of such Fund is not reasonably practicable, and for such
other periods as the Securities and Exchange Commission may by order permit for
the protection of shareholders of the Fund.
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Section 5. Duties of the Company.
(a) The Company shall furnish to FAMD copies of all information, financial
statements and other papers which FAMD may reasonably request for use in
connection with the distribution of Class III Shares of the Company, and this
shall include one certified copy, upon request by FAMD, of all financial
statements prepared for the Company by independent public accountants. The
Company shall make available to FAMD such number of copies of its Prospectus as
FAMD shall reasonably request.
(b) The Company shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Class III Shares and to register Class III Shares under the
Securities Act, to the end that there will be available for sale such number of
Class III Shares as investors may reasonably be expected to purchase.
(c) The Company shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Class III Shares for sale under
the securities laws of such states as FAMD and the Company may approve, if such
qualification is required by such securities laws. Any such qualification may be
withheld, terminated or withdrawn by the Company at any time in its discretion.
As provided in Section 7(b) hereof, the expense of qualification and maintenance
of qualification of the Class III Shares shall be borne by the Company for the
account of each Fund. FAMD shall furnish such information and other material
relating to its affairs and activities as may be required by the Company in
connection with such qualification.
(d) The Company will furnish, in reasonable quantities upon request by
FAMD, copies of annual and interim reports of the Company.
Section 6. Duties of FAMD.
(a) FAMD shall devote reasonable time and effort to effect sales of Class
III Shares of the Company, but shall not be obligated to sell any specific
number of Class III Shares. The services of FAMD hereunder are not to be deemed
exclusive and nothing herein contained shall prevent FAMD from entering into
distribution arrangements with other investment companies so long as the
performance of its obligations hereunder is not impaired thereby.
(b) In selling the Class III Shares of the Company, FAMD 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.
Neither FAMD nor any Insurance Company nor any other person is authorized by the
Company 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 Company.
(c) FAMD shall require each Insurance Company to which it sells, and which
purchases, Class III Shares to enter into a Sub-Agreement with the Company
substantially in the form attached to the Distribution Plan agreed to by FAMD in
accordance with Rule 12b-1 under the Investment Company Act, which authorizes
the payment of a distribution fee to such Insurance Company.
Section 7. Payment of Expenses.
(a) The Company shall bear all costs and expenses of the Company relating
to the Funds, including fees and disbursements of its counsel and auditors, in
connection with the preparation and filing of any required registration
statements and prospectuses under the Investment Company Act, the
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Securities Act, and all amendments and supplements thereto, and the expense of
preparing, printing, mailing and otherwise, distributing prospectuses, annual or
interim reports to shareholders and proxy materials.
(b) The Company shall bear, for the account of the funds, the costs and
expenses of qualification of the Class III Shares for sale, and, if necessary or
advisable in connection therewith, the Company shall bear the cost and expense
of qualifying the Company as a broker or dealer, in such states of the United
States or other jurisdictions as shall be selected by the Company and FAMD
pursuant to Section 5(c) hereof and the cost and expenses payable to each such
state for continuing qualification therein until the Company decides to
discontinue such qualification pursuant to Section 5(c) hereof.
Section 8. Indemnification.
(a) The Company shall, for the account of the Funds, indemnify and hold
harmless FAMD and each person, if any, who controls FAMD against any loss,
liability, claim, damage or expense (including the reasonable costs 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 Class III Shares, which may be based upon the
Securities 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, or the annual or interim reports to shareholders of the Company
relating to the Funds, 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
Company in connection therewith by or on behalf of FAMD; provided, however, that
in no case (i) is the indemnity of the Company in favor of FAMD and any such
controlling persons to be deemed to protect FAMD or any such controlling persons
thereof against any liability to the Company or its security holders to which
FAMD 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 Company to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made against
FAMD or any such controlling persons, unless FAMD or such controlling persons,
as the case may be, shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information or the nature of the claim shall have been served upon FAMD or such
controlling persons (or after FAMD or such controlling persons shall have
received notice of such service on any designated agent), but failure to notify
the Company 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 Company 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 Company elects to assume the defense, such defense shall be conducted
by counsel chosen by it and satisfactory to FAMD or such controlling person or
persons, defendant or defendants in the suit. In the event the Company elects to
assume the defense of any such suit and retain such counsel, FAMD or such
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Company does not elect to assume the defense of any such suit, it will
reimburse FAMD 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 Company shall promptly notify FAMD of the commencement of any litigation or
proceedings against it or any of its officers or directors in connection with
the issuance or sale of the Class III Shares.
(b) FAMD shall indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company against
any loss, liability, claims, damage or
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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 Company with respect to the
Funds in writing by or on behalf of FAMD for use in connection with the
registration statement or related prospectus, as from time to time amended, or
the annual or interim reports to shareholders. In case any action shall be
brought against the Company or any persons so indemnified, in respect of which
indemnity may be sought against FAMD, FAMD shall have the rights and duties
given to the Company, and the Company and each person so indemnified shall have
the rights and duties given to FAMD by the provisions of subsection (a) of this
Section 8.
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 as
to each Fund until the second anniversary and thereafter, but only so long as
such continuance is specifically approved at least annually by (i) the Board of
Directors of the Company, or by the vote of a majority of the outstanding voting
securities of the Fund, cast in person or by proxy, and (ii) a majority of those
directors 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 as to a Fund, without the
payment of any penalty, by the Board of Directors of the Company or by vote of a
majority of the outstanding voting securities of the Fund, or by the Adviser, 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," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company 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 Board of
Directors of the Company, or by the vote of a majority of outstanding voting
securities of the Funds affected by the amendment, and (ii) a majority of those
directors of the Company 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.
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
Investment Company Act. To the extent the applicable law of the State of New
York, or any of the provisions herein, conflicts with the applicable provisions
of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date and year first above written in New York, New York.
XXXXXXX XXXXX VARIABLE SERIES FUNDS, INC.
By ______________________________________
President
FAM DISTRIBUTORS, INC.
By ______________________________________
President
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