Exhibit (m.4)
LEBENTHAL FUNDS, INC.
DISTRIBUTION AGREEMENT
AGREEMENT made as of the second day of December, 2005, by and between
Lebenthal Funds, Inc. (the "Fund), and FAM DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Fund to offer its
shares for sale continuously; and
WHEREAS, the Directors of the Fund have established three separate
series relating to separate portfolios of securities, and the Directors have
established and designated such multiple series of the Fund: Lebenthal New York
Municipal Bond Fund ("LNYMBF"), Lebenthal New Jersey Municipal Bond Fund
("LNJMBF"), and Lebenthal Taxable Municipal Bond Fund ("LTMBF"); and
WHEREAS, the Fund offers one or more separate classes of shares of
common stock, par value of $.001 per share, consisting of Class A and Class B
shares of LNYMBF, Class A shares of LNJMBF, and Class A shares of LTMBF (the
"Shares"); and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
financial intermediaries, including, without limitation, brokers, dealers,
retirement plans, financial consultants, registered investment advisers and
mutual fund supermarkets ("financial intermediaries"); and
WHEREAS, the Fund and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of each class of the
Fund's shares;
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as its principal underwriter and distributor to sell its Shares to
eligible investors (as defined below) and hereby agrees during the term of this
Agreement to sell the Shares to the Distributor upon the terms and conditions
herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
Fund's exclusive representative to act as principal underwriter and distributor
of its Shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of Shares with
respect to areas other than the United States as to which the Distributor may
have expressly waived in writing its right to act as such. If such designation
is deemed exclusive, the right of the Distributor under this Agreement to sell
Shares in the areas so
designated shall terminate, but this Agreement shall remain otherwise in full
effect until terminated in accordance with the other provisions hereof.
(b) The exclusive rights granted to the Distributor to purchase Shares
from the Fund shall not apply to Shares issued in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the Fund's acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Shares of any such company.
(c) Such exclusive rights also shall not apply to Shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive rights also shall not apply to Shares of any class
issued by the Fund pursuant to any conversion, exchange or reinstatement
privilege afforded redeeming shareholders or to any other Shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Shares from the Fund.
(a) The Distributor shall have the right, acting as principal to buy
from the Fund the Shares needed, but not more than the Shares needed (except
for clerical errors in transmission), to fill unconditional orders for Shares
of the Fund placed with the Distributor by eligible investors or financial
intermediaries. Investors eligible to purchase each class of Shares of the Fund
shall be those persons so identified in the currently effective prospectus and
statement of additional information of the Fund (the "prospectus" and
"statement of additional information," respectively) under the Securities Act
of 1933, as amended (the "Securities Act"), relating to such class of Shares
("eligible investors"). The price that the Distributor shall pay for Shares so
purchased from the Fund shall be the net asset value, determined as set forth
in Section 3(b) hereof, used in determining the public offering price on which
such orders were based.
(b) The Shares are to be resold by the Distributor to eligible investors
at the public offering price, as set forth in Section 3(c) hereof, or to
financial intermediaries having agreements with the Distributor pursuant to
Section 7 hereof. The Distributor shall also have the right, as principal, to
sell shares to dealers against orders therefore at the public offering price
less a concession as set forth in the prospectus or statement of additional
information.
(c) The public offering price of each class of Shares, i.e., the price
per share at which the Distributor or financial intermediaries may sell the
Shares to eligible investors, shall be the public offering price as set forth
in the prospectus and statement of additional information relating to such
class of Shares, or as otherwise permissible under the federal and state
securities laws. If the public offering price does not equal an even cent, the
public offering price may be adjusted to the nearest cent. All payments to the
Fund hereunder shall be made in the manner set forth in Section 3(f).
2
(d) The net asset value of Shares shall be determined by the Fund or any
agent of the Fund in accordance with the method set forth in each Fund's
prospectus and statement of additional information and guidelines established
by the Directors.
(e) The Fund shall have the right to suspend the offering of its Shares
at any time in the absolute discretion of its Board of Directors, and upon
notice of such suspension, the Distributor shall cease to offer such Shares
hereunder.
(f) The Fund, or any agent of the Fund designated in writing by the
Fund, shall be promptly advised of all purchase orders for Shares received by
the Distributor. Any order may be rejected by a Fund at any time for any
reason. The Fund (or its agent) will confirm orders upon their receipt, will
make appropriate book entries and, upon receipt by the Fund (or its agent) of
payment therefor, will deliver deposit receipts or certificates for such Shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Fund through the National Securities Clearing Corporation ("NSCC") in New York
Clearing House funds or by Federal Funds wire. The Distributor agrees to cause
such payment and such instructions to be delivered promptly to the Fund (or its
agent).
Section 4. Repurchase or Redemption of Shares by the Fund.
(a) Any of the outstanding Shares may be tendered for redemption at any
time, and the Fund agrees to repurchase or redeem the Shares so tendered in
accordance with its obligations as set forth in its Articles of Incorporation,
as amended from time to time, and in accordance with the applicable provisions
set forth in the prospectus and statement of additional information relating to
the Fund. The price to be paid to redeem or repurchase the Shares shall be
equal to the net asset value calculated in accordance with the provisions of
Section 3(d) hereof, less any contingent deferred sales charge ("CDSC"),
redemption fee or other charge(s), if any, set forth in the prospectus and
statement of additional information relating to the Fund. All payments by the
Fund hereunder shall be made in the manner set forth below. The redemption or
repurchase by the Fund of any of the Shares purchased by or through the
Distributor will not affect the applicable sales charge, if any, secured by the
Distributor or any financial intermediary in the course of the original sale,
unless otherwise set forth in the prospectus or statement of additional
information [except that if any Shares are tendered for redemption or
repurchase within seven business days after the date of the confirmation of the
original purchase, the right to the sales charge, if any, shall be forfeited by
the Distributor and the financial intermediary that sold such Shares.]
The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor through
NSCC, in New York Clearing House funds or by Federal Funds wire on or before
the seventh business day subsequent to its having received the notice of
redemption in proper form, except as set forth in section 4(b) below. The
proceeds of any redemption of Shares shall be paid by the Fund as follows:
(i) any applicable CDSC shall be paid to the Distributor, and (ii) the balance
shall be paid to or for the account of the Shareholder, in each case in
accordance with
3
the applicable provisions of the prospectus and statement of additional
information.
(b) Redemption of Shares or payment may be suspended at times when the
New York Stock Exchange is closed (other than customary weekend and holiday
closings), when the Securities and Exchange Commission (the "SEC") determines
that trading on said Exchange is restricted, when the SEC determines that an
emergency exists as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or during any other
period when the Securities and Exchange Commission, by order, so permits, or as
otherwise set forth in the Fund's prospectus and statement of additional
information or as permitted by applicable law.
Section 5. Duties of the Fund.
(a)The Fund shall make available to the Distributor such number of
copies of the prospectus and statement of additional information as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Fund's shareholders, all necessary action to fix the number of
authorized Shares and such steps as may be necessary to register the same under
the Securities Act, to the end that there will be available for sale such
number of Shares of each class as the Distributor may reasonably be expected to
sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Shares for sale under the
securities laws of such states as the Distributor may reasonably be expected to
sell. Any such qualification may be withheld, terminated or withdrawn by a Fund
at any time in its discretion. As provided in Section 8(c) hereof, the expense
of qualification and maintenance of qualification shall be borne by the Fund.
The Distributor shall furnish such information and other material relating to
its affairs and activities as may be required by the Fund in connection with
such qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of its annual and interim reports.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect
sales of Shares of the Fund but shall not be obligated to sell any specific
number of Shares. The services of the Distributor to the Fund hereunder are not
to be deemed exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment
companies so long as the performance of its obligations hereunder is not
impaired thereby.
(b) In selling the Shares of the Fund, the Distributor shall use its
best efforts in all respects duly to conform with the requirements of all
Federal and state laws relating to the sale of such securities. Neither the
Distributor nor any financial intermediary having an agreement to offer and
sell shares pursuant to Section 7
4
hereof, nor any other person is authorized by the Fund to give any information
or to make any representations, other than those contained in its registration
statement or related prospectus and statement of additional information and any
sales literature specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by
the officers of the Fund, for the confirmation of sales to eligible investors
and financial intermediaries, the collection of amounts payable by eligible
investors and financial intermediaries 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. (the "NASD"), as such
requirements may from time to time exist.
(d) The Distributor agrees to comply with the terms of the Fund's
prospectus and statement of additional information and its policies and
procedures relating to frequent trading and agrees to provide reasonable
cooperation to the Fund and its transfer agent in implementing and applying the
policies and procedures of the Fund aimed at detecting and preventing frequent
trading. This assistance may include providing the Fund or its agents with
information concerning shareholder activity in omnibus accounts held by
financial intermediaries who have entered into agreements with the Distributor
or assisting the Fund in obtaining such information from these intermediaries.
The Distributor also agrees to provide reasonable cooperation and assistance to
the Fund in connection with performing due diligence of, and obtaining
representations or certifications from, financial intermediaries relating to
their policies and procedures with respect to (i) the handling and processing
of orders for Shares in compliance with applicable law and (ii) the application
of redemption fees and limitations on short-term trading and exchanges, if any.
(e) The Distributor represents, warrants and agrees that (i) the
Distributor has, and agrees to maintain, an anti-money laundering ("AML")
program that satisfies the requirements of Title III of the USA PATRIOT Act and
applicable anti-money laundering regulations ("Applicable Law"); and (ii) the
Distributor will comply with Applicable Law with respect to Shares held by
financial intermediaries on behalf of their customers, including, but not
limited to, the monitoring and reporting of suspicious transactions and the
implementation of a customer identification program that complies with
Applicable Law. The Distributor may delegate its AML responsibilities
hereunder, including customer identification and monitoring of suspicious
transactions with respect to the underlying customers, in whole or part to the
financial intermediaries, in accordance with Applicable Law. The Distributor
further agrees that it will be responsible for performing screening of any
financial intermediaries with which it enters into a selling or other agreement
hereunder in accordance with the Fund's AML Policy; provided, however, that the
Distributor will not be required to screen financial intermediaries that have
already entered into selling or servicing agreements with the principal
underwriter of the Fund prior to the effective date of this Agreement. In
addition, the Distributor agrees to assist the Fund in complying with the
Fund's Compliance Policies and Procedures adopted pursuant to Rule 38a-1 of the
1940 Act and the Fund's AML Policies with
5
respect to the oversight of financial intermediaries that are responsible for
performing AML responsibilities on behalf of the Fund, including sending out
periodic certifications or such other actions that the Fund may reasonably
request. The distributor also agrees to permit inspection by U.S. federal
departments or regulatory agencies with appropriate jurisdiction and to make
available to examiners from such departments or regulatory agencies such
information and record relating to Distributor's AML program as they may
reasonably request.
Section 7. Agreements with Financial Intermediaries.
(a) The Distributor shall have the right to enter into agreements with
financial intermediaries of its choice for the sale of Shares and to fix
therein the portion of the sales charge that may be allocated to the financial
intermediaries on such terms and conditions as the Distributor shall deem
necessary or appropriate; provided, however, that the Distributor shall
periodically inform the Directors of the nature and substance of such
agreements. Shares sold to financial intermediaries shall be for resale by such
intermediaries only at the public offering price(s) set forth in the applicable
prospectus and statement of additional information or as otherwise permissible
under the federal and state securities laws. No financial intermediary or other
person shall be appointed to act as the Fund's agent without the Fund's written
consent.
(b) With respect to financial intermediaries who are acting as brokers
or dealers within the United States, the Distributor shall offer and sell
Shares only to such financial intermediaries who are members in good standing
of the NASD and who agree to abide by the Conduct Rules of the NASD, as amended
from time to time.
Section 8. Payment of Expenses.
(a) Each Fund shall bear all costs and expenses of the Fund, including
fees and disbursements of its counsel and auditors, in connection with the
preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto,
preparing and mailing annual and interim reports and proxy materials to
Shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials), and payment of
"Shareholder Servicing Fees" for the LNJMBF and LTMBF series of the Fund
pursuant to separate "Shareholder Servicing Agreements."
(b) The Distributor shall be responsible for any payments made to
financial intermediaries pursuant to this Agreement. With respect to the LNJMBF
and LTMBF series of the Fund, payments to financial intermediaries for
"Shareholder Services" outlined in separate "Shareholder Servicing Agreements"
shall be governed by those agreements. In addition, after the prospectuses,
statements of additional information and annual and interim reports have been
prepared and set in type, the Distributor shall bear the costs and expenses of
printing and distributing any copies thereof which are to be used in connection
with the offering of Shares to financial intermediaries or eligible investors
pursuant to this Agreement. The
6
Distributor shall bear the costs and expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it
for use by financial intermediaries in connection with the offering of the
Shares for sale to eligible investors and any expenses of advertising incurred
by the Distributor in connection with such offering. It is understood and
agreed that so long as any Plan pursuant to Rule 12b-1 under the Investment
Company Act with respect to a particular class of Shares of a Fund remains in
effect, any expenses incurred by the Distributor hereunder in connection with
distribution and/or account maintenance activities for such class of Shares, as
applicable, may be paid from amounts recovered by it from the Fund under such
Plan.
The Distributor in its sole discretion, may also make payments from time to
time from its own resources for performing shareholder servicing and related
administrative functions on behalf of the Fund. The Distributor in its sole
discretion, will determine the amount of such payments made pursuant to the
applicable Plan pursuant to Rule 12b-1 under the Investment Company Act,
provided that such payments will not increase the amount which the Fund is
required to pay to the Distributor for any fiscal year under this Agreement or
the Manager under the Management Contract in effect for that year.
(c) The Fund shall bear the cost and expenses of qualification of its
Shares for sale pursuant to this Agreement and, if necessary or advisable in
connection therewith, of qualifying the Fund as a broker or dealer in such
states of the United States or other jurisdictions as shall be selected by the
Fund and the Distributor pursuant to Section 5(c) hereof and the cost and
expenses payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5(c)
hereof.
Section 9. Indemnification.
(a) The Fund severally 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), as
incurred, arising by reason of any person acquiring any of its 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 and
statement of additional information, as from time to time amended and
supplemented, or an annual or interim report to the Fund's shareholders,
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 Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no
case (i) is the indemnity of the Fund 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 Fund or its security
holders to which the Distributor or any such controlling persons would
otherwise be subject by reason of willful misfeasance,
7
bad faith or gross negligence in the performance of their duties or by reason
of the reckless disregard of their obligations and duties under this Agreement;
or (ii) is the Fund 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 such controlling persons,
as the case may be, shall have notified the Fund 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 Fund 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 Fund 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 Fund 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 Fund 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 expenses of any additional
counsel retained by them, but in case the Fund 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 Fund shall promptly notify
the Distributor 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
any of the Shares.
(b) The Distributor shall indemnify and hold harmless the Fund and each
of its Directors and officers and each person, if any, who controls the Fund
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 Fund in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the annual or interim reports to shareholders. In case any action
shall be brought against the Fund 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 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 9.
Section 10. Fee-Based or Other Programs. In connection with certain
fee-based or other programs offered by the Fund's investment adviser or its
affiliates or by financial intermediaries having agreements with the
Distributor pursuant to Section 7 hereof, the Distributor and its affiliates
are authorized to offer and sell Shares of the Fund, as agent for the Fund, to
participants in such programs. The terms of this Agreement shall apply to such
sales, including terms as to the offering price of Shares, the proceeds to be
paid to the
8
Fund, the duties of the Distributor, the payment of expenses and
indemnification obligations of the Fund and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until July 31, 2007, but only for so long as such continuance is
specifically approved at least annually by (i) the Directors, or with respect
to the Fund, by the vote of a majority of the outstanding voting securities of
the Fund and (ii) by the vote of 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 on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, with respect to the Fund by the Directors or by vote of a majority of
the outstanding voting securities of the Fund, 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," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifically approved by (i) the
Directors or by the vote of a majority of outstanding voting securities of the
Fund and (ii) by the vote of a majority of those Directors of the Fund 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 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment
Company Act. To the extent that the applicable law of the State of New York, or
any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
Section 14. The Distributor will receive payment from the Fund in the
form of sales loads, and, with respect to the LNYMBF series, shareholder
servicing fees of 0.25% with respect to Class A Shares and Class B Shares, and
distribution fees of 0.75% per annum for the sale of Class B Shares, as
specified in the prospectus and statement of additional information of the Fund.
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
LEBENTHAL FUNDS, INC.
By:
------------------------------
Title:
FAM DISTRIBUTORS, INC.
By:
-----------------------------
Title:
10
