DISTRIBUTION AGREEMENT
Agreement dated as of this 3rd day of September, 1991, by and between
FPA PERENNIAL FUND, INC., a Maryland corporation (hereinafter called the
"Fund"), and FPA FUND DISTRIBUTORS, INC., a California corporation (hereinafter
called the "Distributor").
WITNESSETH:
WHEREAS, the Fund is registered under the Investment Company Act of
1940 as an open-end investment company and it is a part of the business of the
Fund, and affirmatively in the interest of the Fund, to offer its shares for
sale, either continuously, or from time to time, by means of such arrangements
as are determined by its Board of Directors to be appropriate; and
WHEREAS, the Distributor proposes to engage in the business of
promoting the distribution of shares of investment companies through securities
broker-dealers, and has the ability to create appropriate and effective sales
literature, advertising, and other sales promotional aids; and
WHEREAS, the Fund and the Distributor wish to enter into an Agreement
with each other to promote the growth of the Fund and facilitate the
distribution of its shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the Fund and the Distributor agree as follows:
1. DISTRIBUTOR IS EXCLUSIVE AGENT OF FUND. The Fund hereby appoints
the Distributor as the agent of the Fund exclusively authorized to act as the
principal underwriter and distributor of the shares of the Fund during the term
of this Agreement. The Distributor agrees to accept such appointment, and to act
as the agent of the Fund in accordance with the terms of this Agreement, as the
principal underwriter and exclusive distributor of the shares of the Fund.
2. TERM OF AGREEMENT. This Agreement shall have an initial term of
two years from the date hereof. It may be continued in effect thereafter by
mutual consent, provided that such continuance shall be specifically approved at
least annually by (i) the Board of Directors of the Fund, or by a vote of the
majority (as defined in the Investment Company Act of 1940) of the outstanding
voting securities of the Fund, and (ii) by a majority of the Directors who are
not parties to this Agreement or interested persons (as defined in the
Investment Company Act of 1940) of any such party, cast in person in a meeting
called for the purpose of voting on such approval.
3. DUTIES OF THE FUND.
(a) The Fund agrees that it will use its best efforts to keep
authorized and registered under the Securities Act of 1933, but unissued,
sufficient shares of its common stock to meet the reasonable requirements of the
Distributor. The Fund further agrees to use its best efforts to prepare, file
and keep effective registration statements, prospectuses, and qualifications
covering
sufficient shares of the Fund to meet the Distributor's reasonable requirements
in all jurisdictions approved by the Fund and the Distributor in which shares of
the Fund may lawfully be sold.
(b) The Fund will not arbitrarily or without reasonable cause
refuse to accept or confirm orders for the purchase of its shares obtained by
the Distributor as agent of the Fund and submitted by the Distributor to the
Fund (or to another agent of the Fund designated by the Fund to receive and/or
act upon such orders). In all proper cases, the Fund (or its agent) will confirm
orders upon their receipt either through the Distributor as agent for the Fund
or through another agent of the Fund authorized to deliver proper confirmations.
The Fund (or its agent) will make appropriate book entries and/or will deliver
certificates for such shares to the Distributor or to the designated record
owner upon receipt by the Fund (or by its agent) of payment therefore in cash
(or cash equivalent) together with receipt of proper registry or transfer
instructions. The Distributor agrees to cause such payment and such instructions
to be delivered promptly to the Fund (or to the agent or agents of the Fund
designated by it in writing as authorized to receive such payment and/or such
instructions).
(c) The Fund will not during the term of this Agreement offer
any of its shares for sale directly or through any person other than the
Distributor, excepting shares sold or issued at net asset value without sales
charge upon reinvestment of income dividends or capital gain distributions paid
by the Fund. Provided, however, that in the event the Distributor should be
unable to continue to distribute shares of the Fund for reasons that do not
apply to the sale of shares of the Fund by any other person, the Fund may at its
option make arrangements for the offer and sale of its shares within the
jurisdiction or jurisdictions in which distribution and sale thereof by the
Distributor has been prevented, except that if the Distributor shall have
removed all material obstacles to resuming the offer and sale within said
jurisdictions within 90 days from its first restraint or inability, then the
right of the Fund to distribute through instrumentalities other than the
Distributor shall be extinguished, subject only to the provisions of paragraph 2
hereof. The Fund further agrees that the Distributor may act as principal
underwriter and distributor for the shares of other investment companies
registered under the Investment Company Act of 1940.
(d) The compensation and expenses of the transfer agent acting
for the Fund and acting as plan agent under the Fund's Investor Service Plans
shall be borne by the Fund.
4. DUTIES OF THE DISTRIBUTOR.
(a) The Distributor shall exercise its best efforts lawfully and
properly to promote the sale of shares of the Fund by broker-dealers that are
members in good standing of the National Association of Securities Dealers, Inc.
("NASD").
(b) The Distributor is, and shall do all things necessary to
continue to be, a broker-dealer in securities registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, a member in good
standing of the NASD, and a licensed broker-dealer in the States in which its
activities require it to be so licensed.
(c) The Distributor shall enter into Selling Group Agreements
with broker-dealer members of the NASD selected by the Distributor, authorizing
such broker-dealers to
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offer and sell shares of the Fund to the public upon the terms and conditions
set forth therein, which shall not be inconsistent with the provisions of this
Agreement. The Distributor shall continue each such Selling Group Agreement in
effect, or terminate it, upon its sole discretion. Such Selected Dealer
Agreements shall provide that the selected dealer shall act as principal and not
as an agent of the Fund.
(d) Upon the Distributor's receipt from broker-dealers that have
entered into Selling Group Agreements with it of unconditional orders for the
purchase of shares of the Fund, the Distributor will transmit such orders to the
Fund (or to another agent of the Fund authorized by it in writing to receive
such orders). In so doing, the Distributor will act solely as the agent of the
Fund.
(e) The Distributor agrees that it will not directly or
indirectly withhold orders for the purchase of shares of the Fund or purchase
shares of the Fund in anticipation of orders, and further agrees that in all its
Selling Group Agreements with broker-dealers the Distributor will require a
similar contractual undertaking of the broker-dealer. The Distributor agrees to
pay the Fund, on a monthly basis, the amount of any net dilution resulting from
the cancellation or reversal of a confirmed purchase or repurchase order for
shares of the Fund resulting from the failure of a Selling Group member to
settle the trade. All gains and losses realized each month from such "fails"
shall be netted, and any net gain for a month shall be carried forward to offset
any net losses for any subsequent month in the same fiscal year of the Fund.
(f) The Distributor will print and distribute copies of the
Fund's prospectuses as from time to time in effect under the Securities Act of
1933, as amended, and will prepare, print and distribute all advertising and
sales literature relating to the Fund. The Distributor will not publicly
distribute supplemental literature or advertising except such as shall be lawful
under state and federal securities laws and regulations. The Distributor agrees
to file with the Securities and Exchange Commission and/or the NASD, and with
such other regulatory authorities as may be required, copies of any
advertisements, pamphlet, circular, form letter, or other sales literature
relating to the Fund or its shares, addressed to or intended for distribution to
prospective investors, within the time required by such regulatory authorities.
The Distributor will furnish to the Fund at its principal office a copy of all
such material prior to its use, and will not use any such material to which the
Fund reasonably and promptly objects.
(g) The Distributor shall maintain or retain a dealer
service organization suitable to the promotion of the sale of shares of the Fund
by the broker-dealers that have entered into Selling Group Agreements with the
Distributor.
(h) Except with respect to sales and repurchases of shares of
the Fund, the Distributor shall act as principal in all matters relating to
promotion of the growth of the Fund and shall enter into all of its engagements,
agreements, and contracts as principal on its own account.
(i) The Distributor shall act in the performance of its duties
hereunder in a manner that effects compliance with the current prospectus of the
Fund from time to time in effect under the Securities Act of 1933, the Articles
of Incorporation and the By-Laws of the Fund, and with applicable laws and
regulations of the United States and of the individual states within which
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the Distributor or the Fund may do business, or in which shares of the Fund are
offered for sale, and will conduct its affairs with relation to the Fund,
broker-dealers, and investors in accordance with the Rules of Fair Practice of
the NASD.
5. PUBLIC OFFERING PRICE OF FUND'S SHARES TO BE MAINTAINED. Shares of
the Fund shall be offered and sold only at a public offering price described in
the current prospectus of the Fund, and shall be composed of the sum of (i) the
current net asset value per share furnished to the Distributor by the Fund at
least once on each day on which the New York Stock Exchange is open for trading,
(ii) the Distributor's commission, if any, as set forth in the current
prospectus of the Fund, and (iii) the broker-dealer's xxxx-up, if any, described
in the Selling Group Agreement referred to in paragraph 4(c) hereof.
6. DISTRIBUTOR'S COMMISSIONS. As compensation for its services
hereunder, the Distributor shall be paid, if at all, only such commissions on
sales of shares of the Fund (except shares sold or issued at net asset value in
accordance with Section 3(c) hereof) as is described in the current prospectus
of the Fund and subject to any reductions or quantity discounts described in
such current prospectus.
7. OTHER PROVISIONS.
(a) The Distributor may, but is not obligated to, act as agent
for the Fund without commission on repurchases of shares of the Fund.
(b) This Agreement shall not be construed as authorizing any
dealer or other person to act as agent either of the Fund or of the Distributor.
(c) The books and records of the Distributor, insofar as they
relate to sales of shares of the Fund, shall be open to inspection during
business hours by the officers and authorized representatives of the Fund, and
the books and records of the Fund relating to the determination of the offering
price of shares shall be open to inspection during business hours by the
officers and authorized representatives of the Distributor.
(d) This Agreement may be terminated at any time without payment
of any penalty by the Board of Directors of the Fund or by the vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Distributor, or by the Distributor on like notice to the Fund. In
the absence of the issuance of an Order by the Securities and Exchange
Commission providing an exemption from the provisions of Section 15(b) of the
Investment Company Act of 1940, this Agreement shall automatically terminate in
the event of its assignment (as defined in the Investment Company Act of 1940)
by the Distributor.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers duly authorized and their corporate seal to be
affixed as of the day and year first above written.
FPA PERENNIAL FUND, INC.
(Seal)
By /s/ Xxxxxxxxxxx Xxxxxx
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Xxxxxxxxxxx Xxxxxx,
President
FPA FUND DISTRIBUTORS, INC.
(Seal)
By /s/ Xxxxxxxx X. XxXxxx
-----------------------------
Xxxxxxxx X. XxXxxx,
President
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