DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement") is made and entered into as
of November 8, 2002, between THE CHACONIA INCOME AND GROWTH FUND, INC., a
Maryland corporation (the "Fund"), and CHACONIA FINANCIAL SERVICES, INC., a
Rhode Island corporation (the "Distributor").
WHEREAS, the Fund is a diversified open-end management investment Company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "40 Act");
WHEREAS, the Distributor is a registered broker-dealer under state and
federal laws and regulations and is a member of the National Association of
Securities Dealers, Inc., and is experienced in providing distribution services
to mutual funds and possesses sufficient facilities to provide such services;
and
WHEREAS, the Fund desires to utilize the Distributor to offer and sell its
shares for a continuous offering of the Fund's shares (the "Shares") on a
best-effort basis in certain states and the Distributor is willing to furnish
such services in accordance with the terms set forth herein.
NOW, THEREFORE, in consideration of the recitals and the mutual agreements
contained herein, the parties agree as follows:
1. Appointment of Distributor. Subject to the terms and for the period set
forth in this Agreement, the Fund hereby appoints the Distributor as its
exclusive agent for the distribution of the Shares for a continuous offering of
the Shares on a best-effort basis, in jurisdictions where the Fund deems it
necessary or advisable to offer and sell the Shares by means of a registered
broker-dealer. The jurisdictions are listed on Schedule A, which may be amended
or modified from time to time in accordance with applicable law and by agreement
of the parties. The Shares shall be offered and sold only pursuant to, and on
the terms contained in, the then current Prospectus of the Fund.
2. Acceptance; Services of Distributor. The Distributor hereby accepts
appointment as agent for the distribution of the Shares as provided in Section
1.
3. Expenses Borne by Distributor. The Distributor will pay all its expenses
incurred by it in connection with its offer and sale of the Shares hereunder,
including, without limitation, accounting, legal, clerical and office expenses,
rent, printing and postage expenses, reasonable and necessary travel expenses
and fees for the performance of administrative services. The Fund may, at its
election, make payments to the Distributor pursuant to the Fund's Distribution
Plan for expenses the Distributor incurs in connection with distribution of the
Shares, in the amount set forth on Schedule B, which may be amended or modified
from time to time in accordance with applicable law and by agreement of the
parties.
4. Fee. Subject to Section 3, in connection with the Distributor's duties
hereunder, the Fund may pay the Distributor the fees set forth on Schedule B.
5. Repurchase of Shares. The Distributor may act as agent for the Fund in
connection with the repurchase and redemption of the Shares by the Fund on the
terms and conditions of the then current Prospectus of the Fund or as the Fund
may otherwise direct. The Distributor may employ such subagents, including one
or more participating brokers, for this purpose as the Distributor, in its sole
discretion, shall deem to be advisable or desirable.
6. Basis of Purchase and Sales of Shares. The Distributor's obligation to
sell shares hereunder shall be on a best-efforts basis only and the Distributor
shall not be obligated to sell any specific number of shares.
7. Anti-Money Laundering Program.
(a) The Fund hereby delegates to the Distributor, and the Distributor
hereby accepts, responsibility for the implementation and operation of the
Fund's anti-money laundering ("AML") program, as it relates to the operations
and actions of the Distributor.
(b) The Distributor hereby represents and warrants that the
Distributor has received a copy of the Fund's AML program and undertakes to
perform all responsibilities imposed on the Distributor as a service provider
thereunder. The Fund hereby agrees to provide to the Distributor any
amendment(s) to the AML program promptly after adoption of any such amendment(s)
by the Fund. Copies of any such amendment shall be provided to the Distributor
in accordance with Section 10.
(c) The Distributor hereby represents and warrants that it has
implemented and currently enforces an AML program that complies with all laws,
regulations and regulatory guidance applicable to the Fund and the Distributor.
(d) The Distributor agrees to furnish to the Fund, in accordance with
Section 10, the following: (i) a copy of the Distributor's AML program as in
effect on the date hereof, and any material amendment thereto promptly after the
adoption of any such amendment; (ii) a copy of any deficiency letter sent by
federal examination authorities concerning the Distributor's AML program; and
(iii) upon request from the Fund, a report on the Distributor's AML program that
includes a certification to the Fund concerning the Distributor's implementation
of, and ongoing compliance with, its AML program, such certification in a form
reasonably acceptable to the Fund, and a copy of any audit report prepared with
respect to the Distributor's AML program.
(e) The Distributor hereby consents to provide the Fund and regulators
access to all records and information relating to the implementation and
operation of, and compliance with, the Fund's AML program. The Distributor
further agrees to permit the Fund and regulators to inspect the Distributor with
respect to the Fund's and/or the Distributor's AML program.
8. Duration and Termination. This Agreement shall remain in effect until
two years from the date of this Agreement, and, unless sooner terminated as
provided herein, shall
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continue in force from year to year thereafter so long as continuance of the
Agreement is approved annually by (i) the Fund's Board of Directors or by the
holders of a majority of the outstanding securities of the Fund and (ii) a
majority vote of the directors who are not "interested persons" (as defined in
the 40 Act) of the Fund or the Distributor, cast in person at a meeting called
for the purpose of voting on such approval. This Agreement may be terminated at
any time, without payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other party.
9. Responsibility and Indemnification.
(a) The Distributor shall be held to the exercise of reasonable care
in carrying out the provisions of this Agreement, but shall be without liability
to the Fund for any action taken or omitted by it in good faith without
negligence, bad faith, willful misconduct or reckless disregard or breach of its
duties hereunder. It shall be entitled to rely upon and may act upon the
accounting records and reports generated by the Fund, advice of the Fund, or of
counsel for the Fund and upon statements of the Fund's independent accountants,
and shall be without liability for any action reasonably taken or omitted
pursuant to such records and reports or advice, provided that such action is
not, to the knowledge of the Distributor, in violation of applicable federal or
state laws or regulations, and provided further that such action is taken
without negligence, bad faith, willful misconduct or reckless disregard of its
duties.
(b) Nothing herein contained shall be construed to protect the
Distributor against any liability to the Fund or its security holders to which
the Distributor shall otherwise be subject by reason of willful misfeasance, bad
faith, negligence in the performance of its duties on behalf of the Fund,
reckless disregard or breach of the Distributor's obligations and duties under
this Agreement or the willful violation of any applicable law.
(c) Except as may otherwise be provided by applicable law, neither the
Distributor nor its stockholder(s), officers, directors, employees or agents
shall be subject to, and the Fund shall indemnify and hold such persons harmless
from and against, any liability for and any damages, expenses or losses incurred
by reason of the inaccuracy of information furnished to the Distributor by the
Fund or its authorized agents or in connection with any error in judgment or
mistake of law or any act or omission in the course of, connected with or
arising out of any services to be rendered hereunder, except by reason of
willful misfeasance, bad faith or negligence in the performance of its duties,
by reason of reckless disregard or breach of the Distributor's obligations and
duties under this Agreement or the willful violation of any applicable law.
10. Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such address as
such other party may from time to time designate for the receipt of such notice.
11. Assignment. This Agreement shall neither be assignable nor subject to
pledge or hypothecation and in the event of assignment, pledge or hypothecation
this Agreement shall automatically terminate. For purposes of determining
whether an "assignment" has occurred, the definition of "assignment" in section
202(a)(1) of the Investment Advisers Act of 1940, as amended, shall control.
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12. Miscellaneous.
(a) This Agreement shall be construed in accordance with the laws of
the State of Maryland, provided that nothing herein shall be construed in a
manner inconsistent with the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, or any rule or order of the Securities and
Exchange Commission under such Acts or any rule of the National Association of
Securities Dealers, Inc.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) 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 and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) The validity, construction and operation of this Agreement shall
be governed by the laws of the State of Maryland, except where preempted by the
provisions of federal law.
(e) This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement, draft or agreement or
proposal with respect to the subject matter hereof. This Agreement or any part
hereof may be changed or waived by an instrument in writing signed by the party
against which enforcement of such change or waiver is sought.
(f) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
THE CHACONIA INCOME AND
GROWTH FUND, INC.
BY: /s/ Xxxxxx Xxxx
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Xxxxxx Xxxx, President
THE CHACONIA FINANCIAL SERVICES, INC.
BY: /s/ Xxxxx Xxxxx
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Xxxxx Xxxxx, President
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SCHEDULE A
TO THE
DISTRIBUTION AGREEMENT
Jurisdictions:
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United States of America
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SCHEDULE B
TO THE
DISTRIBUTION AGREEMENT
12b-1 Fees. Up to 50 basis point 12b-1 fees in accordance with the Fund's
Distribution Plan.
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