UNDERWRITING AGREEMENT
ThisAgreement, dated as of the _______ day of _______, 1997, made by
and between Metropolitan West Funds, (the "Trust") a Delaware business trust
operating as an open end management investment company registered under the
Investment Company Act of 1940, as amended (the "Act"); Metropolitan West Asset
Management, LLC ("Metropolitan"), a registered investment adviser existing as
corporation duly organized and existing under the laws of the State of
California; and FPS Broker Services, Inc. ("FPSB"), a corporation duly organized
and existing under the laws of the State of Delaware (collectively, the
"Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Trust Instrument to issue
separate series of shares representing interests in separate investment
portfolios (the "Series"), which Series are identified on Schedule "C" attached
hereto, and which Schedule "C" may be amended from time to time by mutual
agreement among the Parties;
WHEREAS, Metropolitan has been appointed investment adviser to the
Trust;
WHEREAS, FPSB is a broker-dealer registered with the U.S. Securities
and Exchange Commission and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Parties are desirous of entering into an agreement
providing for the distribution by FPSB of the shares of the Trust (the
"Shares").
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange of good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows;
1. Appointment.
The Trust hereby appoints FPSB as its exclusive agent for the
distribution of the Shares in the fifty United States of America, the District
of Columbia and Commonwealth of Puerto Rico, and FPSB hereby accepts such
appointment under the terms of this Agreement. The Trust agrees that it will not
sell any shares to any person except to full orders for the shares received
through FPSB; provided, however, that the foregoing exclusive right shall not
apply: (a) to shares issued or sold in connection with the merger or
consolidation of any other investment company with the Trust or the acquisition
by purchase or otherwise of all or substantially all of the assets of any
investment company or substantially all of the outstanding shares of any such
company by the Trust; (b) to shares which may be offered by the Trust to its
stockholders for reinvestment of cash distributed from capital gains or net
investment income of the Trust; (c) to shares which may be issued to
shareholders of other funds who exercise any exchange privilege set forth in the
Trust's Prospectus. Notwithstanding any other provision hereof, the Trust may
terminate, suspend, or withdraw the offering of the Shares whenever, in its sole
discretion, it deems such action to be desirable.
2. Sale and Repurchase of Shares.
FPSB agrees to provide the services contemplated hereby, and
(a) FPSB is hereby granted the right, as agent for the Trust, to sell
Shares to the public against orders therefor at the public offering price (as
defined in subparagraph 2.(c) below).
(b) FPSB will also have the right to take, as agent for the Trust, all
actions which, in FPSB's judgment, and subject to the Trust's reasonable
approval, are necessary to carry into effect the distribution of the Shares.
(c) The public offering price for Shares shall be the net asset value
per Share then in effect, plus a sales charge, if applicable.
(d) The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional Information
relating to the Shares, and when determined shall be applicable to all
transactions as provided in the Prospectus. The net asset value of the Shares
shall be calculated by the Trust or by another entity on behalf of the Trust.
FPSB shall have no duty to inquire into, or liability for, the accuracy of the
net asset value per Share as calculated.
(e) On every sale, the Distributor shall promptly pay to the Trust the
applicable net asset value of the Shares.
(f) Upon receipt of purchase instructions, FPSB will transmit such
instructions to the Trust or its transfer agent for registration of the Shares
purchased.
(g) Nothing in this Agreement shall prevent FPSB or any affiliated
person (as defined in the Act) of FPSB from acting as underwriter or distributor
for any other person, firm or corporation (including other investment
companies), or in any way limit or restrict FPSB or such affiliated person from
buying, selling or trading any securities for its or their own account or for
the accounts of others for whom it or they may be acting; provided, however,
that FPSB expressly agrees that it will not for its own account purchase any
Shares of the Trust except for investment purposes, and that it will not for its
own account sell any such Shares except by redemption of such Shares by the
Trust, and that it will not undertake in any activities which, in its judgment,
will adversely affect the performance of its obligations to the Trust under this
Agreement.
(h) FPSB may repurchase Shares at such prices and upon such terms and
conditions as shall be specified in the Prospectus.
3. Rules of Sale of Shares.
FPSB does not agree to sell any specific number of Shares. FPSB, as
Underwriter for the Trust, undertakes to sell Shares on a best efforts basis and
only against orders received therefor. The Trust reserves the right to
terminate, suspend or withdraw the sale of its Shares for any reason deemed
adequate by it, and the Trust reserves the right to refuse at any time or times
to sell any of its Shares to any person for any reason deemed adequate by it.
4. Rules of NASD.
(a) FPSB will conform to the Rules of Fair Practice of the NASD and the
securities laws of any jurisdiction in which it directly or indirectly sells any
Shares.
(b) FPSB will require each dealer with whom FPSB has a selling
agreement to conform to the applicable provisions of the Prospectus, with
respect to the public offering price of the Shares, and FPSB shall not cause the
Trust to withhold the placing of purchase orders so as to make a profit thereby.
(c) The Trust and Metropolitan agree to furnish to FPSB sufficient
copies of any and all: agreements, plans, communications with the public or
other materials which the Trust or Metropolitan intends to use in connection
with any sales of Shares, in adequate time for FPSB to file and clear such
materials with the proper authorities before they are put in use. FPSB and the
Trust or Metropolitan may agree that any such material does not need to be filed
subsequent to distribution. In addition, the Trust and Metropolitan agree not to
use any such materials until so filed and cleared for use by appropriate
authorities as well as by FPSB.
(d) FPSB, at its own expense, will qualify as a dealer or broker, or
otherwise, under all applicable state or federal laws required in order that the
Shares may be sold in such states as may be mutually agreed upon by the Parties.
(e) FPSB shall remain registered with the U.S. Securities and Exchange
Commission and a member of the National Association of Securities Dealers for
the term of this Agreement.
(f) FPSB shall not, in connection with any sale or solicitation of a
sale of the Shares, make or authorize any representative, service organization,
broker or dealer to make any representations concerning the Shares, except those
contained in the Prospectus covering the Shares and in communications with the
public or sales materials approved by FPSB as information supplemental to such
Prospectus. Copies of the Prospectus will be supplied by the Trust or
Metropolitan to FPSB in reasonable quantities upon request.
5. Records to be Supplied by the Trust.
The Trust shall furnish to FPSB copies of all information, financial
statements and other papers which FPSB may reasonably request for use in
connection with the distribution of the Shares including, but not limited to,
one certified copy of all financial statements prepared for the Trust by its
independent public accountants.
6. Expenses.
(a) The Trust will bear the following expenses:
(i) preparation, setting in type, and printing of sufficient
copies of the Prospectuses and Statements of Additional Information for
distribution to shareholders, and the cost of distribution of same to the
shareholders;
(ii) preparation, printing and distribution of reports and
other communications to shareholders;
(iii) registration of the Shares under the federal securities
laws;
(iv) qualification of the Shares for sale in the jurisdictions
as directed by the Trust;
(v) maintaining facilities for the issue and transfer of the
Shares;
(vi) supplying information, prices and other data to be
furnished by the Trust under this Agreement; and
(vii) any original issue taxes or transfer taxes applicable to
the sale or delivery of the Shares or certificates therefor.
(b) Metropolitan will pay all other expenses incident to the sale and
distribution of the Shares sold hereunder.
7. Term and Compensation.
(a) The term of this Agreement shall commence on the date on which the
Trust's registration statement is declared effective-by the U.S. Securities and
Exchange Commission ("Effective Date").
(b) This Agreement shall remain in effect for two (2) years from the
Effective Date. This Agreement shall continue thereafter for periods not
exceeding one (1) year, if approved at least annually (i) by a vote of a
majority of the outstanding voting securities of each Series; or (ii) by a vote
of a majority of the Trustees of the Trust who are not parties to this Agreement
(other than as Trustees of the Trust) or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
(c) Fees payable to FPSB shall be paid by Metropolitan as set forth in
Schedule "B" attached and shall be fixed for the two (2) year period commencing
on the Effective Date of this Agreement. Thereafter, the fee schedule will be
subject to annual review and adjustment.
(d) This Agreement (i) may at any time be terminated without the
payment of any penalty, either by a vote of the Trustees of the Trust or by a
vote of a majority of the outstanding voting securities of each Series with
respect to such Series, on sixty (60) days
written notice to FPSB; and (ii) may be terminated by FPSB on sixty (60) days
written notice to the Trust with respect to any Series.
(e) This Agreement shall automatically terminate in the event of its
assignment.
8. Indemnification of FPSB by Metropolitan.
Metropolitan and the Trust will indemnify and hold FPSB harmless for
the actions of Metropolitan employees registered with the NASD as FPSB
representatives, and hereby undertakes to maintain compliance with all rules and
regulations concerning any and all sales presentations made by such employees.
9. Liability of FPSB.
(a) FPSB, its directors, officers, employees, shareholders and agents
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 performance of this Agreement,
except a loss resulting from a breach of FPSB's obligation pursuant to Section 4
of this Agreement (Rules of NASD), a breach of fiduciary duty with respect to
the receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or negligence on the part of FPSB in the performance of
its obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
(b) The Trust agrees to indemnify and hold harmless FPSB against any
and all liability, loss, damages, costs or expenses (including reasonable
counsel fees) which FPSB may incur or be required to pay hereafter, in
connection with any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which FPSB may be
involved as a party or otherwise or with which FPSB may be threatened, by reason
of the offer or sale of the Trust Shares by persons other than FPSB or its
representatives, prior to the execution of this Agreement. Indemnification under
this paragraph shall not apply to actions or omissions of FPSB, or its
directors, officers,
employees, shareholders and agents in cases of its or their willful misfeasance,
bad faith, negligence or reckless disregard of its or their duties hereunder. If
a claim is made against FPSB as to which FPSB may seek indemnity under this
Section, FPSB shall notify the Trust promptly after any written assertion of
such claim threatening to institute an action or proceeding with respect thereto
and shall notify the Trust promptly of any action commenced against FPSB within
10 days time after FPSB shall have been served with a summons or other legal
process, giving information as to the nature and basis of the claim. Failure to
notify the Trust shall not, however, relieve the Trust from any liability which
it may have on account of the indemnity under this Section 9(b) if the Trust has
not been prejudiced in any material respect by such failure. The Trust may
negotiate the settlement of any such action, suit or proceeding subject to
FPSB's approval, which shall not be unreasonably withheld. FPSB shall have the
right to participate in the defense of an action or proceeding and to retain its
own counsel, and the reasonable fees and expenses of such counsel shall be borne
by the Trust (which shall pay such fees, costs and expenses at least quarterly)
if: (i) FPSB has received an opinion of counsel stating that the use of counsel
chosen by the Trust to represent FPSB would present such counsel with a conflict
of interest; (ii) the defendants in, or targets of, any such action or
proceeding include both FPSB and the Trust, and legal counsel to FPSB shall have
reasonably-concluded that there are legal defenses available to it which are
different from or additional to those available to the Trust or which may be
adverse to or inconsistent with defenses available to the Trust (in which case
the Trust shall not have the right to direct the defense of such action on
behalf of FPSB); or (iii) the Trust shall authorize FPSB to employ separate
counsel at the expense of the Trust.
(c) Any person, even though also a director, officer, employee,
shareholder or agent of FPSB, who may be or become an officer, director,
trustee, employee or agent of
the Trust, shall be deemed, when rendering services to the Trust or acting on
any business of the Trust (other than services or business in connection with
FPSB's duties hereunder), to be rendering such services to or acting solely for
the Trust and not as a director, officer, employee, shareholder or agent, or one
under the control or direction of FPSB even though receiving a salary from FPSB.
(d) The Trust agrees to indemnify and hold harmless FPSB, and each
person who controls FPSB within the meaning of Section 15 of the Securities Act
of 1933, as amended (the "Securities Act"), or Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any and all
losses, claims, damages and liabilities, joint or several (including any
reasonable investigative, legal and other expenses incurred in connection
therewith) to which they, or any of them, may become subject under the Act, the
Securities Act, the Exchange Act or other federal or state law or regulation, at
common law or otherwise insofar as such losses, claims, damages or liabilities
(or actions, suits 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 a Prospectus, Statement of Additional Information, supplement
thereto, sales literature or other written information prepared by the Trust and
furnished by the Trust to FPSB for FPSB's use hereunder, disseminated by the
Trust or which arise out of or are based upon any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading. Such indemnity shall not, however,
inure to the benefit of FPSB (or any person controlling FPSB) on account of any
losses, claims, damages or liabilities (or actions, suits or proceedings in
respect thereof) arising from the sale of the Shares of the Trust to any person
by FPSB (i) if such untrue statement or omission or alleged untrue statement or
omission was made in the Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity with
information furnished in writing to the Trust by FPSB specifically for use
therein or (ii) if such losses, claims, damages or liabilities arise out of or
are based upon an untrue statement or omission or alleged untrue statement or
omission found in any Prospectus, Statement of Additional Information,
supplement, sales or other literature, subsequently corrected, but negligently
distributed by FPSB and a copy of the corrected Prospectus was not delivered to
such person at or before the confirmation of the sale to such person.
(e) FPSB shall not be responsible for any damages, consequential or
otherwise, which Metropolitan or the Trust may experience, due to the disruption
of the distribution of Shares caused by any action or inaction of any registered
representative or affiliate of FPSB or of FPSB itself.
10. Amendments.
No provision of this Agreement may be amended or modified in any manner
whatsoever, except by a written agreement properly authorized and executed by
the Parties.
11. Section Headings.
Section and paragraph headings are for convenience only and shall not
be construed as part of this Agreement.
12. Reports.
FPSB shall prepare reports for the Board of Trustees of the Trust, on a
quarterly basis, showing such information as, from time to time, shall be
reasonably requested by such Board.
13. Severability.
If any part, term or provision of this Agreement is held by any court
to be illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not affected, and the
rights and obligations of the Parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or
provision held to be illegal or invalid provided that the basic agreement is not
thereby substantially impaired.
14. Governing Law.
This Agreement shall be governed by the laws of the State of California
and the exclusive venue of any action arising under this Agreement shall be
Xxxxxxxxxx County, Commonwealth of Pennsylvania.
15. Authority to Execute
The Parties represent and warrant to each other that the execution and
delivery of this Agreement by the undersigned officer of each Party has been
duly and validly authorized; and, when duly executed, this Agreement will
constitute a valid and legally binding and enforceable obligation of each Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of ten type written pages, together with Schedules "X," "X" and "C,"
to be signed by their duly authorized officers, as of the day and year first
above written.
Metropolitan West Asset Management, LLC
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By:
Metropolitan West Funds
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By: Xxxxx X. Dubchansky, Chief Executive
Officer and Trustee
FPS Broker Services, Inc.
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By: Xxxxxxx X. Xxxxx, President
SCHEDULE "A"
UNDERWRITER/SPONSOR SERVICES
FOR
METROPOLITAN WEST FUNDS
I. Underwriter/Sponsor services include:
(A) Preparation and execution of Underwriter and 12b-1 Plan
Agreements
o Monitoring accruals
o Monitoring expenses
o Disbursements for expenses and trail commissions
(B) Quarterly 12b-1 Reports to Board of Directors and/or Trustees
(C) Literature review, recommendations and submission to the NASD
(D) Initial NASD Licensing and Transfers of Registered
Representatives
o U4 Form and Fingerprint Submission to NASD
o Supplying. Series 6 and 63 written study material
o Registration for Exam Preparation classes
o Renewals and Terminations of Representatives
(E) Written supervisory procedures and manuals for Registered
Representatives
(F) Ongoing compliance updates for Representatives regarding sales
practices, written correspondence and other communications
with the public.
(G) NASD Continuing Education Requirement
SCHEDULE "B"
UNDERWRITER AND DISTRIBUTION FEE SCHEDULE
FOR
METROPOLITAN WEST FUNDS
This Fee Schedule is fixed for a period of two (2) years from the Effective
Date as that term is defined in the Agreement.
I. (A) Underwriter/Sponsor Services
The annual fee to FPS Broker Services, Inc. (FPSB) will be included
under our Administration Services. As Underwriter/Distributor, including primary
licensing/ regulatory agent for Fund personnel, FPS Broker Services, Inc. will
be required to maintain the Fund's registration as Broker/Dealer of record.
These services include representing the Funds as primary Distributor
includes the expenses and personnel required to maintain the various regulatory
books and records of the Broker/Dealer and maintenance of shareholder files and
records for all transactions processed on behalf of Metropolitan West Asset
Management. The services also include the regulatory requirements of all
marketing related and distribution reports including maintenance of records
regarding individual transaction activities of the Funds' registered
representatives.
(B) FPBS will maintain annual NASD and state license renewals and the
monitoring required of representative activities as follows:
Up to 10 States $2,000 per Representative per Year
All 50 States $4,000 per Representative per Year
(C) OUT-OF-POCKET EXPENSES
The Funds will reimburse FPS Services, Inc. monthly for all reasonable
out-of-pocket expenses, including telephone, postage, overdraft charges, XXXXX
filings, Fund/SERV and Networking expenses, telecommunications, special reports,
record retention, special transportation costs, copying and sending materials to
auditors and/or regulatory agencies, as incurred and approved.
SCHEDULE "C"
Identification of Series
Below are listed the Series and Classes of Shares to which services under this
Agreement are to be performed as of the Effective Date of this Agreement:
"Metropolitan West Funds"
1.. Metropolitan West Total Return Bond Fund
2. Metropolitan West Low Duration Bond Fund
3. Metropolitan West Short Term Investment Fund
This Schedule "C" may be amended from time to time by agreement of the Parties
