DISTRIBUTION AGREEMENT
SHORT TERM INCOME FUND, INC.
(the "Fund")
Money Market Portfolio
(the "Portfolio")
First Southwest Prime Income Fund Shares ("First Southwest Shares")
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
, 2002
Xxxxx & Xxxx Distributors, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. In consideration of the agreements on your part herein
contained and of the payment by us to you of a compensatory asset-based sales
charge in an amount not to exceed 0.25% per annum of the First Southwest Shares'
average daily net assets and on the terms and conditions set forth herein, on
behalf of our Portfolio, we have agreed that you shall be, for the period of
this Agreement, a distributor, as our agent, for the unsold portion of the First
Southwest Shares, $.001 par value per share, as may be effectively registered
from time to time under the Securities Act of 1933, as amended (the "1933 Act").
This Agreement is being entered into pursuant to the Distribution and Service
Plan (the "Plan") adopted by us on behalf of the First Southwest Shares in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act").
2. You will make payments from time to time from your fees
payable hereunder and your own resources and past profits for the following
purposes:
(a) to compensate First Southwest Company ("FS"), with whom
you have a written contract, for providing assistance in distributing the First
Southwest Shares;
(b) to pay the costs of printing and distributing the
Portfolio's First Southwest Shares' prospectus to prospective investors; and
(c) to defray the cost of the preparation and printing of
brochures and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including salaries and/or
commissions of sales personnel in connection with the distribution of the First
Southwest Shares.
The Distributor will in its sole discretion determine the amount
of any payments made by the Distributor pursuant to this Agreement, provided,
however, that no such payment will increase the amount which the Portfolio, on
behalf of the First Southwest Shares, is required to pay either to the
Distributor under this Agreement or the Shareholder Servicing Agreement or to
the Manager under the Investment Management Contract, the Administrative
Services Agreement, or otherwise.
3. We hereby agree that you will act as our agent, and hereby
appoint you our agent, to offer, and to solicit offers to subscribe to, the
unsold balance of the First Southwest Shares as shall then be effectively
registered under the 0000 Xxx. All subscriptions for the First Southwest Shares
obtained by you shall be directed to us for acceptance and shall not be binding
on us until accepted by us. You shall have no authority to make binding
subscriptions on our behalf. We reserve the right to sell First Southwest Shares
through other distributors or directly to investors through subscriptions
received by us at our principal office in New York, New York. The right given to
you under this Agreement shall not apply to First Southwest Shares issued in
connection with (a) the merger or consolidation of any other investment company
with us, (b) our acquisition by purchase or otherwise of all or substantially
all of the assets or stock of any other investment company, or (c) the
reinvestment in our common stock by our stockholders of dividends or other
distributions or any other offering by us of securities to our stockholders.
4. You will use your best efforts to obtain subscriptions to
First Southwest Shares upon the terms and conditions contained herein and in our
Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of First Southwest Shares, such other
information with respect to us and First Southwest Shares as you may reasonably
request. We shall supply you with such copies of our Registration Statement and
Prospectus, as in effect from time to time, as you may request. Except as we may
authorize in writing, you are not authorized to give any information or to make
any representation that is not contained in the Registration Statement or
Prospectus, as then in effect. You may use employees, agents and other persons,
at your cost and expense, to assist you in carrying out your obligations
hereunder, but no such employee, agent or other person shall be deemed to be our
agent or have any rights under this agreement. You may sell First Southwest
Shares to or through FS under the Private Class Sub-Distribution and Service
Agreement (the "FS Agreement") provided that FS shall not be appointed or
authorized to act as our agent without our written consent.
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With respect to the First Southwest Shares of our Portfolio,
you have entered into the FS Agreement which has been approved by our Board of
Directors, pursuant to which FS is authorized to provide distribution assistance
to you and to provide certain shareholder servicing activities for customers of
FS in connection with the First Southwest Shares and pursuant to which FS will
be compensated directly by you for providing such assistance and services.
Pursuant to our Shareholder Servicing Agreement with you with respect to our
First Southwest Shares, you may make payments to FS for performing shareholder
servicing and related administrative functions with respect to First Southwest
Shares. These payments will be made pursuant to the FS Agreement. It is
recognized that we shall have no obligation or liability to you or to FS for any
such payments under the FS Agreement. Our obligation is solely to make payments
to you under this Distribution Agreement and under the Shareholder Servicing
Agreement (with respect to the First Southwest Shares) and to the Manager under
the Investment Management Contract and the Administrative Services Contract. All
sales of our shares effected through you will be made in compliance with all
applicable federal securities laws and regulations and the Constitution, rules
and regulations of the National Association of Securities Dealers, Inc.
("NASD").
5. We reserve the right to suspend the offering of the First
Southwest Shares at any time, in the absolute discretion of our Board of
Directors, and upon notice of such suspension you shall cease to offer shares of
the First Southwest Shares hereunder.
6. Both of us will cooperate with each other in taking such
action as may be necessary to qualify the First Southwest Shares for sale under
the securities laws of such states as we may designate, provided, that you shall
not be required to register as a broker-dealer or file a consent to service of
process in any such state where you are not now so registered. Pursuant to the
Investment Management Contract in effect between us and the Manager, we will pay
all fees and expenses of registering the First Southwest Shares under the 1933
Act and of qualification of the First Southwest Shares, and to the extent
necessary, our qualification under applicable state securities laws. You will
pay all expenses relating to your broker-dealer qualification.
7. We represent to you that our Registration Statement and
Prospectus have been carefully prepared to date in conformity with the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Securities and Exchange Commission (the "SEC") thereunder. We represent and
warrant to you, as of the date hereof, that our Registration Statement and
Prospectus contain all statements required to be stated therein in accordance
with the 1933 Act and the 1940 Act and the SEC's rules and regulations
thereunder; that all statements of fact contained therein are or will be true
and correct at the time indicated or the effective date as the case may be; and
that neither our Registration Statement nor our Prospectus, when they shall
become effective or be authorized for use, will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the
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statements therein not misleading to a purchaser of the First Southwest Shares.
We will from time to time file such amendment or amendments to our Registration
Statement and Prospectus as, in the light of future development, shall, in the
opinion of our counsel, be necessary in order to have our Registration Statement
and Prospectus at all times contain all material facts required to be stated
therein or necessary to make any statements therein not misleading to a
purchaser of the First Southwest Shares. If we shall not file such amendment or
amendments within fifteen days after our receipt of a written request from you
to do so, you may, at your option, terminate this agreement immediately. We will
not file any amendment to our Registration Statement or Prospectus without
giving you reasonable notice thereof in advance; provided, however, that nothing
in this agreement shall in any way limit our right to file such amendments to
our Registration Statement or Prospectus, of whatever character, as we may deem
advisable, such right being in all respects absolute and unconditional. We
represent and warrant to you that any amendment to our Registration Statement or
Prospectus hereafter filed by us will be carefully prepared in conformity within
the requirements of the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder and will, when it becomes effective, contain all
statements required to be stated therein in accordance with the 1933 Act and the
1940 Act and the SEC's rules and regulations thereunder; that all statements of
fact contained therein will, when the same shall become effective, be true and
correct; and that no such amendment, when it becomes effective, will include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading to
a purchaser of the First Southwest Shares.
8. We agree to indemnify, defend and hold you, and any person
who controls you within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which you or
any such controlling person may incur, under the 1933 Act or the 1940 Act, or
under common law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in our Registration Statement or
Prospectus in effect from time to time or arising out of or based upon any
alleged omission to state a material fact required to be stated in either of
them or necessary to make the statements in either of them not misleading;
provided, however, that in no event shall anything herein contained be so
construed as to protect you against any liability to us or our security holders
to which you would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of your duties, or by reason of
your reckless disregard of your obligations and duties under this agreement. Our
agreement to indemnify you and any such controlling person is expressly
conditioned upon our being notified of any action brought against you or any
such controlling person, such notification to be given by letter or by telegram
addressed to us at our principal office in New York, New York, and sent to us by
the person against whom such action is brought within ten days after the summons
or other first legal process shall have been served. The failure so to notify us
of any such action shall not relieve us from any liability which we may have to
the person against whom such action
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is brought other than on account of our indemnity agreement contained in this
paragraph 8. We will be entitled to assume the defense of any suit brought to
enforce any such claim, and to retain counsel of good standing chosen by us and
approved by you. In the event we do elect to assume the defense of any such suit
and retain counsel of good standing approved by you, the defendant or defendants
in such suit shall bear the fees and expenses of any additional counsel retained
by any of them; but in case we do not elect to assume the defense of any such
suit, or in case you, in good faith, do not approve of counsel chosen by us, we
will reimburse you or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel retained by
you or them. Our indemnification agreement contained in this paragraph 8 and our
representations and warranties in this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of you or any
controlling person and shall survive the sale of any First Southwest Shares made
pursuant to subscriptions obtained by you. This agreement of indemnity will
inure exclusively to your benefit, to the benefit of your successors and
assigns, and to the benefit of any of your controlling persons and their
successors and assigns. We agree promptly to notify you of the commencement of
any litigation or proceeding against us in connection with the issue and sale of
any First Southwest Shares.
9. You agree to indemnify, defend and hold us, our several
officers and directors, and any person who controls us within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any reasonable counsel fees
incurred in connection therewith) which we, our officers or directors, or any
such controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, or shall arise out of or
be based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or directors or such controlling person shall
each have the right to participate in the defense or preparation of the defense
of any such action. The failure so to notify you of any such action shall not
relieve you from any liability which you may have to us, to our officers
5
or directors, or to such controlling person other than on account of your
indemnity agreement contained in this paragraph 9.
10. We agree to advise you immediately:
(a) of any request by the SEC for amendments to our
Registration Statement or Prospectus or for additional information,
(b) of the issuance by the SEC of any stop order suspending
the effectiveness of our Registration Statement or Prospectus or the initiation
of any proceedings for that purpose,
(c) of the happening of any material event which makes
untrue any statement made in our Registration Statement or Prospectus or which
requires the making of a change in either of them in order to make the
statements therein not misleading, and
(d) of all action of the SEC with respect to any amendments
to our Registration Statement or Prospectus.
11. This Agreement will become effective on the date hereof and
shall continue in effect until August 31, 2002, and thereafter for successive
twelve-month periods (computed from each September 1), provided that such
continuation is specifically approved at least annually by vote of our Board of
Directors and of a majority of those of our directors who are not interested
persons (as defined in the 0000 Xxx) and have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on this agreement.
This agreement may be terminated at any time, without the payment of any
penalty, (a) on sixty days' written notice to you (i) by vote of a majority of
our entire Board of Directors, and by a vote of a majority of our Directors who
are not interested persons (as defined in the 0000 Xxx) and who have no direct
or indirect financial interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by vote of a majority of the outstanding voting
securities of the First Southwest Shares, as defined in the Act, or (b) by you
on sixty days' written notice to us.
12. This Agreement may not be transferred, assigned, sold or in
any manner hypothecated or pledged by you and this Agreement shall terminate
automatically in the event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and "sale" as used in this
paragraph shall have the meanings ascribed thereto by governing law and in
applicable rules or regulations of the SEC thereunder.
13. Except to the extent necessary to perform your obligations
hereunder, nothing herein shall be deemed to limit or restrict your right, the
right of any of your employees, officers or directors, who may also be a
director, officer or employee
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of ours, or of a person affiliated with us, as defined in the 1940 Act, to
engage in any other business or to devote time and attention to the management
or other aspects of any other business, whether of a similar or dissimilar
nature, or to render services of any kind to another corporation, firm,
individual or association.
If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
SHORT TERM INCOME FUND, INC.
Money Market Portfolio
First Southwest Prime Income Fund Shares
By
---------------------------------------
Name:
Title:
Accepted: , 2002
XXXXX & XXXX DISTRIBUTORS, INC.
By:____________________________
Name:
Title:
