DISTRIBUTION AGREEMENT
Agreement dated as of this 27th day of December, 1994, by and between
FPA NEW INCOME, INC., a Maryland corporation (hereinafter called the "Fund"),
and FPA FUND DISTRIBUTORS, INC., a California corporation (hereinafter called
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 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, including
distribution 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 Common Stock of the Fund
(sometimes herein referred to as "shares") 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 continue in effect to
September 3, 1995. 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 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
any such party, cast in person at 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 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 own shares for sale directly or through any person (as defined in
Sections 2(a)(28) and 2(a)(8) of the Investment Company Act) other than the
Distributor, excepting shares sold or issued at net asset value without sales
charge in accordance with applicable provisions of the Investment Company Act.
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.
(d) The compensation and expenses of the transfer agent acting
for the Fund and acting as plan agent under the Fund's Investor Services 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 jurisdictions in which
its activities require it to be so licensed.
(c) The Distributor shall enter into Selected Dealer Agreements
with broker-dealer members of the NASD selected by the Distributor, authorizing
such broker-dealers to offer and sell shares of the Fund to the public upon the
terms and conditions set forth therein, which shall not be
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inconsistent with the provisions of this Agreement. The Distributor shall
continue each such Selected Dealer 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 Selected Dealer 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
Selected Dealer 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 Selected Dealer 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 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.
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5. PUBLIC OFFERING PRICE OF FUND'S SHARES TO BE MAINTAINED. Except
as provided in paragraph 3(c) of this Agreement, the shares of the Fund shall
be offered and sold only at the public offering price thereof 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 Selected Dealer 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. INDEMNIFICATION.
(a) The Fund 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), arising by reason
of any person acquiring any shares, which may be based upon the Securities Act
of 1933, or on any other statute or at common law, on the ground that the
registration statement or related prospectus, as from time to time amended and
supplemented, or an annual or interim report to shareholders of the Fund,
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, bad faith or negligence in the
performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; nor (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
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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 Section 7(a) hereof, 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 Section 7(a)
hereof.
8. 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, this Agreement shall automatically terminate in the
event of its assignment (as defined in the Investment Company Act) 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 NEW INCOME, INC.
(Seal)
By:/s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx,
President
FPA FUND DISTRIBUTORS, INC.
(Seal)
By:/s/ Xxxxxxxx X. XxXxxx
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Xxxxxxxx X. XxXxxx,
President
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