1
EXHIBIT (C)(4)
DISTRIBUTION AGREEMENT
Sierra Investment Services Corporation
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
This is to confirm that, whereas the undersigned Sierra Prime Income
Fund (the "Trust"), a business trust organized under the laws of the
Commonwealth of Massachusetts and registered as a closed-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and Sierra Investment Services Corporation ("Sierra Services"), a
corporation organized under the laws of the State of California, have entered
into a Distribution Agreement dated as of February 14, 1996 pursuant to which
the Trust and Sierra Services have agreed that Sierra Services shall act as a
distributor of the classes of Common Shares of beneficial interest of the Trust.
Now, therefore, in consideration of the mutual promises and covenants
hereinafter contained, the Trust and Sierra Services do agree as follows:
1. Appointment
The Trust hereby appoints Sierra Services as agent of the Trust to act,
for the period and on the terms set forth in this Agreement, as a distributor of
the Trust Shares covered by the Trust's registration statement (the
"Registration Statement"), prospectuses and statements of additional information
as in effect from time to time under the Securities Act of 1933, as amended (the
"1933 Act"), and the 1940 Act, and Sierra Services accepts such appointment and
agrees to render the services herein described for the compensation herein
provided.
As used in this Agreement, the terms "registration statement,"
"prospectus," and "statement of additional information" shall mean any
registration statement, prospectus and statement of additional information filed
by the Trust with the Securities and Exchange Commission ("SEC" or "Commission")
and any amendments thereof and supplements thereto which at any time shall have
been filed with the SEC. "Prospectus" shall mean, with respect to any Shares of
the Trust at any time, the then-current prospectus and statement of additional
information relating to such Shares. The Trust and Sierra Services acknowledge
expressly that references in this Agreement to the "term" or "period" of this
Agreement shall include the term or period of this Original Agreement.
2. Sales of Shares
A. Authorization. The Trust hereby authorizes Sierra Services to sell
Shares of the Trust, and Sierra Services agrees to use its best efforts to
solicit orders for the sale of such Shares, at such Shares' public offering
price, as determined in accordance with the Registration Statement. Sierra
Services shall have the right to order from the Trust the Shares of the Funds
needed, but not more than needed (correcting for any clerical errors or errors
of transmission), to fill such orders as are unconditional.
B. Selling Broker-Dealers and Other Agents. Sierra Services may, as
principal and on its own behalf, enter into agreements ("Dealer Agreements"), on
such terms and conditions as Sierra Services determines are not inconsistent
with this Agreement, with (a) any broker-dealer who is (i) registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), (ii) registered as
required under applicable state securities or blue sky laws,
2
and (iii) a member in good standing of the National Association of Securities
Dealers, Inc. ("NASD"); and (b) any other person (as such term is defined in the
0000 Xxx) that is not required, for purposes of effecting transactions in
securities, to be registered under the 1934 Act, but is registered as required
under applicable state securities or blue sky laws, authorizing such
broker-dealers and other persons (collectively, "Brokers") to act as agents in
connection with the sale of the Shares of the Trust (which may include accepting
orders for the purchase or redemption of Shares, responding to inquiries
regarding the Trust or the Funds, and performing other related functions).
Expulsion or suspension from the NASD of any Broker required to be registered
under the 1934 Act shall automatically terminate such Broker's Dealer Agreement
with Sierra Services for sales of Shares as of the effective date of such
expulsion or suspension.
C. Refusal and Suspension of Sales. Each of Sierra Services and the
Trust reserves the right to refuse at any time or times (a) to sell any Shares
for any reason, and (b) to accept an order for Shares for any reason. Sierra
Services acknowledges specifically that, whenever in the judgment of the Trust's
officers such action is warranted for any reason, including, without limitation,
market, economic or political conditions, the Trust may decline to accept any
orders for, or make any sales of, any Shares until such time as those officers
deem it advisable to accept such orders and to make such sales.
No Shares shall be offered and no orders for the purchase or sale of
Shares under any provisions of this Agreement shall be accepted by the Trust (a)
if and so long as the effectiveness of the Registration Statement or any
necessary amendments thereto shall be suspended under any provisions of the 1933
Act, or (b) if and so long as a current prospectus as required by Section
5(b)(2) of the 1933 Act is not on file with the SEC.
3. Distribution Services and Expenses
A. Distribution Expenses. Sierra Services will bear all expenses in
connection with the performance of its services and the incurring of
distribution expenses under this Agreement. For purposes of this Agreement,
"distribution expenses" of Sierra Services shall mean all expenses borne by
Sierra Services or by any other person with which Sierra Services has an
agreement (including but not limited to Dealer Agreements) approved by the
Trust, which expenses represent payment for activities primarily intended to
result in the sale of Shares, including, but not limited to, the following
(provided, that "distribution expenses" shall not include any expenditures in
connection with services that Sierra Services or any other person have agreed to
bear or provide without reimbursement or compensation):
(1) payments made to, and expenses of, registered
representatives and other employees of Sierra Services or of
Brokers;
(2) payments made to, and expenses of, persons providing
support services in connection with the distribution of
Shares, including but not limited to office space and
equipment, telephone facilities, answering routine inquiries
regarding the Trust, and processing transactions;
(3) costs relating to the formulation and implementation of
marketing and promotional activities, including but not
limited to direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising, and
costs involved in preparing, printing and distributing
advertising and sales literature pertaining to the Trust;
(4) costs of printing and distributing Prospectuses and
reports of the Trust to prospective Shareholders;
(5) costs involved in obtaining whatever information, analyses
and reports with respect to marketing and promotional
activities that the Trust may, from time to time, deem
advisable; and
(6) costs of financing any of the foregoing.
-2-
3
B. Scope of Distribution Services. Distribution services rendered
pursuant to this Agreement with respect to any Share of the Trust shall be
deemed to be complete upon the issuance and sale of such Share.
C. Trust Expenses. Sierra Services shall not be liable to assume any
other expenses of the Trust, which other expenses may include without
limitation: investment advisory fees; charges and expenses of any registrar,
custodian or depositary appointed by the Trust for safekeeping of its cash,
portfolio securities, or other property, and any transfer, dividend or
accounting agent(s) appointed by the Trust; brokers' commissions chargeable to
the Trust in connection with its portfolio securities transactions; all taxes,
including securities issuance and transfer taxes; all costs and expenses in
connection with maintenance of registration of the Trust, any Fund and the
Shares with the SEC, various states, and other jurisdictions (including filing
and legal fees and disbursements of counsel); expenses of printing, including
typesetting, and distributing Prospectuses to the Trust's shareholders; all
expenses of shareholders' and Trustees' meetings and of preparing, printing and
mailing proxy statements and reports to shareholders; fees and expenses of
Trustees; all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption, whether in Shares or in cash; charges and expenses of
any outside service used for pricing of Shares; charges and expenses of legal
counsel and independent accountants, in connection with any matter relating to
the Trust; membership dues of industry associations; interest payable on
borrowings; postage; insurance premiums on property or personnel (including
officers and Trustees) of the Trust that inure to its benefit; extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other charges
and costs of operations unless otherwise explicitly provided herein.
4. Compensation
The Distributor will receive no compensation from the Trust in
consideration of its services in connection with the distribution of Shares of
the Trust.
A. Early Withdrawal Charges. The Trust shall cause its transfer agent
(the "Transfer Agent") to withhold, from repurchase proceeds payable to holders
of Shares of the Funds, all early withdrawal sales charges properly payable by
such holders in accordance with the terms of the Prospectuses relating to such
Shares ("EWCs") and shall cause the Transfer Agent to pay such amounts over as
promptly as possible after the settlement date for each repurchase of such
Shares.
B. Other Services; Service Fee. Upon request of the Trust's Board of
Trustees, Sierra Services may, but shall be under no duty to, perform additional
services on behalf of the Trust, which services are not required by this
Agreement but may be performed by Sierra Services in conformity with applicable
law. Any such services will be performed on behalf of the Trust, and Sierra
Services may impose additional charges for such services, which charges may be
billed to the Trust and subject to examination by the Trust's independent
accountants. Sierra Services's payment or assumption of any expense of the Trust
that Sierra Services is not required to pay or assume under this Agreement shall
not relieve Sierra Services of any of its obligations to the Trust or obligate
Sierra Services to pay or assume any similar expense on any subsequent occasion.
Any shareholder services provided by Sierra Services to the Trust,
which services may include processing of shareholder transactions, responding to
inquiries from shareholders concerning the status of their accounts and the
operations of the Trust communicating with the Trust and its transfer agent on
behalf of such shareholders, or providing other shareholder services, nor for
any expenses associated with the provision of such shareholder services,
including office space and equipment, and telephone facilities, shall be
provided pursuant to a separate agreement.
C. Directed Payment; Allocable Portion Calculations. Sierra Services
may direct the Trust to pay any part or all of the EWCs payable to Sierra
Services in respect of any Shares directly to persons providing funds to Sierra
Services to cover or otherwise enable the incurring of expenses associated with
distribution services, and the Trust agrees to accept and to comply with such
direction. Sierra Services shall, at its own expense and not the expense of the
Trust, provide the Trust with any necessary calculations of Sierra Services's
Allocable Portion of any EWCs, and the Trust shall be entitled to rely
conclusively on such calculations, without prejudice to any claim it may have
concerning the accuracy of such calculations.
-3-
4
D. Maximum Charges. Notwithstanding anything to the contrary contained
in this Agreement, EWCs paid to Sierra Services by any class of shares of the
Trust shall not exceed the amount permitted by the Rules of Fair Practice of the
NASD ("NASD Rules"), as in effect from time to time, and the aggregate amount of
EWCs paid to Sierra Services by any class of shares of the Trust shall not
exceed 8.50% of the offering price (determined in accordance with the NASD Rules
in effect from time to time).
5. Disclosure and Sales Materials
A. Trust Governing Documents. The Trust shall have furnished Sierra
Services with copies, properly certified or authenticated as Sierra Services may
reasonably request, of the following documents and of all amendments or
supplements thereto ("Governing Documents"):
(1) The Agreement and Declaration of Trust, as amended and in
effect as of the date of this Agreement (such Declaration of
Trust, as they may be amended from time to time hereafter, the
"Declaration of Trust");
(2) The Trust's Bylaws, as amended and in effect as of the
date of this Agreement (such Bylaws, as they may be amended
from time to time hereafter, the "Bylaws");
(3) Resolutions of the Trust's Board of Trustees authorizing
the appointment of Sierra Services as a Distributor of the
Shares and authorizing this Agreement as hereby amended and
restated;
(4) The Trust's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act,
as filed with the Securities and Exchange Commission (the
"SEC") on October 31, 1995;
(5) The Trust's registration statement on Form N-2 under the
1933 Act, (File No. 33-27489) and under the 1940 Act as filed
with the SEC on October 31, 1995 relating to the Shares of the
Fund, and all amendments thereto;
(6) The most recent Prospectus relating to the Shares; and
(7) All documents, notices and reports filed with the SEC.
The Trust authorizes Sierra Services and any Broker with whom Sierra
Services has entered into Dealer Agreements to use, in connection with the sale
of Shares, any Prospectus furnished by the Trust from time to time. Sierra
Services shall not, and shall take reasonable steps to ensure that no Broker
will, give any information nor make any representations, concerning any aspect
of the Shares or the Trust to any persons or entity unless such information or
representations are contained in the Registration Statement and/or the pertinent
Prospectus, or are contained in sales or promotional literature approved by the
Trust. Sierra Services shall not use, and shall take reasonable steps to ensure
that no Broker will, use any sales promotion material or advertising that has
not been previously approved by the Trust.
6. Duties of the Trust
A. The Trust agrees at its own expense to execute any and all
documents, to furnish any and all information and to take any other actions that
may be reasonably necessary in connection with (a) the registration of Shares
under the 1933 Act and (b) the qualification, pursuant to state securities laws,
of the Shares for sale in those states that Sierra Services may designate.
B. Information Reports; Financial Data. The Trust shall furnish to
Sierra Services from time to time, for use in connection with the sale of the
Shares, such information reports with respect to the Trust and the Shares as
-4-
5
Sierra Services may reasonably request. Such reports shall be signed by officers
of the Trust duly authorized; the Trust warrants the statements contained in any
reports so signed to be true and correct. The Trust shall furnish to Sierra
Services, upon its request, (a) annual audits of the Trust's books and accounts
made by independent public accountants regularly retained by the Trust, (b)
semiannual unaudited financial statements pertaining to the Trust, (c) quarterly
earnings statements prepared by the Trust, (d) a monthly itemized list of the
securities in the portfolio of the Trust, (e) monthly balance sheets as soon as
practicable after the end of each month and (f) such additional information
regarding the Trust's financial condition as Sierra Services may reasonably
request from time to time.
7. Compliance; Standard of Care
A. Compliance. In performing any activity as distributor for the Shares
pursuant to this Agreement, Sierra Services shall comply with:
(1) all applicable provisions of the 1940 Act and any rules
and regulations thereunder;
(2) all provisions of the Registration Statement relating to
the Trust;
(3) all provisions of the Trust's Governing Documents;
(4) all rules and regulations of the NASD and all other
self-regulatory organizations applicable to the sale of
investment company shares; and
(5) any other applicable provisions of federal and state law.
Sierra Services shall use its best efforts to maintain all required
licenses and registrations for itself as a broker or dealer, and for its
registered representatives or other associated persons, under the 1934 Act and
applicable state securities or blue sky laws. Sierra Services shall be
responsible for ensuring that each Broker and its representatives engaged in
selling Shares of the Trust shall be duly and appropriately licensed, registered
and otherwise qualified to do so under the 1934 Act and any applicable blue sky
laws of each state or other jurisdiction in which such Shares may be sold.
Sierra Services shall be responsible for ensuring that each Broker supervises
its representatives. Expulsion or suspension of Sierra Services from the NASD
shall automatically terminate this Agreement on the effective date of such
expulsion or suspension.
B. Direction of the Board. Any distribution activities undertaken by
Sierra Services pursuant to this Agreement or any other services undertaken by
Sierra Services on behalf of the Trust, shall at all times be subject to any
directives of the Board of Trustees of the Trust.
C. Standard of Care. In performing its duties under this Agreement,
Sierra Services shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits in performing
all services provided for under this Agreement, but shall not be liable for any
act or omission not constituting Sierra Services's willful misfeasance, bad
faith or gross negligence, or Sierra Services's reckless disregard of its duties
under this Agreement.
8. Representations and Warranties
A. Registration Statements and Prospectuses. The Trust represents to
Sierra Services that all Registration Statements and Prospectuses filed by the
Trust with the SEC under the 1933 Act and the 1940 Act with respect to the
Shares are in conformity with the requirements of the 1933 Act, the 1940 Act and
the rules and regulations of the SEC thereunder. The Trust represents and
warrants to Sierra Services that any Registration Statement or Prospectus, when
it becomes effective, will include all statements required to be contained
therein in conformity with the 1933 Act, the 1940 Act and the rules and
regulations of the SEC; that all statements of fact contained in any
Registration Statement or Prospectus will be true and correct when such
Registration Statement or Prospectus becomes effective; and that no Registration
Statement nor any Prospectus, when the same shall become
-5-
6
effective, will include any 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 Shares. Sierra Services may,
but shall not be obligated to, propose from time to time such amendment(s) to
any Registration Statement and such supplement(s) to any Prospectus as, in the
light of future developments, may, in the opinion of Sierra Services or its
counsel, be necessary or advisable. The Trust shall not file any amendment to
any Registration Statement or supplement to any Prospectus without giving Sierra
Services reasonable notice thereof in advance; provided, however, that nothing
contained in this Agreement shall in any way limit the Trust's right to file at
any time such amendment(s) to any Registration Statement and supplement(s) to
any Prospectus, of whatever character, as the Trust may deem advisable, such
right being in all respects absolute and unconditional.
B. Charter. The Trust represents that a copy of its Agreement and
Declaration of Trust dated October 4, 1995, together with all amendments
thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts and the office of the City Clerk of Boston, Massachusetts.
C. Authorization. Sierra Services represents to the Trust that it is
authorized to perform the services described herein.
D. NASD. Sierra Services represents to the Trust that it is a member in
good standing of the NASD.
9. Indemnification
A. Indemnification by the Trust. The Trust agrees to indemnify, defend
and hold Sierra Services, its officers, directors, agents, employees, and any
person who controls Sierra Services within the meaning of Section 15 of the 1933
Act (Sierra Services and such persons, collectively, "Sierra Services
Indemnified Persons"), 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 counsel fees incurred in
connection therewith) that any Sierra Services Indemnified Person may incur
under the 1933 Act, the 1940 Act or common law or otherwise, arising out of or
based upon any untrue statement (or alleged untrue statement) of a material fact
contained in any Registration Statement or Prospectus relating to Shares of the
Trust, or arising out of or based upon any omission (or alleged omission) to
state a material fact required to be stated in any Registration Statement or
Prospectus relating to Shares of the Trust, or necessary to make the statements
in such Registration Statement or Prospectus not misleading, or arising out of
or based upon the Trust's material breach of this Agreement; provided, however,
that the Trust's agreement to indemnify Sierra Services Indemnified Persons
shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of or based upon any statements or representations made by Sierra
Services or its representatives or agents other than such statements and
representations as are contained in any Registration Statement or Prospectus and
in such financial and other statements regarding the Shares as are furnished to
Sierra Services pursuant to Sections 5a and 6b of this Agreement; provided
further, that the Trust's agreement to indemnify Sierra Services and the Trust's
representations and warranties hereinbefore set forth in Section 8 of this
Agreement shall not be deemed to cover any liability to the Trust or its
shareholders to which Sierra Services would otherwise be subject by reason of
Sierra Services' willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of Sierra Services' reckless disregard
of its obligations and duties under this Agreement; and provided further, that
this Section 9 shall apply to all acts or omissions by the parties hereto that
occur on or after the date first written above and the indemnification
provisions of this Agreement shall apply to all acts or omissions by the parties
hereto that occur prior to such date.
The Trust's agreement to indemnify Sierra Services Indemnified Persons
is expressly conditioned upon such Sierra Services Indemnified Person's
notifying the Trust, or causing the Trust to be notified, of any action brought
against such Sierra Services Indemnified Person, such notification to be given
by letter, telegram, telecopy or facsimile addressed to the Trust at its
principal office, within ten (10) days after the summons or other first legal
process shall be served; provided that the failure to provide such notification
within such time limit shall limit the Trust's obligation to indemnify such
persons only to the extent such failure causes prejudice to the interests of the
Trust with respect to such action. The failure so to notify the Trust of any
such action shall not relieve the Trust from any liability that the Trust may
have to the person against whom such action is brought by reason of any such
untrue
-6-
7
(or alleged untrue) statement or omission (or alleged omission) otherwise than
on account of the Trust's indemnity agreement contained in this Section 9a. The
Trust's indemnification agreement contained in this Section 9a and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Sierra Services Indemnified Person, and shall survive the delivery of any
Shares and, to the extent permitted by law, the termination of this Agreement.
This agreement of indemnity will inure exclusively to the benefit of Sierra
Services Indemnified Persons and their respective estates or successors, as
applicable.
B. Indemnification by Sierra Services. Sierra Services agrees to
indemnify, defend and hold the Trust, its officers, directors, agents,
employees, and any person who controls the Trust within the meaning of Section
15 of the 1933 Act (the Trust and such persons, collectively, "Trust Indemnified
Persons"), free and harmless from and against any and all claims, demands,
liabilities and expenses (including the costs of investigating or defending such
claims, demands or liabilities and any counsel fees incurred in connection
therewith) that any Trust Indemnified Person may incur under the 1933 Act, the
1940 Act or common law or otherwise, but only to the extent that such liability
or expense incurred by such Trust Indemnified Person shall arise out of or be
based upon (a) any unauthorized sales literature, advertisements, information,
statements or representations or (b) any untrue statement (or alleged untrue
statement) of a material fact contained in information furnished in writing by
Sierra Services to the Trust and used in the answers to any of the items of the
Registration Statement or in the corresponding statements made in any
Prospectus, or shall arise out of or be based upon any omission (or alleged
omission) to state a material fact in connection with such information furnished
in writing by Sierra Services to the Trust and required to be stated in such
answers or necessary to make such information not misleading, or shall arise out
of or be based upon Sierra Services' material breach of this Agreement;
provided, that this Section 9 shall apply to all acts or omissions by the
parties hereto that occur on or after the date first written above and the
indemnification provisions of the Original Agreement shall apply to all acts or
omissions by the parties hereto that occur prior to such date.
Sierra Services' agreement to indemnify Trust Indemnified Persons is
expressly conditioned upon such Trust Indemnified Person's notifying Sierra
Services, or causing Sierra Services to be notified, of any action brought
against such Trust Indemnified Person, such notification to be given by letter,
telegram, telecopy or facsimile addressed to Sierra Services at its principal
office, within ten (10) days after the summons or other first legal process
shall be served; provided that the failure to provide such notification within
such time limit shall limit Sierra Services' obligation to indemnify such
persons only to the extent such failure causes prejudice to the interests of
Sierra Services with respect to such action. The failure so to notify Sierra
Services of any such action shall not relieve Sierra Services from any liability
that Sierra Services may have to the Trust Indemnified Person by reason of any
such untrue (or alleged untrue) statement or omission (or alleged omission)
otherwise than on account of Sierra Services' indemnity agreement contained in
this Section 9b. Sierra Services' indemnification agreement contained in this
Section 9b and its representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any Trust Indemnified Person, and shall survive the delivery of
any Shares and, to the extent permitted by law, the termination of this
Agreement. This agreement of indemnity will inure exclusively to the benefit of
Trust Indemnified Persons and their respective estates or successors, as
applicable.
C. Assumption of Defense. An indemnifying party will be entitled to
assume the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of good
standing chosen by the indemnifying party and approved by the indemnified party
(provided that such counsel shall not, except with the consent of an indemnified
party that is a Sierra Services Indemnified Person, be counsel to any investment
fund of the Trust); provided that the indemnified party shall be entitled to
conduct its own defense with counsel selected by it if such indemnified party is
advised by counsel that there may be a conflict of interest between the
indemnified party and the indemnifying party with respect to such defense. In
the event the indemnifying party elects to assume the defense of any such suit
and retain counsel of good standing approved by the indemnified party, 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 the indemnifying party
does not elect or is not permitted to assume the defense of any such suit, or in
case the indemnified party does not approve of counsel chosen by the
indemnifying party, the indemnifying
-7-
8
party will reimburse the indemnified party named as defendant or defendants in
such suit, for the fees and expenses of any counsel retained by such indemnified
party.
D. Notice. Each of Sierra Services and the Trust agrees to notify the
other promptly of the commencement of any litigation or proceedings against it
or any of its officers or directors or Trustees, as applicable, in connection
with the issuance and sale of any Shares.
E. Contribution. If the indemnification provided for in this Section
shall for any reason be unavailable to or insufficient to hold harmless a party
indemnified hereunder in respect of any claim, demand, liability or expense, or
any action in respect thereof, referred to therein, then each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such claim, demand,
liability or expense, or action in respect thereof, (a) in such proportion as
shall be appropriate to reflect the relative benefits received by the Trust on
the one hand and Sierra Services on the other from the offering of the Shares or
(b) if the allocation provided by clause (a) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (a) above but also the relative fault of
the Trust (and its agents other than Sierra Services) on the one hand and Sierra
Services on the other with respect to the statements or omissions which resulted
in such claim, demand, liability or expense, or action in respect thereof, as
well as any other relevant equitable considerations. The relative benefits
received by the Trust on the one hand and Sierra Services on the other with
respect to the offering of the Shares shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares purchased
under this agreement (before deducting expenses) received by the Trust bear to
the total net underwriting discounts and commissions received by Sierra Services
with respect to the Shares purchased under this Agreement and retained by Sierra
Services after payments to the selling agents retained by it. The relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Trust (or any of its agents other
than Sierra Services) or by Sierra Services, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Trust and Sierra Services agree that it would
not be just and equitable if contributions pursuant to this Section were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the claim, demand,
liability or expense, or action in respect thereof, referred to above in this
Section shall be deemed to include, for purposes of this Section, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section, Sierra Services shall not be required to contribute
any amount in excess of the amount by which the total net underwriting discounts
and commissions received by Sierra Services with respect to the Shares purchased
under this Agreement and retained by Sierra Services after payments to the
selling agents retained by it exceed the amount of any damages which Sierra
Services has otherwise paid or become liable to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
10. Notice to Sierra Services.
A. The Trust agrees to advise Sierra Services immediately in writing:
(1) of any request by the SEC for amendments to the
Registration Statement or Prospectus then in effect or for
additional information;
(2) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or
Prospectus then in effect or the initiation of any proceeding
for that purpose;
(3) of the happening of any event that makes untrue any
statement of a material fact made in the Registration
Statement or Prospectus then in effect or that requires the
making of a change in
-8-
9
such Registration Statement or Prospectus in order to make the
statements therein not misleading; and
(4) of all actions of the SEC with respect to any amendment to
any Registration Statement or Prospectus that may from time to
time be filed with the SEC.
11. Term of Agreement.
A. This Agreement shall become effective as of the date first set forth
above, shall remain in effect for an initial period of two years, and shall
continue thereafter from year to year for so long as such continuance is
specifically approved at least annually by
(1) the Trust's Board of Trustees or a vote of a "majority of
the outstanding voting securities" (as defined in the 0000
Xxx) of the Trust; and
(2) a vote of a majority of the Trustees who are not
"interested persons" (as defined in the 0000 Xxx) of the Trust
and who have no direct or indirect financial interest in the
operation of the Plan, in this Agreement or any other
agreement related to the Plan (the "Qualified Trustees"), such
vote cast in person at a meeting called for the purpose of the
voting on such approval.
12. Termination.
A. Termination on Assignment. This Agreement shall terminate
automatically in the event of its "assignment" (as defined in the 1940 Act), it
being understood that this Agreement has been approved by the Trustees,
including the Qualified Trustees. Sierra Services agrees to notify the Trust of
any circumstances that might result in this Agreement being deemed to be
assigned.
B. Voluntary Termination. The Trust may terminate this Agreement with
respect to the Trust, or in its entirety, without penalty, on 60 days' written
notice to Sierra Services, by vote of a majority of the Qualified Trustees or by
vote of a "majority of the outstanding voting securities" of the Trust, as the
case may be. Sierra Services may terminate this Agreement on 90 days' written
notice to the Trust. Termination of this Agreement with respect to any class of
shares of the Trust shall not cause this Agreement to terminate with respect to
any other class of shares of such Trust. Notice of termination as provided for
in this Section may be waived by either party, such waiver to be in writing.
13. Miscellaneous.
A. Non-Exclusivity. The Trust recognizes that Sierra Services and its
affiliates shall be free to render distribution or other services to others
(including other investment companies) and to engage in other activities. The
Trust agrees that the directors, officers and employees of Sierra Services shall
not be prohibited by reason of this Agreement from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, directors, trustees or officers of any other firm or
corporation, including the Trust and other investment companies. Sierra Services
acknowledges that its appointment as distributor pursuant to this Agreement is
not exclusive, and that the Trust may appoint one or more other persons to act
as distributor for the Shares of one or more Funds.
B. Independent Contractor. Sierra Services and any Broker shall be
independent contractors and none of them nor any of their directors, officers or
employees shall, as such, be deemed employees of the Trust.
C. Notices. Any notices under this Agreement shall be in writing,
mailed postage paid or sent by telegram, telecopy, or facsimile to the other
party at such address as such other party may designate from time to time for
the receipt of such notice.
-9-
10
D. Integration; Amendment; Counterparts; Governing Law.
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and may not be modified,
amended, or waived except by a written instrument duly executed by the party
against whom such modification, amendment, or waiver is sought to be enforced.
If any provisions 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.
This Agreement shall be subject to the provisions of the 1940 Act and
the 1934 Act and the rules, regulations and rulings thereunder, and of the
applicable rules and regulations of the NASD, from time to time in effect, and
the terms hereof shall be interpreted and construed in accordance therewith.
This Agreement may be executed in any number of counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same instrument.
This Agreement shall be governed in accordance with the internal
substantive laws of the Commonwealth of Massachusetts.
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but bind only the trust property of
the Trust, as provided in the Trust Agreement. The execution and delivery of
this Agreement have been authorized by the Trustees and effected by an
authorized officer of the Trust, acting as such, and neither such authorization
nor such execution and delivery shall be deemed to have been made by any Trustee
or officer individually or to impose any liability on any of them personally,
but shall bind only the trust property of the Trust as provided in the Trust
Agreement.
Please confirm that the foregoing accurately sets forth our agreement
by indicating your acceptance hereof at the place below indicated, whereupon it
shall become a binding agreement between us as of the date first set forth
above.
Very truly yours,
Sierra Prime Income Fund
By /s/ F. Xxxxx Xxxxxx
-------------------------------
Title: President
ACCEPTED:
Sierra Investment Services Corporation
By /s/ Xxxxx X. Xxxxx
------------------------------------------
Title: Senior Vice President and Secretary
-10-
