EXHIBIT 6(a)
DISTRIBUTION CONTRACT
THIS AGREEMENT, dated this 23rd day of January 1997, is a continuation of
Agreements initially adopted in 1983 (with the exception of Composite Northwest
Fund, Inc. which adopted the Plan in 1987), by and between individual funds
within the Composite Group of Funds (corporations duly incorporated and existing
under the laws of the State of Washington), and XXXXXXX XXXXX, INC., doing
business at Seattle, Washington, herein sometimes referred to as the
"DISTRIBUTOR." This Agreement is by and between the Composite Group of Funds and
the Distributor.
RECITALS
WHEREAS, the Composite Group of Funds ("Composite") is a family of funds
registered as open-end, management investment companies under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Composite Group of Funds and the Distributor desire to enter
into an agreement that sets forth standard terms and conditions for distribution
services for the individual funds, as noted on the signatory page, and in
accordance with the schedule of fees attached as Exhibit A;
WHEREAS, the payments contemplated herein intend to result in the sale of
Composite shares of common stock with the allocation of certain charges and
expenses in paragraph 6 hereof and the reimbursement of expenses incurred by the
Distributor as agent for Composite for advertisement, promotional material,
sales literature and printing and mailing of prospectuses to other than current
Composite shareholders;
WHEREAS, such payments may be considered the financing of activities
intended to result in the sale of Composite shares;
WHEREAS, this Agreement is intended to be a "written plan" of the
reimbursement type for Class A shares and of the compensation type for Class B
shares as contemplated by Rule 12b-1 promulgated pursuant to the provisions of
the 1940 Act;
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. APPOINTMENT. Composite hereby appoints Xxxxxxx Xxxxx as the Distributor for
the funds for the period and on terms set forth in this Agreement. The
Distributor accepts such appointment and agrees to render the services
herein set forth, for the payments herein provided (including reimbursement
of expenses).
2. DELIVERY OF DOCUMENTS. Composite has furnished the Distributor with copies
of:
(a) Articles of Incorporation and all amendments thereto for each fund;
(b) Bylaws and all amendments thereto for each fund;
(c) Each fund's most recent prospectus and recent registration statement.
From time to time, each fund will furnish the Distributor properly
certified or authenticated copies of all amendments or supplements to the
foregoing, if any, and all documents, notices and reports filed with the
Securities and Exchange Commission (the "SEC").
3. DUTIES OF THE DISTRIBUTOR. The Distributor shall provide each fund with the
benefit of its best judgment, efforts and facilities in rendering its
services as Distributor. The Distributor will act as the exclusive
Distributor, subject to the supervision of each fund's board of directors
and the following understandings: (i) directors shall be responsible for
and control the conduct of each fund's affairs; (ii) in all matters
relating to the performance of this Agreement, the Distributor will act in
conformity with the Articles of Incorporation, Bylaws and Prospectus of
each fund and with the instructions and directions of each fund's board of
directors and will conform to and comply with the requirements of the 1940
Act and all other applicable federal or state laws and regulations. In
carrying out its obligations hereunder, the Distributor shall:
(a) provide to each fund's board of directors, at least quarterly, a
written report of the amounts expended in connection with all
distribution services rendered pursuant to this Agreement, including
an explanation of the purposes for which such expenditures were made;
and
(b) take, on behalf of each fund, all actions which appear to be necessary
to carry into effect the distribution of each fund's shares as
provided in paragraph 4.
4. DISTRIBUTION OF SHARES. It is mutually understood and agreed that the
Distributor does not undertake to sell all or any specific portion of the
shares of common stock of any of the funds. A fund shall not sell any
shares of its common stock except through the Distributor. Notwithstanding
the provisions of the foregoing sentence:
(a) A fund may issue its shares at their net asset value to any
shareholder of the fund purchasing such shares with dividends or other
cash distributions received from the fund pursuant to any special or
continuing offer made to shareholders;
(b) the Distributor may, and when requested by a fund, shall, suspend its
efforts to effectuate sales of the shares of common stock of a fund at
any time when in the opinion of the Distributor or of the fund no
sales should be made because of market or other economic
considerations or abnormal circumstances of any kind and may in its
sole discretion reject orders for the purchase of a fund's shares;
(c) a fund may withdraw the offering of its shares of common stock (i) at
any time with the consent of the Distributor or (ii) without such
consent when so required by the provisions of any statute or of any
order, rule or regulation of any governmental body having
jurisdiction; and
(d) the price at which the shares may be sold (the "offering price") shall
be the net asset value per share, plus a sales charge which shall be
determined in the manner established from time to time by a fund's
Distributor and set forth in a fund's then current prospectus.
5. COMPENSATION FOR SERVICING SHAREHOLDER ACCOUNTS. Composite acknowledges
that the Distributor may compensate its investment representatives for
opening accounts, processing investors' purchase and redemption orders,
responding to inquiries from fund shareholders concerning the status of
their accounts and the operations of a fund, and communicating with a fund
and its transfer agent on behalf of fund shareholders in such manner and
amount as the Distributor may deem appropriate.
6. EXPENSES. The expenses connected with distribution shall be allocable
between the funds and the Distributor as follows:
(a) the Distributor shall furnish the services of personnel to the extent
that such services are required to carry out its obligations under
this Agreement.
(b) Composite agrees that each fund assumes and shall pay or cause to be
paid the following expenses incurred on its behalf:
registration of common stock (except the initial registration)
including the expense of printing and distributing prospectuses;
expenses incurred for corporate services; taxes and expenses related
to portfolio transactions; charges and expenses of any registrar,
custodian or depository for portfolio securities and other property,
and any stock transfer, dividend or account agent or agents; brokers'
commissions chargeable in connection with portfolio securities
transactions; all taxes, including securities issuance and transfer
taxes, and corporate fees payable to federal, state or other
governmental agencies; the costs and expenses of engraving or printing
of stock certificates representing shares of a fund; costs and
expenses in connection with the registration and maintenance of
registration of a fund and its shares with the SEC and various states
and other jurisdictions (including filing fees, legal fees and
disbursements of counsel); expenses of shareholders' and directors'
meetings and of preparing, printing, and mailing of proxy statements
and reports to shareholders; fees and travel expenses of
"disinterested" directors; 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 a fund's shares; fees and expenses of legal counsel and of
independent accountants; membership dues of industry associations;
postage (excluding postage for promotional and sales literature);
insurance premiums on property of personnel (including, but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of a
fund's operation unless otherwise explicitly provided herein.
(c) With respect to Class A shares, the Distributor shall request
reimbursement for distribution expenses not otherwise described above,
including, without limitation, the direct cost of advertising,
marketing, selling, and distributing shares of common stock of each
fund; printing and mailing prospectuses to other than current
shareholders; the cost of preparation, printing, and mailing of
promotional and sales literature; and compensation paid to registered
representatives of the Distributor, affiliates of the Manager or other
dealers. Reimbursement for these distribution expenses will be subject
to the provisions of Rule 12b-1 and will not exceed an annual rate of
a fund's average daily net assets attributable to Class A shares as
set forth in Exhibit A. Such expenditures will be reviewed at least
quarterly by the board of directors. In addition, the Distributor and
its affiliates or the Manager and its affiliates may pay additional
expenses of any type or nature which are reported to and deemed by the
directors to be appropriate for reimbursement within the provisions of
this paragraph.
(d) With respect to Class B shares, the Distributor shall be compensated
with a distribution fee equal to an annual rate of .75 of 1% of a
fund's average net assets attributable to Class B shares and a service
fee at an annual rate of .25 of 1% of such assets. Proceeds from any
contingent deferred sales charges are paid to the Distributor.
(e) The distributor will furnish the board of directors statements of
distribution revenues and expenditures at least quarterly with respect
to each class of shares. Only distribution expenses properly
attributable to Class A shares will be used to support the
reimbursement charged to Class A shareholders.
(f) Each fund will record all payments made under the Plan as expenses in
the calculation of its net investment income. The amount of
distribution expenses incurred by the Distributor that may be paid
pursuant to the Plan in future periods will not be incurred as a
liability, unless the standards for accrual of a liability under
generally accepted accounting principles have been satisfied. Such
distribution expenses will be recorded as an expense in future periods
as they are paid by a fund.
(g) For purposes of Section 6 of this Distribution Contract, the
Distributor shall not be responsible for the payment of distribution
expenses that are subject to reimbursement, as the Distributor has
acted solely as the agent of Composite or of a specific fund in
connection therewith.
7. EXPENSE LIMITATION. In the event the operating expenses of any fund, for
any fiscal year exceed the expense limitations imposed by the securities
laws or regulations thereunder of any state in which that fund's shares are
qualified for sale, as such limitations may be raised or lowered from time
to time, the Distributor will reimburse that fund for annual operating
expenses in excess of any expense limitation that may be applicable;
provided, however, there shall be excluded from such expenses the amount of
all distribution costs as well as any interest, taxes, brokerage
commissions, and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund.
8. NON-EXCLUSIVITY. The services of the Distributor are not exclusive and the
Distributor shall be entitled to render distribution or other services to
others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers of the Distributor
may serve as officers or directors of Composite, and that officers or
directors of Composite may serve as officers of the Distributor to the
extent permitted by law; and that officers of the Distributor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers or
directors of any other firm or corporation, including other investment
companies.
9. TERM AND APPROVAL. This Agreement shall become effective upon execution and
shall continue in force and effect from year to year, provided that such
continuance is specifically approved at least annually:
(a) by Composite's board of directors or (ii) by the vote of a majority of
the outstanding voting securities of any fund (as defined in Section
2{1}{42} of the 1940 Act), and
(b) the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of any such party or
have no direct or indirect financial interest in the operation of this
Agreement or any agreement related to this Agreement, by votes cast in
person at a meeting specifically called for the purpose of voting on
such approval.
10. TERMINATION. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of Composite's board of directors, by a
vote of a majority of the members of the board of directors of Composite
who are not interested persons of any fund and have no direct or indirect
financial interest in the operation of this Agreement or in agreement
related to this Agreement, or by a vote of a majority of any fund's
outstanding voting securities (as defined in Section 2{a}{42} of the 1940
Act), or by the Distributor on sixty (60) days' written notice to the other
party. The notice provided for herein may be waived by either party. This
Agreement shall automatically terminate in the event of its assignment, the
term "assignment" for this purpose having the meaning defined in Section
{a}{4} of the 1940 Act.
11. AMENDMENTS.
(a) This Agreement may be amended by the parties hereto only if such
amendment is specifically approved (i) by the board of directors of
Composite or by the vote of majority of outstanding voting securities
of any fund, and (ii) by a majority of those directors who are not
parties to this Agreement or disinterested persons of any such party,
which vote must be cast in person at a meeting called for the purpose
of voting on such approval; provided, however, that if any such
amendment is "material" as such word is used in Rule 12b-1 under the
1940 Act, such amendment shall be approved in the manner prescribed in
paragraph 10 for the annual approval of the continuation of the
Agreement.
(b) In the event that this Agreement is proposed to be amended to increase
materially the amount to be spent for distribution, such amendment
will not be effected without shareholder approval.
12. LIABILITY OF THE DISTRIBUTOR. In the performance of its duties hereunder,
the Distributor shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits to
insure the accuracy of all services performed under this Agreement, but the
Distributor shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part
of the Distributor or reckless disregard by the Distributor of its duties
under this Agreement provided that the Distributor shall be responsible for
its own negligent failure to perform its duties under this Agreement.
13. NOTICES. Any notices under this Agreement shall be in writing, addressed
and delivered or mailed postage paid to the other party at such address as
such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of
Composite shall be 000 Xxxx Xxxx Xxxxxx, Xxxxxxx, XX 00000, and the address
of the Distributor shall be 0000 Xxxxx Xxxxxx, Xxxxxxx, XX 00000.
14. QUESTIONS OF INTERPRETATION. This Agreement shall be implemented and
continued in a manner consistent with the provisions of the 1940 Act and to
interpretations thereof, if any, of the United States Courts or, in the
absence of any controlling decision of any such court, by rules,
regulations or orders of the SEC issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is revised by rule, regulation or order of
the SEC, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
FUNDS BOUND BY THIS AGREEMENT COMPOSITE GROUP OF FUNDS
Composite Bond & Stock Fund, Inc. By:/s/ Xxxxxxx X. Xxxxxx
Composite Equity Series, Inc. Xxxxxxx X. Xxxxxx
Composite Northwest Fund, Inc. President
Composite U.S. Government Securities, Inc.
Composite Income Fund, Inc.
Composite Tax-Exempt Bond Fund, Inc.
Composite Cash Management Company
ATTEST:/s/ Xxxx X. Xxxx
Xxxx X. Xxxx
Secretary XXXXXXX XXXXX, INC.
By:/s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
President
ATTEST:/s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Secretary