DISTRIBUTION AGREEMENT
This Agreement made as of December 8, 2000 by and between
Threshold Advisor Funds, Inc. (the "Fund"), a Maryland Corporation in the
process of registering as an open-end investment company, and Unified Financial
Securities, Inc., an Indiana corporation ("Distributor").
WHEREAS, the Fund is registering as an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, Distributor is a broker-dealer registered with the Securities
and Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund and Distributor are desirous of entering into an
agreement providing for the distribution by Distributor of shares of beneficial
interest (the "Shares") of each series or share class of shares of the Fund (the
"Series");
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
1. Appointment.
The Fund hereby appoints Distributor as its exclusive agent for the
distribution of the Shares, and Distributor hereby accepts such appointment
under the terms of this Agreement. While this Agreement is in force, the
Fund shall not sell any Shares except on the terms set forth in this
Agreement. Notwithstanding any other provision hereof, the Fund may
terminate, suspend or withdraw the offering of Shares whenever, in its sole
discretion, it deems such action to be desirable.
2. Sale and Repurchase of Shares.
(a) Distributor will have the right, as agent for the Fund, to enter into
dealer agreements with responsible investment dealers, and to sell
Shares to such investment dealers against orders therefor at the public
offering price (as defined in subparagraph 2(d) hereof) stated in the
Fund's effective Registration Statement on Form N-1A under the Act and
the Securities Act of 1933, as amended,including the then current
prospectus and statement of additional information (the "Registration
Statement"). Upon receipt of an order to purchase Shares from a dealer
with whom Distributor has a dealer agreement, Distributor will promptly
cause such order to be filled by the Fund.
(b) Distributor will also have the right, as agent for the Fund, to sell
such Shares to the public against orders therefor at the public
offering price.
(c) Distributor will also have the right to take, as agent for the Fund,
all actions which, in Distributor's reasonable judgment, are necessary
to carry into effect the distribution of the Shares.
(d) The public offering price for the Shares of each Series shall be the
respective net asset value of the Shares of that Series then in effect,
plus any applicable sales charge determined in the manner set forth in
the Registration Statement or as permitted by the Act and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder. In no event shall any applicable sales charge exceed the
maximum sales charge permitted by the Rules of the NASD. Distributor
shall pay re-allowances of sales charges as set forth in the Statement
of Additional Information to broker-dealers with whom Distributor has a
dealer agreement.
(e) The net asset value of the Shares of each Series shall be determined in
the manner provided in the Registration Statement, and when determined
shall be applicable to transactions as provided for in the Registration
Statement. The net asset value of the Shares of each Series shall be
calculated by the Fund or by another entity on behalf of the Fund.
Distributor shall have no duty to inquire into or liability for the
accuracy of the net asset value per Share as calculated.
(f) On every sale, the Fund shall receive the applicable net asset value of
the Shares promptly, but in no event later than the third business day
following the date on which Distributor shall have received an order
for the purchase of the Shares.
(g) Upon receipt of purchase instructions, Distributor will transmit such
instructions to the Fund or its transfer agent for registration of the
Shares purchased.
(h) Nothing in this Agreement shall prevent Distributor or any affiliated
person (as defined in the Act) of Distributor from acting as
Distributor or distributor for any other person, firm or corporation
(including other investment companies) or in any way limit or restrict
Distributor or any such affiliated person from buying, selling or
trading any securities for its or their own account or for the accounts
of others from whom it or they may be acting; provided, however, that
Distributor expressly represents that it will undertake no activities
which, in its reasonable judgment, will adversely affect the
performance of its obligations to the Fund under this Agreement.
(i) Distributor, as agent of and for the account of the Fund, may
repurchase the Shares at such prices and upon such terms and conditions
as shall be specified in the Registration Statement.
3. Sale of Shares by the Fund.
The Fund reserves the right to issue any Shares at any time directly to the
holders of Shares ("Shareholders"), to sell Shares to its Shareholders or
to other persons at not less than net asset value and to issue Shares in
exchange for substantially all the assets of any corporation or trust or
for the shares of any corporation or trust.
4. Basis of Sale of Shares.
Distributor does not agree to sell any specific number of Shares.
Distributor, as agent for the Fund, undertakes to sell Shares on a best
efforts basis only against orders therefor.
5. Rules of NASD, etc.
(a) Distributor will conform to the Rules of the NASD and the securities
laws of any jurisdiction in which it sells, directly or indirectly, any
Shares.
(b) Distributor will require each dealer with whom Distributor has a dealer
agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of the
Shares, and neither Distributor nor any such dealers shall withhold the
placing of purchase orders so as to make a profit thereby.
(c) Distributor agrees to furnish to the Fund sufficient copies of any
agreements, plans or other materials it intends to use in connection
with any sales of Shares in reasonably adequate time for the
Distributor, on behalf of the Fund, to file and clear them with the
proper authorities before they are put in use, and not to use them
until so filed and cleared.
(d) Distributor, at its own expense, will qualify as dealer or broker, or
otherwise, under all applicable state or federal laws required in order
that Shares may be sold in such States as may be mutually agreed upon
by the parties.
(e) Distributor shall not make, or permit any representative, broker or
dealer to make, in connection with any sale or solicitation of a sale
of the Shares, any representations concerning the Shares except those
contained in the then current prospectus and statement of additional
information covering the Shares and in printed information approved by
the Fund as information supplemental to such prospectus and statement
of additional information. Copies of the then effective prospectus and
statement of additional information and any such printed supplemental
information will be supplied by the Fund to Distributor in reasonable
quantities upon request.
6. Records to be Supplied by Fund.
The Fund shall furnish to Distributor copies of all information, financial
statements and other papers which Distributor may reasonably request for
use in connection with the distribution of the Shares, and this shall
include, but shall not be limited to, one certified copy, upon request by
Distributor, of all financial statements prepared for the Fund by
independent public accountants.
7. Fees and Expenses.
For performing its services under this Agreement, Distributor will receive
from the Fund a minimum fee of $12,000 per year to be paid on a monthly
basis. The portion of sales charges retained by Distributor after payment
of amounts reallowed to dealers shall be applied against the minimum each
month. The balance of the minimum due, if any, shall be paid monthly in
arrears. The Fund shall also promptly reimburse Distributor for any
expenses that are to be paid by the Fund in accordance with the following
paragraph.
In the performance of its obligations under this Agreement, Distributor
will pay only the costs incurred in qualifying as a broker or dealer under
state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in
connection with the offering of the Shares will be paid by the Fund in
accordance with agreements between them as permitted by applicable laws,
including the Act and rules and regulations promulgated thereunder. These
costs include, but are not limited to, licensing fees, filing fees
(including NASD), sales literature review fees ($50.00 per hour), travel
and such other expenses as may be incurred by Distributor on behalf of the
Fund.
8. Indemnification of Fund.
Distributor agrees to indemnify and hold harmless the Fund and each person
who has been, is, or may hereafter be a trustee, director, officer,
employee, shareholder or control person of the Fund against any loss,
damage or expense (including the reasonable costs of investigation)
reasonably incurred by any of them in connection with any claim or in
connection with any action, suit or proceeding to which any of them may be
a party, which arises out of or is alleged to arise out of or is based upon
any untrue statement or alleged untrue statement of a material fact, or the
omission or alleged omission to state a material fact necessary to make the
statements not misleading, on the part of Distributor or any agent or
employee of Distributor or any other person for whose acts Distributor is
responsible, unless such statement or omission was made in reliance upon
written information furnished by the Fund. Distributor likewise agrees to
indemnify and hold harmless the Fund and each such person in connection
with any claim or in connection with any action, suit or proceeding which
arises out of or is alleged to arise out of Distributor's failure to
exercise reasonable care and diligence with respect to its services, if
any, rendered in connection with investment, reinvestment, automatic
withdrawal and other plans for Shares. The term "expenses" for purposes of
this and the next paragraph includes amounts paid in satisfaction of
judgments or in settlements which are made with Distributor's consent. The
foregoing rights of indemnification shall be in addition to any other
rights to which the Fund or each such person may be entitled as a matter of
law.
9. Indemnification of Distributor.
The Fund agrees to indemnify and hold harmless Distributor and each person
who has been, is, or may hereafter be a director, officer, employee,
shareholder or control person of Distributor against any loss, damage or
expense (including the reasonable costs of investigation) reasonably
incurred by any of them in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad
faith or negligence, including clerical errors and mechanical failures, on
the part of any of such persons in the performance of Distributor's duties
or from the reckless disregard by any of such persons of Distributor's
obligations and duties under this Agreement, for all of which exceptions
Distributor shall be liable to the Fund. The Fund will advance attorneys'
fees or other expenses incurred by any such person in defending a
proceeding, upon the undertaking by or on behalf of such person to repay
the advance if it is ultimately determined that such person is not entitled
to indemnification.
In order that the indemnification provisions contained in this Paragraph 9
shall apply, it is understood that if in any case the Fund may be asked to
indemnify Distributor or any other person or hold Distributor or any other
person harmless, the Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that Distributor will use all reasonable care to identify and
notify the Fund promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification
against the Fund. The Fund shall have the option to defend Distributor and
any such person against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will so notify
Distributor, and thereupon the Fund shall take over complete defense of the
claim, and neither Distributor nor any such person shall in such situation
initiate further legal or other expenses for which it shall seek
indemnification under this Paragraph 9. Distributor shall in no case
confess any claim or make any compromise in any case in which the Fund will
be asked to indemnify Distributor or any such person except with the Fund's
written consent.
Notwithstanding any other provision of this Agreement, Distributor shall be
entitled to receive and act upon advice of counsel (who may be counsel for
the Fund or its own counsel) and shall be without liability for any action
reasonably taken or thing reasonably done pursuant to such advice, provided
that such action is not in violation of applicable federal or state laws or
regulations.
10. Termination and Amendment of this Agreement.
This Agreement shall automatically terminate, without the payment of any
penalty, in the event of its assignment. This Agreement may be amended only
if such amendment is approved (i) by Distributor, (ii) either by action of
the Board of Directors of the Fund or at a meeting of the Shareholders of
the Fund by the affirmative vote of a majority of the outstanding Shares,
and (iii) by a majority of the Directors of the Fund who are not interested
persons of the Fund or of Distributor by vote cast in person at a meeting
called for the purpose of voting on such approval.
Either the Fund or Distributor may at any time terminate this Agreement on
sixty (60) days' written notice delivered or mailed by registered mail,
postage prepaid, to the other party.
11. Effective Period of this Agreement.
This Agreement shall take effect upon its execution and shall remain in
full force and effect for a period of one (1) year from the date of its
execution (unless terminated automatically as set forth in Section 11), and
from year to year thereafter, subject to annual approval (i) by
Distributor, (ii) by the Board of Directors of the Fund or a vote of a
majority of the outstanding Shares, and (iii) by a majority of the
Directors of the Fund who are not interested persons of the Fund or of
Distributor by vote cast in person at a meeting called for the purpose of
voting on such approval.
12. New Series.
The terms and provisions of this Agreement shall become automatically
applicable to any additional series of the Fund established during the
initial or renewal term of this Agreement.
13. Successor Investment Fund.
Unless this Agreement has been terminated in accordance with Paragraph 11,
the terms and provisions of this Agreement shall become automatically
applicable to any investment company which is a successor to the Fund as a
result of reorganization, recapitalization or change of domicile.
14. Limitation of Liability.
It is expressly agreed that the obligations of the Fund hereunder shall not
be binding upon any of the Directors, shareholders, nominees, officers,
agents or employees of the Fund, personally, but bind only the trust
property of the Fund. The execution and delivery of this Agreement have
been authorized by the Directors of the Fund and signed by an officer of
the Fund, acting as such, and neither such authorization by such Directors
nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Fund.
15. Severability.
In the event any provision of this Agreement is determined to be void or
unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
16. Questions of Interpretation.
(a) This Agreement shall be governed by the laws of the State of
Indiana.
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the Act shall be resolved by reference to such term or
provision of the Act and to interpretation thereof, if any, by the
United States courts or in the absence of any controlling decision of
any such court, by rules, regulations or orders of the Securities and
Exchange Commission issued pursuant to said Act. In addition, where the
effect of a requirement of the Act, reflected in any provision of this
Agreement is revised by rule, regulation or order of the Securities and
Exchange Commission, such provision shall be deemed to incorporate the
effect of such rule, regulation or order.
17. Notices.
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party, with a copy to the
Fund's counsel, at such address as such other party may designate for the
receipt of such notice. Such notice will be effective upon receipt. Until
further notice to the other party, it is agreed that the address of the
Fund for this purpose shall be 00000 Xxxxx Xxxxxxxxx, Xx. Xxxxx, Xxxxxxxx
00000 and that the address of Distributor for this purpose shall be 000 X.
Xxxxxxxxxxxx Xx., Xxxxxxxxxxxx, Xxxxxxx 00000.
18. Execution
This Agreement may be executed by one or more counterparts, each of which
shall be deemed an original, but all of which together will constitute one
in the same instrument.
IN WITNESS WHEREOF, the Fund and Distributor have each caused this
Agreement to be signed in duplicate on their behalf, all as of the day and
year first above written.
ATTEST: THRESHOLD ADVISOR FUNDS, INC.
/s/ Xxxxxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxxxx
Secretary President
ATTEST: UNIFIED FINANCIAL SECURITIES, INC.
/s/ Xxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
Assistant Vice President President
