UNDERWRITING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT, Made this 22nd day of October, 1998, by and between
Advantus Mortgage Securities Fund, Inc., a Minnesota corporation (the "Fund")
and Ascend Financial Services, Inc. (the "Underwriter").
WITNESSETH:
1. UNDERWRITING SERVICES.
The Fund hereby engages the Underwriter, and the Underwriter hereby
agrees to act, as principal underwriter for the Fund in the sale and
distribution of the shares of the Fund to the public, either through dealers or
otherwise. The Underwriter agrees to offer such shares for sale at all times
when such shares are available for sale and may lawfully be offered for sale and
sold.
2. SALE OF FUND SHARES.
Such shares are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to
acceptance or rejection by the Fund. Any offer or sale shall be conclusively
presumed to have been accepted by the Fund if the Fund shall fail to notify the
Underwriter of the rejection of such offer or sales prior to the computation of
the net asset value of the Fund's shares next following receipt by the Fund of
notice of such offer or sale.
(b) No share of the Fund shall be sold by the Underwriter (i) for any
consideration other than cash or, pursuant to an exchange privilege provided for
by the Fund's currently effective Prospectus, shares of any other investment
company for which the Underwriter acts as principal underwriter, or (ii), except
in instances otherwise provided for by the Fund's currently effective
Prospectus, for any amount less than the public offering price per share, which
shall be determined in accordance with the Fund's currently effective
Prospectus.
(c) In connection with certain sales of Fund shares, a contingent
deferred sales charge will be imposed in the event of a redemption transaction
occurring within a certain period of time following such a purchase, as
described in the Fund's currently effective Prospectus and Statement of
Additional Information.
(d) The front-end sales charge, if any, for the Fund may, at the
discretion of the Fund and the Underwriter, be reduced or eliminated as
permitted by the Investment Company Act of 1940, and the rules and regulations
thereunder, as they may be amended from time to time (the "1940 Act"), provided
that such reduction or elimination shall be set forth in the Prospectus for the
Fund, and provided that the Fund shall in no event receive for any shares sold
an amount less than the net asset value thereof. In addition, any contingent
deferred sales charge for the Fund may, at the discretion of the Fund and the
Underwriter, be reduced or eliminated in accordance with the terms of an
exemptive order received from the Securities and Exchange Commission by the
Fund, and any amendments thereto, provided that such reduction or elimination
shall be set forth in the Prospectus for the Fund.
3. REGISTRATION OF SHARES.
The Fund agrees to make prompt and reasonable efforts to effect and keep
in effect, at its expense, the registration or qualification of its shares for
sale in such jurisdictions as the Fund may designate.
4. INFORMATION TO BE FURNISHED TO THE UNDERWRITER.
The Fund agrees that it will furnish the Underwriter with such
information with respect to the affairs and accounts of the Fund as the
Underwriter may from time to time reasonably require, and further agrees that
the Underwriter, at all reasonable times, shall be permitted to inspect the
books and records of the Fund.
5. ALLOCATION OF EXPENSES.
During the period of this contract, the Fund shall pay or cause to be
paid all expenses, costs, and fees incurred by the Fund which are not assumed by
the Underwriter or Advantus Capital Management, Inc., a Minnesota corporation
and the Fund's investment adviser. The Underwriter agrees to provide, and shall
pay costs which it incurs in connection with providing, administrative or
accounting services to shareholders of the Fund (such costs are referred to as
"Shareholder Servicing Costs"). The Underwriter shall also pay all costs of
distributing the shares of the Fund ("Distribution Expenses"). Distribution
Expenses include, but are not limited to, initial and ongoing sales compensation
(in addition to sales loads) paid to investment executives of the Underwriter
and to other broker-dealers and participating financial institutions; expenses
incurred in the printing of prospectuses, statements of additional information
and reports used for sales purposes; expenses of preparation and distribution of
sales literature; expenses of advertising of any type; an allocation of the
Underwriter's overhead; payments to and expenses of persons who provide support
services in connection with the distribution of Fund shares; and other
distribution-related expenses. Shareholder Servicing Costs include all expenses
of the Underwriter incurred in connection with providing administrative or
accounting services to shareholders of the Fund, including, but not limited to,
an allocation of the Underwriter's overhead and payments made to persons,
including employees of the Underwriter, who respond to inquiries of shareholders
regarding their ownership of Fund shares, or who provide other administrative or
accounting services not otherwise required to be provided by the Fund's
investment adviser or transfer agent.
6. COMPENSATION TO THE UNDERWRITER.
It is understood and agreed by the parties hereto that the Underwriter
will receive as compensation for services it performs hereunder:
(a) The Underwriter shall be entitled to receive or retain the
front-end sales charge imposed in connection with sales of Fund shares, as
set forth in Schedule A hereto. Up to the entire amount of the front-end
sales charge with respect to the Fund may be reallowed by the Underwriter to
broker-dealers and participating financial institutions in connection with
their sale of Fund shares. The amount of the front-end sales charge may be
retained or deducted by the Underwriter from any sums received by it in
payment for shares so sold. If such amount is not
-2-
deducted by the Underwriter from such payments, such amount shall be paid to
the Underwriter by the Fund not later than five business days after the close
of any calendar quarter during which any such sales were made by the
Underwriter and payment received by the Fund.
(b) The Underwriter shall be entitled to receive or retain any
contingent deferred sales charge imposed in connection with any redemption of
Fund shares, as set forth in Schedule A hereto.
(c) Pursuant to the Fund's Plans of Distribution adopted by Class
A, Class B and Class C shareholders in accordance with Rule 12b-1 under the
1940 Act (the "Plans"), the Fund shall pay the Underwriter a total fee each
month equal to .25% per annum of the average daily net assets represented by
Class A shares of the Fund and 1.0% per annum of the average daily net assets
represented by Class B and Class C shares of the Fund to cover Distribution
Expenses and Shareholder Servicing Costs. As determined from time to time by
the Board of Directors of the Fund, a portion of such fee for each Class may
be designated as a "distribution fee" designed to cover Distribution
Expenses, and a portion may be designated as a "shareholder servicing fee"
designed to cover Shareholder Servicing Costs. Until further action by the
Board of Directors, all of such fees for Class A shall be designated as a
"shareholder servicing fee" designed to cover only Shareholder Servicing
Costs; and all of such fees for Class B and Class C shall be designated as a
"distribution fee" designed to cover only Distribution Expenses, except that
a portion of such fee for both Class B and Class C, equal to .25% per annum
of the average daily net assets of Class B and Class C, shall be designated
as a "shareholder servicing fee" designed to cover only Shareholder Servicing
Costs. Average daily net assets shall be computed in accordance with the
Prospectus of the Fund. Amounts payable to the Underwriter under the Plans
may exceed or be less than the Underwriter's actual Distribution Expenses and
Shareholder Servicing Costs. In the event such Distribution Expenses and
Shareholder Servicing Costs exceed amounts payable to the Underwriter under
the Plans, the Underwriter shall not be entitled to reimbursement by the Fund.
(d) In each year during which this Agreement remains in effect,
the Underwriter will prepare and furnish to the Board of Directors of the
Fund, and the Board will review, on a quarterly basis, written reports
complying with the requirements of Rule 12b-1 under the 1940 Act that set
forth the amounts expended under this Agreement and the Plans and the
purposes for which those expenditures were made.
7. LIMITATION OF THE UNDERWRITER'S AUTHORITY.
The Underwriter shall be deemed to be an independent contractor and,
except as specifically provided or authorized herein, shall have no authority
to act for or represent the Fund.
-3-
8. SUBSCRIPTION FOR SHARES--REFUND FOR CANCELLED ORDERS.
The Underwriter shall subscribe for the shares of the Fund only for
the purpose of covering purchase orders already received by it or for the
purpose of investment for its own account. In the event that an order for
the purchase of shares of the Fund is placed with the Underwriter by a
customer or dealer and subsequently cancelled, the Underwriter shall
forthwith cancel the subscription for such shares entered on the books of the
Fund, and, if the Underwriter has paid the Fund for such shares, shall be
entitled to receive from the Fund in refund of such payment the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of cancellation
by the Underwriter.
9. INDEMNIFICATION OF THE FUND.
The Underwriter agrees to indemnify the Fund against any and all
litigation and other legal proceedings of any kind or nature and against any
liability, judgment, cost, or penalty imposed as a result of such litigation
or proceedings in any way arising out of or in connection with the sale or
distribution of the shares of the Fund by the Underwriter. In the event of
the threat or institution of any such litigation or legal proceedings against
the Fund, the Underwriter shall defend such action on behalf of the Fund at
its own expense, and shall pay any such liability, judgment, cost, or penalty
resulting therefrom, whether imposed by legal authority or agreed upon by way
of compromise and settlement; provided, however, the Underwriter shall not be
required to pay or reimburse the Fund for any liability, judgment, cost, or
penalty incurred as a result of information supplied by, or as the result of
the omission to supply information by, the Fund to the Underwriter, or to the
Underwriter by a director, officer, or employee of the Fund who is not an
interested person of the Underwriter, unless the information so supplied or
omitted was available to the Underwriter or Management without recourse to
the Fund or any such person referred to above.
10. FREEDOM TO DEAL WITH THIRD PARTIES.
The Underwriter shall be free to render to others services of a nature
either similar to or different from those rendered under this contract,
except such as may impair its performance of the services and duties to be
rendered by it hereunder.
11. EFFECTIVE DATE, DURATION AND TERMINATION OF
AGREEMENT.
The effective date of this Agreement is set forth in the first
paragraph of this Agreement. Wherever referred to in this Agreement, the
vote or approval of the holders of a majority of the outstanding voting
securities of the Fund shall mean the vote of 67% or more of such securities
if the holders of more than 50% of such securities are present in person or
by proxy or the vote of more than 50% of such securities, whichever is the
lesser.
-4-
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect only so long as such continuance is specifically approved at
least annually (a) by the Board of Directors of the Fund, or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, and (b)
by a majority of the directors who are not interested persons of the Underwriter
or of the Fund cast in person at a meeting called for the purpose of voting on
such approval.
This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
the Underwriter, upon 60 days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment (as defined by the provisions of the Investment Company Act of 1940,
as amended).
12. AMENDMENTS TO AGREEMENT.
No material amendment to this Agreement shall be effective until
approved by the Underwriter and by vote of majority of the Board of Directors of
the Fund who are not interested persons of the Underwriter.
13. NOTICES.
Any notice under this Agreement shall be in writing, addressed,
delivered, or mailed, postage prepaid, to the other party at such address as
such other party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, The Fund and the Underwriter have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
Advantus Mortgage Securities Fund, Inc.
By
----------------------------------------
Xxxxxxx X. Xxxxxxxx
Its President
Ascend Financial Services, Inc.
By
----------------------------------------
Xxxxxx X. Xxxxxxxx
Its President
-5-
SCHEDULE A
The Underwriter shall receive, as compensation for its services pursuant
to this Agreement, a front-end sales charge for each investment in the Fund's
Class A shares, or a contingent deferred sales charge in certain circumstances,
which shall be a percentage of the offering price of such Class A shares, as
determined in accordance with the Fund's currently effective Prospectus,
determined in accordance with the following table:
Front-End Sales Charge
as a Percentage of
Amount of Investment Offering Price
-------------------- ----------------------
Less than $100,000 4.5%
$100,000 but less than $250,000 3.5%
$250,000 but less than $500,000 2.5%
$500,000 but less than $1,000,000 2.0%
$1,000,000 or more (1) -0-
The Underwriter shall also receive, as compensation for its
services pursuant to this Agreement, a contingent deferred sales charge imposed
in connection with certain redemptions of shares of the Fund designated as Class
B shares, determined in accordance with the following table:
Contingent Deferred Sales Charge
Shares Purchased Applicable Year
In an Amount 1 2 3 4 5 6
---------------- ------------------------------------------------
Less than $50,000 5.0% 4.5% 3.5% 2.5% 1.5% 1.5%
$50,000 but less than $100,000 4.5 3.5 2.5 1.5 1.5 -0-
$100,000 but less than $250,000 3.5 2.5 1.5 1.5 -0- -0-
$250,000 but less than $500,000 2.5 1.5 1.5 -0- -0- -0-
$500,000 but less than $1,000,000 1.5 1.5 -0- -0- -0- -0-
--------------------------
(1) The customer will not be assessed an initial sales charge for purchases of
Class A shares of at least $1,000,000, but a contingent deferred sales charge of
1.00% will be imposed if the customer redeems such shares within one year of the
date of purchase.
-6-
