EX-99.B(6)(a)
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 19th day of January, 1989 by and
between FLAG INVESTORS TELEPHONE INCOME FUND, INC., a Maryland Corporation (the
"Fund"), and ALEX. XXXXX & SONS INCORPORATED, a Maryland corporation ("Alex.
Xxxxx").
W I T N E S S E T H
WHEREAS, on January 18, 1989 the Fund succeeded to the
Registration Statement of Flag Investors Telephone Income Trust as an open-end,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Xxxxx as the
exclusive distributor of the shares of Common Stock of the Fund (the "Shares")
and Alex. Xxxxx wishes to become the distributor of the Shares; and
WHEREAS, the compensation to Alex. Xxxxx hereunder and the
payments contemplated by paragraph 5 constitute the financing of activities
intended to result in the sale of Shares, and this Agreement is entered into
pursuant to a "written plan" pursuant to Rule 12b-1 under the Act (the "Plan")
allowing the Fund to make such payments.
NOW THEREFORE, in consideration of the premises herein and of
other good and valuable consideration the receipt whereof is hereby
acknowledged, the parties hereto agree as follows:
1. Appointment. The Fund hereby appoints Alex. Xxxxx as
Distributor for the Shares for the period and on the terms set forth in this
Agreement. Alex. Xxxxx accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Alex. Xxxxx
with copies properly certified or authenticated of each of the following:
(a) The Fund's Articles of Incorporation, filed with
the Secretary of State of Maryland on November 4, 1988 and all amendments
thereto;
(b) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
(c) Resolutions of the Fund's Board of Directors and
shareholders authorizing the appointment of Alex. Xxxxx as the Fund's
Distributor of the Shares and approving this Agreement;
(d) Post-Effective Amendment No. 9 under the
Securities Act of 1933 (the "1933 Act") and Post-Effective Amendment No. 11
under the 1940 Act to the Fund's Registration Statement on Form N-1A (File No.
2-87336) as filed with the Securities and Exchange Commission (the "SEC") on
November 18, 1988 relating to the Shares; and
(e) The Fund's most recent prospectus (such
prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will xxxxxxx Xxxx. Xxxxx from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Xxxxx shall give the Fund the
benefit of its best judgment, efforts and facilities in rendering its services
as Distributor of the Shares. In carrying out its obligations hereunder, Alex.
Xxxxx shall:
(a) respond to inquiries from the Fund's shareholders
concerning the status of their accounts with the Fund;
(b) take, on behalf of the Fund, all actions deemed
necessary to carry into effect the distribution of the Shares; and
(c) provide the Board of Directors of the Fund with
quarterly reports as required by Rule 12b-1 under the 1940 Act.
4. Distribution of Shares. Alex. Xxxxx shall be the exclusive
distributor of the Shares. It is mutually understood and agreed that Alex. Xxxxx
does not undertake to sell all or any specific portion of the Shares. The Fund
shall not sell any of the Shares except through Alex. Xxxxx and securities
dealers who have valid Sub-Distribution Agreements with Alex. Xxxxx.
Notwithstanding the provisions of the foregoing sentence, the Fund may issue
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 an offer made to all shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Xxxxx on behalf of the Fund pursuant hereto, shall at all
times be subject to any directives of the Board of Directors of the Fund. The
Board of Directors may agree, on behalf of the Fund, to amendments to this
Agreement, provided that the Fund must obtain the prior approval of the
shareholders of the Fund to any such amendment which would result in a material
increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, Alex. Xxxxx shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any
rules and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act and any amendments or supplements
thereto;
(c) the provisions of the Articles of Incorporation
of the Fund and any amendments thereto;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the National
Association of Securities Dealers ("NASD") and all other self-regulatory
organizations applicable to the sale of investment company shares; and
(f) any other applicable provisions of state and
Federal law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Xxxxx as follows:
(a) Alex. Xxxxx shall furnish, at its expense and
without cost to the Fund, the services of personnel to the extent that such
services are required to carry out its obligations under this Agreement;
(b) Alex. Xxxxx shall bear the expenses of any
promotional or sales literature used by Alex. Xxxxx or furnished by Alex. Xxxxx
to purchasers or dealers in connection with the public offering of the Shares,
the expenses of advertising in connection with such public offering and all
legal expenses in connection with the foregoing;
(c) The Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Fund's investment advisor; the charges and expenses of any registrar,
custodian or depositary appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing of stock
certificates representing Shares; all costs and expenses in connection with
maintenance of registration of the Fund and the Shares with the SEC and various
states and other jurisdictions (including filing fees and legal fees and
disbursements of counsel); except as provided in subparagraph (a) above, the
expenses of printing, including typesetting, and distributing prospectuses of
the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
"Non-Interested" Directors (within the meaning of Section 2(a)(19) of the 0000
Xxx) or members of any advisory board or committee; 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 the Fund's Shares; charges and expenses of legal counsel, including counsel
to the Non-Interested Directors and of independent accountants, in connection
with any matter relating to the Fund; membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and directors) of the Fund which 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 the Fund's operation unless otherwise explicitly
provided herein.
8. Delegation of Responsibilities. Alex. Xxxxx may, but shall
be under no duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Such services will be performed on behalf of the Fund and Alex. Xxxxx'x charge
in rendering such services may be billed monthly to the Fund, subject to
examination by the Fund's independent accountants. Payment or assumption by
Alex. Xxxxx of any Fund expense that Alex. Xxxxx is not required to pay or
assume under this Agreement shall not relieve Alex. Xxxxx of any of its
obligations to the Fund nor obligate Alex. Xxxxx to pay or assume any similar
Fund expense on any subsequent occasion.
9. Compensation. For the services to be rendered and the
expenses to be assumed by Alex. Xxxxx the Fund shall pay to Alex. Xxxxx,
compensation at the annual rate of .25% of the average daily net assets of the
Fund. Except as hereinafter set forth, continuing compensation under this
Agreement shall be calculated and accrued daily and the amounts of the daily
accruals shall be paid monthly. If this Agreement becomes effective subsequent
to the first day of a month or shall terminate before the last day of a month
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculations of the fees as set forth
above. Payment of Alex. Xxxxx'x compensation for the preceding month shall be
made as promptly as possible.
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Xxxxx may compensate its investment representatives for
opening accounts, processing investor letters of transmittals and applications
and withdrawal and redemption orders, responding to inquiries from Fund
shareholders concerning the status of their accounts and the operations of the
Fund, and communicating with the Fund and its transfer agent on behalf of the
Fund shareholders.
11. Participating Dealer Agreements. Alex. Xxxxx may enter
into participating dealer agreements (the "Participating Dealer Agreements")
with any securities dealer who is registered under the Securities Exchange Act
of 1934 and who is a member in good standing of the NASD, who may wish to act as
a Participating Dealer in connection with the proposed offering. All
Participating Dealer Agreements shall be in substantially the form of the
agreement attached hereto as Exhibit "A". For processing Fund shareholders'
redemption orders, responding to inquiries from Fund shareholders concerning the
status of their accounts and the operations of the Fund and communicating with
the Fund, its transfer agent and Alex. Xxxxx, Xxxx. Xxxxx may pay each such
Participating Dealer an amount not to exceed that portion of the compensation
paid to Alex. Xxxxx hereunder that is attributable to accounts of Fund
shareholders who are customers of such Participating Dealer.
12. Non-Exclusivity. The services of Alex. Xxxxx to the Fund
are not to be deemed exclusive and Alex. Xxxxx shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that directors,
officers or employees of Alex. Xxxxx may serve as directors or officers of the
Fund, and that directors or officers of the Fund may serve as directors,
officers or employees of Alex. Xxxxx to the extent permitted by law; and that
the directors, officers and employees of Alex. Xxxxx are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, directors or officers of any other firm or
corporation, including other investment companies.
13. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall remain in force and effect
for an initial term of two years and from year to year thereafter, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities (as defined in
Section 2(a)(42) of the 0000 Xxx); and
(b) by the affirmative vote of a majority of the
Non-Interested Directors who do not have a financial interest in the operation
of this Agreement, by votes cast in person at a meeting specifically called for
such purpose.
14. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party without the payment of any
penalty, (i) by vote of the Fund's Board of Directors, (ii) by vote of a
majority of the Non-Interested Directors who do not have a financial interest in
the operation of this Agreement, (iii) by vote of a majority of the Fund's
outstanding voting securities (as defined in Section 2(a)(42) of the 0000 Xxx)
or (iv) by Alex. Xxxxx. The notice provided for herein may be waived by either
party. This Agreement shall automatically terminate in the event of its
assignment (as that term is defined in Section 2(a)(4) of the 1940 Act).
15. Liability. In the performance of its duties hereunder,
Alex. Xxxxx 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 which does not constitute willful misfeasance, bad faith or gross
negligence on the part of Alex. Xxxxx or reckless disregard by Alex. Xxxxx of
its duties under this Agreement.
16. 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 both
Alex. Xxxxx and the Fund for this purpose shall be 000 Xxxx Xxxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxx 00000.
17. Questions of Interpretation. 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 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations 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 SEC issued pursuant to the 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. Otherwise the
provisions of this Agreement shall be interpreted in accordance with the laws of
Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers as of the day
and year first above written.
[SEAL] FLAG INVESTORS TELEPHONE
INCOME FUND, INC.
Attest: /s/ Xxxxxx X. Xxxxxx By /s/ Xxxxx X. Xxxxxx
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Vice President and Secretary
[SEAL] ALEX. XXXXX & SONS
INCORPORATED
Attest: /s/ Xxxxxx X. Xxxxxx By /s/ Xxxxxx X. Xxxxxxxx
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