DISTRIBUTION AGREEMENT
XXXXXX MUTUAL FUNDS, INC.
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of the __th day
of November, 2002 by and among Xxxxxx Mutual Funds, Inc. (the "Company"), a
Maryland corporation, Edgemoor Capital Management, Inc. (the "Advisor"), a
Maryland corporation, and Viking Fund Distributors, LLC (the "Distributor"), a
North Dakota Limited Liability Company.
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and has registered its shares of common stock (the "Shares") under the
Securities Act of 1933, as amended (the "1933 Act") in one or more distinct
series of Shares (the "Portfolio" or "Portfolios");
WHEREAS, the Advisor has been appointed advisor to the Company;
WHEREAS, the Company and the Advisor have entered into an "Operating
Services Agreement" authorizing the Advisor to provide certain distribution
services to the Company, and which further authorizes the Advisor to enter into
this Agreement on behalf of the Company;
WHEREAS, the Distributor is a broker-dealer registered with the U.S.
Securities and Exchange Commission (the "SEC") and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, the Company has adopted a plan of distribution (the "Distribution
Plan") pursuant to Rule 12b-1 under the 1940 Act relating to the payment by the
Company of distribution expenses; and
WHEREAS, the Company, the Advisor and the Distributor desire to enter into
this Agreement pursuant to which the Distributor will provide distribution
services to the Portfolios of the Company identified on Schedule A, as may be
amended from time to time, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Company, the Advisor and the Distributor,
intending to be legally bound hereby, agree as follows:
1. APPOINTMENT OF DISTRIBUTOR. The Company hereby appoints the Distributor
as its exclusive agent to be the principal underwriter to promote the Company,
solicit orders for the purchase of the Shares and accept orders for the purchase
and redemption of Shares on behalf of the Company, subject to the terms and for
the period set forth in this Agreement. The Distributor hereby accepts such
appointment and agrees to act hereunder.
2. COMPANY DOCUMENTS. The Company has provided the Distributor with
properly certified or authenticated copies of the following Company related
documents in effect on the date hereof: the Company's organizational documents,
including Articles of Incorporation and by-laws; the Company's Registration
Statement on Form N-1A, including all exhibits thereto; the Company's most
current Prospectus and Statement of Additional Information; and resolutions of
the Company's Board of Directors authorizing the appointment of the Distributor
and approving this Agreement. The Company shall promptly provide to the
Distributor copies, properly certified or authenticated, of all amendments or
supplements to the foregoing. The Company shall provide to the Distributor
copies of all other information which the Distributor may reasonably request for
use in connection with the distribution of Shares, including, but not limited
to, a certified copy of all financial statements prepared for the Company by its
independent public accountants. The Company shall also supply the Distributor
with such number of copies of the current Prospectus, Statement of Additional
Information and shareholder reports as the Distributor shall reasonably request.
3. DISTRIBUTION SERVICES. Distribution Services shall be allocated as
follows:
a. The Distributor agrees to sell the Shares on a best efforts basis from
time to time during the term of this Agreement as agent for the Company and upon
the terms described in the Registration Statement. As used in this Agreement,
the term "Registration Statement" shall mean the currently effective
registration statement of the Company, and any supplements thereto, under the
1933 Act and the 0000 Xxx.
b. Upon the date of this Agreement, the Distributor will hold itself
available to receive purchase orders satisfactory to the Distributor for Shares
and will accept such orders on behalf of the Company. Purchase orders shall be
deemed effective at the time and in the manner set forth in the Registration
Statement.
c. The offering price of the Shares shall be the net asset value per share
as next determined by the Company in the manner provided in the then current
Prospectus and Statement of Additional Information. The net asset value of the
Shares shall be calculated by the Company or by another entity on behalf of the
Company. The Distributor shall have no duty to inquire into or liability for the
accuracy of the net asset value per Share as calculated.
d. The Distributor shall also have the right to take, as agent for the
Company, all actions that, in the Distributor's judgment, are necessary to
effect the distribution of Shares.
e. Nothing in this Agreement shall prevent the Distributor or any
"affiliated person" from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that the Distributor expressly agrees that it shall
not for its own account purchase any Shares of the Company except for investment
purposes and that it shall not for its own account sell any such Shares except
for redemption of such Shares by the Company, and that it shall not undertake
activities which, in its judgment, would adversely affect the performance of its
obligations to the Company under this Agreement.
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f. The Distributor agrees to act as agent for the Company to receive and
transmit promptly to the fund's transfer agent shareholder requests for
redemption of Shares.
4. DISTRIBUTION SUPPORT SERVICES. In addition to facilitating the sale
and repurchase of Shares as agent for the company, the Distributor shall perform
distribution support services to include: review of sales and marketing
literature and submission to the NASD; NASD recordkeeping; assisting Advisor in
preparation of quarterly reports to the Company's Board of Directors relating to
distribution activities and any other services agreed to by Distributor, Advisor
and the Company. Such distribution support services may also include:
fulfillment services and licensing Advisor or Company personnel as registered
representatives of the Distributor and related supervisory activities.
5. REASONABLE EFFORTS. The Distributor shall use all reasonable efforts
in connection with the distribution of Shares. The Distributor shall have no
obligation to sell any specific number of Shares and shall only sell Shares
against orders received therefor. The Company shall retain the right to refuse
at any time to sell any of its Shares for any reason deemed adequate by it.
6. COMPLIANCE. In furtherance of the distribution services being
provided hereunder, the Distributor and the Company agree as follows:
a. The Distributor shall comply with the Conduct Rules of the NASD
and the securities laws of any jurisdiction in which it sells, directly or
indirectly, Shares.
b. The Distributor shall require each dealer with whom the
Distributor has a selling agreement to conform to the applicable provisions of
the Company's most current Prospectus and Statement of Additional Information,
with respect to the public offering price of the Shares.
c. The Company agrees to furnish to the Distributor sufficient
copies of any agreements, plans, communications with the public or other
materials it intends to use in connection with any sales of Shares in a timely
manner in order to allow the Distributor to review, approve and file such
materials with the appropriate regulatory authorities and obtain clearance for
use. The Company agrees not to use any such materials until so filed and cleared
for use by appropriate authorities and the Distributor.
d. The Distributor shall qualify as a broker or dealer, or
otherwise, under all applicable Federal or state laws required to permit the
sale of Shares in such states as shall be mutually agreed upon by the parties.
However, the Distributor shall have no obligation to register as a broker or
dealer under the Blue Sky Laws of any jurisdiction if it determines that
registering or maintaining registration in such jurisdiction would be
uneconomical.
e. The Distributor shall not, in connection with any sale or
solicitation of a sale of the Shares, make or authorize any representative,
service organization, broker or dealer to make any representations concerning
the Shares except those contained in the Company's most current Prospectus
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covering the Shares and in communications with the public or sales materials
approved by the Company as information supplemental to such Prospectus.
7. EXPENSES. Expenses shall be allocated as follows:
a. The Company shall bear the following expenses: preparation,
setting in type, and printing of sufficient copies of the Prospectus and
Statement of Additional Information for distribution to existing shareholders;
preparation and printing of reports and other communications to existing
shareholders; distribution of copies of the Prospectus, Statement of Additional
Information and all other communications to existing shareholders; registration
of the Shares under the Federal securities laws; qualification of the Shares for
sale in the jurisdictions mutually agreed upon by the Company and the
Distributor; transfer agent/shareholder servicing agent services; supplying
information, prices and other data to be furnished by the Company under this
Agreement; and any original issue taxes or transfer taxes applicable to the sale
or delivery of the Shares or certificates therefor.
b. The Advisor shall pay all other expenses incident to the sale and
distribution of the Shares sold hereunder, including, without limitation:
printing and distributing copies of the Prospectus, Statement of Additional
Information and reports prepared for use in connection with the offering of
Shares for sale to the public; advertising in connection with such offering,
including public relations services, sales presentations, media charges,
preparation, printing and mailing of advertising and sales literature; data
processing necessary to support a distribution effort; distribution and
shareholder servicing activities of broker-dealers and other financial
institutions; filing fees required by regulatory authorities for sales
literature and advertising materials; any additional out-of-pocket expenses
incurred in connection with the foregoing and any other costs of distribution.
8. COMPENSATION. For the distribution and distribution support services
provided by the Distributor pursuant to the terms of the Agreement, the Advisor
shall pay to the Distributor the compensation set forth in Schedule A attached
hereto, which schedule may be amended from time to time. The Advisor shall pay
the Distributor's monthly invoices for distribution fees and out-of-pocket
expenses within five days of the respective month-end. If this Agreement becomes
effective subsequent to the first day of the month or terminates before the last
day of the month, the Company shall pay to the Distributor a distribution fee
that is prorated for that part of the month in which this Agreement is in
effect. All rights of compensation and reimbursement under this Agreement for
services performed by the Distributor as of the termination date shall survive
the termination of this Agreement.
9. USE OF DISTRIBUTOR'S NAME. The Company shall not use the name of the
Distributor or any of its affiliates in the Prospectus, Statement of Additional
Information, sales literature or other material relating to the Company in a
manner not approved prior thereto in writing by the Distributor; provided,
however, that the Distributor shall approve all uses of its and its affiliates'
names that merely refer in accurate terms to their appointments or that are
required by the Securities and Exchange Commission (the "SEC") or any state
securities commission; and further provided, that in no event shall such
approval be unreasonably withheld.
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10. USE OF COMPANY'S NAME. Neither the Distributor nor any of its
affiliates shall use the name of the Company or material relating to the Company
on any forms (including any checks, bank drafts or bank statements) for other
than internal use in a manner not approved prior thereto by the Company;
provided, however, that the Company shall approve all uses of its name that
merely refer in accurate terms to the appointment of the Distributor hereunder
or that are required by the SEC or any state securities commission; and further
provided, that in no event shall such approval be unreasonably withheld.
11. LIABILITY OF DISTRIBUTOR. The duties of the Distributor shall be
limited to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Distributor hereunder. The Distributor shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Company in connection with the matters to which this Agreement
relates, except to the extent of a loss resulting from willful misfeasance, bad
faith or gross negligence, its failure to comply with its obligations and duties
under this Agreement, or its violation of any applicable law or regulation or
any rule of a self-regulatory organization. As used in this Section 11 and in
Section 12 (except the second paragraph of Section 12), the term "Distributor"
shall include directors, officers, employees and other agents of the
Distributor.
12. INDEMNIFICATION OF DISTRIBUTOR. The Company shall indemnify and hold
harmless the Distributor against any and all liabilities, losses, damages,
claims and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and investigation expenses incident thereto) which the
Distributor may incur or be required to pay hereafter, in connection with any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which the Distributor may be involved as
a party or otherwise or with which the Distributor may be threatened, by reason
of the offer or sale of the Company shares prior to the effective date of this
Agreement.
Any director, officer, employee, shareholder or agent of the Distributor
who may be or become an officer, Director, employee or agent of the Company,
shall be deemed, when rendering services to the Company or acting on any
business of the Company (other than services or business in connection with the
Distributor's duties hereunder), to be rendering such services to or acting
solely for the Company and not as a director, officer, employee, shareholder or
agent, or one under the control or direction of the Distributor, even though
receiving a salary from the Distributor.
The company agrees to indemnify and hold harmless the Distributor, and
each person, who controls the Distributor within the meaning of Section 15 of
the 1933 Act, or Section 20 of the Securities Exchange Act of 1934, as amended
("1934 Act"), against any and all liabilities, losses, damages, claims and
expenses, joint or several (including, without limitation, reasonable attorneys'
fees and disbursements and investigation expenses incident thereto) to which
they, or any of them, may become subject under the 1933 Act, the 1934 Act, the
1940 Act or other Federal or state laws or regulations, at common law or
otherwise, insofar as such liabilities, losses, damages, claims and expenses (or
actions, suits or proceedings in respect thereof) arise out of or relate to any
untrue statement or alleged untrue statement of a material fact contained in a
Prospectus, Statement of Additional Information, supplement thereto, sales
literature or other written information prepared by the Fund and provided by the
Fund to the Distributor for the Distributor's use hereunder, or arise out of or
relate to any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
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misleading. The Distributor (or any person controlling the Distributor) shall
not be entitled to indemnity hereunder for any liabilities, losses, damages,
claims or expenses (or actions, suits or proceedings in respect thereof)
resulting from (i) an untrue statement or omission or alleged untrue statement
or omission made in the Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity with
information furnished in writing to the Fund by the Distributor specifically for
use therein or (ii) the Distributor's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations in the
performance of this Agreement.
The Distributor agrees to indemnify and hold harmless the Fund, and each
person who controls the Fund within the meaning of Section 15 of the 1933 Act,
or Section 20 of the 1934 Act, against any and all liabilities, losses, damages,
claims and expenses, joint or several (including, without limitation reasonable
attorneys' fees and disbursements and investigation expenses incident thereto)
to which they, or any of them, may become subject under the 1933 Act, the 1934
Act, the 1940 Act or other Federal or state laws, at common law or otherwise,
insofar as such liabilities, losses, damages, claims or expenses arise out of or
relate to any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or Statement of Additional Information or any
supplement thereto, or arise out of or relate to any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if based upon
information furnished to the Fund by the Distributor specifically for use
therein.
A party seeking indemnification hereunder (the "Indemnitee") shall give
prompt written notice to the party from whom indemnification is sought
("Indemnitor") of a written assertion or claim of any threatened or pending
legal proceeding which may be subject to indemnity under this Section; provided,
however, that failure to notify the Indemnitor of such written assertion or
claim shall not relieve the Indemnitor of any liability arising from this
Section. The Indemnitor shall be entitled, if it so elects, to assume the
defense of any suit brought to enforce a claim subject to this Indemnity and
such defense shall be conducted by counsel chosen by the Indemnitor and
satisfactory to the Indemnitee; provided, however, that if the defendants
include both the Indemnitee and the Indemnitor, and the Indemnitee shall have
reasonably concluded that there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnitor
("conflict of interest"), the Indemnitor shall not have the right to elect to
defend such claim on behalf of the Indemnitee, and the Indemnitee shall have the
right to select separate counsel to defend such claim on behalf of the
Indemnitee. In the event that the Indemnitor elects to assume the defense of any
suit pursuant to the preceding sentence and retains counsel satisfactory to the
Indemnitee, the Indemnitee shall bear the fees and expenses of additional
counsel retained by it, except for reasonable investigation costs which shall be
borne by the Indemnitor. If the Indemnitor (i) does not elect to assume the
defense of a claim, (ii) elects to assume the defense of a claim but chooses
counsel that is not satisfactory to the Indemnitee or (iii) has no right to
assume the defense of a claim because of a conflict of interest, the Indemnitor
shall advance or reimburse the Indemnitee, at the election of the Indemnitee,
reasonable fees and disbursements of any counsel retained by Indemnitee,
including reasonable investigation costs.
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13. DUAL EMPLOYEES. The Advisor agrees that only its employees who are
registered representatives of the Distributor ("dual employees") shall offer or
sell Shares of the Portfolios and further agrees that the activities of any such
employees as registered representatives of the Distributor shall be limited to
offering and selling Shares in states where the Distributor is registered or
exempt from registration. The Advisor shall maintain errors and omissions and
fidelity bond insurance policies providing reasonable coverage for its
employee's activities and shall provide copies of such policies to the
Distributor. The Advisor shall indemnify and hold harmless the Distributor
against any and all liabilities, losses, damages, claims and expenses (including
reasonable attorneys' fees and disbursements and investigation costs incident
thereto) arising from or related to the Advisor's employees' activities as
registered representatives of the Distributor, including, without limitation,
any and all such liabilities, losses, damages, claims and expenses arising from
or related to the breach by such dual employees of any rules or regulations of
the NASD or SEC.
14. FORCE MAJEURE. The Distributor shall not be liable for any delays or
errors occurring by reason of circumstances not reasonably foreseeable and
beyond its control, including, but not limited, to acts of civil or military
authority, national emergencies, work stoppages, fire, flood, catastrophe, acts
of God, insurrection, war, riot or failure of communication or power supply. In
the event of equipment breakdowns which are beyond the reasonable control of the
Distributor and not primarily attributable to the failure of the Distributor to
reasonably maintain or provide for the maintenance of such equipment, the
Distributor shall, at no additional expense to the Fund, take reasonable steps
in good faith to minimize service interruptions, but shall have no liability
with respect thereto.
15. SCOPE OF DUTIES. The Distributor and the Fund shall regularly
consult with each other regarding the Distributor's performance of its
obligations and its compensation under the foregoing provisions. In connection
therewith, the Fund shall submit to the Distributor at a reasonable time in
advance of filing with the SEC copies of any amended or supplemented
Registration Statement of the Fund (including exhibits) under the 1940 Act and
the 1933 Act, and at a reasonable time in advance of their proposed use, copies
of any amended or supplemented forms relating to any plan, program or service
offered by the Fund. Any change in such materials that would require any change
in the Distributor's obligations under the foregoing provisions shall be subject
to the Distributor's approval. In the event that a change in such documents or
in the procedures contained therein increases the cost or burden to the
Distributor of performing its obligations hereunder, the Distributor shall be
entitled to receive reasonable compensation therefore.
16. DURATION. This Agreement shall become effective as of the date first
above written, and shall continue in force for one year from that date and
thereafter from year to year, provided continuance is approved at least annually
by either (i) the vote of a majority of the Directors of the Fund, or by the
vote of a majority of the outstanding voting securities of the Fund, and (ii)
the vote of a majority of those Directors of the Fund who are not interested
persons of the Fund, and who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on the approval.
17. TERMINATION. This Agreement shall terminate as follows:
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a. This Agreement shall terminate automatically in the event of its
assignment.
b. This Agreement shall terminate upon the failure to approve the
continuance of the Agreement after the initial one-year term as set forth in
Section 16 above.
c. This Agreement shall terminate at any time upon a vote of the
majority of the Directors who are not interested persons of the Fund or by a
vote of the majority of the outstanding voting securities of the Fund, upon not
less than 60 days prior written notice to the Distributor.
d. The Distributor may terminate this Agreement upon not less than
60 days prior written notice to the Fund.
Upon the termination of this Agreement, the Advisor shall pay to the
Distributor such compensation and out-of-pocket expenses as may be payable for
the period prior to the effective date of such termination. In the event that
the Fund designates a successor to any of the Distributor's obligations
hereunder, the Distributor shall, at the expense of the Advisor and direction of
the Fund, transfer to such successor all relevant books, records and other data
established or maintained by the Distributor pursuant to the foregoing
provisions.
Sections 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 21, 22, 24, 25 and 26 shall
survive any termination of this Agreement.
18. AMENDMENT. The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a written
instrument signed by the Distributor and the Fund and shall not become effective
unless its terms have been approved by the majority of the Directors of the Fund
or by a "vote of majority of the outstanding voting securities" of the Fund and
by a majority of those Directors who are not "interested persons" of the Fund or
any party to this Agreement.
19. NON-EXCLUSIVE SERVICES. The services of the Distributor rendered to
the Fund are not exclusive. The Distributor may render such services to any
other investment company.
20. DEFINITIONS. As used in this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignment," "interested
person" and "affiliated person" shall have the respective meanings specified in
the 1940 Act and the rules enacted thereunder as now in effect or hereafter
amended.
21. CONFIDENTIALITY. The Distributor shall treat confidentially and as
proprietary information of the Fund all records and other information relating
to the Fund and prior, present or potential shareholders and shall not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except as may be required by
administrative or judicial tribunals or as requested by the Fund.
22. NOTICE. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
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upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section 22 as promptly as practicable thereafter). Notices shall be
addressed as follows:
(a) if to the Fund:
Xxxxxx Mutual Funds, Inc.
0000 X Xxxxxx X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, President
(b) if to the Advisor:
Edgemoor Capital Management, Inc.
0000 X Xxxxxx X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, President
(c) if to the Distributor:
Viking Fund Distributors, LLC
X.X. Xxx 000
0000 00xx Xxxxxx, XX
Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx, President
or to such other respective addresses as the parties shall designate by like
notice, provided that notice of a change of address shall be effective only upon
receipt thereof.
23. SEVERABILITY. If any provision 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.
24. GOVERNING LAW. This Agreement shall be administered, construed and
enforced in accordance with the laws of the State of North Dakota to the extent
that such laws are not preempted by the provisions of any law of the United
States heretofore or hereafter enacted, as the same may be amended from time to
time.
25. ENTIRE AGREEMENT. This Agreement (including the Exhibit attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto.
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26. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction. This Agreement may be executed in two counterparts,
each of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
Xxxxxx Mutual Funds, Inc.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Xxxxxx X. Xxxxxx, President
Edgemoor Capital Management, Inc.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------------
Xxxxxx X. Xxxxxx, President
Viking Fund Distributors, LLC
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Xxxxxxx X. Xxxxx, President
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SCHEDULE A
Xxxxxx Mutual Funds, Inc.
Portfolio and Fee Schedule
Portfolios covered by Distribution Agreement:
Xxxxxx Focus Fund
Fees for distribution and
distribution support services on
behalf of the Portfolios:
$4,500 Annual Fee
Plus out- of- pocket expenses to include, BUT NOT LIMITED TO: travel, printing,
postage, telephone, registration fees for Advisor/ Fund personnel, broker/
dealer and Principal registration fees specific to Distributor, and other
standard miscellaneous items.
