DISTRIBUTION AGREEMENT
Agreement to be effective July 1, 1997, by and between PRINCIPAL INTERNATIONAL
SMALLCAP FUND, INC., a Maryland corporation (hereinafter sometimes called the
"Fund") and PRINCOR FINANCIAL SERVICES CORPORATION, an Iowa corporation
(Hereinafter sometimes called the "Distributor").
W I T N E S S E T H:
WHEREAS, The Fund and the Distributor wish to enter into an agreement setting
forth the terms upon which the Distributor will act as underwriter and
distributor of the Fund.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Fund hereby appoints the Distributor to act as principal
underwriter (as such term is defined in Section 2(a)(29) of the Investment
Company Act of 1940 (as amended) of the shares of Capital Stock of the Fund
(hereinafter sometimes call "shares"), and the distributor agrees to act and
perform the duties and functions of underwriter in the manner and subject to the
conditions hereinafter set forth.
1. SOLICITATION OF ORDERS
The Distributor will use its best efforts (but only in states where it may
lawfully do so) to obtain from investors unconditional orders for shares
authorized for issue by the Fund and registered under the Securities Act of
1933, as amended, provided the Distributor may in its own discretion refuse
to accept orders for shares from any particular applicant. The Distributor
does not undertake to sell any specific number of shares of the Fund.
2. SALE OF SHARES
The Distributor is authorized to sell as agent on behalf of the Fund
authorized shares of the Fund by accepting unconditional orders placed with
the Distributor by investors in states wherever sales may lawfully be made.
3. PUBLIC OFFERING PRICE
Except as limited by paragraphs 6 and 7 hereof, all shares of the Fund sold
to investors by the Distributor as agent for the Fund will be sold for the
basic retail price, which basic retail price shall be the public offering
price applicable to each purchase as from time to time stated in the
current prospectus of the Fund.
4. COMMISSIONS
The Distributor shall receive a commission equal to the difference between
the basic retail price and the "net asset value" of the Fund's shares sold
through the Distributor subject to a sales charge at the basic retail
price. The term, "net asset value," as used herein, means said value as
determined either as of the close of trading of the New York Stock Exchange
on the day an order for purchase of shares is accepted or as of such other
time as may be in accordance with any provision of the 1940 Investment
Company Act, any rule or regulation thereunder, or any rule or regulation
made or adopted by any securities association registered under the 1934
Securities Exchange Act (all as the Distributor may determine) or as of
such time as the Board of Directors or duly authorized officers or agents
of the Fund may determine in the manner provided in the Fund's Certificate
of Incorporation or Bylaws as from time to time amended. If any such
commission is received by the Fund, it will pay such commission to the
Distributor. In addition, the Distributor will be paid the entire amount of
any contingent deferred sales charge imposed and paid by shareholders upon
the redemption or repurchase of the Fund's shares as set forth in the
Fund's prospectus, subject to any waivers or reductions in sales charge
that may be disclosed in the prospectus. The Distributor may pay its agents
and employees such compensation, allow to dealers such concessions, and
allow (and authorize dealers to re-allow) such discounts to purchasers, as
the Distributor may determine from time to time. The Distributor may also
purchase as principal shares of the Fund at "net asset value" and sell such
shares at the public offering price.
5. DELIVERY OF PAYMENTS AND ISSUANCE OF SHARES
The Distributor will deliver to the Fund all payments made pursuant to
orders accepted by the Distributor upon receipt thereof by the Distributor
in its principal place of business.
After payment the Fund will issue shares of Capital Stock by crediting to a
stockholder account in such names and such manner as specified in the
application or order relating to such shares. Certificates will be issued
only upon request by the shareholder.
6. SALES OF SHARES TO CERTAIN CLASSES OF INVESTORS OR TRANSACTIONS
The sale price of Class A shares of the Fund will reflect the scheduled
variations in, or elimination of, the sales load to particular classes of
investors or transactions as may be described in the Fund's current
prospectus or statement of additional information.
7. SALE OF SHARES TO INVESTORS BY THE FUND
Any right granted to the Distributor to accept orders for shares or make
sales on behalf of the Fund will not apply to shares issued in connection
with the merger or consolidation of any other investment company with the
Fund or its acquisition, purchase or otherwise, of all or substantially all
the assets of any investment company or substantially all the outstanding
shares of any such company. Also, any such right shall not apply to shares
issued, sold or transferred, whether Treasury or newly issued shares, that
may be offered by the Fund to its shareholders as stock dividends or splits
for not less than "net asset value".
8. AGREEMENTS WITH DEALERS OR OTHERS
In making agreements with any dealers or others, the Distributor shall act
only in its own behalf and in no sense as agent for the Fund and shall be
agent for the Fund only in respect of sales and repurchases of Fund shares.
9. COPIES OF CORPORATE DOCUMENTS
The Fund will furnish the Distributor promptly with properly certified or
authenticated copies of any registration statements filed by it with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, or the Investment Company Act of 1940, as amended, together with
any financial statements and exhibits included therein and all amendments
or supplements thereto hereafter filed. Also, the Fund shall furnish the
Distributor with a reasonable number of printed copies of each semi-annual
and annual report (quarterly if made) of the Fund as the Distributor may
request, and shall cooperate fully in the efforts of the Distributor to
sell and arrange for the sale of the Fund's shares of Capital Stock and in
the performance by the Distributor of all of its duties under this
Agreement.
10. RESPONSIBILITY FOR CONTINUED REGISTRATION INCLUDING INCREASE IN SHARES
The Fund will assume the continued responsibility for meeting the
requirements of registration under the Securities Act of 1933, as amended,
under the Investment Company Act of 1940, as amended, and under the
securities laws of the various states where the Distributor is registered
as a broker-dealer. The Fund, subject to the necessary approval of its
shareholders, will increase the number of authorized shares from time to
time as may be necessary to provide the Distributor with such number of
shares as the Distributor may reasonably be expected to sell.
11. SUSPENSION OF SALES
If and whenever the determination of asset value is suspended pursuant to
applicable law, and such suspension has become effective, until such
suspension is terminated no further applications for shares shall be
accepted by the Distributor except unconditional orders placed with the
Distributor before the Distributor had knowledge of the suspension. In
addition, the Fund reserves the right to suspend sales and the
Distributor's authority to accept orders for shares on behalf of the Fund,
if in the judgment of the majority of its Board of Directors, if such
Committee exists, it is in the best interest of the Fund to do so,
suspension to continue for such period as may be determined by such
majority; and in that event no shares will be sold by the Fund or by the
Distributor on behalf of the Fund while such suspension remains in effect
except for shares necessary to cover unconditional orders accepted by the
Distributor before the Distributor had knowledge of the suspension.
12. EXPENSES
The Fund will pay (or will enter into arrangements providing for the
payment of) all fees and expenses (1) in connection with the preparation
and filing of any registration statement or amendments thereto as required
under the Investment Company Act of 1940, as amended; (2) in connection
with the preparation and filing of any registration statement and
prospectus or amendments thereto under the Securities Act of 1933, as
amended, covering the issue and sale of the Fund's shares; and (3) in
connection with the registration of the Fund and qualification of shares
for sale in the various states and other jurisdictions. The Fund will also
pay the cost of (i) preparation and distribution to shareholders of
prospectuses, reports, tax information, notices, proxy statements and
proxies; (ii) preparation and distribution of dividend and capital gain
payments to shareholders; (iii) issuance, transfer, registry and
maintenance of open account charges; (iv) delivery, remittance, redemption
and repurchase charges; (v) communication with shareholders concerning
these items; and (vi) stock certificates. The Fund will pay taxes
including, in the case of redeemed shares, any initial transfer taxes
unpaid.
The Distributor shall assume responsibility for the expense of printing
prospectuses used for the solicitation of new accounts. The Distributor
will pay the expenses of other sales literature, all fees and expenses in
connection with the Distributor's qualification as a dealer under the
Securities Exchange Act of 1934, as amended, and in the various states, and
all other expenses in connection with the sale and offering for sale of
shares of the Fund which have not been herein specifically allocated to or
assumed by the Fund.
13. CONFORMITY WITH LAW
The Distributor agrees that in selling the shares of the Fund it will duly
conform in all respects with the laws of the United States and any state or
other jurisdiction in which such shares may be offered for sale pursuant to
this Agreement.
14. MEMBERSHIP IN NATIONAL ASSOCIATION OF SECURITIES DEALERS
The Fund recognizes that the Distributor is now a member of the National
Association of Securities Dealers, and in the conduct of its duties under
this Agreement the Distributor is subject to the various rules, orders and
regulations of such organization. The right to determine whether such
membership should or should not continue, or to join other organizations,
is reserved by the Distributor.
15. OTHER INTERESTS
It is understood that directors, officers, agents and stockholders of the
Fund are or may be interested in the Distributor as directors, officers,
stockholders, or otherwise; that directors, officers, agents, and
stockholders of the Distributor are or may be interested in the Fund as
directors, officers, stockholders or otherwise; that the Distributor may be
interested in the Fund as a stockholder or otherwise; and that the
existence of any dual interest shall not affect the validity hereof or of
any transaction hereunder except as otherwise provided in the Certification
of Incorporation of the Fund and the Distributor, respectively, or by
specific provision of applicable law.
16. INDEMNIFICATION
The Fund agrees to indemnify, defend and hold the Distributor, its officers
and directors, and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act of 1933, free and harmless from
and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
the Distributor, its officers, directors or any such controlling person may
incur under the Securities Act of 1933, or under common law or otherwise,
arising out of or based upon any untrue statement of a material fact
contained in the Fund's registration statement or prospectus or arising out
of or based upon any alleged omission to state a material fact required to
be stated in either thereof or necessary to make the statements in either
thereof not misleading, except insofar as such claims, demands, liabilities
or expenses arise out of or are based upon any such untrue statement or in
conformity with information furnished in writing by the Distributor to the
Fund for use in the Fund's registration statement or prospectus: provided,
however, that this indemnity agreement, to the extent that it might require
indemnity of any person who is also an officer or director of the Fund or
who controls the Fund within the meaning of Section 15 of the Securities
Act of 1933, shall not inure to the benefit of such officer, director or
controlling person unless a court of competent jurisdiction shall
determine, or it shall have been determined by controlling precedent that
such result would not be against public policy as expressed in the
Securities Act of 1933, and further provided, that in no event shall
anything contained herein be so construed as to protect the Distributor
against any liability to the Fund or to its security holders to which the
Distributor would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence, in the performance of its duties, or by
reason of its reckless disregard of its obligations under this Agreement.
The Fund's agreement to indemnify the Distributor, its officers and
directors and any such controlling person as aforesaid is expressly
conditioned upon the Fund being promptly notified of any action brought
against the Distributor, its officers or directors, or any such controlling
person, such notification to be given by letter or telegram addressed to
the Fund. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
directors in connection with the issue and sale of any shares of it Capital
Stock.
The Distributor agrees to indemnify, defend and hold the Fund, its officers
and directors and any person who controls the Fund, if any, within the
meaning of Section 15 of the Securities Act of 1933, free and harmless from
and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands
liabilities and any counsel fees incurred in connection therewith) which
the Fund, its directors or officers or any such controlling person may
incur under the Securities Act of 1933 or under common law or otherwise;
but only to the extent that such liability or expense incurred by the Fund,
its directors or officers or such controlling person resulting from such
claims or demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained in information furnished in writing
by the Distributor to the Fund for use in the Fund's registration statement
or prospectus or shall arise out of or be based upon any alleged omission
to state a material fact in connection with such information required to be
stated in the registration statement or prospectus or necessary to make
such information not misleading. The Distributor's agreement to indemnify
the Fund, its directors and officers, and any such controlling person as
aforesaid is expressly conditioned upon the Distributor being promptly
notified of any action brought against the Fund, its officers or directors
or any such controlling person.
17. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective upon the effective date of the Fund's
initial registration statement under the Securities Act of 1933 and will
remain in effect from year to year thereafter, but only so long as such
continuance is specifically approved, at least annually, either by the
Board of Directors of the Fund, or by a vote of a majority of the
outstanding voting securities of the Fund, provided that in either event
such continuation shall be approved by the vote of a majority of the
directors who are not interested persons of the Distributor, Principal
Mutual Life Insurance Company, or the Fund cast in person at a meeting
called for the purpose of voting on such approval. This Agreement may on 60
days written notice be terminated at any time, without the payment of any
penalty, by the Fund, or by the Distributor. This Agreement shall terminate
automatically in the event of its assignment by the Distributor and shall
not be assignable by the Fund without the consent of the Distributor.
In interpreting the provisions of this paragraph, the definitions contained
in section 2(a) of the Investment Company Act of 1940 (particularly the
definitions of "interested person", "assignment" and "voting security")
shall be applied.
18. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination
is sought. If the Fund should at any time deem it necessary or advisable in
the best interests of the Fund that any amendment of this Agreement be made
in order to comply with the recommendations or requirements of the
Securities and Exchange Commission or other governmental authority or to
obtain any advantage under state or federal tax laws and should notify the
Distributor of the form of such amendment, and the reasons therefor, and if
the Distributor should decline to assent to such amendment, the Fund may
terminate this Agreement forthwith. If the Distributor should at any time
request that a change be made in the Fund's Certificate of Incorporation or
By-laws, or in its method of doing business, in order to comply with any
requirements of federal law or regulations of the Securities and Exchange
Commission or of a national securities association of which the Distributor
is or may be a member, relating to the sale of shares of the Fund, and the
Fund should not make such necessary change within a reasonable time, the
Distributor may terminate this Agreement forthwith.
19. ADDRESS FOR PURPOSES OF NOTICE
Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notices. Until
further notice to the other party, it is agreed that the address of the
Fund and that of the Distributor for this purpose shall be The Principal
Financial Group, Xxx Xxxxxx, Xxxx 00000.
IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be
executed in duplicate on the day and year first above written.
PRINCIPAL INTERNATIONAL SMALLCAP PRINCOR FINANCIAL SERVICES CORPORATION
FUND, INC.
By __________________________________ By _________________________________
A. S. Filean, Vice Presiden X. X. Xxxxx, President
