EXHIBIT (e)(1)
Distribution Agreement
October 21, 1988
as amended on December 3, 1999
ND Capital, Inc.
000 Xxxxx Xxxxxxxx
Xxxxx, XX 00000
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, NDTax-Free Fund, Inc. (the "Fund"), an
open-end, non-diversified, management investment company organized as a
corporation under the laws of the State of North Dakota, has agreed that ND
Capital, Inc. ("Capital"), shall be, for the period of this distribution
agreement (the "Agreement"), the principal underwriter of shares issued by
the Fund, including such classes of shares as may now or hereafter be
authorized (the "Shares").
SECTION 1. SERVICES AS UNDERWRITER
Section 1.1 Capital will act as principal underwriter for the
distribution of the Shares covered by the registration statement, prospectus,
and statement of additional information then in effect of the Fund (the
"Registration Statement") under the Securities Act of 1933, as amended
(the "1933 Act"), and the Investment Company Act of 1940, as amended
(the "1940 Act").
Section 1.2 Capital agrees to use its best efforts to solicit orders
for the sale of the Shares at the public offering price, as determined in
accordance with the Registration Statement, and will undertake such
advertising and promotion as it believes is reasonable in connection with
such solicitation. Capital shall order Shares from the Fund only to the
extent that it shall have received purchase orders therefor.
Section 1.3 All activities by Capital as underwriter of the Shares shall
comply with all applicable laws, rules, and regulations, including, without
limitation, all rules and regulations made or adopted by the Securities and
Exchange Commission (the "SEC") or by any securities association registered
under the Securities Exchange Act of 1934 and the Fund's Registration
Statement.
Section 1.4 Capital will provide one or more persons during normal
business hours to respond to telephone questions concerning the Fund.
Section 1.5 Capital acknowledges that, whenever in the judgment of the
Fund's officers such action is warranted for any reason, including, without
limitation, market, economic, or political conditions, those officers may
decline to accept any orders for, or make any sales of, the Shares until
such time as those officers deem it advisable to accept such orders and
to make such sales.
Section 1.6 Capital 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. Capital will act only on its own behalf as
principal should it choose to enter into selling agreements with selected
dealers or others. Capital may allow commissions or concessions to dealers
in such amounts as Capital shall determine from time to time, as set forth
in the Fund's Registration Statement. Except as may otherwise be determined
by Capital and the Fund from time to time, such commissions or concessions
shall be uniform to all dealers. Shares sold to dealers shall be for resale
by such dealers only at the public offering price(s) set forth in the Fund's
then current Registration Statement. The price the Fund shall receive for
all Shares purchased from the Fund shall be the net asset value used in
determining the public offering price applicable to the sale of such Shares.
Section 1.7 In consideration of the services rendered pursuant to this
Agreement, Capital shall receive the excess, if any, of the sales price, as
set forth in the Fund's Registration Statement, over the net asset value of
Shares sold by Capital, as underwriter. In addition, Capital shall receive
the proceeds from any contingent deferred sales charge imposed on the
redemption of shares, as set forth in the Fund's Registration Statement. The
Fund shall also pay Capital any distribution and/or service fees applicable
to the Shares as authorized by the Distribution and Service Plan (the "Plan")
adopted by the Fund under Rule 12b-1 of the Investment Company Act of 1940
and set forth in the Fund's Registration Statement. Such fees shall be
payable in the manner and terms set forth in the Plan.
Section 1.8 Capital will bear all expenses in connection with the
performance of its services and the incurring of distribution expenses under
this Agreement. For purposes of this Agreement, "distribution expenses" of
Capital shall mean all expenses borne by Capital or by any other person with
which Capital has an agreement approved by the Fund, which expenses represent
payment for activities primarily intended to result in the sale of Shares,
including, but not limited to, the following:
(a) payments made to, and expenses of, persons who provide support
services in connection with the distribution of Shares, including, but not
limited to, office space and equipment, telephone facilities, answering
routine inquiries regarding the Fund, processing shareholder transactions,
and providing any other shareholder services;
(b) costs relating to the formulation and implementation of marketing
and promotional activities, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine, and other mass media
advertising;
(c) costs of printing and distributing prospectuses and reports of the
Fund to prospective shareholders of the Fund;
(d) costs involved in preparing, printing, and distributing sales
literature pertaining to the Fund;
(e) costs involved in obtaining whatever information, analyses, and
reports with respect to marketing and promotional activities that the Fund
may, from time to time, deem advisable; and
(f) sales commissions and other fees paid, together with related
financing costs to brokers, dealers or other selling entities with a dealer
agreement in effect for the sale of Fund Shares.
Distribution expenses, however, shall not include any expenditures in
connection with services which Capital, any of its affiliates, or any other
person has agreed to bear without reimbursement.
Section 1.9 Capital shall prepare and deliver reports to the
Treasurer of the Fund and to the Investment Adviser on a regular, at least
quarterly, basis, showing the distribution expenses incurred pursuant to
this Agreement and the Plan and the purposes therefor, as well as any
supplemental reports as the Directors, from time to time, may reasonably
request.
SECTION 2. DUTIES OF THE FUND
Section 2.1 The Fund agrees at its own expense to execute any and
all documents, to furnish any and all information, and to take any other
actions that may be reasonably necessary in connection with the
qualification of the Shares for sale in those states that Capital may
designate.
Section 2.2 The Fund shall furnish from time to time, for use in
connection with the sale of the Shares, such information reports with respect
to the Fund and its Shares as Capital may reasonably request, all of which
shall be signed by one or more of the Fund's duly authorized officers; and the
Fund warrants that the statements contained in any such reports, when so
signed by one or more of the Fund's officers, shall be true and correct. The
Fund shall also furnish Capital upon request with: (a) annual audits of the
Fund's books and accounts made by independent public accountants regularly
retained by the Fund, (b) semi-annual unaudited financial statements
pertaining to the Fund, (c) quarterly earnings statements prepared by the
Fund, (d) a monthly itemized list of the securities in the portfolio of the
Fund, (e) monthly balance sheets as soon as practicable after the end of each
month, and (f) from time to time such additional information regarding the
Fund's financial condition as Capital may reasonably request.
Section 2.3 The Fund shall pay to Capital, as set forth in the
Registration Statement, the proceeds from any contingent deferred sales charge
imposed on the redemption of the Shares, the excess (if any) of the sales
price of the Shares over the net asset value of Shares sold by Capital, and
any distribution and service fee authorized by the Plan.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Section 3.1 The Fund represents to Capital that all registration
statements, prospectuses, and statements of additional information filed
by the Fund with the SEC under the 1933 Act and the 1940 Act with respect
to the Shares of the Fund have been carefully prepared in conformity with
the requirements of the 1933 Act, the 1940 Act, and the rules and regulations
of the SEC thereunder. As used in this Agreement, the terms "registration
statement," "prospectus," and "statement of additional information" shall mean
any registration statement, prospectus, and statement of additional
information filed by the Fund with the SEC and any amendments and supplements
thereto which at any time shall have been filed with the SEC. The Fund
represents and warrants to Capital that any registration statement,
prospectus, and statement of additional information, when such registration
statement becomes effective, will include all statements required to be
contained therein in conformity with the 1933 Act, the 1940 Act, and the rules
and regulations of the SEC; that all statements of fact contained in any
registration statement, prospectus, or statement of additional information
will be true and correct when such registration statement becomes effective;
and that neither any registration statement nor any prospectus or statement of
additional information when such registration statement becomes effective will
include an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading to a purchaser of Shares. Capital may, but shall not be obligated
to, propose from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus or statement of
additional information as, in the light of future developments, may, in the
opinion of Capital's counsel, be necessary or advisable. If the Fund shall not
propose such amendment or amendments and/or supplement or supplements within
fifteen days after receipt by the Fund of a written request from Capital to
do so, Capital may, at its option, terminate this Agreement. The Fund shall
not file any amendment to any registration statement or supplement to any
prospectus or statement of additional information without giving Capital
reasonable notice thereof in advance; provided, however, that nothing contained
in this Agreement shall in any way limit the Fund's right to file at any time
such amendments to any registration statement and/or supplements to any
prospectus or statement of additional information, of whatever character, as
the Fund may deem advisable, such right being in all respects absolute and
unconditional.
SECTION 4 INDEMNIFICATION
Section 4.1 The Fund authorizes Capital and any dealers with whom Capital
has entered into dealer agreements to use any prospectus or statement of
additional information furnished by the Fund from time to time in connection
with the sale of Shares. The Fund agrees to indemnify, defend, and hold
Capital, its several officers and directors, and any person who controls
Capital within the meaning of Section 15 of the 1933 Act, 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
Capital, its officers and directors, or any such controlling person may incur
under the 1933 Act, the 1940 Act, or common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any registration statement, any prospectus, or any statement
of additional information, or arising out of or based upon any omission or
alleged omission to state a material fact required to be stated in any
registration statement, any prospectus, or any statement of additional
information, or necessary to make the statements in any of them not
misleading; provided, however, that the Fund's agreement to indemnify Capital,
its officers or directors, and any such controlling person shall not be deemed
to cover any claims, demands, liabilities, or expenses arising out of or based
upon any statements or representations made by Capital or its representatives
or agents other than such statements and representations as are contained in
any registration statement, prospectus, or statement of additional
information and in such financial and other statements as are furnished to
Capital pursuant to paragraph 2.2 hereof; and further provided that the Fund's
agreement to indemnify Capital and the Fund's representations and warranties
hereinbefore set forth in paragraph 3 shall not be deemed to cover any
liability to the Fund or its shareholders to which Capital would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of Capital's reckless disregard
of its obligations and duties under this Agreement. The Fund's agreement to
indemnify Capital, its officers and directors, and any such controlling
person, as aforesaid, is expressly conditioned upon the Fund's being notified
of any action brought against Capital, its officers or directors, or any such
controlling person, such notification to be given by letter or by telegram
addressed to the Fund at its principal office in Minot, North Dakota, and sent
to the Fund by the person against whom such action is brought, within ten
days after the summons or other first legal process shall have been served.
The failure so to notify the Fund of any such action shall not relieve the
Fund from any liability that the Fund may have to the person against whom
such action is brought by reason of any such untrue statement or omission
or alleged omission otherwise than on account of the Fund's indemnity
agreement contained in this paragraph 4.1. The Fund's indemnification
agreement contained in this paragraph 4.1 and the Fund's representations
and warranties in this Agreement shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of Capital,
its officers and directors, or any controlling person, and shall survive the
delivery of any Shares. This agreement of indemnity will inure exclusively to
Capital's benefit, to the benefit of its several officers and directors, and
their respective estates, and to the benefit of the controlling persons and
their successors. The Fund agrees to notify Capital promptly of the
commencement of any litigation or proceedings against the Fund or any of its
officers or directors in connection with the issuance and sale of any Shares.
Section 4.2 Capital agrees to indemnify, defend, and hold the Fund, its
several officers and directors, and any person who controls the Fund within
the meaning of Section 15 of the 1933 Act, free and harmless from and against
any and all claims, demands, liabilities, and expenses (including the costs of
investigating or defending such claims, demands, or liabilities and any
counsel fees incurred in connection therewith) that the Fund, its officers or
directors, or any such controlling person may incur under the 1933 Act, the
1940 Act, or common law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its officers or directors, or such
controlling person resulting from such claims or demands shall arise out of or
be based upon (a) any unauthorized sales literature, advertisements,
information, statements, or representations or (b) any untrue or alleged
untrue statement of a material fact contained in information furnished in
writing by Capital to the Fund and used in the answers to any of the items of
the registration statement or in the corresponding statements made in the
prospectus or statement of additional information, or shall arise out of or be
based upon any omission or alleged omission to state a material fact in
connection with such information furnished in writing by Capital to the Fund
and required to be stated in such answers or necessary to make such information
not misleading. Capital's agreement to indemnify the Fund, its officers and
directors, and any such controlling person, as aforesaid, is expressly
conditioned upon Capital's being notified of any action brought against the
Fund, its officers or directors, or any such controlling person, such
notification to be given by letter or telegram addressed to Capital at its
principal office in Minot, North Dakota, and sent to Capital by the person
against whom such action is brought, within ten days after the summons or
other first legal process shall have been served. The failure so to notify
Capital of any such action shall not relieve Capital from any liability that
Capital may have to the Fund, its officers or directors, or to such
controlling person by reason of any such untrue or alleged untrue statement or
omission or alleged omission otherwise than on account of Capital's indemnity
agreement contained in this paragraph 4.2. Capital agrees to notify the Fund
promptly of the commencement of any litigation or proceedings against Capital
or any of its officers or directors in connection with the issuance and sale
of any Shares.
Section 4.3 In case any action shall be brought against any indemnified
party under paragraph 4.1 or 4.2, and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish to do so, to assume the
defense thereof with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action, the indemnifying
party will not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than (a) reasonable costs of investigation or the
furnishing of documents or witnesses and (b) all reasonable fees and expenses
of separate counsel to such indemnified party if (i) the indemnifying party and
the indemnified party shall have agreed to the retention of such counsel or
(ii) the indemnified party shall have concluded reasonably that representation
of the indemnifying party and the indemnified party by the same counsel would
be inappropriate due to actual or potential differing interests between them
in the conduct of the defense of such action.
SECTION 5. EFFECTIVENESS OF REGISTRATION
Section 5.1 None of the Shares shall be offered by either Capital or the
Fund under any of the provisions of this Agreement and no orders for the
purchase or sale of the Shares hereunder shall be accepted by the Fund if
and so long as the effectiveness of the registration statement then in effect
or any necessary amendments thereto shall be suspended under any of the
provisions of the 1933 Act or if and so long as a current prospectus as
required by Section 5(b)(2) of the 1933 Act is not on file with the SEC;
provided, however, that nothing contained in this paragraph 5 shall in any
way restrict or have an application to or bearing upon the Fund's obligation
to repurchase Shares from any shareholder in accordance with the provisions
of the Fund's prospectus, statement of additional information, or articles
of incorporation.
SECTION 6. NOTICE TO CAPITAL
Section 6.1 The Fund agrees to advise Capital immediately in writing:
(a) of any request by the SEC for amendments to the registration
statement, prospectus, or statement of additional information then in
effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus,
or statement of additional information then in effect or the initiation
of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement
of a material fact made in the registration statement, prospectus, or
statement of additional information then in effect or that requires the
making of a change in such registration statement, prospectus, or statement
of additional information in order to make the statement therein not
misleading; and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus, or statement of additional information
which may from time to time be filed with the SEC.
SECTION 7. TERM OF AGREEMENT
Section 7.1 This amended Agreement shall continue until December 3, 2000,
and thereafter shall continue automatically for successive annual periods
ending on December 3rd, of each year, provided such continuance is
specifically approved at least annually by (a) the Fund's Board of Directors
and (b) a vote of a majority (as defined in the 0000 Xxx) of the Fund's
Directors who are not interested persons (as defined in the 0000 Xxx) of the
Fund and who have no direct or indirect financial interest in the operation
of the Plan, in this Agreement, or any agreement related to the Plan (the
"Qualified Directors"), by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable with respect
to the Fund, without penalty, (a) on 60 days' written notice, by vote of a
majority of the Qualified Directors or by vote of a majority (as defined in
the 0000 Xxx) of the outstanding voting securities of the Fund or (b) on 90
days' written notice by Capital. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
SECTION 8 MISCELLANEOUS
Section 8.1 The Fund recognizes that directors, officers, and employees
of Capital may from time to time serve as directors, officers, and employees
of corporations and business trusts (including other investment companies)
and that Capital or its affiliates may enter into distribution or other
agreements with such other corporations and trusts.
Section 8.2 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 property of the Fund. The execution and delivery of this Agreement
have been authorized by the Directors and the sole shareholder of the Shares
and signed by an authorized officer of the Fund, acting as such, and neither
such authorization by such Directors and shareholder 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 property of the Fund.
Section 8.3 This Agreement shall be construed in accordance with the
laws of the State of North Dakota.
Section 8.4 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
Section 8.5 This Agreement may not be amended or modified in any
manner except by both parties with the same formality as this Agreement
and as may be permitted or required by the 1940 Act
Section 8.6 The captions of 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 or effect.
In Witness Whereof, the parties hereto have caused this Agreement to be
executed as of the date first set forth herein.
ND Tax-Free Fund, Inc.
By: Xxxxxx X. Xxxxxxx
Title: President
Date: December 3, 1999
Accepted:
ND Capital, Inc.
By: Xxxxxx X. Xxxxxxx
Title: President
Date: December 3, 1999
