Exhibit 7(b)
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Draft--February 22, 1996
Rule 00x-0 Xxxxxxxxxxxx Xxxx xxx Xxxxxxxxx
Xxxx Xxxxxx Tax-Free Income Fund, Inc. -- California Series -- Class C Shares
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RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of July 12, 1996
by and between LORD XXXXXX TAX-FREE INCOME FUND, INC., a Maryland corporation
(the "Fund"), on behalf of its CALIFORNIA SERIES (the "Series"), and LORD XXXXXX
DISTRIBUTOR LLC, a New York limited liability company (the "Distributor").
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
the Distributor is the exclusive selling agent of the Fund's shares of capital
stock, including the Series' Class C shares (the "Shares") pursuant to the
Distribution Agreement between the Fund and the Distributor, dated as of the
date hereof, and
WHEREAS, the Fund desires to adopt a Distribution Plan and Agreement
(the "Plan") for the Series with the Distributor, as permitted by Rule 12b-1
under the Act, pursuant to which the Series may make certain payments to the
Distributor for payment to institutions and persons permitted by applicable law
and/or rules to receive such payments ("Authorized Institutions") in connection
with sales of Shares and for use by the Distributor as provided in paragraph 3
of this Plan, and
WHEREAS, the Fund's Board of Directors has determined that there is a
reasonable likelihood that the Plan will benefit the Series and the holders of
the Shares.
NOW, THEREFORE, in consideration of the mutual covenants and of other
good and valuable consideration, receipt of which is hereby acknowledged, it is
agreed as follows:
1. The Fund hereby authorizes the Distributor to enter into
agreements with Authorized Institutions (the "Agreements") which may provide for
the payment to such Authorized Institutions of distribution and service fees
which the Distributor receives from the Series in order to provide incentives to
such Authorized Institutions (i) to sell Shares and (ii) to provide continuing
information and investment services to their accounts holding Shares and
otherwise to encourage their accounts to remain invested in the Shares. The
Distributor may, from time to time, waive or defer payment of some fees payable
at the time of the sale of Shares provided for under paragraph 2 hereof.
2. Subject to possible reduction as provided below in this paragraph
2, the Series shall pay to the Distributor fees (i) at the time of sale of
Shares (a) for services, not to exceed .25 of 1% of the net asset value of the
Shares sold and (b) for distribution, not to exceed .75 of 1% of the net asset
value of the Shares sold; and (ii) at each quarter-end after the first
anniversary of the sale of Shares (a) for services, at an annual rate not to
exceed .25 of 1% of the average annual net asset value of Shares outstanding for
one year or more and (b) for distribution, at an annual rate not to exceed .75
of 1% of the average annual net asset value of Shares outstanding for one year
or more. For purposes of clause (ii) above, (A) Shares issued pursuant to an
exchange for Class C shares of another series of the Fund or another Lord
Xxxxxx-sponsored fund (or for shares of a fund acquired by the Fund) will be
credited with the time held from the initial purchase of such other shares when
determining how long Shares mentioned in clause (ii) have been outstanding and
(B) payments will be based on Shares outstanding during any such quarter. Sales
in clause (i) above exclude Shares issued for reinvested dividends and
distributions, and Shares outstanding in clause (ii) above include Shares issued
for reinvested dividends and distributions which have been outstanding for one
year or more. The Board of Directors of the Fund shall from time to time
determine the amounts, within the foregoing maximum amounts, that the Series may
pay the Distributor hereunder. Such determinations by the Board of Directors
shall be made by votes of the kind referred to in paragraph 10 of this Plan. The
service fees mentioned in this paragraph are for the purposes mentioned in
clause (ii) of paragraph 1 of this Plan and the distribution fees mentioned in
this paragraph are for the purposes mentioned in clause (i) of paragraph 1 and
the second sentence of paragraph 3 of this Plan. The Distributor will monitor
the payments hereunder and shall reduce such payments or take such other steps
as may be necessary to assure that (x) the payments pursuant to this Plan shall
be consistent with Article III, Section 26, subparagraphs (d)(2) and (5) of the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
with respect to investment companies with asset-based sales charges and service
fees as the same may be in effect from time to time and (y) the Series shall not
pay with respect to any Authorized Institution service fees equal to more than
.25 of 1% of the average annual net asset value of Shares sold by (or
attributable to shares sold by) such Authorized Institution and held in an
account covered by an Agreement.
3. The Distributor may use amounts received as distribution fees
hereunder from the Series to finance any activity which is primarily intended to
result in the sale of Shares including, but not limited to, commissions or other
payments relating to selling or servicing efforts. Without limiting the
generality of the foregoing, the Distributor may apply up to 10 of the total
basis points authorized by the Fund's Board of Directors designated as the
distribution fee referred to in clause (ii)(b) of paragraph 2 to expenses
incurred by the Distributor if such expenses are
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primarily intended to result in the sale of Shares. The Fund's Board of
Directors (in the manner contemplated in paragraph 10 of this Plan) shall
approve the timing, categories and calculation of any payments under this
paragraph 3 other than those referred to in the foregoing sentence.
4. The net asset value of the Shares shall be determined as provided
in the Articles of Incorporation of the Fund. If the Distributor waives all or a
portion of fees which are to be paid by the Series hereunder, the Distributor
shall not be deemed to have waived its rights under this Agreement to have the
Series pay such fees in the future.
5. The Secretary of the Fund, or in his absence the Chief Financial
Officer, is hereby authorized to direct the disposition of monies paid or
payable by the Series hereunder and shall provide to the Fund's Board of
Directors, and the Board of Directors shall review, at least quarterly, a
written report of the amounts so expended pursuant to this Plan and the purposes
for which such expenditures were made.
6. Neither this Plan nor any other transaction between the parties
hereto pursuant to this Plan shall be invalidated or in any way affected by the
fact that any or all of the directors, officers, shareholders, or other
representatives of the Fund are or may be "interested persons" of the
Distributor, or any successor or assignee thereof, or that any or all of the
directors, officers, partners, or other representatives of the Distributor are
or may be "interested persons" of the Fund, except as otherwise may be provided
in the Act.
7. The Distributor shall give the Fund the benefit of the
Distributor's best judgment and good faith efforts in rendering services under
this Plan. Other than to abide by the provisions hereof and render the services
called for hereunder in good faith, the Distributor assumes no responsibility
under this Plan and, having so acted, the Distributor shall not be held liable
or held accountable for any mistake of law or fact, or for any loss or damage
arising or resulting therefrom suffered by the Fund, the Series or any of the
shareholders, creditors, directors or officers of the Fund; provided however,
that nothing herein shall be deemed to protect the Distributor against any
liability to the Fund or the Series' shareholders by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
hereunder, or by reason of the reckless disregard of its obligations and duties
hereunder.
8. This Plan shall become effective on the date hereof, and shall
continue in effect for a period of more than one year from such date only so
long as such continuance is specifically approved at least annually by a vote of
the Board of
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Directors of the Fund, including the vote of a majority of the directors who are
not "interested persons" of the Fund and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement related to
this Plan, cast in person at a meeting called for the purpose of voting on such
renewal.
9. This Plan may not be amended to increase materially the amount to
be spent by the Series hereunder without the vote of a majority of its
outstanding voting securities and each material amendment must be approved by a
vote of the Board of Directors of the Fund, including the vote of a majority of
the directors who are not "interested persons" of the Fund and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement related to this Plan, cast in person at a meeting called for the
purpose of voting on such amendment.
10. Amendments to this Plan other than material amendments of the kind
referred to in the foregoing paragraph 9 of this Plan may be adopted by a vote
of the Board of Directors of the Fund, including the vote of a majority of the
directors who are not "interested persons" of the Fund and who have no direct or
indirect financial interest in the operation of this Plan or in any agreement
related to this Plan. The Board of Directors of the Fund may, by such a vote,
interpret this Plan and make all determinations necessary or advisable for its
administration.
11. This Plan may be terminated at any time without the payment of any
penalty by (a) the vote of a majority of the directors of the Fund who are not
"interested persons" of the Fund and have no direct or indirect financial
interest in the operation of this Plan or in any agreement related to this Plan,
or (b) by a shareholder vote in compliance with Rule 12b-1 and Rule 18f-3 under
the Act as in effect at such time. This Plan shall automatically terminate in
the event of its assignment.
12. So long as this Plan shall remain in effect, the selection and
nomination of those directors of the Fund who are not "interested persons" of
the Fund are committed to the discretion of such disinterested directors. The
terms "interested persons," "assignment" and "vote of a majority of the
outstanding voting securities" shall have the same meaning as those terms are
defined in the Act.
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IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and on its behalf by its duly authorized representative
as of the date first above written.
LORD XXXXXX TAX-FREE INCOME
FUND, INC.
By:___________________________
President
ATTEST:
____________________________
Assistant Secretary
LORD XXXXXX DISTRIBUTOR LLC
By:___________________________
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