DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this ___ day of December, 1997, by and between
The Xxxxxxx Investment Fund, a Delaware business trust (the "Trust"), and
Sunstone Distribution Services, LLC, a Wisconsin limited liability company (the
"Distributor").
WHEREAS, the Trust is an open-end investment company registered under the
Investment Company Act of 1940, as amended (the "Act") and is authorized to
issue shares of beneficial interests (the "Shares") in separate series with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member of
the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Trust and Distributor desire to enter into an agreement
pursuant to which Distributor shall be the distributor of the Shares of the
Trust representing the investment portfolios listed on Schedule A hereto and any
additional investment portfolios the Trust and Distributor may agree upon and
include on Schedule A as such Schedule may be amended from time to time (such
investment portfolios and any additional investment portfolios are individually
referred to as a "Fund" and collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. APPOINTMENT OF THE DISTRIBUTOR.
The Trust hereby appoints the Distributor as agent for the
distribution of the Shares, on the terms and for the period set forth in this
Agreement. Distributor hereby accepts such appointment as agent for the
distribution of the Shares on the terms and for the period set forth in this
Agreement.
2. SERVICES AND DUTIES OF THE DISTRIBUTOR.
2.1 Distributor will act as agent for the distribution of Shares in
accordance with the instructions of the Trust's Board of Trustees and the
registration statement and prospectuses then in effect with respect to the Funds
under the Securities Act of 1933, as amended (the "1933 Act").
2.2 Subject to the terms of Section 4.2, Distributor may finance
appropriate activities which it deems reasonable which are primarily intended to
result in the sale of Shares, including, but not limited to, advertising, the
printing and mailing of prospectuses to other than current shareholders, and the
printing and mailing of sales literature. Distributor may enter into servicing
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and/or selling agreements with qualified broker/dealers and other persons with
respect to the offering of Shares to the public, and if it so chooses
Distributor will act only on its own behalf as principal. The Distributor shall
not be obligated to sell any certain number of Shares of any Fund.
2.3 All Shares of the Funds offered for sale by Distributor shall be
offered for sale to the public at a price per unit (the "offering price") equal
to their net asset value (determined in the manner set forth in the Funds' then
current prospectus).
2.4 Distributor shall act as distributor of the Shares in compliance in
all material respects with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or adopted
pursuant to the 1940 Act, by the Securities and Exchange Commission (the
"Commission") and the NASD. Distributor shall provide to the Trust's Board of
Trustees, at least quarterly, a report of its expenses incurred pursuant to this
Agreement.
3. DUTIES AND REPRESENTATIONS OF THE TRUST.
3.1 The Trust represents that it is registered as an open-end management
investment company under the 1940 Act and that it has and will continue to act
in conformity with its Declaration of Trust, By-Laws, its registration statement
as may be amended from time to time and resolutions and other instructions of
its Board of Trustees and has and will continue to comply with all applicable
laws, rules and regulations including without limitation the 1933 Act, the 1934
Act, the 1940 Act, the laws of the states in which shares of the Funds are
offered and sold, and the rules and regulations thereunder.
3.2 The Trust shall take or cause to be taken all necessary action to
register and maintain the registration of the Shares under the 1933 Act for sale
as herein contemplated and shall pay all costs and expenses in connection with
the registration of Shares under the 1933 Act, and be responsible for all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Trust hereunder.
3.3 The Trust shall execute any and all documents and furnish any and all
information and otherwise take all actions which may be reasonably necessary in
the discretion of the Trust's officers in connection with the qualification of
the Shares for sale in such states as Distributor and the Trust may approve,
shall maintain the registration of a sufficient number or amount of shares
thereunder, and shall pay all expenses which may be incurred in connection with
such qualification.
3.4 The Trust shall, at its expense, keep the Distributor fully informed
with regard to its affairs. In addition, the Trust shall furnish Distributor
from time to time such information with respect to the Trust and the Shares as
Distributor may reasonably request, and the Trust warrants that the statements
contained in any such information shall be true and correct. The Trust
represents that it will not use or authorize the use of any advertising or sales
material unless and until such materials have been approved and authorized for
use by the Distributor.
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3.5 The Trust represents to Distributor that all registration statements
and prospectuses of the Trust filed or to be filed with the Commission under the
1933 Act with respect to the Shares have been and will be prepared in conformity
with the requirements of the 1933 Act, the 1940 Act, and the rules and
regulations of the Commission thereunder. As used in this Agreement the terms
"registration statement" and "prospectus" shall mean any registration statement
and prospectus (together with the related statement of additional information)
at any time now or hereafter filed with the Commission with respect to any of
the Shares and any amendments and supplements thereto which at any time shall
have been or will be filed with said Commission. The Trust represents and
warrants to Distributor that any registration statement and prospectus, when
such registration statement becomes effective, will contain all statements
required to be stated therein in conformity with the 1933 Act, the 1940 Act and
the rules and regulations of the Commission; that all information contained in
the registration statement and prospectus will be true and correct in all
material respects when such registration statement becomes effective; and that
neither the registration statement nor any prospectus when such registration
statement becomes effective will include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading. The Trust agrees to file from time
to time such amendments, supplements, reports and other documents as may be
necessary or required in order to comply with the 1933 Act and the 1940 Act and
in order that there may be no untrue statement of a material fact in a
registration statement or prospectus, or necessary or required in order that
there may be no omission to state a material fact in the registration statement
or prospectus which omission would make the statements therein misleading.
3.6 The Trust shall not file any amendment to the registration statement
or supplement to any prospectus without giving Distributor reasonable notice
thereof in advance and if the Distributor declines to assent to such amendment
(after a reasonable time), the Trust may terminate this Agreement forthwith by
written notice to the Distributor without payment of any penalty. If the Trust
shall not propose an amendment or amendments and/or supplement or supplements
promptly after receipt by the Trust of a written request in good faith from
Distributor to do so, Distributor may, at its option, immediately terminate this
Agreement. In addition, if, at any time during the term of this Agreement, the
Distributor requests the Trust to make any change in its governing instruments
or in its methods of doing business which are necessary in order to comply with
any requirement of applicable law or regulation, and the Trust fails (after a
reasonable time) to make any such change as requested, the Distributor may
terminate this Agreement forthwith by written notice to the Trust without
payment of any penalty. Nothing contained in this Agreement shall in any way
limit the Trust's right to file at any time any amendments to any registration
statement and/or supplements to any prospectus, of whatever character, as the
Trust may deem advisable, such right being in all respects absolute and
unconditional.
3.7 Whenever in their judgment such action is warranted by market,
economic or political conditions, or by circumstances of any kind, the Trust's
officers may decline to accept any orders for, or make any sales of, any Shares
until such time as they deem it advisable to accept such orders and to make such
sales and the Trust shall advise Distributor promptly of such determination.
3.8 The Trust agrees to advise the Distributor promptly in writing:
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(i) of any correspondence or other communication by the Commission
or its staff relating to the Funds including requests by the Commission for
amendments to the registration statement or prospectuses;
(ii) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or prospectuses
then in effect or the initiation of any proceeding for that purpose;
(iii) of the happening of any event which makes untrue any statement
of a material fact made in the registration statement or prospectuses or which
requires the making of a change in such registration statement or prospectuses
in order to make the statements therein not misleading; and
(iv) of all actions taken by the Commission with respect to any
amendments to any registration statement or prospectus which may from time to
time be filed with the Commission.
4. COMPENSATION.
4.1 For the services provided pursuant to this Agreement, and subject to
the limitations contained in Section 4.3 below, the Funds will pay to the
Distributor a fee, payable monthly in arrears, at the annual rate of 0.0175% per
annum of each Fund's average daily net assets; provided, however, that such
compensation shall be subject to an aggregate minimum annual fee of $25,000 per
Fund.
4.2 In addition to the compensation payable pursuant to Section 4.1, and
subject to the limitations contained in Section 4.3 below, the Funds will
reimburse the Distributor or pay directly, at the Distributor's discretion, the
Distributor's (i) out-of-pocket expenses incurred in connection with activities
primarily intended to result in the sale of Shares including, without
limitation, typesetting, printing and distribution of prospectuses and
shareholder reports, production, printing and distribution of sales materials
and forms, placement of media advertising, engagement of designers, free xxxxx
writers and public relation firms, long distance telephone lines, services and
charges, postage, overnight delivery charges, storage of inventory, regulatory
filing fees and travel, lodging and meals, and (ii) amounts paid by Distributor
to dealers or other persons entering into a selling or servicing agreement with
Distributor or the Trust.
4.3 Subject to and calculated in accordance with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., if during any
annual period the total of the compensation payable and out-of-pocket
reimbursements under Sections 4.1 and 4.2 to the Distributor exceeds 0.25% of a
Fund's average daily net assets, the Distributor will rebate that portion of its
fee and expenses necessary to result in the total of (i) and (ii) above not
exceeding 0.25% of the Fund's average daily net assets. The payment of
compensation and reimbursement of expenditures is authorized pursuant to the
Trust's Distribution Plan under Rule 12b-1 under the 1940 Act and is contingent
upon the continued effectiveness of the Trust's Distribution Plan. It is
understood that the Trust's investment adviser will reimburse the Distributor
(or pay directly at the discretion of the
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Distributor) any distribution expenses and compensation incurred by Distributor
in excess of the amounts, if any, the Trust, on behalf of a Fund, pays to
Distributor.
5. INDEMNIFICATION.
5.1(a) The Trust authorizes Distributor to use any prospectus, in the form
furnished to Distributor from time to time, in connection with the sale of
Shares. The Trust shall indemnify, defend and hold the Distributor, and each of
its present or former directors, officers, employees, representatives and any
person who controls or previously controlled the Distributor within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
losses, claims, demands, liabilities, damages and expenses (including the costs
of investigating or defending any alleged losses, claims, demands, liabilities,
damages or expenses and any counsel fees incurred in connection therewith) which
Distributor, each of its present and former directors, officers, employees or
representatives or any such controlling person, may incur under the 1933 Act,
the 1934 Act, any other statute (including Blue Sky laws) or any rule or
regulation thereunder, or under common law or otherwise, arising out of or based
upon any untrue statement, or alleged untrue statement, of a material fact
contained in the registration statement or any prospectus, as from time to time
amended or supplemented, or an annual or interim report to shareholders, or
arising out of or based upon 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; provided, however, that the Trust's
obligation to indemnify Distributor and any of the foregoing indemnitees shall
not be deemed to cover any losses, claims, demands, liabilities, damages or
expenses arising out of any untrue statement or alleged untrue statement or
omission or alleged omission made in the registration statement, prospectus, or
annual or interim report in reliance upon and in conformity with information
relating to the Distributor and furnished to the Trust or its counsel by
Distributor for the purpose of, and used in, the preparation thereof; and
provided further that the Trust's agreement to indemnify Distributor and any of
the foregoing indemnitees shall not be deemed to cover any liability to the
Trust or its shareholders to which Distributor would otherwise be subject by
reason of its willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement. The Trust's agreement to indemnify
the Distributor, and any of the foregoing indemnitees, as the case may be, with
respect to any action, is expressly conditioned upon the Trust being notified of
such action brought against Distributor, or any of the foregoing indemnitees,
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor, or such person, such notification to be given by letter or by
telegram addressed to the Trust's President, but the failure so to notify the
Trust of any such action shall not relieve the Trust from any liability which
the Trust may have to the person against whom such action is brought by reason
of any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Trust's indemnity agreement contained
in this Section 5.1.
5.1(b) The Trust shall be entitled to participate at its own expense in
the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such loss, claim, demand, liability, damage or expense, but if the
Trust elects to assume the defense, such defense shall be conducted by counsel
chosen by the Trust and approved by the Distributor, which approval shall not be
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unreasonably withheld. In the event the Trust elects to assume the defense of
any such suit and retain such counsel, the indemnified defendant or defendants
in such suit shall bear the fees and expenses of any additional counsel retained
by them. If the Trust does not elect to assume the defense of any such suit, or
in case the Distributor does not, in the exercise of reasonable judgment,
approve of counsel chosen by the Trust, the Trust will reimburse the indemnified
person or persons named as defendant or defendants in such suit, for the fees
and expenses of any counsel retained by Distributor and them. The Trust's
indemnification agreement contained in this Section 5.1 and the Trust'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
the Distributor, and each of its present or former directors, officers,
employees, representatives or any controlling person, and shall survive the
delivery of any Shares and the termination of this Agreement. This agreement of
indemnity will inure exclusively to the Distributor's benefit, to the benefit of
each of its present or former directors, officers, employees or representatives
or to the benefit of any controlling persons and their successors. The Trust
agrees promptly to notify Distributor of the commencement of any litigation or
proceedings against the Trust or any of its officers or directors in connection
with the issue and sale of any of the Shares.
5.2(a) Distributor shall indemnify, defend and hold the Trust, and each of
its present or former trustees, officers, employees, representatives, and any
person who controls or previously controlled the Trust within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
losses, claims, demands, liabilities, damages and expenses (including the costs
of investigating or defending any alleged losses, claims, demands, liabilities,
damages or expenses, and any counsel fees incurred in connection therewith)
which the Trust, and each of its present or former trustees, officers,
employees, representatives, or any such controlling person, may incur under the
1933 Act, the 1934 Act, any other statute (including Blue Sky laws) or any rule
or regulation thereunder, or under common law or otherwise, arising out of or
based upon any untrue, or alleged untrue, statement of a material fact contained
in the Trust's registration statement or any prospectus, as from time to time
amended or supplemented, or annual or interim report to shareholders or the
omission, or alleged omission, to state therein a material fact required to be
stated therein or necessary to make the statement not misleading, but only if
such statement or omission was made in reliance upon, and in conformity with,
information relating to the Distributor and furnished to the Trust or its
counsel by the Distributor for the purpose of, and used in, the preparation
thereof. Distributor's agreement to indemnify the Trust and any of the
foregoing indemnitees shall not be deemed to cover any liability to Distributor
to which the Trust would otherwise be subject by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties, under this
Agreement. The Distributor's Agreement to indemnify the Trust, and any of the
foregoing indemnitees, is expressly conditioned upon the Distributor's being
notified of any action brought against the Trust, and any of the foregoing
indemnitees, such notification to be given by letter or telegram addressed to
Distributor's President, within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Trust or such person, but the failure so to notify
Distributor of any such action shall not relieve Distributor from any liability
which Distributor may have to the person against whom such action is brought by
reason of any such untrue, or alleged untrue, statement or omission, otherwise
than on account of Distributor's indemnity agreement contained in this Section
5.2(a).
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5.2(b) The Distributor shall be entitled to participate at its own expense
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such loss, claim, demand, liability, damage or expense, but if the
Distributor elects to assume the defense, such defense shall be conducted by
counsel chosen by the Distributor and approved by the Trust, which approval
shall not be unreasonably withheld. In the event the Distributor elects to
assume the defense of any such suit and retain such counsel, the indemnified
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by them. If the Distributor does not elect to
assume the defense of any such suit, or in case the Trust does not, in the
exercise of reasonable judgment, approve of counsel chosen by the Distributor,
the Distributor will reimburse the indemnified person or persons named as
defendant or defendants in such suit, for the fees and expenses of any counsel
retained by the Trust and them. The Distributor's indemnification agreement
contained in this Section 5.2 and the Distributor'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 the Trust, and each of
its present or former directors, officers, employees, representatives or any
controlling person, and shall survive the delivery of any Shares and the
termination of this Agreement. This Agreement of indemnity will inure
exclusively to the Trust's benefit, to the benefit of each of its present or
former directors, officers, employees or representatives or to the benefit of
any controlling persons and their successors. The Distributor agrees promptly
to notify the Trust of the commencement of any litigation or proceedings against
the Distributor or any of its officers or directors in connection with the issue
and sale of any of the Shares.
6. OFFERING OF SHARES.
No Shares shall be offered by either the Distributor or the Trust under any
of the provisions of this Agreement and no orders for the purchase or sale of
such Shares hereunder shall be accepted by the Trust 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 the current prospectus as required by Section 10 of
the 1933 Act, as amended, is not on file with the Commission; provided, however,
that nothing contained in this paragraph 6 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectus or
Declaration of Trust.
7. TERM.
7.1 This Agreement shall become effective with respect to each Fund listed
on Schedule A hereof as of the date hereof and, with respect to each Fund not in
existence on that date, on the date an amendment to Schedule A to this Agreement
relating to that Fund is executed. Unless sooner terminated as provided herein,
this Agreement shall continue in effect with respect to each Fund until December
__, 1998. Thereafter, if not terminated, this Agreement shall continue
automatically in effect as to each Fund for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Trust's
Board of Trustees or (ii) the vote of a majority (as defined in the 0000 Xxx) of
the outstanding voting securities of a Fund, and provided that in either event
the continuance is also approved by the Distributor and by a majority of the
Trust's Board of Trustees who are not "interested persons" (as defined in the
0000 Xxx) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval.
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7.2 This Agreement may be terminated without penalty with respect to a
particular Fund (1) through a failure to renew this Agreement at the end of a
term, (2) upon mutual consent of the parties, or (3) on no less than thirty (30)
days' written notice, by the Trust's Board of Trustees, by vote of a majority
(as defined with respect to voting securities in the 1940 Act) of the
outstanding voting securities of a Fund, or by the Distributor (which notice may
be waived by the party entitled to such notice). In addition, this Agreement
may be terminated at any time, without penalty, with respect to a particular
Fund by vote of a majority of the members of the Board of Trustees who are not
interested persons of the Trust (as defined in the 0000 Xxx) and have no direct
or indirect financial interest in the operation of the Trust's Service and
Distribution Plan or in this Agreement. 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 Trust. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
8. MISCELLANEOUS.
8.1 The services of the Distributor rendered to the Funds are not deemed
to be exclusive. The Distributor may render such services and any other
services to others, including other investment companies. The Trust recognizes
that from time to time directors, officers, and employees of the Distributor may
serve as directors, trustees, officers and employees of other entities
(including other investment companies), that such other entities may include the
name of the Distributor as part of their name and that the Distributor or its
affiliates may enter into distribution, administration, fund accounting,
transfer agent or other agreements with such other entities.
8.2 Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records relative
to the Funds and prior, present or potential shareholders of the Trust (and
clients of said shareholders), and not to use such records and information for
any purpose other than performance of its responsibilities and duties hereunder,
except after prior notification to and approval in writing by the Trust, which
approval may not be withheld where the Distributor may be exposed to civil or
criminal proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, when subject to governmental or
regulatory audit or investigation, or when so requested by the Trust. Records
and information which have become known to the public through no wrongful act of
the Distributor or any of its employees, agents or representatives shall not be
subject to this paragraph.
8.3 This Agreement shall be governed by Wisconsin law (except as to
Section 8.4 hereof which shall be construed in accordance with Delaware law).
To the extent that the applicable laws of the State of Wisconsin, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control, and nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or order of the Commission
thereunder. Any provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or
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unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.4 This Agreement is executed by or on behalf of the Trust and the
obligations hereunder are not binding upon any of the Trustees, officers or
shareholders of the Trust individually but are binding only upon the Funds to
which such obligations pertain and the assets and property of such Funds.
8.5 Any notice required or to be permitted to be given by either party to
the other shall be in writing and shall be deemed to have been given when sent
by registered or certified mail, postage prepaid, return receipt requested, as
follows: Notice to the Distributor shall be sent to Sunstone Distribution
Services, LLC, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxx, XX, 00000,
Attention: Xxxxxx X. Xxxxxxx, and notice to the Trust shall be sent to The
Xxxxxxx Investment Fund, 0000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000,
Attention: Xxxxxxx X. Xxxxx.
8.6 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer as of the day and year first above
written.
THE XXXXXXX INVESTMENT FUND
(the "Trust")
By:
------------------------------
SUNSTONE DISTRIBUTION SERVICES, LLC
(the "Distributor")
By:
------------------------------
Xxxxxx X. Xxxxxxx
President
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SCHEDULE A
TO THE
DISTRIBUTION AGREEMENT
BY AND BETWEEN
THE XXXXXXX INVESTMENT TRUST
AND
SUNSTONE DISTRIBUTION SERVICES, LLC
NAME OF FUNDS
The Xxxxxxx Focus Fund
The Xxxxxxx Growth & Income Fund
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