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EXHIBIT (h(2))
DEALER AGREEMENT
WITH XXX XXXXXX FUNDS INC.
REGARDING XXX XXXXXX
OPEN-END AND CLOSED-END INVESTMENT COMPANIES
Ladies and Gentlemen:
As dealer for our own account, we offer to sell to you shares of any of
the Xxx Xxxxxx open-end investment companies (the "Open-End Funds" or,
individually, an "Open-End Fund") and Xxx Xxxxxx closed-end investment
companies (the "Closed-End Funds" or, individually, a "Closed-End Fund")
distributed by Xxx Xxxxxx Funds Inc. ("VK Funds") pursuant to the terms and
conditions contained herein. Collectively, the Open-End Funds and Closed-End
Funds sometimes are referred to herein as the "Funds" or, individually,
as a "Fund".
VK Funds acts as the principal underwriter (as such term is defined in the
Investment Company Act of 1940, as amended) for each Fund with respect to its
offering of one or more classes of shares as described in each Fund's
Prospectus. Pursuant to this Agreement, VK Funds offers to sell to you shares
of each Open-End Fund and each Closed-End Fund prior to the Effective Date (as
defined herein) of each Fund's Registration Statement (as defined herein) (the
"Initial Offering Period") and after the Effective Date of each Fund's
Registration Statement (the "Continuous Offering Period") (if any) as described
in each respective Fund's Prospectus.
As used herein unless otherwise indicated, the term "Prospectus" means the
final prospectus and Statement of Additional Information included in the
registration statement for the fund on the effective date and as from time to
time thereafter amended or supplemented. As used herein unless otherwise
indicated, the term "Preliminary Prospectus" means any preliminary prospectus
and any preliminary Statement of Additional Information included at any time as
a part of the registration statement for any Fund prior to the effective date
and which is authorized by VK Funds for use in connection with the offering
of shares.
In consideration of the mutual obligations contained herein, the
sufficiency of which is hereby acknowledged by you, the terms of the Agreement
are as follows:
GENERAL TERMS AND CONDITIONS
1. Your acceptance of this Agreement constitutes a representation that
you are a broker-dealer registered with the Securities and Exchange Commission
(the "SEC") and a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD") or, in the alternative, that you are a
foreign dealer or bank, not required to be registered as a broker-dealer with
the SEC and not required or eligible for membership in the NASD. If you are
such an NASD member, you agree that in making sales of shares of the one or
more classes of shares of each Fund you will comply with all applicable rules
of the NASD, including without limitation rules pertaining to the opening,
approval, supervision and monitoring of customer accounts, the NASD's
Interpretation with Respect to Free-Riding and Withholding and Sections 8, 24
and 36 of Article III of the NASD's Rules of Fair Practice. If you are such an
unregistered foreign dealer or bank, you agree not to offer or sell, or to
agree to offer or sell, directly or indirectly, except through VK Funds,
any shares to any party to whom such shares may not be sold unless you are
so registered and a member of the NASD, and in making sales of such shares
you agree to comply with the NASD's Interpretation with Respect to Free-Riding
and Withholding and Sections 8, 24 and 36 of Article III of the NASD's Rules
of Fair Practice as though you were a member in
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good standing of the NASD and to comply with Section 25 of such Article III as
it applies to a nonmember broker or dealer in a foreign country. You and we
agree to abide by all other Rules and Regulations of the NASD, including
Section 26 of its Rules of Fair Practice, and all applicable state and Federal
laws, rules and regulations. Your acceptance also constitutes a representation
that you have been duly authorized by proper corporate or partnership action to
enter into this Agreement and to perform your obligations hereunder. You will
not accept any orders from any broker, dealer or financial institution who is
purchasing from you with a view toward distribution unless you have obtained
such person's or entity's written consent to be bound by the terms of this
Agreement.
2. In all sales of shares of the Funds to the public you shall act as
dealer for your own account, and you shall have no authority in any transaction
to act as agent for the Fund or for VK Funds.
3. Each Fund has filed with the SEC and the securities commissions of one
or more states a Registration Statement (the "Registration Statement") on the
SEC Form applicable to the respective Fund. The date on which the Registration
Statement is declared effective by the SEC is referred to herein as the
"Effective Date". Prior to the Effective Date of the Registration Statement
with respect to a particular Fund, you expressly acknowledge and understand
that with respect to such Fund:
(a) Shares of such Fund may not be sold, nor may offers to buy be
accepted, (i) in any state prior to the Effective Date of the Registration
Statement with respect thereto or (ii) in any state in which such offer or sale
would be unlawful prior to registration or qualification under the securities
laws of such state.
(b) The Fund's Preliminary Prospectus, together with any sales material
distributed for use in connection with the offering of shares of such Fund,
does not constitute an offer to sell or the solicitation of an offer to buy
shares of such Fund and is subject to completion and modification by the
Prospectus. You agree that you will distribute to the public only (a) the
Preliminary Prospectus, the Prospectus and any amendment or supplement thereto
and (b) sales literature or other documents expressly authorized for such
distribution by VK Funds.
(c) In the event that you transmit indications of interest to VK Funds
for accumulation prior to the Effective Date, you will be responsible for
confirming such indications of interest with your customers following the
Effective Date. Indications of interest with respect to shares of a class of a
Fund's shares transmitted to VK Funds prior to the Effective Date will be
conditioned upon the occurrence of the Effective Date and the registration or
qualification of the respective class of shares in the respective state.
(d) Indications of interest with respect to shares of a class of a Fund's
shares which are not canceled by you prior to the latter of the Effective Date
and the registration or qualification of the respective class of the Fund's
shares in the respective state, and accepted by VK Funds will be deemed by
VK Funds to be orders for shares of such class of shares of the Fund.
(e) All indications of interest and orders transmitted to VK Funds are
subject to the terms and conditions of the Prospectus and this Agreement.
4. After the Effective Date, you will not offer shares of a class of the
Fund's shares for sale in any state where they are not qualified for sale under
the "blue sky" laws and regulations of such state or where you are not
qualified to act as a dealer, except for states in which they are exempt from
qualification.
5. In the event that you offer shares of the Fund for sale outside the
United States, you agree to comply with the applicable laws, rules and
regulations of the foreign government having jurisdiction over such sales,
including any regulations of the United States military authorities applicable
to solicitations to military personnel.
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6. Upon application to VK Funds, VK Funds will inform you as to the
jurisdictions in which VK Funds believes shares of a Fund have been qualified
for sale under the respective securities or "blue sky" laws of such
jurisdictions. VK Funds understands and agrees that qualification of any shares
of a Fund for sale in such jurisdictions shall be solely VK Funds'
responsibility and that you assume no responsibility or obligation with respect
to such eligibility. You understand and agree that your compliance with the
requirements of the securities or "blue sky" laws in each jurisdiction with
respect to your right to sell the shares in such jurisdiction shall be solely
your responsibility.
7. No person is authorized to make any representations concerning any
class of shares of a Fund except those contained in the Fund's current
Preliminary Prospectus or Prospectus, as the case may be. In purchasing shares
from us you shall rely solely on the representations contained in such
Prospectus. VK Funds will furnish additional copies of a Fund's current
Prospectus and sales literature issued by VK Funds in reasonable quantities upon
request.
8. Orders received from you will be accepted by VK Funds only at the
public offering price applicable to each order as specified in the then-current
Fund Prospectus. The minimum dollar purchase of any shares of each Fund by any
person shall be the applicable minimum dollar amount described in the
then-current Fund Prospectus for that class of shares, and no order for less
than such amount will be accepted hereunder. The procedures relating to the
handling of orders shall be subject to instructions that VK Funds shall
communicate from time to time to you. All orders are subject to acceptance or
rejection by VKAC in its sole discretion.
9. Payment for Fund shares shall be made on or before the settlement date
specified in the VK Funds confirmation at the office of VK Funds' clearing
agent, or wire to the order of the Fund which reserves VK Funds' right to delay
issuance or transfer of shares until such check has cleared. If such payment is
not received by VK Funds, VK Funds reserves the right, without notice, forthwith
either to cancel the sale or, at its option, to sell the shares ordered back to
the Fund, and in either case, VK Funds may hold you responsible for any loss
suffered by the Fund. You agree that in transmitting investors' funds, you will
comply with Rule 15c2-4 under the Securities Exchange Act of 1934, as amended.
10. You shall not withhold placing orders with VK Funds from your
customers so as to profit yourself as a result of such withholding; e.g., by a
change in the net asset value from that used in determining the public offering
price to your customers.
11. VK Funds will not accept from you any conditioned orders for shares,
except at a definite, specified price.
12. You represent that you are familiar with Release No. 4968 under the
Securities Act of 1933, as amended, and Rule 15c2-8 under the Securities
Exchange Act of 1934, as amended, as it relates to the distribution of
Preliminary Prospectuses (and not Statements of Additional Information) and
Prospectuses (and not Statements of Additional Information) for each Fund and
agree that you will comply therewith. You agree that if an investor or
potential investor places a request with you to receive a Statement of
Additional Information, you will (i) provide such person with a Statement of
Additional Information without charge and notify the Fund that you have done so,
(ii) notify the Fund of the request so that the Fund can fulfill the request or
(iii) tell such person to request a Statement of Additional Information by
telephoning the Fund at the number set forth on the cover of the current
Prospectus or Preliminary Prospectus. You also agree to keep an accurate record
of your distribution (including dates, number of copies and persons to whom
sent) of copies of any Preliminary Prospectus (and any Statement of Additional
Information) and/or Prospectus (and any Statement of Additional Information) for
each Fund (or any amendment or supplement to either) and, promptly upon request
by VK Funds, to bring all subsequent changes to such Preliminary Prospectus or
Prospectus to the attention of anyone to whom such material shall have been
distributed. You further agree to furnish to persons who receive a confirmation
of sale of shares of any Fund a copy of the Prospectus (and not the Statement of
Additional Information) for such Fund filed pursuant to Rule 497 under the
Securities Act of 1933, as amended.
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13. Unless otherwise indicated in a Fund's Prospectus, stock certificates
for shares of Funds sold to you shall be issued only if specifically requested.
14. VK Funds will have no liability to you, except for lack of good faith
and for obligations expressly assumed by VK Funds in this Agreement.
15. All communications to VK Funds shall be sent to 0 Xxxxxxxx Xxxxx,
XX Xxx 0000 Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000-0000, Attention: Mutual Fund
Department. Any notice to you shall be duly given if sent to you at the address
specified by you below or such other address as you may designate to VK Funds in
writing.
16. Neither this Agreement nor the performance of the services hereunder
shall be considered to create a joint venture or partnership between VK Funds
and you.
17. This Agreement shall be construed in accordance with the laws of the
State of Illinois without reference to the choice-of-law principles thereof.
18. The Fund reserves the right in its discretion and VK Funds reserves
the right in its discretion, without notice, to suspend or withdraw the offering
of any shares of a Fund entirely. VK Funds reserves the right, without notice,
to amend, modify or cancel the Agreement. The Agreement may not be assigned by
either party without prior written consent of the other party.
19. This Agreement may be terminated at any time by either party.
TERMS AND CONDITIONS APPLICABLE ONLY TO OPEN-END FUNDS
20. Each of the Open-End Fund's is subject to an alternative distribution
plan (the "Alternative Distribution Plan") as described in such Fund's
then-current Prospectus pursuant to which the Open-End Fund may sell multiple
classes of its shares with varying combinations of front-end service charges
(each a "FESC"), distributions fees, service fees, contingent deferred sales
charges (each a "CDSC"), exchange features, conversion rights, voting rights,
expenses allocations and investment requirements. As used herein, classes of
shares of a Fund subject to a FESC will be referred to as FESC Shares, and
classes of shares of a Fund subject to a CDSC will be referred to as CDSC
Shares.
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21.(a) With respect to any shares of a class of FESC Shares of an
Open-End Fund, the public offering price for such shares shall be the net asset
value per share plus a FESC, expressed as a percentage of the applicable public
offering price, as determined and effective as of the time specified in the
then-current Prospectus of such Open-End Fund. The dealer discount applicable
to any sale of shares of a class of FESC Shares of an Open-End Fund shall be a
percentage of the applicable public offering price for such shares as provided
for in the then-current Prospectus of such Open-End Fund or, if not so
provided, as provided to you from time to time in writing by VK Funds.
(b) With respect to any shares of a class of CDSC Shares of an Open-End
Fund, the public offering price for such shares shall be the net asset value per
share as determined and effective as of the time specified in the then-current
Prospectus of such Open-End Fund. The dealer sales compensation payable by VK
Funds applicable to any sale of shares of a class of CDSC Shares of an Open-End
Fund shall be the percentage of the applicable public offering price for such
shares as provided for in the then-current Prospectus of such Open-End Funds or,
if not so provided, as provided to you from time to time in writing by VK Funds.
22. Should you wish to participate in the Distribution Plan with respect
to a class of shares adopted by an Open-End Fund pursuant to Rule 12b-1 ("Rule
12b-1 Plan") under the Investment Company Act of 1940, as amended, or the
Service Plan with respect to a class of shares, it is understood that you must
be approved by the Board of Directors of such Open-End Fund and execute a
Distribution Assistance Agreement.
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23. With respect to the Open-End Funds, your acceptance of this Agreement
constitutes a representation that you will adopt policies and procedures to
comply with Rule 18f-3 under the Investment Company Act of 1940, with respect to
when you may appropriately sell the various classes of shares of the Open-End
Funds to investors and that you will sell such shares only in accordance
therewith.
24.(a) You agree to purchase shares of an Open-End Fund only from VK Funds
or from your customers. If you purchase shares of an Open-End Fund from VK
Funds, you agree that all such purchases shall be made only: (i) to cover
orders already received by you from your customers or (ii) for your own bona
fide investment. If you purchase shares of an Open-End Fund from your customers,
you agree to pay such customers not less than the applicable repurchase price
for such shares as established by the then-current Prospectus for such Open-End
Fund. VK Funds in turn agrees that it will not purchase any shares from an
Open-End Fund except for the purpose of covering purchase orders that it has
already received.
(b) With respect to shares of a class of CDSC Shares of an
Open-End Fund purchased from your customers, you additionally agree to resell
such shares only to VK Funds as agent for the Fund at the repurchase price for
such shares as established by the then-current Prospectus of such Open-End Fund.
You acknowledge and understand that shares of a class of CDSC Shares of an
Open-End Fund may be subject to a CDSC payable to VK Funds as set forth in the
Prospectus for such Open-End Fund in effect at the time of the original purchase
of such shares from the Open-End Fund and that the repurchase price for such
shares that will be paid by VK Funds will reflect the imposition of any
applicable CDSC.
25.(a) You shall sell shares of a class of shares of an Open-End Fund
only: (i) to customers at the applicable public offering price or (ii) to VK
Funds as agent for the Open-End Fund at the repurchase price in the then-current
Prospectus of such Open-End Fund. In such a sale to VK Funds, you may act
either as principal for your own account or as agent for your customer. If you
act as principal for your own account in purchasing shares of a class of shares
of an Open-End Fund for resale to VK Funds, you agree to pay your customer not
less than the price that you receive from VK Funds. If you act as agent for
your customer in selling shares of a class of shares of an Open-End Fund to VK
Funds, you agree not to charge your customer more than a fair commission for
handling the transaction. You acknowledge and understand that CDSC Shares of an
Open-End Fund may be subject to a CDSC payable to VK Funds as set forth in the
Prospectus of such Open-End Fund in effect at the time of the original purchase
of such CDSC Shares and that the repurchase price that will be paid by VK Funds
for such CDSC Shares will reflect the imposition of any such CDSC.
26. If any shares of a class of FESC Shares of an Open-End Fund sold to or
by you under the terms of this Agreement are repurchased by the Fund or by VK
Funds as agent for the Fund or are tendered for redemption within seven business
days after the date of VK Funds' confirmation of the original purchase, it is
agreed that you shall forfeit your right to any dealer discount received by you
on such FESC Shares. VK Funds will notify you of any such repurchase or
redemption within ten business days from the date on which the repurchase or
redemption order in proper form is delivered to VK Funds or to the Fund, and you
shall forthwith refund to VK Funds the full dealer discount allowed to you on
such sale. VK Funds agrees, in the event of any such repurchase or redemption,
to refund to the Fund its share of any discount allowed to VK Funds and, upon
receipt from you of the refund of the discount allowed to you, to pay such
refund forthwith to the Fund.
TERMS AND CONDITIONS APPLICABLE TO CLOSED END-FUNDS
27. No Closed-End Fund will issue fractional shares.
28. VK Funds may, in its sole discretion, allocate shares of a Closed-End
Fund among brokers and dealers participating in the Initial Offering Period or
among brokers, dealers and banks in the Continuous Offering Period, as the case
may be, on other than a pro rata basis, which may result in
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certain brokers, dealers and banks not being allocated the full amount of
shares of such fund sold by them while certain other brokers, dealers and banks
may receive their full allocation.
29. You agree that with respect to orders for shares of a Closed-End Fund,
you will transmit such orders received during the Initial Offering Period to VK
Funds within the time period as specified in such Closed-End Fund's Prospectus
(or in the time period as extended by VK Funds in writing). You also agree to
transmit any customer order received during the Continuous Offering Period to VK
Funds prior to the time that the public offering price for such Closed-End Fund
is next determined after your receipt of such order as set forth in the
Closed-End Fund's Prospectus. There is no assurance that each Closed-End Fund
will engage in a continuous offering of shares.
30. On each order accepted by VK Funds for shares of a Closed-End Fund,
you will be entitled to receive a concession paid out of VK Funds' own assets
as set forth in the then-current Prospectus of such Closed-End Fund (exclusive
of additional compensation that may be payable pursuant to sales programs, if
any, that may be established from time to time as described in the Prospectus
for such Closed-End Fund, which will be payable only as and to the extent the
requirements of such programs are satisfied). In no event will any Closed-End
Fund reimburse VK Funds for any such sales concessions or other additional
compensation or pay any such concession or other additional compensation or
allowance directly to you. VK Funds will specify for each Closed-End Fund a
period after the date that the shares of such Closed-End Fund are listed on the
New York Stock Exchange, the American Stock Exchange or another national
securities market system (which period will end no later that the first dividend
payment date with respect to such Closed-End Fund) during which sales
concessions and other additional compensation are subject to forfeiture as
provided in the following sentence (the "Forfeiture Period"). During the
Forfeiture Period for any Closed-End Fund, physical delivery of certificates
representing shares will be required to transfer ownership of such shares. In
the event that any shares of a Closed-End Fund sold through an order received
from you in the Initial Offering Period or the Continuous Offering Period are
resold in the open market or otherwise during the Forfeiture Period, VK Funds
reserves the right to require you to forfeit any sales concessions and other
additional compensation with respect to such shares. In the event of a
forfeiture, VK Funds may withhold any forfeited sales concessions and other
additional compensation that has not yet been paid or from other amounts yet to
be paid to you (whether or not payable with respect to such shares) and you
agree to repay to VK Funds, promptly upon demand, any forfeited sales
concessions and other compensation that has been paid. Determinations of the
amounts to be paid to you or by you to VK Funds shall be made by VK Funds and
shall be conclusive.
31. During the Initial Offering Period and any Continuous Offering Period
for any Closed-End Fund, you agree to supply VK Funds, not less frequently than
once a week by Friday, 5:00 p.m. Eastern Time, during such Closed-End Fund's
Initial Offering Period, a list setting forth by state and in the aggregate all
indications of interest and, during any Continuous Offering Period, all shares
sold by you of such Closed-End Fund during such week (or lesser period of time),
and a list setting forth by name and location each registered representative
making said sales and indicating the amount of all sales per Closed-End Fund to
date.
32. You expressly acknowledge and understand that there is no Rule 12b-1
Plan for the Closed-End Funds.
33. You expressly acknowledge and understand that shares of the Closed-End
Funds will not be repurchased by either the Closed-End Funds (other than through
tender offers from time to time, if any) or by VK Funds and that no secondary
market for such shares is expected to develop until the shares have begun
trading on a national exchange or national market system. You hereby covenant
that, until notified by VK Funds that the distribution of such shares has been
completed or that the Forfeiture Period has ended, you (a) will not make a
secondary market in any shares of such a Closed-End Fund, (b) will not purchase
or hold shares of such Closed-End Fund in inventory for the purpose of resale in
the open market or to your customers and (c) without VK Funds' consent, will
not repurchase shares of such Closed-End Fund in the open market or from your
customers for any account in which you have a beneficial interest.
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34. Unlike the other Closed-End Funds, the Continuous Offering period with
respect to the Xxx Xxxxxx Prime Rate Income Trust (the "Prime Rate Fund") may
continue indefinitely. The offer to sell shares of the Prime Rate Fund is
subject to further terms and conditions in addition to those set forth above as
follows:
(a) You expressly acknowledge and understand that shares of the
Prime Rate Fund will not be repurchased by either the Prime Rate Fund (other
than through tender offers from time to time, if any) or VK Funds, and that no
secondary market for the shares of the Prime Rate Fund exists currently, or is
expected to develop. You also expressly acknowledge and agree that, in the
event your customer cancels their order for shares after confirmation, such
shares may not be repurchased, remarketed or otherwise disposed of by or
through VK Funds.
(b) You acknowledge and understand that, while the Board of
Trustees of the Prime Rate Fund intends to consider tendering for all or a
portion of the Prime Rate Fund's shares on a quarterly basis, there is no
assurance the Prime Rate Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Prime
Rate Fund. You acknowledge and understand that an early withdrawal charge
payable to VK Funds will be imposed on most shares accepted for tender by the
Prime Rate Fund which have been held for less than five years, as set forth in
the Prime Rate Fund's Prospectus. ANY REPRESENTATION AS TO A TENDER OFFER BY
THE PRIME RATE FUND, OTHER THAN THAT WHICH IS SET FORTH IN THE PRIME RATE FUND'S
CURRENT PROSPECTUS IS EXPRESSLY PROHIBITED.
Please accept the foregoing by signing this Dealer Agreement, keeping a
copy for your files and returning the original to us.
Accepted and Agreed to:
(PRINT OR TYPE)
Dated:_______________________________ By:
Its:
_______________________________
Broker-Dealer Name
________________________________
Broker-Dealer Taxpayer ID Number
_________________________________
Address XXX XXXXXX FUNDS INC.
__________________________________
City, State, Zip
By: __________________________________
Signature
__________________________________
Name
__________________________________
Title
__________________________________
Phone
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