DISTRIBUTION AGREEMENT
(Class B Shares)
AGREEMENT (the Agreement), dated as of February 29, 1996, between
AMERICAN GROWTH FUND, INC., a Maryland corporation, (the Fund) and
AMERICAN GROWTH FUND SPONSORS, INC., a Colorado corporation, (the
Distributor).
RECITALS
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the 1940 Act), as a diversified, open-end management
investment company;
WHEREAS, the Fund intends to offer its Class B shares to the public
on a continuous basis;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the 1934 Act), and is in the
business of selling shares of the Fund and other registered investment
companies to the public, either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into this
Agreement with respect to the continuous offering of the Funds Class B
shares from and after the date hereof in order to promote the growth of the
Fund and
facilitate the distribution of its Class B shares; and
WHEREAS, the Fund has adopted a distribution and service plan
pursuant to Rule 12b-1 under the 1940 Act (the Plan) authorizing payments
by the Fund to the Distributor with respect to the distribution of Class
B shares of the Fund and the provision of services in respect of Class B
shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
1. The Distributor shall be the distributor for the Class B shares of
the capital stock of the Fund as may from time to time be effectively
registered under the Securities Act of 1933, as amended (hereinafter
referred to as the 1933
Act).
2. The Fund agrees to sell and deliver from time to time, upon the terms
hereinafter described, such number of its fully paid and nonassessable
Class B shares of capital stock as the Distributor shall order, but only
to the extent that the Distributor shall have received purchase orders
therefor. All orders from the Distributor hereunder shall be subject to
confirmation by the Fund.
3. The Distributor may sell and distribute any shares so purchased by
it through dealers or otherwise in such manner not inconsistent with the
provisions hereof as it may determine from time to time, and it agrees to
use its best
4.efforts to effect such sale and distribution. The Distributor shall
not make any short sales of Fund shares. The Distributor shall in
addition, in so far as they concern it, comply with all applicable laws,
rules and regulations including, without limiting the generality of the
foregoing, all rules or regulations made or adopted pursuant to Section 22
of the 1940 Act by the Securities and Exchange Commission or any securities
association registered under the 1934
Act.
7. Subject to the provisions of paragraph 5 hereof, all shares offered
for sale and sold by the Distributor shall be offered for sale and sold by
it at a price per share equal to the offering price per share (hereinafter
called the offering price) rounded to the nearest one cent and equal to (a)
the net asset value per share (determined as authorized from time to time
under the direction of the Board of Directors of the Fund in conformity
with the 1940 Act) plus (b) a sales charge or premium, if any, based upon
the schedule of such charges (including all exceptions therefrom) and
related terms and conditions as may be set forth from time to time in the
then current Prospectus or Statement of Additional Information of the Fund
pertaining to its Class B shares. The Fund shall determine and promptly
thereupon furnish to the Distributor a statement of the Funds net asset
value and offering price as often and at such times as its Board of
Directors shall by resolution determine provided, however, that subject to
the provisions hereinafter contained in this paragraph 4, the Fund shall
determine and furnish such offering price at least once on each business
day on which the New York Stock Exchange is open for trading. Each such
offering price shall become effective at such time, and shall remain in
effect during such period, as may be stated in the statement thereof
furnished to the Distributor as above provided. Every statement of the
offering price furnished to the Distributor as above provided shall show
the basis of its computation. The Fund shall also accept and confirm at
the offering price in effect before a price change such orders as are
entered by the Distributor to fill orders placed with it prior to such time
of price change, but only if such orders are received by the Fund within
a time deemed by the Fund to be reasonable after the time of receipt
thereof by the Distributor and if such orders are time-stamped or bear
other evidence to show that they were filed for transmission at the point
of origin prior to the time of such price change. Anything to the contrary
herein notwithstanding, however, whenever in its judgment such action is
warranted by market, economic or political conditions or by abnormal
circumstances of any kind, Fund officers may suspend the sale of Fund
shares, without incurring any liability under any of the provisions of this
Agreement, and decline to accept or confirm any orders for or make any
sales of any shares to the Distributor under this agreement until such time
as the Fund shall deem it advisable to accept and confirm such orders and
to make such sales, and during any such period, the Fund shall be under no
obligation to confirm or accept any such orders or make any such sales at
any price.
8. At or prior to the time of delivery by the Fund to the Distributor,
for its accounts, of any shares of the Fund's stock, the Distributor will
pay or cause to be paid to the Fund or its order an amount equal to the
offering price of such shares at which the Distributors order has been
confirmed by the Fund, less the applicable sales charge or premium, if any,
which charge or premium shall constitute the Distributors concession for
selling and distributing such shares and may be deducted by it from the
offering price in making payment to the Fund hereunder. The Distributor
may in its discretion allow a concession or other accounting to dealers or
other persons out of such concession to it.
9. The Distributor shall receive and may retain any contingent deferred
sales charges which are imposed with respect to repurchases and redemptions
of Class B shares as set forth from time to time in the Funds Prospectus
and Statement of Additional Information current upon the date of sale of
any such shares. Payment of such amounts is not contingent upon the
adoption or continuation of the Plan.
10.11.12.a.13. (a) The Fund shall pay to the Distributor as
compensation for services under the Plan and under this Agreement, (i) a
fee at the annual rate of up to 0.75% of average daily net assets
attributable to Class B shares of the Fund to pay for certain
distribution-related activities (a distribution fee), and (ii) a fee at
the annual rate of up to 0.25% of such average daily net assets to pay for
shareholder servicing related to distribution of such shares (a service
fee). Amounts payable under the Plan shall be accrued daily and payable
quarterly or at such other intervals as the Board of Directors shall
determine. No fee shall be payable hereunder if it would cause the Fund
to fail to comply with the requirements of Article III, Section 26 of the
Rules of Fair Practice of the National Association of Securities Dealers,
Inc.
(b) So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the distribution and
service fees to be paid by the Distributor to Securities Firms and at the
request of the Fund will provide such information as may reasonably be
requested concerning the activities of the Distributor hereunder and the
costs incurred in performing such services.
(c) The distribution fee under paragraph (a) shall be used to
compensate the Distributor and/or broker-dealers and financial institutions
("Securities Firms") having agreements with the Distributor for providing
distribution assistance to customers and to pay for the preparation,
printing and distribution of prospectuses, statements of additional
information and periodic financial reports to persons other than current
shareholders of the Fund, as well as to pay for the preparation and
distribution of sales literature and pay for other promotional and
distribution activities.
(d) The service fee payable under paragraph (a) above shall be used
to compensate the Distributor and/or Securities Firms for providing
personal services such as shareholder liaison services (responding to
customer inquiries and providing information on their investment) to Fund
shareholders and/or maintaining shareholder accounts.
(e) Payments to Securities Firms hereunder may take the form of
sales commissions or trailer commissions.
14. Delivery of certificates for shares of the Fund's capital stock, when
and if requested (subject to any determination by the Fund not to issue
certificates for shares), shall be made as soon as practicable after
confirmation by it or the Distributors order therefor and against payment
therefor by the Distributor. The certificates for such shares shall be
registered in such names and amounts as the Distributor may specify to the
Fund in writing.
15. The Fund agrees to pay all costs and expenses in connection with
future registrations of its capital stock under the 1933 Act, and all
expenses in connection with maintaining facilities for the issue and
transfer of its shares, and for supplying information, prices and other
data to be furnished by it hereunder.
The Fund agrees to execute any and all documents and to furnish any
and all information which may be reasonable necessary, in the discretion
of its Board of Directors, in connection with the qualification of its
shares for sale in such states as the Distributor may designate to it. The
Distributor will pay all expenses connected with its own qualification as
a dealer or broker under State or federal laws.
16. The Fund shall furnish the Distributor from time to time, for use in
connection with the sale of its shares, such information with respect to
the Fund and its shares as the Distributor may reasonably request, all of
which, if so requested, shall be signed by one or more of its duly
authorized officers, warranting that the statements contained in
17.18.any such information, when so signed by its officers, shall be true
and correct. The Fund shall also furnish the Distributor with annual
audits of its books and accounts made by independent public accountants,
who may also be the independent public accountants regularly retained by
it, with semi-annual earnings statements prepared by its accountants, with
balance sheets at least on a semi-annual basis, and from time to time with
such additional information regarding its financial condition as the
Distributor may reasonably request.
19. As used in this agreement, the term registration statement shall
mean and include the registration statement with respect to shares of Fund
capital stock which became effective under the 1933 Act on April 28, 1959,
and also any other registration statement filed by it under the 1933 Act
which shall become effective, in each case including any amendment thereto
filed after the effective date thereof which amendment shall become
effective. The Fund represents that its registration statement under the
1933 Act, its Prospectus and Statement of Additional Information, have been
or will be, as the case may be, prepared substantially in conformity with
the requirements of said 1933 Act and the rules and regulations of the
Securities and Exchange Commission thereunder. The Fund further represents
and warrants that its registration statement, Prospectus and Statement of
Additional Information contain or will contain all statements required to
be stated therein in accordance with the 1933 Act and the rules and
regulations of said Commission, and that all statements of fact contained
or to be contained therein are or will be true and correct; that none of
its registration statement when it shall become effective, or its
Prospectus or its Statement of Additional Information when used, 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 to a purchaser of its shares. The Fund may but
shall not be obligated to propose from time to time such amendments to its
registration statement, or amendments or supplements to its Prospectus and
Statement of Additional Information, as, in the light of future
developments, may, in its opinion or the opinion of its counsel, be
necessary in order to have such documents at all times contain all material
facts required to be stated therein or necessary to make any statements
therein not misleading to a purchaser of its shares, but, if it shall not
propose such amendment or amendments within fifteen days after receipt by
it of a written request from the Distributor to do so, the Distributor may,
at its option, terminate this agreement immediately. The Fund shall not
file any amendment to its registration statement, or amendment or
supplement to its Prospectus or Statement of Additional Information,
without giving the Distributor 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 its
registration statement, and/or amendments or supplements to its Prospectus
and Statement of Additional Information, of whatever character, as it may
deem advisable, such right being in all respects absolute and
unconditional. The Fund represents and warrants to the Distributor that
any such amendments or supplements hereafter filed by it will, when it
becomes effective, contain all statements required to be stated therein in
accordance with the 1933 Act and the rules and regulations of said
Commission, that all statements of fact contained therein will, when the
same shall become effective, be true and correct and that no such
amendment, when it becomes effective, will include an untrue statement of
a material fact or will omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of its shares.
20. The Fund agrees to prepare and furnish the Distributor from time to
time copies of its Prospectus and Statement of Additional Information in
the forms as then most recently filed with the Securities and Exchange
Commission, and authorizes the Distributor and dealers to use such
Prospectus and Statement of Additional Information, in the forms furnished,
from time to time, in connection with the sale of its shares. The Fund
agrees to indemnify, defend and hold the Distributor, its several officers
and directors, and any person who controls it 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
21.22.cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which
the Distributor, its officers or directors, or any such controlling person
may incur, under the 1933 Act, or under common law or otherwise, arising
out of or based upon any alleged untrue statement of a material fact
contained in its registration statement, or Prospectus or Statement of
Additional Information, or arising out of or based upon any alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that Fund's agreement to indemnify the Distributor, its officers or
directors, and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of any statements or
representations made by the Distributor or by its representatives or agents
other than such statements and representations as are contained in Fund's
Prospectus or Statement of Additional Information and in such financial and
other statements as are furnished the Distributor pursuant to this
paragraph 12 or paragraphs 10 and 11 hereof; and further provided, that in
no event shall anything herein contained be so construed as to protect the
Distributor against any liability to the Fund or its security holders to
which the Distributor would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under this agreement. The agreement to indemnify the Distributor,
its officers and directors, and any such controlling person as aforesaid,
is expressly conditioned upon the Fund being notified of any action brought
against the Distributor, its officers or directors, or any such controlling
person, such notification to be given by letter or by telegram addressed
to the Fund at its principal office in Denver, Colorado, and sent 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 it from any
liability which it may have to the person against whom such action is
brought by reason of any such alleged untrue statement or omission
otherwise than on account of the indemnity agreement contained in this
paragraph 12. The Fund will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case,
such defense shall be conducted by counsel of good standing chosen by it
and approved by the Distributor. In the event the Fund does elect to
assume the defense of any such suit and retain counsel of good standing
approved by the Distributor, the defendant or defendants in such suit shall
bear the fees and expenses of any additional counsel retained by any of
them; but in case it does not elect to assume the defense of any such suit,
or in case the Distributor does not approve the counsel chosen by it, the
Fund will reimburse the Distributor, its officers and directors, or the
controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by it or them. The
Funds indemnification agreement contained in this paragraph 12 and its
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, its officers and directors, or any controlling
person, and shall survive the delivery of any shares of its capital stock
hereunder. This agreement of indemnity will inure exclusively to the
Distributors benefit, and its successors, and to the benefit of its
officers and directors, and their respective estates, and to the benefit
of any controlling persons and their successors. The Fund agrees promptly
to notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or directors in connection
with the issue and sale of any of its capital stock.
23. The Distributor agrees to indemnify, defend and hold the Fund, its
several officers and directors, and any person who controls it 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 the Fund, its officers
or directors, or any such controlling person may incur under the 1933 Act
or under 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
24.or demands shall arise out of or be based upon any alleged untrue
statement of a material fact contained in
information furnished in writing by the Distributor to the Fund for use in
its registration statement, Prospectus or Statement of Additional
Information or shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information required to be
stated therein or necessary to make such information not misleading. The
Distributors agreement to indemnify the Fund, its officers and directors,
and any such controlling person as aforesaid is expressly conditioned upon
the Distributor 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 the Distributor at its
principal office in Denver, Colorado, and sent 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 Distributor shall have a right
to control the defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon such alleged
misstatement or omission on Distributors part and in any other event, the
Distributor or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any such
action.
The failure so to notify the Distributor of any such action shall not
relieve it from any liability which it may have to the Fund, its officers
or directors, or to such controlling person by reason by any such untrue
statement or omission on its part otherwise than on account of its
indemnity agreement contained in this paragraph 13.
25. No shares of the Fund's capital stock shall be bought or sold by
either the Distributor or the Fund under any of the provision of this
agreement and no orders for the purchase or sale of such stock hereunder
shall be confirmed or accepted by the Fund if and so long as the
effectiveness of its registration statement, or any necessary amendments
thereto, covering such stock, shall be suspended under any of the
provisions of the 1933 Act; provided, however, that nothing in this
paragraph 14 contained shall in any way restrict or limit or have any
application to or bearing upon the Fund's obligation to repurchase shares
of its capital stock from any stockholder.
26. The Fund agrees to advise the Distributor immediately:
(a) of any request by the Securities and Exchange Commission for
amendments to the Funds registration statement, Prospectus or
Statement of Additional Information or for additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of its
registration statement or the initiation of any proceedings for that
purpose;
(c) of the happening of any event which makes untrue any statement
made in its registration statement, Prospectus or Statement of
Additional Information or which requires the making of a change therein in
order
to make the statements therein not misleading; and
(d) of all action of the Securities and Exchange Commission with
respect to any amendments to its registration statement which may
from time to time be filed with the Securities and Exchange Commission
under the 1933 Act.
27. The Distributor is authorized, as agent, to accept offers for resale
to the Fund and to repurchase shares of its capital stock upon such terms
and conditions as the Fund's Board of Directors by resolution shall
determine. At least once on each business day on which the New York Stock
Exchange is open for trading, the Fund shall determine and promptly
thereupon furnish to the Distributor a statement of the price at which such
repurchases may be made during
28.29.the period or periods specified in such statement and, upon request,
it shall advise the Distributor of the price at which such repurchase may
be made at other times. In so far as they concern the Fund it agrees to
comply with all applicable laws, rules and regulations, including without
limiting the generality of the foregoing, all rules or regulations made or
adopted pursuant to Section 22 of the 1940 Act by the Securities and
Exchange Commission or any securities association registered under the 1934
Act.
30. (a) Subject to the provisions of paragraph 11 hereof, this agreement
shall continue in effect for a period more than two years from the date
hereof only so long as such continuance is specifically approved at least
annually (x) by
the Fund's Board of Directors or by a vote of a majority of its outstanding
voting securities (as defined in the 0000 Xxx) and (y) by the Directors who
are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in this or any other
agreement relating to the Plan (the "Independent Directors"), cast in
person at a meeting called for the purpose of voting on such approval.
(b) This agreement may be terminated at any time, without payment
of any penalty, by the Board of Directors of the Fund, by vote of a
majority of the Independent Directors, or by vote of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of Class B
shares of the Fund, on not more than 60 days' written notice to the other
party to the agreement. This agreement shall automatically terminate in
the event of its assignment.
IN WITNESS WHEREOF the parties hereto have caused this agreement to be
executed as of the day and year first
written above.
AMERICAN GROWTH FUND, INC.
By
Name:
Title: President
AMERICAN GROWTH FUND SPONSORS, INC.
By
Name:
Title: Executive Vice President
