Rule 12b-1 Distribution Plan and Agreement
RULE 12b-1 DISTRIBUTION PLAN AND AGREEMENT dated as of the ____th day of
December, 1995 by and between LORD XXXXXX TAX-FREE INCOME FUND, INC., a Maryland
corporation (the "Corporation") on behalf of its CALIFORNIA SERIES (the
"Series"), and LORD, XXXXXX & CO., a New York partnership (the "Distributor").
WHEREAS, the Corporation is an open-end management investment company
and is registered as such under the Investment Company Act of 1940, as amended
(the "Act"); and the Distributor acts as the Corporation's distributor pursuant
to the Distribution Agreement between the Corporation and the Distributor, dated
the 29th day of February, 1984, as amended.
WHEREAS, the Corporation 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 broker-dealers with respect to the distribution
of shares of the Series.
WHEREAS, the Corporation's Board of Directors has determined that there
is a reasonable likelihood that the Plan will benefit the Series and its
shareholders.
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 Corporation hereby authorizes the Distributor to enter into
distributor's agreements (the "Distributor's Agreements") with independent
broker-dealers appointed by the Distributor providing for the payment to such
broker-dealers of distribution fees which the Distributor receives from the
Series in order to provide additional incentives to the broker-dealers (i) to
sell shares of the Series and (ii) to provide continuing personal, information
and investment services to their shareholder accounts and otherwise to encourage
their accounts to remain invested in the Series. The provisions of sections 1
and 2 of the Plan go into effect (the "effective date") on the first day of the
calendar quarter subsequent to the Series' net assets reaching $100 million with
respect to accounts existing at the time and covered by Distributor's
Agreements, except with respect to certain accounts for which tracking data is
not available, such as street name accounts.
2. The Series shall pay to the Distributor pursuant to this Plan fees
(i) for services at an annual rate not to exceed .25 of 1% of the average daily
net asset value of the shares of the Series, sold on or after the effective
date, and held in each account covered by the Distributor's Agreements and .15
of 1% of the average daily net asset value of such shares, sold prior to the
effective date, and held in any such account; and (ii) in a one-time sales
distribution payment of 1% of the net asset value of such shares, sold on or
after the effective date, in the amount of $1 million or more. The fees
mentioned in (i) and (ii) of this paragraph are for the purposes mentioned in
(ii) and (i), respectively, of paragraph 1 of this Plan. In determining whether
a shareholder has made such an investment of $1 million or more, the investment
may be deemed to include the value of other shares of the Series and the value
of the shares of any other Lord Xxxxxx sponsored fund or series that has a Rule
12b-1 plan deemed comparable to this Plan for this purpose by the Board of
Directors of the Corporation (a "Lord Xxxxxx Rule 12b-1 Fund") which the
shareholder could include within the right of accumulation or statement of
intention privileges described in the Corporation's Prospectus as in effect at
such time. Such fees shall be calculated and paid quarterly, subject to change
by the Board of Directors of the Corporation in the manner contemplated in
paragraph 11 of this Plan.
3. If any shares subject to the 1% sales distribution fee described in
paragraph 2 are redeemed out of the family of funds sponsored by Lord Xxxxxx on
or before the end of the twenty-fourth month after the month in which the shares
were purchased (the "twenty-fourth month end"), the shareholder will be required
to reimburse the Series by paying a contingent deferred reimbursement charge of
1% of the lesser of the cost or then net asset value of the shares; provided,
however, that such reimbursement charge shall not apply to redemptions by tax
qualified retirement plans under Section 401 of the Internal Revenue Code due to
plan loans, hardship withdrawals, death, retirement or separation from service
with respect to plan participants. If such shares in the Series are exchanged
for shares of another Lord Xxxxxx Rule 12b-1 Fund and the shares of the other
fund are later redeemed out of the family before the twenty-fourth month end,
the 1% contingent deferred reimbursement charge will be collected by the other
Lord Xxxxxx Rule 12b-1 Fund at the time of redemption and will be paid to the
Series. Effective the date hereof, the Series also will collect such a charge
for another Lord Xxxxxx Rule 12b-1 Fund in a similar situation. Adoption of this
provision in similar Plans by the other Lord Xxxxxx Rule 12b-1 Funds and their
shareholders represents the agreement of such funds to collect such charges from
their shareholders. The timing, categories and calculation of this charge may be
changed by the Corporation's Board of Directors in the manner contemplated in
paragraph 11 of this Plan.
4. Subject to the limits in paragraph 2, the Distributor may use such
amounts received from the Series to finance any activity which is primarily
intended to result in the sale of shares of the Series including, but not
limited to, commissions or other payments relating to selling or servicing
efforts, provided: (i) that the Corporation's Board of Directors (in the manner
contemplated in paragraph 11 of this Plan) shall have approved the timing,
categories and calculation of such payments, and (ii) the Distributor shall
neither retain any portion of such payments, nor use such payments for its
obligations under the above-mentioned Distribution Agreement.
5. The value of the net assets of the Series shall be determined as
provided in the Articles of Incorporation of the Corporation. 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.
6. The Secretary of the Corporation, 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 Corporation's Board
of Directors, and the 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.
7. 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, stockholders, or other
representatives of the Corporation 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 Corporation, except as otherwise may be
provided in the Act.
8. The Distributor shall give the Corporation 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 Corporation, the Series or any of
the stockholders, creditors, directors, or officers of the Corporation; provided
however, that nothing herein shall be deemed to protect the Distributor against
any liability to the Corporation or the Series' stockholders 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 obligation and
duties hereunder.
9. This Agreement shall be effective upon the date hereof (subject to
the effective date provisions of section 1), 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 Directors of
the Corporation, including the vote of a majority of the directors who are not
"interested persons" of the Corporation and who have no direct or indirect
financial interest in the operation of this Plan or in any agreement related to
the Plan, cast in person at a meeting called for the purpose of voting on such
renewal.
10. 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 Corporation, including the vote of a
majority of the directors who are not "interested persons" of the Corporation
and who have no direct or indirect financial interest in the operation of this
Plan or in any agreement related to the Plan, cast in person at a meeting called
for the purpose of voting on such amendment .
11. Amendments to this Plan other than material amendments of the kind
referred to in the forgoing paragraph 10 may be adopted by a vote of the Board
of Directors of the Corporation, including the vote of a majority of the
directors who are not "interested persons" of the Corporation 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 Corporation may,
by such a vote, interpret this Plan and make all determinations necessary or
advisable for its administration.
12. 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 Corporation who
are not "interested persons" of the Corporation and have no direct or indirect
financial interest in the operation of this Plan or in any agreement related to
the Plan, or (b) by vote of a majority of the outstanding voting securities of
the Series. This Plan shall automatically terminate in the event of its
assignment. 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.
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:
Chairman of the Board
ATTEST:
Assistant Secretary
LORD, XXXXXX & CO.
By:
Partner
