DISTRIBUTION AND SERVICES AGREEMENT
May 23, 2003
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Tne Integrity Equity Fund, (the "Fund"), an open-
end, diversified, management investment company organized as a series of The
Integrity Funds, a Delaware business trust, has agreed that Xxxxxx Capital
Corporation ("Xxxxxx"), shall be, for the period of this distribution agreement
(the "Agreement"), the principal underwriter of shares issued by the Fund,
including such classes of shares as may now or hereafter be authorized (the
"Shares").
SECTION 1. SERVICES AS UNDERWRITER
Section 1.1 Xxxxxx will act as principal underwriter for the distribution
of the Shares covered by the registration statement, prospectus, and statement
of additional information then in effect of the Fund (the "Registration
Statement") under the Securities Act of 1933, as amended (the "1933 Act"), and
the Investment Company Act of 1940, as amended (the "1940 Act").
Section 1.2 Xxxxxx agrees to use its best efforts to solicit orders for
the sale of the Shares at the public offering price, as determined in
accordance with the Registration Statement, and will undertake such advertising
and promotion as it believes is reasonable in connection with such
solicitation. Xxxxxx shall order Shares from the Fund only to the extent that
it shall have received purchase orders therefor.
Section 1.3 All activities by Xxxxxx as underwriter of the Shares shall
comply with all applicable laws, rules, and regulations, including, without
limitation, all rules and regulations made or adopted by the Securities and
Exchange Commission (the "SEC") or by any securities association registered
under the Securities Exchange Act of 1934 and the Fund's Registration
Statement.
Section 1.4 Xxxxxx will provide one or more persons during normal
business hours to respond to telephone questions concerning the Fund.
Section 1.5 Xxxxxx acknowledges that, whenever in the judgment of the
Fund's officers such action is warranted for any reason, including, without
limitation, market, economic, or political conditions, those officers may
decline to accept any orders for, or make any sales of, the Shares until such
time as those officers deem it advisable to accept such orders and to make
such sales.
Section 1.6 Xxxxxx shall be deemed to be an independent contractor and,
except as specifically provided or authorized herein, shall have no authority
to act for or represent the Fund. Xxxxxx will act only on its own behalf as
principal should it choose to enter into selling agreements with selected
dealers or others. Xxxxxx may allow commissions or concessions to dealers in
such amounts as Xxxxxx shall determine from time to time, as set forth in the
Fund's Registration Statement. Except as may otherwise be determined by
Xxxxxx and the Fund from time to time, such commissions or concessions shall
be uniform to all dealers. Shares sold to dealers shall be for resale by such
dealers only at the public offering price(s) set forth in the Fund's then
current Registration Statement. The price the Fund shall receive for all Shares
purchased from the Fund shall be the net asset value used in determining the
public offering price applicable to the sale of such Shares.
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Section 1.7 In consideration of the services rendered pursuant to this
Agreement, Xxxxxx shall receive the excess, if any, of the sales price, as set
forth in the Fund's Registration Statement, over the net asset value of Shares
sold by Xxxxxx, as underwriter. The Fund shall also pay Xxxxxx any
distribution and/or service fees applicable to the Shares as authorized by the
Distribution and Service Plan (the "Plan") adopted by the Fund under Rule 12b-1
of the Investment Company Act of 1940 and set forth in the Fund's Registration
Statement. Such fees shall be payable in the manner and terms set forth in
the Plan.
Section 1.8 Xxxxxx will bear all expenses in connection with the
performance of its services and the incurring of distribution expenses under
this Agreement. For purposes of this Agreement, "distribution expenses" of
Xxxxxx shall mean all expenses borne by Xxxxxx or by any other person with
which Xxxxxx has an agreement approved by the Fund, which expenses represent
payment for activities primarily intended to result in the sale of Shares,
including, but not limited to, the following:
(a) payments made to, and expenses of, persons who provide support
services in connection with the distribution of Shares, including, but not
limited to, office space and equipment, telephone facilities, answering
routine inquiries regarding the Fund, processing shareholder transactions, and
providing any other shareholder services;
(b) costs relating to the formulation and implementation of marketing
and promotional activities, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine, and other mass media
advertising;
(c) costs of printing and distributing prospectuses and reports of the
Fund to prospective shareholders of the Fund;
(d) costs involved in preparing, printing, and distributing sales
literature pertaining to the Fund;
(e) costs involved in obtaining whatever information, analyses, and
reports with respect to marketing and promotional activities that the Fund may,
from time to time, deem advisable; and
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(f) sales commissions and other fees paid, together with related
financing costs to brokers, dealers or other selling entities with a dealer
agreement in effect for the sale of Fund Shares.
Distribution expenses, however, shall not include any expenditures in
connection with services which Xxxxxx, any of its affiliates, or any other
person has agreed to bear without reimbursement.
Section 1.9 Xxxxxx shall prepare and deliver reports to the Treasurer of
the Fund and to the Investment Adviser on a regular, at least quarterly, basis,
showing the distribution expenses incurred pursuant to this Agreement and the
Plan and the purposes therefor, as well as any supplemental reports as the
Trustees, from time to time, may reasonably request.
SECTION 2. DUTIES OF THE FUND
Section 2.1 The Fund agrees at its own expense to execute any and all
documents, to furnish any and all information, and to take any other actions
that may be reasonably necessary in connection with the qualification of the
Shares for sale in those states that Xxxxxx may designate.
Section 2.2 The Fund shall furnish from time to time, for use in
connection with the sale of the Shares, such information reports with respect
to the Fund and its Shares as Xxxxxx may reasonably request, all of which shall
be signed by one or more of the Fund's duly authorized officers; and the Fund
warrants that the statements contained in any such reports, when so signed by
one or more of the Fund's officers, shall be true and correct. The Fund shall
also furnish Xxxxxx upon request with: (a) annual audits of the Fund's books
and accounts made by independent public accountants regularly retained by the
Fund, (b) semi-annual unaudited financial statements pertaining to the Fund,
(c) quarterly earnings statements prepared by the Fund, (d) a monthly itemized
list of the securities in the portfolio of the Fund, (e) monthly balance sheets
as soon as practicable after the end of each month, and (f) from time to time
such additional information regarding the Fund's financial condition as
Xxxxxx may reasonably request.
Section 2.3 The Fund shall pay to Xxxxxx, as set forth in the
Registration Statement, any distribution and service fee authorized by the
Plan.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Section 3.1 The Fund represents to Xxxxxx that all registration
statements, prospectuses, and statements of additional information filed by
the Fund with the SEC under the 1933 Act and the 1940 Act with respect to the
Shares of the Fund have been carefully prepared in conformity with the
requirements of the 1933 Act, the 1940 Act, and the rules and regulations of
the SEC thereunder. As used in this Agreement, the terms "registration
statement," "prospectus," and "statement of additional information" shall
mean any registration statement, prospectus, and statement of additional
information filed by the Fund with the SEC and any amendments and supplements
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thereto which at any time shall have been filed with the SEC. The Fund
represents and warrants to Xxxxxx that any registration statement, prospectus,
and statement of additional information, when such registration statement
becomes effective, will include all statements required to be contained therein
in conformity with the 1933 Act, the 1940 Act, and the rules and regulations
of the SEC; that all statements of fact contained in any registration
statement, prospectus, or statement of additional information will be true and
correct when such registration statement becomes effective; and that neither
any registration statement nor any prospectus or statement of additional
information when such registration statement becomes effective will include an
untrue statement of 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 Shares. Xxxxxx may, but shall not be obligated to, propose from
time to time such amendment or amendments to any registration statement and
such supplement or supplements to any prospectus or statement of additional
information as, in the light of future developments, may, in the opinion of
Xxxxxx'x counsel, be necessary or advisable. If the Fund shall not propose such
amendment or amendments and/or supplement or supplements within fifteen days
after receipt by the Fund of a written request from Xxxxxx to do so, Xxxxxx
may, at its option, terminate this Agreement. The Fund shall not file any
amendment to any registration statement or supplement to any prospectus or
statement of additional information without giving Xxxxxx 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
any registration statement and/or supplements to any prospectus or statement of
additional information, of whatever character, as the Fund may deem advisable,
such right being in all respects absolute and unconditional.
SECTION 4. INDEMNIFICATION
Section 4.1 The Fund authorizes Xxxxxx and any dealers with whom Xxxxxx
has entered into dealer agreements to use any prospectus or statement of
additional information furnished by the Fund from time to time in connection
with the sale of Shares. The Fund agrees to indemnify, defend, and hold Xxxxxx,
its several officers and directors, and any person who controls Xxxxxx 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 Xxxxxx, its officers and
directors, or any such controlling person may incur under the 1933 Act, the
1940 Act, or common law or otherwise, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
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registration statement, any prospectus, or any statement of additional
information, or arising out of or based upon any omission or alleged omission
to state a material fact required to be stated in any registration statement,
any prospectus, or any statement of additional information, or necessary to
make the statements in any of them not misleading; provided, however, that the
Fund's agreement to indemnify Xxxxxx, its officers or directors, and any such
controlling person shall not be deemed to cover any claims, demands,
liabilities, or expenses arising out of or based upon any statements or
representations made by Xxxxxx or its representatives or agents other than such
statements and representations as are contained in any registration statement,
prospectus, or statement of additional information and in such financial and
other statements as are furnished to Xxxxxx pursuant to paragraph 2.2 hereof;
and further provided that the Fund's agreement to indemnify Xxxxxx and the
Fund's representations and warranties hereinbefore set forth in paragraph 3
shall not be deemed to cover any liability to the Fund or its shareholders to
which Xxxxxx would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of
Xxxxxx'x reckless disregard of its obligations and duties under this Agreement.
The Fund's agreement to indemnify Xxxxxx, its officers and directors, and any
such controlling person, as aforesaid, is expressly conditioned upon the Fund's
being notified of any action brought against Xxxxxx, 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 Minot, North Dakota,
and sent to the Fund 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 the
Fund from any liability that the Fund may have to the person against whom such
action is brought by reason of any such untrue statement or omission or alleged
omission otherwise than on account of the Fund's indemnity agreement contained
in this paragraph 4.1. The Fund's indemnification agreement contained in this
paragraph 4.1 and the Fund'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 Xxxxxx, its officers and directors, or
any controlling person, and shall survive the delivery of any Shares. This
agreement of indemnity will inure exclusively to Xxxxxx'x benefit, to the
benefit of its several officers and directors, and their respective estates,
and to the benefit of the controlling persons and their successors. The Fund
agrees to notify Xxxxxx promptly of the commencement of any litigation or
proceedings against the Fund or any of its officers or trustees in connection
with the issuance and sale of any Shares.
Section 4.2 Xxxxxx agrees to indemnify, defend, and hold the Fund, its
several officers and trustees, and any person who controls the Fund 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 costs of
investigating or defending such claims, demands, or liabilities and any
counsel fees incurred in connection therewith) that the Fund, its officers or
trustees, or any such controlling person may incur under the 1933 Act, the
1940 Act, or common law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its officers or trustees, or such
controlling person resulting from such claims or demands shall arise out of
or be based upon (a) any unauthorized sales literature, advertisements,
information, statements, or representations or (b) any untrue or alleged
untrue statement of a material fact contained in information furnished in
writing by Xxxxxx to the Fund and used in the answers to any of the items of
the registration statement or in the corresponding statements made in the
prospectus or statement of additional information, or shall arise out of or be
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based upon any omission or alleged omission to state a material fact in
connection with such information furnished in writing by Xxxxxx to the Fund and
required to be stated in such answers or necessary to make such information not
misleading. Xxxxxx'x agreement to indemnify the Fund, its officers and
trustees, and any such controlling person, as aforesaid, is expressly
conditioned upon Xxxxxx'x being notified of any action brought against the
Fund, its officers or trustees, or any such controlling person, such
notification to be given by letter or telegram addressed to Xxxxxx at its
principal office in Minot, North Dakota, and sent to Xxxxxx 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
Xxxxxx of any such action shall not relieve Xxxxxx from any liability that
Xxxxxx may have to the Fund, its officers or trustees, or to such controlling
person by reason of any such untrue or alleged untrue statement or omission or
alleged omission otherwise than on account of Xxxxxx'x indemnity agreement
contained in this paragraph 4.2. Xxxxxx agrees to notify the Fund promptly of
the commencement of any litigation or proceedings against Xxxxxx or any of its
officers or directors in connection with the issuance and sale of any Shares.
Section 4.3 In case any action shall be brought against any indemnified
party under paragraph 4.1 or 4.2, and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish to do so, to assume the
defense thereof with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action, the indemnifying
party will not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than (a) reasonable costs of investigation or the
furnishing of documents or witnesses and (b) all reasonable fees and expenses
of separate counsel to such indemnified party if (i) the indemnifying party
and the indemnified party shall have agreed to the retention of such counsel
or (ii) the indemnified party shall have concluded reasonably that
representation of the indemnifying party and the indemnified party by the
same counsel would be inappropriate due to actual or potential differing
interests between them in the conduct of the defense of such action.
SECTION 5. EFFECTIVENESS OF REGISTRATION
Section 5.1 None of the Shares shall be offered by either Xxxxxx or the
Fund under any of the provisions of this Agreement and no orders for the
purchase or sale of the Shares hereunder shall be accepted by the Fund 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 a current prospectus as required by
Section 5(b)(2) of the 1933 Act is not on file with the SEC; provided, however,
that nothing contained in this paragraph 5 shall in any way restrict or have an
application to or bearing upon the Fund's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the Fund's prospectus,
statement of additional information, or articles of incorporation.
SECTION 6. NOTICE TO XXXXXX
Section 6.1 The Fund agrees to advise Xxxxxx immediately in writing:
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(a) of any request by the SEC for amendments to the registration
statement, prospectus, or statement of additional information then in effect
or for additional information;
(b) in the event of the issuance by the SEC of any stop order suspending
the effectiveness of the registration statement, prospectus, or statement of
additional information then in effect or the initiation of any proceeding for
that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement, prospectus, or statement of
additional information then in effect or that requires the making of a change
in such registration statement, prospectus, or statement of additional
information in order to make the statement therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus, or statement of additional information
which may from time to time be filed with the SEC.
SECTION 7. TERM OF AGREEMENT
Section 7.1 This Agreement shall continue until May 23, 2004, and
thereafter shall continue automatically for successive annual periods ending
on May 23rd, of each year, provided such continuance is specifically approved
at least annually by (a) the Fund's Board of Trustees and (b) a vote of a
majority (as defined in the 1940 Act) of the Fund's Trustees who are not
interested persons (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan, in this
Agreement, or any agreement related to the Plan (the "Qualified Trustees"), by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable with respect to the Fund, without
penalty, (a) on 60 days' written notice, by vote of a majority of the Qualified
Trustees or by vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Fund or (b) on 90 days' written notice
by Xxxxxx. This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act).
SECTION 8. MISCELLANEOUS
Section 8.1 The Fund recognizes that directors, officers, and employees
of Xxxxxx may from time to time serve as directors, officers, and employees of
corporations and business trusts (including other investment companies) and
that Xxxxxx or its affiliates may enter into distribution or other agreements
with such other corporations and trusts.
Section 8.2 It is expressly agreed that the obligations of the Fund
hereunder shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents, or employees of the Fund, personally, but bind
only the property of the Fund. The execution and delivery of this Agreement
have been authorized by the Trustees and signed by an authorized officer of
the Fund, acting as such, and neither such authorization by such Trustees nor
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such execution and delivery by such officer shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, but shall bind only the property of the Fund.
Section 8.3 This Agreement shall be construed in accordance with the
laws of the State of Kansas.
Section 8.4 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
Section 8.5 This Agreement may not be amended or modified in any manner
except by both parties with the same formality as this Agreement and as may be
permitted or required by the 1940 Act.
Section 8.6 The captions of this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
In Witness Whereof, the parties hereto have caused this Agreement to be
executed as of the date first set forth herein.
The Integrity Equity Fund
By/s/ Xxxxxx X. Xxxxxxx
----------------------
Title: President
Date: May 23, 2003
Accepted:
Xxxxxx Capital Corporation
By/s/ Xxxxxx X. Xxxxxxx
----------------------
Title:President
Date: May 23, 2003
