GENERAL DISTRIBUTION AGREEMENT
Agreement made this 11th day of May, 1992 between CAPSTONE U.S. TREND FUND, INC.
("Issuer"), a Maryland corporation having its principal place of business in
Houston, Texas, and CAPSTONE ASSET PLANNING COMPANY ("Distributor"), a Delaware
corporation having its principal place of business in Houston, Texas.
In consideration of the mutual promises and undertakings herein contained,
the parties agree as follows:
1. Sale of Shares - The Issuer grants to the Distributor the right to sell
shares on behalf of the Issuer during the term of this Agreement and subject to
the registration requirements of the Securities Act of 1933, as amended ("1933
Act"), and of the laws governing the sale of securities in the various states
("Blue Sky Laws") under the following terms and conditions: the Distributor
shall have the right to sell, as agent on behalf of the Issuer, shares
authorized for issue and registered under the 1993 Act.
2. Sale of Shares by the Issuer - The rights granted to the Distributor
shall be nonexclusive in that the Issuer reserves the right to sell its shares
to investors on applications received and accepted by the Issuer. Further, the
Issuer reserves the right to issue shares in connection with the merger or
consolidation, or acquisition by the Issuer through purchase or otherwise, with
any other investment company, trust, or personal holding company.
3. Shares Covered by this Agreement - This agreement shall apply to
unissued shares of the Issuer, shares of the Issuer held in its treasury in the
event that in the discretion of the Issuer treasury shares shall be sold, and
shares of the Issuer repurchased for resale.
4. Public Offering Price - Except as otherwise noted in the Issuer's
current Prospectus, all shares sold to investors by the Distributor or the
Issuer will be sold at the public offering price. The public offering price for
all accepted subscriptions will be the net asset value per share, as determined
in the manner described in the Issuer's current Prospectus, plus a sales charge
(if any) described in the Issuer's current Prospectus. The Issuer shall in all
cases receive the net asset value per share on all sales. If a sales charge is
in effect, the Distributor shall have the right, subject to such rules or
regulations of the Securities and Exchange Commission as may then be in effect
pursuant to Section 22 of the Investment Company Act of 1940, to retain the
sales charges or to reallow all or a portion of the sales charge to dealers who
have sold shares of the Issuer for distribution-related services pursuant to any
plan pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("1940
Act") that may be adopted by the Issuer's Board of Directors.
5. Suspension of Sales - If and whenever the determination of net asset
value is suspended and until such suspension is terminated, no further orders
for sales shall be processed by the Distributor except such unconditional orders
placed with the Distributor before it had knowledge of the suspension. In
addition, the Issuer reserves the right to suspend sales and the Distributor's
authority to process orders for shares on behalf of the Issuer if, in the
judgment of the Issuer, it is in the best interests of the Issuer to do so.
Suspension will continue for such period as may be determined by the Issuer.
6. Solicitation of Sales - In consideration of these rights granted to the
Distributor, the Distributor agrees to use all reasonable efforts, consistent
with its other business, to secure purchasers for shares of the Issuer. This
shall not prevent the Distributor from entering into like arrangements
(including arrangements involving the payment of underwriting commissions) with
other Issuers. This does not obligate the Distributor to register as a broker or
dealer under the Blue Sky Laws of any jurisdiction in which it is not now
registered or to maintain its registration in any jurisdiction in which it is
now registered.
7. Authorized Representations - The Distributor is not authorized by the
Issuer to give any information or to make any representations other than those
contained in the appropriate registration statements or Prospectuses filed with
the Securities and Exchange Commission under the 1933 Act (as these registration
statements and Prospectuses may be amended from time to time), or contained in
shareholder reports or other material that may be prepared by or on behalf of
the Issuer for the Distributor's use. This shall not be construed to prevent the
Distributor from preparing and distributing sales literature or other material
as it may be deem appropriate.
8. Portfolio Securities - Portfolio securities of the Issuer may be bought
or sold by or through the Distributor, and the Distributor may participate
directly or indirectly in brokerage commissions or "spreads" for transactions in
portfolio securities of the Issuer.
9. Registration of Shares - The Issuer agrees that it will take all action
necessary to register shares under the 1933 Act (subject to the necessary
approval of its shareholders) so that there will be available for sale the
number of shares the distributor may reasonably be expected to sell. The Issuer
shall make available to the Distributor such number of copies of its currently
effective prospectus as the Distributor may reasonably request. The Issuer shall
furnish to the Distributor copies of all information, financial statements and
other papers which the Distributor may reasonably request for use in connection
with the distribution of shares of the Issuer.
10. Expenses - The Issuer shall pay all fees and expenses (a) in connection
with the preparation, setting in type and filing of any registration statement
and Prospectus under the 1933 Act and amendments for the issue of its shares,
(b) in connection with the registration and qualifications of shares for sale in
the various states in which the Board of the Issuer shall determine it is
advisable to qualify such shares for sale (including registering the Issuer as a
broker or dealer or any officer of the Issuer as agent or salesman in any
state), (c) of preparing, setting in type, printing and mailing any report or
other communication to shareholders of the Issuer in their capacity as such, and
(d) of preparing, setting in type, printing and mailing Prospectuses sent
annually to existing shareholders. Except as may be otherwise provided by any
plan pursuant to Rule 12b-1 under the 1940 Act that may be adopted by the
Issuer's Board of Directors, the Distributor shall pay expenses of (a) printing
and distributing any Prospectuses or reports prepared for its use in connection
with the offering of the shares for sale to the public, (b) and other literature
used by the Distributor in connection with such offering, and (c) advertising in
connection with such offering. It is recognized by the Issuer that Capstone
Asset Management Company may reimburse the Distributor for its direct and
indirect expenses incurred in the distribution of the Issuer's shares.
11. Indemnification - The Issuer agrees to indemnify and hold harmless the
Distributor and each of its directors and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act gains
any loss, liability, claim, damages or expenses (including the reasonable cost
of investigating or defending any alleged loss, liability, claim, damages, or
expense and reasonable counsel fees incurred in connection therewith), arising
by reason of any person acquiring any shares, based upon the ground that the
registration statement, Prospectus, shareholder reports and other information
filed or made public by the Issuer (as from time to time amended), included an
untrue statement of the material fact or omitted to state a material fact
required to be stated or necessary in order to make the statements not
misleading under the 1933 Act, or any other statute or the common law. However,
the Issuer does not agree to indemnify the Distributor or hold it harmless to
the extent that the statement or omission was made in reliance upon, and in
conformity with, information furnished to Issuer by or on behalf of the
Distributor. In no case (i) is the indemnity of the Issuer in favor of the
Distributor or any person indemnified to be deemed to protect the Distributor or
any person against any liability to the Issuer or its security holders to which
the Distributor or such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of it reckless disregard of its obligations and duties under this
Agreement, or (ii) is the Issuer to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the Director
or any person indemnified unless the Distributor or any person shall have
notified the issuer in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Distributor or any person (or after
the Distributor or the person shall have received notice of service on any
designated agent). However, failure to notify the Issuer of any claim shall not
relieve the Issuer from any liability which it may have to the Distributor or
any person against whom such action is brought otherwise than on account of its
indemnity agreement contained in this paragraph. The Issuer 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 claims, but if the Issuer elects
to assume the defense, the defense shall be conducted by counsel chosen by it
and satisfactory to the Distributor or person or persons, defendant or
defendants in the suit. In the event the Issuer elects to assume the defense of
any suit and retain counsel, the Distributor, officers or directors or
controlling person or person, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them. If the Issuer
does not elect to assume the defense of any suit, it will reimburse the
Distributor, officers or directors or controlling person or persons, defendant
or defendants I the suit, for the reasonable fees and expenses of any counsel
retained by them. The Issuer agrees to notify the Distributor promptly of the
commencement of any litigation or proceedings against it or nay of its officers
or trustees in connection with the issuance of sale of any of the shares.
The Distributor also convenants and agrees that it will indemnify and hold
harmless the Issuer and each of its Board members and officers and each person,
if any, who controls the Issuer within the meaning of Section 15 of the 1933
Act, against any loss, liability, damages, claim or expense (including the
reasonable counsel fees incurred in connection therewith) arising by reason of
any person acquiring any shares, based upon the 1933 Act or any other statute or
common law, alleging that the registration statement, Prospectus, shareholder
reports or other information filed or made public by the Issuer (as from time to
time amended), included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make the
statements not misleading, insofar as the statement or omission was made in
reliance upon, and in conformity with information furnished to the Issuer by or
on behalf of the Distributor. In no case (i) is the indemnify of the Distributor
in favor of the Issuer or any person indemnified to be deemed to protect the
Issuer or any person against any liability to which the Issuer or such person
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason or its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Issuer or any person
indemnified unless the Issuer or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Issuer or upon such person (or after
the Issuer or such person shall have received notice of service on any
designated agent. However, failure to notify the Distributor of any claim shall
not relieve the Distributor from any liability which it may have to the Issuer
or any person against whom the action is brought otherwise than on account of
its indemnity agreement contained in this paragraph. In the case of any notice
to the Distributor, it shall be entitled to participate, at its own expense, in
the defense or, if it so elects, to assume the defense or any suit brought to
enforce the claim, but if the Distributor elects to assume the defense, the
defense shall conducted by counsel chosen by it an satisfactory to the Issuer,
to its officers and Board and to any controlling person or persons, defendant or
defendants in the suit. In the event that the Distributor elects to assume the
defense of any suit and retain counsel, the Issuer or controlling persons,
defendant or defendants in the 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 suit, it will reimburse the Issuer, officers and board or
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Distributor
agrees to notify the Issuer promptly of the commencement of any litigation or
proceedings against it in connection with the issuer and sale of any of the
shares.
12. Acceptance or Rejection of Orders - The Distributor shall have the
right to accept or reject orders for the purchase of shares of the Issuer. Any
consideration received in connection with a rejected purchase order will be
returned promptly. The Distributor agrees to promptly issue confirmations of all
accepted purchase orders and to transmit a copy of such confirmations to the
Issuer, or, if so directed, to any duly appointed transfer or shareholder
servicing agent of the Issuer. The net asset value of all shares which are the
subject of such confirmations, computed in accordance with the applicable rules
under the Investment Company Act of 1940, shall be a liability of the
Distributor to the Issuer to be paid promptly after receipt of payment from the
originating dealer and not later than eleven business days after such
confirmation even if the Distributor has not actually received payment from the
originating dealer. If the originating dealer should fail to make timely
settlement of its purchase order in accordance with the rules of the National
Association of Securities Dealers, Inc., the Distributor shall have the right to
cancel such purchase order and, at the Distributor's account and risk, to hold
responsible the originating dealer. The Distributor agrees to promptly reimburse
the Issuer for any amount by which the Issuer's losses attributable to any such
cancellation, or to errors on the part of the Distributor in relation to the
effective date of accepted purchase orders, exceed contemporaneous gains
realized by the Issuer for either of such reasons in respect to other purchase
orders. The Issuer shall register or cause to be registered all shares sold by
the Distributor pursuant to the provisions hereof in such name or names and
amounts as the Distributor may request from time to time and the Issuer shall
issue or cause to be issued certificates evidencing such shares for delivery to
the Distributor if and to the extent that the shareholder account in question
contemplates the issuance of such share certificates. All shares of the Issuer,
when so issued and paid for, shall be fully paid and non-assessable.
13. Effective Date - This agreement shall be effective upon its execution,
and unless terminated as provided, shall continue in force of two (2) years form
the effective date and thereafter from year to year, provided continuance after
the two (2) year period is approved annually by either (i) the vote of a
majority of the Board members of the Issuer, or by the vote of a majority of the
outstanding voting securities of the Issuer, and (ii) the vote of a majority of
those Board members of the Issuer who are not parties to this Agreement or
interested persons of any party, cast in person at a meeting called for the
purpose of voting on the approval. As used in this paragraph the terms "vote of
a majority of the outstanding voting securities" and "interested person," shall
have the respective meanings specified in the Investment Company Act of 1940 as
now in effect or as hereafter amended.
14. Termination - This Agreement shall automatically terminate in the event
of its assignment. As used in this paragraph the term "assignment" shall have
the respective meaning specified in the Investment Company Act of 1940 as now in
effect or as hereafter amended. In addition to termination by failure to approve
continuance or by assignment, this Agreement may at any time be terminated by
either party upon not less than sixty days' prior written notice to the other
party.
15. Notice - Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
last address furnished by the other party to the party giving notice: if to the
Issuer, at 0000 Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx, and if to the Distributor, at
1100 Milam, Suite 3500, Houston, Texas.
IN WITNESS, the Issuer has executed this instrument in its name and behalf,
and its seal affixed, by one of its officers duly authorized, and the
Distributor has executed this instrument in its name and behalf, and its
corporate seal affixed, by one of its officers duly authorized, as of the day
and year above written.
CAPSTONE U.S. TREND FUND, INC.
SEAL By:
President
CAPSTONE ASSET PLANNING COMPANY
SEAL By:
President
