Exhibit 23(e)(1)
DISTRIBUTION AGREEMENT
AGREEMENT made as of March 15, 2005, between MIDAS SPECIAL EQUITIES FUND,
INC. ("Corporation"), a corporation organized and existing under the laws of the
State of Maryland, and Investor Service Center, Inc. ("Distributor"), a
corporation organized and existing under the laws of the State of Delaware.
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company; and
WHEREAS, the Corporation acts as a distributor of its shares as defined in
Rule 12b-1 under the 1940 Act, and has adopted a plan of distribution pursuant
to such Rule (the "Plan"); and
WHEREAS, the Distributor has been the principal underwriter for the
Corporation in connection with the offering and sale of the shares of common
stock of the Corporation ("Shares"); and
WHEREAS, the Distributor is willing to continue to act as the principal
underwriter for the Corporation on the terms and conditions hereinafter set
forth;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Corporation hereby appoints the Distributor as its
principal underwriter to act as its exclusive agent to arrange for the sale of
the Shares solely through dealers and other financial institutions on the terms
and for the period set forth in this Agreement. The Distributor hereby accepts
such appointment and agrees to act hereunder.
2. Services and Duties of the Distributor.
(a) The Distributor agrees to sell the Shares through dealers and
other financial institutions on a best efforts basis from time to time
during the term of this Agreement as agent for the Corporation and upon the
terms described in the Registration Statement. As used in this Agreement,
the term "Registration Statement" shall mean the currently effective
registration statement of the Corporation, and any supplements thereto,
under the Securities Act of 1933, as amended ("1933 Act"), and the 0000
Xxx.
(b) The Distributor shall provide or arrange for the provision of
ongoing shareholder services, which include responding to shareholder
inquiries, providing shareholders with information on their investments in
the Corporation and any other services now or hereafter deemed to be
appropriate subjects for the payments of "service fees" under Section 26(d)
of the National Association of Securities Dealers, Inc. ("NASD") Rules of
Fair Practice (collectively, "service activities").
(c) The Distributor in its discretion may enter into agreements to
sell Shares to such registered and qualified dealers and other financial
institutions, as it may select.
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(d) The Distributor shall not be obligated to sell or arrange for the
sale of any certain number of Shares or provide or arrange for the
provision of any certain kinds of service activities.
3. Share Purchase Information. Purchase orders shall be deemed effective at
the time and in the manner set forth in the Registration Statement. The offering
price of the Shares shall be the net asset value per Share as next determined by
the Corporation following receipt and acceptance of an order by the
Corporation's transfer agent.
4. Authorization to Enter into Agreements and to Delegate Duties as
Distributor. The Distributor may enter into an agreement with respect to sales
of the Shares or the provision of service activities with any registered and
qualified dealer or other financial institution. In a separate contract or as
part of any such agreement, the Distributor may also delegate to another
registered and qualified dealer ("sub-distributor") any or all of its duties
specified in this Agreement, provided that such separate contract or agreement
imposes on the sub-distributor bound thereby all applicable duties and
conditions to which the Distributor is subject under this Agreement, and further
provided that such separate contract meets all requirements of the 1940 Act and
rules thereunder.
5. Services Not Exclusive. The services furnished by the Distributor
hereunder are not to be deemed exclusive and the Distributor shall be free to
furnish similar services to others so long as its services under this Agreement
are not impaired thereby. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Distributor, who may also be a
director, officer or employee of the Corporation, to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any other business, whether of a similar or a dissimilar
nature.
6. Compensation for Distribution and Service Activities.
(a) As compensation for its activities under this Agreement with
respect to the distribution of Shares, the Distributor shall receive from
the Corporation a fee at the rate and under the terms and conditions of the
Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act ("Plan")
adopted by the Corporation, as such Plan is amended from time to time, and
subject to any further limitations on such fee as the Board may impose.
(b) As compensation for its service activities under this Agreement,
the Distributor shall receive from the Corporation a fee at the rate and
under the terms and conditions of the Plan adopted by the Corporation, as
such Plan is amended from time to time, and subject to any further
limitations on such fee as the Board may impose.
(c) The Distributor may reallow any or all of the fees it is paid to
such dealers and other financial institutions as the Distributor may from
time to time determine.
7. Duties of the Corporation.
(a) The Corporation reserves the right at any time to withdraw
offering Shares by written notice to the Distributor at its principal
office.
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The Corporation shall keep the Distributor fully informed of its affairs
and shall make available to the Distributor copies of all information,
financial statements, and other papers that the Distributor may reasonably
request for use in connection with the distribution of Shares, including,
without limitation, certified copies of any financial statements prepared
for the Corporation by its independent registered public accounting firm
and such reasonable number of copies of the most current prospectus,
statement of additional information, and annual and interim reports as the
Distributor may request, and the Corporation shall fully cooperate in the
efforts of the Distributor to sell and arrange for the sale of the Shares
and in the performance of the Distributor's duties under this Agreement.
(b) The Corporation shall comply with all applicable provisions of the
1940 Act and all other federal and state laws, rules and regulations
governing the issuance and sale of Shares of the Corporation.
(c) The Corporation shall use its best efforts to qualify and maintain
the qualification of an appropriate number of Shares for sale under the
securities laws of such states or other jurisdictions as the Distributor
and the Corporation may approve; provided that the Corporation shall not be
required to amend its Articles of Incorporation or By-Laws to comply with
the laws of any jurisdiction, to maintain an office in any jurisdiction, to
change the terms of the offering of the Shares in any jurisdiction from the
terms set forth in its Registration Statement, to qualify as a foreign
corporation in any jurisdiction, or to consent to service of process in any
jurisdiction other than with respect to claims arising out of the offering
of the Shares. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the
Corporation in connection with such qualifications.
8. Expenses of the Corporation. The Corporation shall bear all costs and
expenses of registering the Shares with the Securities and Exchange Commission
and state and other regulatory bodies, and shall assume expenses related to
communications with shareholders of the Corporation, including (i) fees and
disbursements of its counsel and its independent registered public accounting
firm; (ii) the preparation, filing, and printing of registration statements
and/or prospectuses or statements of additional information required under the
Federal securities laws; (iii) the preparation and mailing of annual and interim
reports, prospectuses, statements of additional information, and proxy materials
to shareholders; and (iv) the qualifications of Shares for sale under the
securities laws of such jurisdictions as shall be selected by the Corporation
and the Distributor pursuant to Paragraph 6(e) hereof, and the costs and
expenses payable to each such jurisdiction for continuing qualification therein.
9. Expenses of the Distributor. Distributor shall bear all costs and
expenses of (i) preparing, printing and distributing any materials not prepared
by the Corporation and other materials used by the Distributor in connection
with the sale of Shares under this Agreement, including the additional cost of
printing copies of prospectuses, statements of additional information, and
annual and interim shareholder reports other than copies thereof required for
distribution to existing shareholders or for filing with any Federal or state
securities authorities; (ii) any expenses of advertising incurred by the
Distributor in connection with such offering; (iii) the expenses of registration
or qualification of the Distributor as a broker or dealer under Federal or state
laws and the expenses of continuing such registration or qualification; and (iv)
all compensation paid to the Distributor's employees and others for selling
Shares, and all expenses of the Distributor, its employees, and others who
engage in or support the sale of Shares as may be incurred in connection with
their sales efforts.
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10. Indemnification.
(a) The Corporation agrees to indemnify, defend, and hold the
Distributor, its officers and directors, and any person who controls the
Distributor 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) that the Distributor, its officers, 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 the Registration Statement or arising out of or
based upon any alleged omission to state a material fact required to be
stated in the Registration Statement or necessary to make the statements
therein not misleading, except insofar as such claims, demands,
liabilities, or expenses arise out of or are based upon any such untrue
statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information furnished in writing by
the Distributor to the Corporation for use in the Registration Statement;
provided, however, that this indemnity agreement shall not inure to the
benefit of any person who is also an officer or director of the Corporation
or who controls the Corporation within the meaning of Section 15 of the
1933 Act, unless a court of competent jurisdiction shall determine, or it
shall have been determined by controlling precedent, that such result would
not be against public policy as expressed in the 1933 Act; and further
provided, that in no event shall anything contained herein be so construed
as to protect the Distributor against any liability to the Corporation or
to the shareholders 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 under this Agreement. The Corporation shall not be liable to
the Distributor under this Agreement with respect to any claim made against
the Distributor or any person indemnified unless the Distributor or other
such person shall have notified the Corporation 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 such other person (or after the Distributor
or the person shall have received notice of service on any designated
agent). However, failure to notify the Corporation of any claim shall not
relieve the Corporation from any liability that it may have to the
Distributor or any person against whom such action is brought otherwise
than on account of this Agreement. The Corporation 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 subject to
this Agreement. If the Corporation elects to assume the defense of any such
claim, the defense shall be conducted by counsel chosen by the Corporation
and satisfactory to indemnified defendants in the suit whose approval shall
not be unreasonably withheld. In the event that the Corporation elects to
assume the defense of any suit and retain counsel, the indemnified
defendants shall bear the fees and expenses of any additional counsel
retained by them. If the Corporation does not elect to assume the defense
of a suit, it will reimburse the indemnified defendants for the reasonable
fees and expenses of any counsel retained by the indemnified defendants.
The Corporation agrees to promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of its
Shares.
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(b) The Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Corporation in connection
with the matters to which this Agreement relates, except a loss resulting
from the willful misfeasance, bad faith, or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
(c) The Distributor agrees to indemnify, defend, and hold the
Corporation, its officers and directors, and any person who controls the
Corporation 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 against such
claims, demands, or liabilities and any counsel fees incurred in connection
therewith) that the Corporation, its directors or officers, 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 information furnished in writing by the
Distributor to the Corporation for use in the Registration Statement,
arising out of or based upon any alleged omission to state a material fact
in connection with such information required to be stated in the
Registration Statement necessary to make such information not misleading,
or arising out of any agreement between the Distributor and any retail
dealer, or arising out of any supplemental sales literature or advertising
used by the Distributor in connection with its duties under this Agreement.
The Distributor 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 the claim, but if the Distributor elects to assume the defense,
the defense shall be conducted by counsel chosen by the Distributor and
satisfactory to the indemnified defendants whose approval shall not be
unreasonably withheld. In the event that the Distributor elects to assume
the defense of any suit and retain counsel, the 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 indemnified defendants in the suit for the reasonable
fees and expenses of any counsel retained by them.
11. Services Provided to the Corporation by Employees of the Distributor.
Any person, even though also an officer, director, employee, or agent of the
Distributor who may be or become an officer, director, employee, or agent of the
Corporation, shall be deemed, when rendering services to the Corporation or
acting in any business of the Corporation, to be rendering such services to or
acting for solely the Corporation and not as an officer, director, employee, or
agent or one under the control or direction of the Distributor even though paid
by the Distributor.
12. Shareholder Lists. The Distributor shall have the right to use lists of
current shareholders of the Corporation and other lists of investors that it
obtains in connection with its provision of services under this Agreement;
provided, however, that the Distributor shall not sell or knowingly provide
lists of current shareholders to any unaffiliated person unless reasonable
payment is made to the Corporation.
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13. Duration and Termination.
(a) This Agreement shall become effective upon the date hereabove
written, provided that this Agreement shall not take effect unless such
action has first been approved by vote of a majority of the Board and by
vote of a majority of those directors of the Corporation who are not
interested persons of the Corporation, and have no direct or indirect
financial interest in the operation of the Plan or in any agreements
related thereto (all such directors collectively being referred to herein
as the "Independent Directors"), cast in person at a meeting called for the
purpose of voting on such action.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for one year from the above written date. Thereafter, if
not terminated, this Agreement shall automatically continue for successive
periods of twelve months each, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of the
Independent Directors, cast in person at a meeting called for the purpose
of voting on such approval, and (ii) by the Board or by vote of a majority
of the outstanding voting securities of the Corporation.
(c) Notwithstanding the foregoing, this Agreement may be terminated at
any time, without the payment of any penalty, by vote of the Board, by vote
of a majority of the Independent Directors, or by vote of a majority of the
outstanding voting securities of the Corporation on sixty days' written
notice to the Distributor or by the Distributor at any time, without the
payment of any penalty, on sixty days' written notice to the Corporation.
This Agreement will automatically terminate in the event of its assignment.
14. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge, or termination is sought.
15. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of New York and the 1940 Act. To the extent that the
applicable laws of the State of New York conflict with the applicable provisions
of the 1940 Act, the latter shall control.
16. Notice. Any notice required or permitted to be given by either party to
the other shall be deemed sufficient upon receipt in writing at the other
party's principal offices.
17. Miscellaneous. The captions in 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. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule, or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person," and "assignment" shall have the same meaning as such terms
have in the 1940 Act. This Agreement is intended to supersede all prior
Distribution Agreements between the parties, although not the Plan adopted by
the Corporation.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated as of the day and year first above
written.
MIDAS SPECIAL EQUITIES FUND, INC.
ATTEST:
/s/ Xxxxxxx X. Xxxxxx By: /s/ Xxxxxx X. Xxxxxxx
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INVESTOR SERVICE CENTER, INC.
ATTEST:
/s/ Xxxx X. Xxxxxxx By: /s/ Xxxxxx Xxxxxx
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