DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of November 14, 1997 between
ALLIANCE INSTITUTIONAL FUNDS, INC., a Maryland corporation
(the "Fund"), and ALLIANCE FUND DISTRIBUTORS, INC., a
Delaware corporation (the "Underwriter").
WITNESSETH
WHEREAS, the Fund is registered under the
Investment Company Act of 1940, as amended (the "Investment
Company Act"), as an open-end management investment company
and it is in the interest of the Fund to offer its shares
for sale continuously;
WHEREAS, the Underwriter is a securities firm
engaged in the business of selling shares of investment
companies either directly to purchasers or through other
securities dealers;
WHEREAS, the Fund and the Underwriter wish to enter
into an agreement with each other with respect to the
continuous offering of the Fund's shares in order to promote
the growth of the Fund and facilitate the distribution of
its shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Underwriter. The
Fund hereby appoints the Underwriter as the principal
underwriter and distributor of the Fund to sell to the
public shares of its Class I Common Stock (the "Class I
shares"), Class II Common Stock (the "Class II shares") and
shares of such other class or classes as the Fund and the
Underwriter shall from time to time mutually agree in
writing shall become subject to this Agreement (the "New
shares") (the Class I shares, the Class II shares and the
New shares being collectively referred to herein as the
"shares") and hereby agrees during the term of this
Agreement to sell shares to the Underwriter upon the terms
and conditions herein set forth.
SECTION 2. Exclusive Nature of Duties. The
Underwriter shall be the exclusive representative of the
Fund to act as principal underwriter and distributor of the
shares except that the rights given under this Agreement to
the Underwriter shall not apply to shares issued in
connection with (a) the merger or consolidation of any other
investment company with the Fund, (b) the Fund's acquisition
by purchase or otherwise of all or substantially all of the
assets or stock of any other investment company or (c) the
reinvestment in shares by the Fund's shareholders of
dividends or other distributions.
SECTION 3. Purchase of Shares from the Fund.
(a) The Underwriter shall have the right to buy
from the Fund the shares needed to fill unconditional orders
for shares of the Fund placed with the Underwriter by
investors or securities dealers, depository institutions or
other financial intermediaries acting as agent for their
customers. The price which the Underwriter shall pay for
the shares so purchased from the Fund shall be the net asset
value, determined as set forth in Section 3(d) hereof, used
in determining the public offering price on which such
orders are based.
(b) The shares are to be resold by the Underwriter
to investors at a public offering price, as set forth in
Section 3(c) hereof, or to securities dealers, depository
institutions or other financial intermediaries acting as
agent for their customers having agreements with the
Underwriter, upon the terms and conditions set forth in
Section 8 hereof.
(c) The public offering price of the shares, i.e.,
the price per share at which the Underwriter or selected
dealers or selected agents (each as defined in Section 8(a)
below) may sell shares to the public, shall be the public
offering price determined in accordance with one or more
then current prospectuses and statements of additional
information of the Fund (each a "Prospectus" and a
"Statement of Additional Information," respectively) under
the Securities Act of 1933, as amended (the "Securities
Act"), relating to such shares, but not to exceed the net
asset value at which the Underwriter is to purchase such
shares. All payments to the Fund hereunder shall be made in
the manner set forth in Section 3(f) hereof.
(d) The net asset value of shares of the Fund
shall be determined by the Fund, or any agent of the Fund,
as of the close of regular trading on the New York Stock
Exchange on each Fund business day in accordance with the
method set forth in the Prospectus and Statement of
Additional Information and guidelines established by the
Directors of the Fund.
(e) The Fund reserves the right to suspend the
offering of its shares at any time in the absolute
discretion of its Directors.
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(f) The Fund, or any agent of the Fund designated
in writing to the Underwriter by the Fund, shall be promptly
advised by the Underwriter of all purchase orders for shares
received by the Underwriter. Any order may be rejected by
the Fund; provided, however, that the Fund will not
arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of shares. The Fund (or its
agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Fund (or
its agent) of payment thereof, will deliver deposit receipts
or certificates for such shares pursuant to the instructions
of the Underwriter. Payment shall be made to the Fund in
New York Clearing House funds. The Underwriter agrees to
cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
SECTION 4. Repurchase or Redemption of
Shares by the Fund.
(a) Any of the outstanding shares may be tendered
for redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in Section 9(d) of ARTICLE FIFTH of
its Articles of Incorporation and in accordance with the
applicable provisions of the Prospectus and Statement of
Additional Information. The price to be paid to redeem or
repurchase the shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(d)
hereof, less any applicable sales charge. All payments by
the Fund hereunder shall be made in the manner set forth
below.
The Fund (or its agent) shall pay the total amount
of the redemption price and, except as may be otherwise
required by the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD") and any
interpretations thereof ("NASD rules and interpretations"),
the deferred sales charges, if any, pursuant to the
instructions of the Underwriter in New York Clearing House
funds on or before the seventh business day subsequent to
its having received the notice of redemption in proper form.
(b) Redemption of shares or payment may be
suspended at times when the New York Stock Exchange is
closed, when trading thereon is restricted, when an
emergency exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, or during any other
period when the Securities and Exchange Commission, by
order, so permits.
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SECTION 5. Plan of Distribution.
(a) It is understood that Sections 5, 12 and 16
hereof together constitute a plan of distribution (the
"Plan") within the meaning of Rule 12b-1 adopted by the
Securities and Exchange Commission under the Investment
Company Act ("Rule 12b-1").
(b) Except as may be required by NASD rules and
interpretations, the Fund will pay to the Underwriter each
month a distribution services fee with respect to each
portfolio of the Fund specified by the Fund's Directors (a
"Portfolio") that will not exceed, on an annualized basis,
.30% of the aggregate average daily net assets of the Fund
attributable to the Class II shares of the Portfolio. With
respect to each Portfolio, the distribution services fee
will be used in its entirety by the Underwriter to make
payments (i) to compensate broker-dealers or other persons
for providing distribution assistance, (ii) to otherwise
promote the sale of shares of each Portfolio, including
payment for the preparation, printing and distribution of
prospectuses and sales literature or other promotional
activities, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries
for providing administrative, accounting and other services
with respect to each Portfolio's shareholders. A portion of
the distribution services fee that will not exceed, on an
annualized basis, .25% of the aggregate average daily net
assets of the Fund attributable to the Class II shares of
each Portfolio will constitute a service fee that will be
used by the Underwriter for personal service and/or the
maintenance of shareholder accounts within the meaning of
NASD rules and interpretations.
(c) Alliance Capital Management L.P., the Fund's
investment adviser (the "Adviser"), may, with respect to any
and all classes of shares of the Fund, make payments from
time to time from its own resources for the purposes
described in Section 5(b) hereof.
(d) Payments to broker-dealers, depository
institutions and other financial intermediaries for the
purposes set forth in Section 5(b) are subject to the terms
and conditions of the respective written agreements between
the Underwriter and each broker-dealer, depository
institution or other financial intermediary. Such
agreements will be in a form satisfactory to the Directors
of the Fund.
(e) The Treasurer of the Fund will prepare and
furnish to the Fund's Directors, and the Directors will
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review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 setting forth all amounts
expended hereunder and the purposes for which such
expenditures were made.
(f) The Fund is not obligated to pay any
distribution expenses in excess of the distribution services
fee described above in Section 5(b) hereof. Any expenses of
distribution of the Fund's Class II shares accrued by the
Underwriter in one fiscal year of the Fund may not be paid
from distribution services fees received from the Fund in
respect of Class II shares in another fiscal year. No
portion of the distribution services fees received from the
Fund in respect of Class II shares may be used to pay any
interest expense, carrying charges or other financing costs
or allocation of overhead of the Underwriter. In the event
this Agreement is terminated by either party or is not
continued with respect to a class of shares as provided in
Section 12 below: (i) no distribution services fees (other
than current amounts accrued but not yet paid) will be owed
by the Fund to the Underwriter with respect to that class,
and (ii) the Fund will not be obligated to pay the
Underwriter for any amounts expended hereunder not
previously reimbursed by the Fund from distribution services
fees in respect of shares of such class. The distribution
services fee of a particular class may not be used to
subsidize the sale of shares of any other class.
SECTION 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter
copies of all information, financial statements and other
papers that the Underwriter may reasonably request for use
in connection with the distribution of shares of the Fund,
and this shall include one certified copy, upon request by
the Underwriter, of all financial statements prepared for
the Fund by the Fund's independent public accountants. The
Fund shall make available to the Underwriter such number of
copies of the Prospectus and Statement of Additional
Information as the Underwriter shall reasonably request.
(b) The Fund shall take, from time to time, but
subject to any necessary approval of its shareholders, all
necessary action to fix the number of authorized shares and
such steps as may be necessary to register the same under
the Securities Act, to the end that there will be available
for sale such number of shares as the Underwriter reasonably
may be expected to sell.
(c) The Fund shall use its best efforts to qualify
for sale and maintain the qualification for sale of an
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appropriate number of its shares under the securities laws
of such states as the Underwriter and the Fund may approve.
Any such qualification may be withheld, terminated or
withdrawn by the Fund at any time in its discretion. As
provided in Section 9(b) hereof, the expense of
qualification and maintenance of qualification shall be
borne by the Fund. The Underwriter shall furnish such
information and other material relating to its affairs and
activities as may be required by the Fund in connection with
such qualification.
(d) The Fund will furnish, in reasonable
quantities upon request by the Underwriter, copies of annual
and interim reports of the Fund.
SECTION 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time
and effort to effect sales of shares of the Fund, but shall
not be obligated to sell any specific number of shares. The
services hereunder of the Underwriter to the Fund are not to
be deemed exclusive as to the Underwriter and nothing in
this Agreement shall prevent the Underwriter from entering
into like arrangements with other investment companies so
long as the performance of its obligations hereunder is not
impaired thereby.
(b) In selling shares of the Fund, the Underwriter
shall use its best efforts in all material respects duly to
conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Fund's Registration Statement on Form N-1A
(the "Registration Statement"), as amended from time to
time, under the Securities Act and the Investment Company
Act or the Prospectus and Statement of Additional
Information or in any sales literature specifically approved
in writing by the Fund.
(c) The Underwriter shall adopt and follow
procedures, as approved by the appropriate officers of the
Fund, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by
investors and selected dealers on such sales, and the
cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD as such
requirements may from time to time exist.
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SECTION 8. Selected Dealer and Agent Agreements.
(a) The Underwriter shall have the right to enter
into selected dealer agreements with securities dealers of
its choice ("selected dealers") and selected agent
agreements with depository institutions and other financial
intermediaries of its choice ("selected agents") for the
sale of shares and fix therein the portion of the sales
charge that may be allocated to the selected dealers and
selected agents; provided, that the Fund shall approve the
forms of agreements with selected dealers and selected
agents and the selected dealer and selected agent
compensation set forth therein. Shares sold to selected
dealers or through selected agents shall be for resale by
such selected dealers and for sale through such selected
agents only at the public offering price set forth in the
Prospectus and/or Statement of Additional Information.
(b) Within the United States, the Underwriter
shall offer and sell shares only to such selected dealers as
are members in good standing of the NASD.
SECTION 9. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of
the Fund, including fees and disbursements of its counsel
and auditors, in connection with the preparation and filing
of its Registration Statement and Prospectus and Statement
of Additional Information, and all amendments and
supplements thereto, and preparing and mailing annual and
interim reports and proxy materials to shareholders
(including but not limited to the expense of printing any
such registration statements, prospectuses, annual or
interim reports or proxy materials).
(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as
an issuer or as a broker or dealer, in such states of the
United States or other jurisdiction as shall be selected by
the Fund and the Underwriter pursuant to Section 6(c) hereof
and the cost and expenses payable to each such state for
continuing qualification therein until the Fund decides to
discontinue such qualification pursuant to Section 6(c)
hereof.
SECTION 10. Indemnification.
(a) The Fund shall indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter
within the meaning of Section 15 of the Securities Act, free
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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 Underwriter or any such controlling
person may incur, under the Securities Act, or under common
law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in the Fund's
Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in
any one thereof or necessary to make the statements in any
one thereof not misleading; provided, however, that in no
event shall anything herein contained be so construed as to
protect the Underwriter against any liability to the Fund or
its security holders to which the Underwriter would
otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties,
or by reason of the Underwriter's reckless disregard of its
obligations and duties under this Agreement. The Fund's
agreement to indemnify the Underwriter and any such
controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any
action brought against the Underwriter or any such
controlling person, such notification to be given by letter
or by telegram addressed to the Fund at its principal office
in New York, New York, 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 to so notify the Fund of the
commencement of any such action shall not relieve the Fund
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 Section 10. The
Fund will be entitled to assume the defense of any suit
brought to enforce any such claim, and to retain counsel of
good standing chosen by the Fund and approved by the
Underwriter. In the event the Fund does not elect to assume
the defense of any such suit and retain counsel of good
standing approved by the Underwriter, the defendant or
defendants in such suit shall bear the fees and expenses of
any additional counsel retained by any of them; but if Fund
does not elect to assume the defense of any such suit, or in
case the Underwriter does not approve of counsel chosen by
the Fund, the Fund will reimburse the Underwriter or the
controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any
counsel retained by the Underwriter or any such person. The
indemnification agreement contained in this Section 10 shall
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remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Underwriter or
any controlling person and shall survive the sale of any of
the Fund's shares made pursuant to subscriptions obtained by
the Underwriter. This agreement of indemnity will inure
exclusively to the benefit of the Underwriter, to the
benefit of its successors and assigns, and to the benefit of
any controlling persons and their successors and assigns.
The Fund shall promptly notify the Underwriter of the
commencement of any litigation or proceeding against the
Fund in connection with the issue and sale of any of its
shares.
(b) The Underwriter shall indemnify, defend and
hold the Fund, its several officers and directors, and any
person who controls the Fund within the meaning of Section
15 of the Securities 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 Securities Act or under common law or otherwise, but
only to the extent that such liability, or expense incurred
by the Fund, its officers, directors or such controlling
person resulting from such claims 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 Underwriter to the Fund for use in its Registration
Statement, Prospectus or Statement of Additional Information
in effect from time to time under the Securities Act, 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 in the Registration Statement,
Prospectus or Statement of Additional Information or
necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers
and directors, and any such controlling person as aforesaid
is expressly conditioned upon the Underwriter being notified
of the commencement 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 Underwriter at its principal office in New
York, and sent to the Underwriter 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
Underwriter 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 its part, and in any
other event the Underwriter and the Fund, and their officers
9
and directors 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 Underwriter of the commencement of any such action shall
not relieve the Underwriter from any liability which it may
have to the Fund, to its officers and directors, or to such
controlling person by reason of any such untrue statement or
omission on the part of the Underwriter otherwise than on
account of the indemnity agreement contained in this Section
10.
SECTION 11. Notification by the Fund.
The Fund shall advise the Underwriter immediately:
(a) of any request by the Securities and Exchange
Commission for any amendment to the Fund's 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 the Fund's Registration Statement,
Prospectus or Statement of Additional Information or the
initiation of any proceeding for that purpose,
(c) of the happening of any material event which
makes untrue any statement made in the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or which requires the making of a change in any one thereof
in order to make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendment to the Fund's
Registration Statement, Prospectus or Statement of
Additional Information which may from time to time be filed
with the Securities and Exchange Commission under the
Securities Act.
SECTION 12. Term of Agreement.
(a) This Agreement shall become effective on the
date hereof and shall continue in effect with respect to
each class of shares of a Portfolio of the Fund so long as
its continuance with respect to that Portfolio is
specifically approved annually by the Directors of the Fund
or by vote of the holders of a majority of the outstanding
voting securities (as defined in the Investment Company Act)
of that class, and, in either case, by a majority of the
Directors of the Fund who are not parties to this Agreement
or interested persons, as defined in the Investment Company
10
Act, of any such party (other than as directors of the Fund)
and who have no direct or indirect financial interest in the
operation of the Plan or any agreement related thereto;
provided further, however, that if the continuation of this
Agreement is not approved as to a class or a Portfolio, the
Underwriter may continue to render to such class or
Portfolio the services described herein in the manner and to
the extent permitted by the Act and the rules and
regulations thereunder. Upon effectiveness of this
Agreement, it shall supersede all previous agreements
between the parties hereto covering the subject matter
hereof. This Agreement may be terminated (i) by the Fund
with respect to any class or Portfolio at any time, without
the payment of any penalty, by the vote of a majority of the
outstanding voting securities (as so defined) of such class
or Portfolio, or by a vote of a majority of the Directors of
the Fund who are not interested persons, as defined in the
Investment Company Act, of the Fund (other than as directors
of the Fund) and have no direct and indirect financial
interest in the operation of the Plan or any agreement
related thereto, in any such event on sixty days' written
notice to the Underwriter; provided, however, that no such
notice shall be required if such termination is stated by
the Fund to relate only to Sections 5 and 16 hereof (in
which event Sections 5 and 16 shall be deemed to have been
severed herefrom and all other provisions of this Agreement
shall continue in full force and effect), or (ii) by the
Underwriter with respect to any Portfolio on sixty days'
written notice to the Fund.
(b) This Agreement may be amended at any time with
the approval of the Directors of the Fund, provided that (i)
any material amendments of the terms hereof will become
effective only upon approval as provided in the first
proviso of the first sentence of Section 12(a) hereof, and
(ii) any amendment to increase materially the amount to be
expended for distribution services fees pursuant to Section
5(b) hereof will be effective only upon the additional
approval by a vote of a majority of the outstanding voting
securities as defined in the Investment Company Act of the
class or Portfolio affected.
SECTION 13. No Assignment. This Agreement may not
be transferred, assigned, sold or in any manner hypothecated
or pledged by either party hereto, and this Agreement shall
terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge. The terms
"transfer", "assignment", and "sale" as used in this
paragraph shall have the meanings ascribed thereto by
governing law and any interpretation thereof contained in
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rules or regulations promulgated by the Securities and
Exchange Commission thereunder.
SECTION 14. Notices. Any notice required or
permitted to be given hereunder by either party to the other
shall be deemed sufficiently given if sent by registered
mail, postage prepaid, addressed by the party giving such
notice to the other party at the last address furnished by
such other party to the party given notice, and unless and
until changed pursuant to the foregoing provisions hereof
addressed to the Fund or the Underwriter.
SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New
York.
SECTION 16. Disinterested Directors of the Fund.
While this Agreement is in effect, the selection and
nomination of the Directors who are not "interested persons"
of the Fund (as defined in the Investment Company Act) will
be committed to the discretion of such disinterested
Directors.
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IN WITNESS WHEREOF, the parties hereto have
executed this Agreement.
ALLIANCE INSTITUTIONAL
FUNDS, INC.
By /s/ Xxxxxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx, Xx.
ALLIANCE FUND DISTRIBUTORS,
INC.
By /s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
Accepted as to
Sections 5, 12 and 16
as of November 14, 1997:
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner
By /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
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00250237.AC2
