EXHIBIT 6
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this 31st day of December, 1995, by and
between Xxx Xxxxxxx Funds, Inc., a Maryland corporation (the
"Corporation") and Sunstone Financial Group, Inc., a Wisconsin corporation
(the "Distributor").
W I T N E S S E T H :
WHEREAS, the Corporation is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company and is authorized to issue shares of common stock
("Shares") in separate series with each such series representing the
interests in a separate portfolio of securities and other assets;
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD"); and
WHEREAS, the Corporation and Distributor desire to enter into an
agreement pursuant to which Distributor shall be the distributor of the
Shares of the Corporation representing the investment portfolios listed on
Schedule A hereto and any additional investment portfolios the Corporation
and Distributor may agree upon and include on Schedule A as such Schedule
may be amended from time to time (such investment portfolios and any
additional investment portfolios are individually referred to as a "Fund"
and collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. Appointment of the Distributor.
The Corporation hereby appoints the Distributor as agent for the
distribution of the Shares, on the terms and for the period set forth in
this Agreement. Distributor hereby accepts such appointment as agent for
the distribution of the Shares on the terms and for the period set forth
in this Agreement.
2. Services and Duties of the Distributor.
2.1 Distributor will act as agent for the distribution of Shares in
accordance with the instructions of the Corporation's Board of Directors
and the registration statement and prospectuses then in effect with
respect to the Funds under the Securities Act of 1933, as amended (the
"1933 Act").
2.2 Subject to the terms of Section 4.2, Distributor may finance
appropriate activities which it deems reasonable which are primarily
intended to result in the sale of Shares, including, but not limited to,
advertising, the printing and mailing of prospectuses to other than
current shareholders, and the printing and mailing of sales literature.
Distributor may enter into servicing and/or selling agreements with
qualified broker/dealers and other persons with respect to the offering of
Shares to the public, and if it so chooses Distributor will act only on
its own behalf as principal. The Distributor shall not be obligated to
sell any certain number of Shares of any Fund.
2.3 All Shares of the Funds offered for sale by Distributor shall be
offered for sale to the public at a price per unit (the "offering price")
equal to their net asset value (determined in the manner set forth in the
Funds' then current prospectus).
2.4 Distributor shall act as distributor of the Shares in compliance
with all applicable laws, rules and regulations, including, without
limitation, all rules and regulations made or adopted pursuant to the 1940
Act, by the Securities and Exchange Commission (the "Commission") and the
NASD. Distributor shall provide to the Corporation's Board of Directors,
at least quarterly, a report of its expenses incurred pursuant to this
Agreement.
3. Duties and Representations of the Corporation.
3.1 The Corporation represents that it is registered as an open-end
management investment company under the 1940 Act and that it has and will
continue to act in conformity with the Articles of Incorporation, By-Laws,
its registration statement as may be amended from time to time and
resolutions and other instructions of its Board of Directors and has and
will continue to comply with all applicable laws, rules and regulations
including without limitation the 1933 Act, the 1934 Act, the 1940 Act, the
laws of the states in which shares of the Funds are offered and sold, and
the rules and regulations thereunder.
3.2 The Corporation shall take all necessary action to register and
maintain the registration of the Shares under the 1933 Act for sale as
herein contemplated and shall pay all costs and expenses in connection
with the registration of Shares under the 1933 Act, and be responsible for
all expenses in connection with maintaining facilities for the issue and
transfer of Shares and for supplying information, prices and other data to
be furnished by the Corporation hereunder.
3.3 The Corporation shall execute any and all documents and furnish
any and all information and otherwise take all actions which may be
reasonably necessary in the discretion of the Corporation's officers in
connection with the qualification of the Shares for sale in such states as
Distributor and the Corporation may approve, shall maintain the
registration of a sufficient number or amount of shares thereunder, and
shall pay all expenses which may be incurred in connection with such
qualification.
3.4 The Corporation shall, at its expense, keep the Distributor
fully informed with regard to its affairs. In addition, the Corporation
shall furnish Distributor from time to time, for use in connection with
the sale of Shares, such information with respect to the Corporation and
the Shares as Distributor may reasonably request, and the Corporation
warrants that the statements contained in any such information shall be
true and correct. The Corporation also shall furnish Distributor upon
request with: (a) annual audited reports of books and accounts with
respect to each of the Funds, made by independent public accountants
regularly retained by the Corporation, (b) semi-annual reports with
respect to each of the Funds, and (c) from time to time such additional
information regarding the Corporation's financial condition as Distributor
may reasonably request.
3.5 The Corporation represents to Distributor that all registration
statements and prospectuses of the Corporation filed or to be filed with
the Commission under the 1933 Act with respect to the Shares have been and
will be prepared in conformity with the requirements of the 1933 Act, the
1940 Act, and the rules and regulations of the Commission thereunder. As
used in this Agreement the terms "registration statement" and "prospectus"
shall mean any registration statement and prospectus (together with the
related statement of additional information) at any time now or hereafter
filed with the Commission with respect to any of the Shares and any
amendments and supplements thereto which at any time shall have been or
will be filed with said Commission. The Corporation represents and
warrants to Distributor that any registration statement and prospectus,
when such registration statement becomes effective, will contain all
statements required to be stated therein in conformity with the 1933 Act,
the 1940 Act and the rules and regulations of the Commission; that all
statements of fact contained in the registration statement and prospectus
will be true and correct in all material respects when such registration
statement becomes effective; and that neither the registration statement
nor any prospectus when such registration statement becomes effective will
include an untrue statement of a 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. The Corporation agrees
to file from time to time such amendments, supplements, reports and other
documents as may be necessary in order to comply with the 1933 Act and the
1940 Act and in order that there may be no untrue statement of a material
fact in a registration statement or prospectus, or necessary in order that
there may be no omission to state a material fact in the registration
statement or prospectus which omission would make the statements therein
misleading. If the Corporation shall not propose an amendment or
amendments and/or supplement or supplements within fifteen days after
receipt by the Corporation of a written request from Distributor to do so,
Distributor may, at its option, terminate this Agreement. The Corporation
shall not file any amendment to the registration statement or supplement
to any prospectus without giving Distributor reasonable notice thereof in
advance; provided, however, that nothing contained in this Agreement shall
in any way limit the Corporation's right to file at any time such
amendments to any registration statement and/or supplements to any
prospectus, of whatever character, as the Corporation may deem advisable,
such right being in all respects absolute and unconditional.
3.6 Whenever in their judgment such action is warranted by market,
economic or political conditions, or by circumstances of any kind, the
Corporation's officers may decline to accept any orders for, or make any
sales of, any Shares until such time as they deem it advisable to accept
such orders and to make such sales and the Corporation shall advise
Distributor promptly of such determination.
3.7 The Corporation agrees to advise the Distributor promptly in
writing:
(i) of any request by the Commission for amendments to the
registration statement or prospectuses;
(ii) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration statement or
prospectuses then in effect or the initiation of any proceeding for that
purpose;
(iii) of the happening of any event which makes untrue any
statement of a material fact made in the registration statement or
prospectuses or which requires the making of a change in such registration
statement or prospectuses in order to make the statements therein not
misleading; and
(iv) of all actions taken by the Commission with respect to any
amendments to any registration statement or prospectus which may from time
to time be filed with the Commission.
4. Compensation.
4.1 For the services provided pursuant to this Agreement, and
subject to the limitations contained in Section 4.3 below, the Funds will
pay to the Distributor a fee, payable monthly in arrears, at the annual
rate of 0.025% per annum of each Fund's average daily net assets;
provided, however, that such compensation shall be subject to an aggregate
minimum annual fee of $25,000.
4.2 In addition to the compensation payable pursuant to Section 4.1,
the Funds will reimburse the Distributor or pay directly, at the
Distributor's discretion, the Distributor's (i) out-of-pocket expenses
incurred in connection with activities primarily intended to result in the
sale of Shares including, without limitation, typesetting, printing and
distribution of prospectuses and shareholder reports, production, printing
and distribution of sales materials and forms, placement of media
advertising, engagement of designers, free xxxxx writers and public
relation firms, long distance telephone lines, services and charges,
postage, overnight delivery charges, storage of inventory, regulatory
filing fees and travel, lodging and meals, and (ii) amounts paid by
Distributor to dealers or other persons entering into a selling or
servicing agreement with Distributor.
4.3 Subject to and calculated in accordance with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., if
during any annual period the total of
(i) the compensation payable under Sections 4.1 and 4.2 to the
Distributor when added to
(ii) any amount paid by the Funds, which payment was primarily
intended to result in the sale of shares pursuant to the Corporation's
service and distribution plan adopted under Rule 12b-1 of the 1940 Act and
which was approved by the Distributor,
exceeds 0.25% of a Funds' average daily net assets, the Distributor will
rebate that portion of its fee necessary to result in the total of (i) and
(ii) above not exceeding .25% of the Fund's average daily net assets. The
payment of compensation and reimbursement of expenditures is authorized
pursuant to the Corporation's Service and Distribution Plan under Rule
12b-1 under the 1940 Act.
5. Indemnification.
5.1(a) The Corporation authorizes Distributor to use any prospectus,
in the form furnished to Distributor from time to time, in connection with
the sale of Shares. The Corporation shall indemnify, defend and hold the
Distributor, and each of its present or former directors, officers,
employees, representatives and any person who controls or previously
controlled the Distributor within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all losses, claims,
demands, liabilities, damages and expenses (including the costs of
investigating or defending any alleged losses, claims, demands,
liabilities, damages or expenses and any counsel fees incurred in
connection therewith) which Distributor, each of its present and former
directors, officers, employees or representatives or any such controlling
person, may incur under the 1933 Act, the 1934 Act, any other statute
(including Blue Sky laws) or any rule or regulation thereunder, or under
common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in
the registration statement or any prospectus, as from time to time amended
or supplemented, or an annual or interim report to shareholders, or
arising out of or based upon any omission, or alleged omission, to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the
Corporation's obligation to indemnify Distributor and any of the foregoing
indemnitees shall not be deemed to cover any losses, claims, demands,
liabilities, damages or expenses arising out of any untrue statement or
alleged untrue statement or omission or alleged omission made in the
registration statement, prospectus, or annual or interim report in
reliance upon and in conformity with information relating to the
Distribution or to the Corporation's financial statement information
prepared by the Distributor (and not audited by the Corporation's
independent accountants) and furnished to the Corporation or its counsel
by Distributor for the purpose of, and used in, the preparation thereof;
and provided further that the Corporation's agreement to indemnify
Distributor and any of the foregoing indemnitees shall not be deemed to
cover any liability to the Corporation or its shareholders to which
Distributor would otherwise be subject by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under this Agreement. The Corporation's agreement to indemnify the
Distributor, and any of the foregoing indemnitees, as the case may be,
with respect to any action, is expressly conditioned upon the Corporation
being notified of such action brought against Distributor, or any of the
foregoing indemnitees, within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon the Distributor, or such person, such notification
to be given by letter or by telegram addressed to the Corporation's
President, but the failure so to notify the Corporation of any such action
shall not relieve the Corporation from any liability which the Corporation
may have to the person against whom such action is brought by reason of
any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Corporation's indemnity
agreement contained in this Section 5.1.
5.1(b) 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 such loss, claim, demand, liability, damage or
expense, but if the Corporation elects to assume the defense, such defense
shall be conducted by counsel chosen by the Corporation and approved by
the Distributor, which approval shall not be unreasonably withheld. In
the event the Corporation elects to assume the defense of any such suit
and retain such counsel, the indemnified defendant or defendants in such
suit shall bear the fees and expenses of any additional counsel retained
by them. If the Corporation does not elect to assume the defense of any
such suit, or in case the Distributor does not, in the exercise of
reasonable judgment, approve of counsel chosen by the Corporation, the
Corporation will reimburse the indemnified person or persons named as
defendant or defendants in such suit, for the fees and expenses of any
counsel retained by Distributor and them. The Corporation's
indemnification agreement contained in this Section 5.1 and the
Corporation'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 the Distributor, and each of its
present or former directors, officers, employees, representatives or any
controlling person, and shall survive the delivery of any Shares and the
termination of this Agreement. This Agreement of indemnity will inure
exclusively to the Distributor's benefit, to the benefit of each of its
present or former directors, officers, employees or representatives or to
the benefit of any controlling persons and their successors. The
Corporation agrees promptly to notify Distributor of the commencement of
any litigation or proceedings against the Corporation or any of its
officers or directors in connection with the issue and sale of any of the
Shares.
5.2(a) Distributor shall indemnify, defend and hold the Corporation,
and each of its present or former directors, officers, employees,
representatives, and any person who controls or previously controlled the
Corporation within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all losses, claims, demands,
liabilities, damages and expenses (including the costs of investigating or
defending any alleged losses, claims, demands, liabilities, damages or
expenses, and any counsel fees incurred in connection therewith) which the
Corporation, and each of its present or former directors, officers,
employees, representatives, or any such controlling person, may incur
under the 1933 Act, the 1934 Act, any other statute (including Blue Sky
laws) or any rule or regulation thereunder, or under common law or
otherwise, arising out of or based upon any untrue, or alleged untrue,
statement of a material fact contained in the Corporation's registration
statement or any prospectus, as from time to time amended or supplemented,
or annual or interim report to shareholders or the omission, or alleged
omission, to state therein a material fact required to be stated therein
or necessary to make the statement not misleading, but only if such
statement or omission was made in reliance upon, and in conformity with,
information relating to the Distributor or to the Corporation's financial
statement information prepared by Distributor (and not audited by the
Corporation's independent accountants) and furnished to the Corporation or
its counsel by the Distributor for the purpose of, and used in, the
preparation thereof. Distributor's agreement to indemnify the Corporation
and any of the foregoing indemnitees shall not be deemed to cover any
liability to Distributor to which the Corporation would otherwise be
subject by reason of its willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties, under this Agreement. The
Distributor's Agreement to indemnify the Corporation, and any of the
foregoing indemnitees, is expressly conditioned upon the Distributor's
being notified of any action brought against the Corporation, and any of
the foregoing indemnitees, such notification to be given by letter or
telegram addressed to Distributor's President, within a reasonable time
after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Corporation or such
person, but the failure so to notify Distributor of any such action shall
not relieve Distributor from any liability which Distributor may have to
the person against whom such action is brought by reason of any such
untrue, or alleged untrue, statement or omission, otherwise than on
account of Distributor's indemnity agreement contained in this Section
5.2(a).
5.2(b) In case any action shall be brought against the Corporation,
and each of its present or former directors, officers, employees,
representatives, or controlling persons, in respect of which indemnity may
be sought against the Distributor, the Distributor shall have the rights
and duties given to the Corporation, and the Corporation and each person
so indemnified shall have the rights and duties given to the Distributor
by the provisions of Section 5.1(b).
6. Offering of Shares.
6.1 No Shares shall be offered by either Distributor or the
Corporation under any of the provisions of this Agreement and no orders
for the purchase or sale of such Shares hereunder shall be accepted by the
Corporation 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 current prospectus as required by Section 10 of the 1933 Act, as
amended, are not on file with the Commission; provided, however, that
nothing contained in this paragraph 6 shall in any way restrict or have an
application to or bearing upon the Corporation's obligation to repurchase
Shares from any shareholder in accordance with the provisions of the
prospectus or Articles of Incorporation.
7. Term.
7.1 This Agreement shall become effective with respect to each Fund
listed on Schedule A hereof as of the date hereof and, with respect to
each Fund not in existence on that date, on the date an amendment to
Schedule A to this Agreement relating to that Fund is executed. Unless
sooner terminated as provided herein, this Agreement shall continue in
effect with respect to each Fund until December 31, 1996. Thereafter, if
not terminated, this Agreement shall continue automatically in effect as
to each Fund for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Corporation's Board of
Directors or (ii) the vote of a majority (as defined in the 0000 Xxx) of
the outstanding voting securities of a Fund, and provided that in either
event the continuance is also approved by a majority of the Corporation's
Board of Directors who are not "interested persons" (as defined in the
0000 Xxx) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval.
7.2 This Agreement may be terminated without penalty with respect to
a particular Fund (1) through a failure to renew this Agreement at the end
of a term, (2) upon mutual consent of the parties, or (3) on no less than
sixty (60) days' written notice, by the Corporation's Board of Directors,
by vote of a majority (as defined with respect to voting securities in the
1940 Act) of the outstanding voting securities of a Fund, or by the
Distributor (which notice may be waived by the party entitled to such
notice). The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a
written instrument signed by the Distributor and the Corporation. This
Agreement will also terminate automatically in the event of its assignment
(as defined in the 1940 Act).
8. Miscellaneous.
8.1 The services of the Distributor rendered to the Funds are not
deemed to be exclusive. The Distributor may render such services and any
other services to others, including other investment companies. The
Corporation recognizes that from time to time directors, officers, and
employees of the Distributor may serve as directors, trustees, officers
and employees of other corporations or trusts (including other investment
companies), that such other entities may include the name of the
Distributor as part of their name and that the Distributor or its
affiliates may enter into distribution, administration, fund accounting,
transfer agent or other agreements with such other corporations or trusts.
8.2 Distributor agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Corporation all
records and other information relative to the Funds and prior, present or
potential shareholders of the Funds (and clients of said shareholders),
and not to use such records and information for any purpose other than
performance of Distributor's responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Corporation,
which approval shall not be unreasonably withheld and may not be withheld
when the Distributor is subject to regulatory audit or inspection, when
Distributor may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Corporation.
8.3 This Agreement shall be governed by Wisconsin law. To the
extent that the applicable laws of the State of Wisconsin, or any of the
provisions herein, conflict with the applicable provisions of the 1940
Act, the latter shall control, and nothing herein shall be construed in a
manner inconsistent with the 1940 Act or any rule or order of the
Commission thereunder. Any provision of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
8.4 Any notice required or to be permitted to be given by either
party to the other shall be in writing and shall be deemed to have been
given when hand delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, as follows: Notice to the Distributor
shall be sent to Sunstone Financial Group, Inc., 000 Xxxx Xxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx, 00000, Attention: Xxxxxx X. Xxxxxxx, and
notice to the Corporation shall be sent to Xxxxxxx X. Xxx Xxxxxxx at
_________________________________________.
8.5 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original agreement but such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by a duly authorized officer as of the day and year first
above written.
XXX XXXXXXX FUNDS, INC.
(the "Corporation")
By:____________________________________
SUNSTONE FINANCIAL GROUP, INC.
("Distributor")
By: /s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
President
SCHEDULE A
TO THE
DISTRIBUTION AGREEMENT
BY AND BETWEEN
XXX XXXXXXX FUNDS, INC.
AND
SUNSTONE FINANCIAL GROUP, INC.
DECEMBER 31, 1995
Micro-Cap Fund
Emerging Growth Fund
Mid-Cap Fund
SUNSTONE FINANCIAL GROUP, INC. XXX XXXXXXX FUNDS, INC.
By:_______________________________ By:_______________________________
