COMMONWEALTH CASH RESERVE FUND, INC.
DISTRIBUTION AGREEMENT
AGREEMENT, made as of this 13th day of June, 1994, by and between
Commonwealth Cash Reserve Fund, Inc. (hereinafter called the "Fund"),
and Commonwealth Financial Group, Inc. (hereinafter called the "Distributor").
WITNESSETH:
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt of which is hereby acknowledged,
it is agreed by and between the parties hereto as follows:
1. Distribution of Services. The Distributor agrees to act as distributor
of the shares of the Fund. The price at which shares of the Fund are
issued to eligible classes of investors by the Distributor shall be the
net asset value per share computed and effective as set forth in the
Prospectus and Statement of Additional Information of the Fund current
as of the time of such sale (collectively, the "Current Prospectus"),
determined in accordance with the Fund's Articles of Incorporation and
By-Laws, as now in effect or as they may be amended, and any resolutions
of the Fund's Board of Directors.
2. Compensation. The Fund agrees to reimburse the Distributor for expenses
incurred by the Distributor in connection with the sale, promotion and
distribution of shares of the Fund pursuant to this agreement. These
expenses may include advertising and direct mail expenses; costs of
printing and mailing prospectuses and sales literature to prospective
investors; payments to third parties who sell shares of the Fund;
compensation of brokers, dealers and other intermediaries; general
administrative overhead (including the payment of compensation to sales
personnel involved in the sale of Fund shares); administrative support
allocable to efforts to sell the Fund's shares; sales promotion expenses
and shareholder servicing expenses. Expenses incurred hereunder shall be
subject to approval of the Board of Directors of the Fund. In addition to
the expenses incurred by the Distributor that meet the approval of the
Board of Directors, the Distributor will receive a monthly asset based fee
at an annual rate calculated in accordance with the following schedule.
Monthly Average of Daily Net Assets
Asset Based Bee(Annual Rate)*
under $100 mm $12,000
over $100 mm - $200 mm $18,000
over $200 mm - $300 mm $24,000
over $300 mm - $400 mm $30,000
over $400 mm - $500 mm $36,000
over $500 mm - $600 mm $42,000
over $600 mm - $700 mm $48,000
3. Issuance of Shares. The Fund agrees to issue its shares subject to the
provisions of its Articles of Incorporation and By-Laws, to the eligible
groups of investors (as approved from time to time by the Board of
Directors) as directed by the Distributor, but only to the extent that
the Distributor shall have received purchase orders therefor at the times
and subject to the conditions set forth in the Current Prospectus.
Certificates for shares need not be created or delivered by the Fund.
All shares when so paid for and issued shall be fully paid and nonassessable.
4. Roles as Principal. The Distributor shall act as principal in all matters
relating to promotion of the growth of the Fund and shall enter into all of
its Distributor engagements, agreements and contracts as principal on its
account. The title to shares of the Fund issued by it through the
Distributor shall pass directly from the Fund to the account holder.
5. Other Agreements. The Fund hereby consents to any arrangements whereby
the Distributor may act as principal underwriter for other investment
companies or as principal underwriter, sponsor or depositor for unit
investment trusts and periodic payment plan certificates issued thereby,
or as investment adviser or sub-adviser to other investment companies or
persons. The Fund also consents to the Distributor carrying on a business
as a broker, dealer and underwriter in securities and to carrying on any
other lawful business.
6. Exclusivity of Distribution. The Fund covenants and agrees that it will
not during the term of this Agreement, without the consent of the
Distributor, offer any of its shares for distribution directly or through
any person or corporation other than the Distributor excepting only (a)
the reinvestment of dividends and/or distributions, or their declaration
in shares of the Fund, in optional form or otherwise; and (b) the issuance
of additional shares through splits or unit dividends.
7. Registration. The Fund agrees to use its best efforts to register from
time to time under the Securities Act of 1933 adequate amounts of its
shares for distribution by the Distributor to investors and to qualify
or to permit the Distributor to qualify such shares for offering in the
Commonwealth of Virginia and in other states in which the shares of the
Fund are authorized to be sold. The Fund agrees to advise the Distributor
of the net asset value of its shares' as often as computed. The Fund will
also furnish to the Distributor, as soon as practicable, copies of any
amendments to the Fund's Registration Statement and annual and semiannual
reports filed with the Securities and Exchange Commission and such
information as may reasonably by requested by the Distributor in order
that it may know all of the facts necessary to distribute shares of the Fund.
8. Articles of Incorporation and By-Laws. The Distributor is familiar with
the Articles of Incorporation and By-Laws of the Fund, each as presently in
effect. Insofar as they are applicable to the Distributor as distributor
of the Fund, it will comply with the provisions of the Articles of
Incorporation and By-Laws of the Fund and with the provisions of all acts
administered by the Securities and Exchange Commission (the "Commission")
and rules thereunder. The Fund will provide the Distributor with notice
of and certified copies of any changes to the Articles of Incorporation
and By-Laws.
9. Expenses. (a) Except as set forth in paragraph 9 (b) hereof, the Fund
will pay (or will enter into arrangements providing that persons other than
the Fund will pay) for all expenses of the offering of its shares, including,
but not exclusively limited to those incurred in connection with:
(i) The registration of the Fund or the registration or qualification of
the Fund's shares for offer or sale under the federal securities laws and
the securities laws of the Commonwealth of Virginia and any other states
in which the shares of the Fund are authorized to be sold;
(ii) The preparation, printing and distribution of the Fund's prospectuses,
statements of additional information, any proxy statements, notices and
reports (including but not necessarily limited to annual and semiannual
reports), and the performance of any acts required to be performed by the
Fund by and under the federal securities laws and the applicable securities
laws of any state or other jurisdiction;
(iii) The preparation, printing and distribution of advertising and sales
literature and all other sales materials approved by the Fund for use in
the offering of the Fund's shares and printing and distribution of reports
to shareholders used as sales literature; and
(iv) The issuance of the Fund's shares, including any stock issue and
transfer taxes.
(b) The Distributor will pay from its own resources (or will enter into
arrangements providing that persons other than the Distributor or the
Fund shall pay), or promptly reimburse the Fund, for all expenses in
connection with the offering for sale and the sale of the Fund's shares
which have not been herein allocated to the Fund.
10. NASD Requirements. The Distributor certifies that it is a member
in good standing of the National Association of Securities Dealers, Inc.
(the "NASD" ) and Distributor agrees to abide by all of the rules and
regulations of the NASD which are binding upon underwriters and brokers
in the distribution of the shares of open-end investment companies,
including, without limitation, Section 6 of Articles III of the Rules of
Fair Practice, all of which are incorporated herein as if fully set forth.
The Distributor further agrees to comply with all applicable state and
Federal Laws and the rules and regulations of authorized regulatory
agencies. The Distributor agrees that it will not sell or offer for
sale, shares of the Fund in any state or jurisdiction where they are not
exempt from registration or have not been qualified for sale.
11. Term. This Agreement shall go into effect on the effective date of
its ratification by the Board of Directors of the Fund and shall, unless
terminated as hereinafter provided, continue in effect until one year from
such effective date and shall continue in effect from year to year
thereafter, but only so long as such continuance is specifically approved
at least annually as provided in the Investment Company Act of 1940 (the
"Act"). This Agreement shall automatically terminate in the event of its
assignment (as defined in the Act) and may be terminated, without penalty,
by either party on sixty (60) days written notice to the other party
without further recourse.
12. Indemnification of Distributor. The Fund agrees with the Distributor,
for the benefit of the Distributor and each person, if any, who controls
the Distributor within the meaning of Section 15 of the Securities Act of
1933 (the "Securities Act") and the Distributor's agents and employees to
indemnify and hold harmless the Distributor and any such controlling person
from and against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the
Securities Act, under any other statute, at common law or otherwise, and
to reimburse the Distributor and such controlling persons, if any, for
any legal or other expenses (including the costs of any investigation and
preparation) reasonably incurred by them or any of them in connection with
any claims or litigation whether or not resulting in any liability,
insofar as such losses, claims, damages, liabilities or litigation arise
out of, or are based upon, any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement or any
Prospectus, or any amendment thereof or supplement thereto, or arise out
of, or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement therein not misleading and to breaches of any representations
and warranties contained in, and breach or failure in performance by the
Fund of this provisions of this agreement or other agreement between the
parties involving the Fund's shares; provided , however, that this
agreement shall not apply to amounts paid in settlement of any such
claim or litigation if settlement is effected without the consent of
the Fund or to any such losses, claims, damages, liabilities or litigation
arising out of, or based upon, any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus, or any amendment thereof or supplement thereto, or arising
out of, or based upon, the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statement therein not misleading, which statement or omission was made
in reliance upon information furnished in writing to the Fund by the
Distributor for inclusion in any Registration Statement or any
Prospectus or any amendment thereof or supplement thereto. The
Distributor and each such controlling person shall, promptly after the
complaint shall have been served upon the Distributor or such controlling
person in any litigation against the Distributor or such controlling
person in respect of which indemnity may be sought from the Fund on
account of its agreement contained in the paragraph, notify the Fund in
writing of the commencement thereof, The omission of the Distributor or
such controlling person so to notify the Fund of any such litigation shall
relieve the Fund from any liability which it may have to the Distributor
or such controlling person on account of the indemnity agreement contained
in this paragraph but shall not relieve the Fund from any liability which
it may have to the Distributor or controlling person otherwise than on
account of the indemnity agreement contained in this paragraph. In case
any such litigation shall be brought against the Distributor or any such
controlling person and notice of the commencement thereof shall have been
so given to the Fund, the Fund shall be entitled to participate in (and,
to the extent that it shall wish, to direct) the defense thereof at its
own expense but such defense shall be conducted by counsel of good
standing and satisfactory to the Distributor or such controlling person
or persons, defendant or defendants in the litigation. The indemnity
agreement of the Fund contained in this paragraph shall remain operative
and in full force and effect regardless of any investigation made by or
on behalf of the Distributor or any such controlling person, and shall
survive any delivery of units of the Fund. The Fund agrees to notify
the Distributor promptly of the commencement of any litigation or
proceeding against it or any of its officers or directors of which it
my be advised in connection with the issue and sale of its shares.
13. Limitation of Indemnification. Anything herein to the contrary
notwithstanding, the agreement in paragraph 12, insofar as it
constitutes a basis for reimbursement by the Fund for liabilities
(other than payment by the Fund of expenses incurred or paid in the
successful defense of any action, suit or proceeding) arising under the
Securities Act, shall not extend to the extent of any interest therein
of any person who is an underwriter or a partner or controlling person
of an underwriter within the meaning of Section 15 of the Securities Act
or who, at the date of this Agreement, is a Director of the Fund, except
to the extent that an interest of such character shall have been
determined by a court of appropriate jurisdiction as not against public
policy as expressed in the Securities Act. Unless, in the opinion of
counsel for the Fund, the matter ahs been adjudicated by controlling
precedent , the Fund will, if a claim for such reimbursement is asserted,
submit to a court of appropriate jurisdiction the question of whether
or not such interest is against the public policy as expressed in the
Securities Act.
14. Indemnification of Fund. The Distributor agrees to indemnify an hold
harmless the Fund and its Directors and such officers as shall have
signed any Registration Statement from and against any and all losses,
claims, damages or liabilities, joint or several, to which the Fund or
such Directors or officers may become subject under the Securities Act,
under any other statute, at common law or otherwise, and will reimburse
the Fund or such Director or officers for any legal or other expenses
(including the cost of any investigation and preparation) reasonably
incurred by it or them or any of them in connection with any claim or
litigation, whether or not resulting in any liability, insofar as such
losses, claims damages, liabilities or litigation arise out of, or are
based upon, any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement or Prospectus, or any
amendment thereof or supplement thereto, or arising out of, or based
upon, the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement therein
not misleading, which statement or omission was made in reliance upon
information furnished to the Fund by the Distributor for inclusion in
any Registration Statement or any Prospectus, or any amendment thereof
or supplement thereto. The Distributor shall not be liable for amounts
paid in settlement of any such litigation if such settlement was effected
without its consent. The Fund and its Directors and such officers,
defendant or defendants, in any such litigation shall, promptly after
the complaint shall have been served upon the Fund or any such Director
of officer in respect of which indemnity may be sought from the
Distributor on account of its agreement contained in this paragraph,
notify the Distributor in writing of the commencement thereof. The
omission of the Fund or such Director or officer so to notify the
Distributor of any such litigation shall relieve the Distributor from
any liability which it may have to the Fund or such Director or officer
on account of the indemnity agreement contained in this paragraph, but
shall not relieve the Distributor from any liability which it may have
to the Fund or such Director or officer otherwise than on account of
the indemnity agreement contained in this paragraph. In case any such
litigation shall be brought against the Fund or any such Director or
officer and notice of the commencement thereof shall have been so given
to the Distributor, the Distributor shall be entitled to participate in
(and, to the extent that it wish, to direct) the defense thereof at its
own expense but such defense shall be conducted by counsel of good
standing and satisfactory to the Fund. The indemnity agreement of the
Distributor contained in this paragraph shall remain operative and in
full force and effect regardless of any investigation made by or on
behalf of the Fund and shall survive any delivery of shares of the Fund.
The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceeding against it or any of its officers or
directors or against any such controlling person of which it may advised,
in connection with the issue and sale of the Fund's shares.
15. Certain Liabilities Not Protected. Notwithstanding any provision
contained in this Agreement, no party hereto and no person or persons in
control of any party hereto shall be protected against any liability to
the Fund or its unit holders or the Distributor or its controlling persons
to which they would otherwise be subject by reason of willful misfeasance,
ad faith, or gross negligence, in the performance of their duties, or by
reason of their reckless disregard of their obligations and duties under
this Agreement.
16. Further Information Provided By the Fund. The Fund shall immediately
advise the Distributor (a) when any post-effective amendment to its
Registration Statement or any further amendment or supplement thereto or
any further Registration Statement or amendment or supplement thereto
becomes effective, (b) of any request by the Commission for amendments
to the Registration Statement or the then effective Prospectus or for
additional information, (c) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement,
or the initiation of any proceedings for that purpose, and (d) of the
happening of any event which make untrue any material statement made in
the Registration Statement or the then current Prospectus or which in
the opinion of counsel for the Fund requires the making of a change in
the Registration Statement or the then current Prospectus in order to
make the statements therein not misleading. In case of the happening
at any time of any event which materially affects the Fund or its
securities and which should be set forth in a supplement to or an
amendment of the then current Prospectus in order to make the
statements therein not misleading the Fund shall prepare and furnish
to the Distributor such amendments or amendments to the then effect
Prospectus as will correct the Prospectus so as corrected it will not
contain, or such supplement or supplements to the then current
Prospectus which when read in conjunction with the then current
Prospectus will make the combined information not contain any untrue
statement of a material fact or any omission to state any material
fact necessary in order to make the statement in the then current
Prospectus not misleading. The Fund shall, if any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement make every reasonable effort to obtain the
prompt lifting of such order.
17. Further Information Provided by Distributor. The Distributor agrees
to provide the Fund, not less frequently than quarterly at the written
request of the Fund, the information required by Rules 12b-1 (b) (3)
(ii) 12b-1 (d) enacted under the Investment Company Act of 1940.
18. Contribution. In the event that indemnification of one party is
prohibited for reasons of public policy, then, to the extent permitted
by the Investment Company Act of 1940 and the Securities Act of 1933,
and to the extent of payment, the other party will make contribution.
19. No Third Party Beneficiaries. Except as expressly provided in
paragraphs 12 and 14 hereof, the agreements herein set forth have been
made and are made solely for the benefit of the Fund, the Distributor,
and the person expressly provided for in paragraphs 12 and 14, their
respective heirs, successors, personal representatives and assigns,
and except as so provided, nothing expressed or mentioned herein is
intended or shall be construed to give any person, firm or corporation,
other than the Fund, the Distributor, and the person expressly provided
for in paragraphs 12 and 14, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any representation,
warranty or agreement herein contained. Except as so provided, the
term "heirs, successors, personal representatives and assigns" shall
not include any purchaser or shares merely because of such purchase.
20. Distributor Not an Agent. In no transaction shall the Distributor
have any authority whatever to act as agent for the Fund and nothing
in this Agreement shall constitute either party hereto the agent of the
other.
21. Governing Law. This agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Virginia.
22. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by
first-class mail, postage prepaid, or otherwise delivered by hand
or by messenger, addressed (a) if to the Fund, at Governor's Plaza
North, 0000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxx 0, Xxxxx 000, Xxxxxxxxxx, XX
00000 or (b) if to the Distributor, to Commonwealth Financial Group,
at 00 Xxxxxxxx Xxxx, Xxxxxx Xxxx, XX 00000.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers and their seals
to be affixed as of the day and year first above written.
/s/ COMMONWEALTH CASH RESERVE FUND, INC.
By:
/s/ COMMONWEALTH FINANCIAL GROUP, INC.
By:
