DISTRIBUTION AGREEMENT
DAILY TAX FREE INCOME FUND, INC.
(the "Fund")
First Southwest Tax Free Income Fund Shares ("First Southwest Shares")
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
, 2002
Xxxxx & Xxxx Distributors, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
We hereby confirm our agreement with you as follows:
1. In consideration of the agreements on your part herein contained and of
the payment by us to you of a compensatory asset-based sales charge in an amount
not to exceed 0.25% per annum of the First Southwest Shares' average daily net
assets and on the terms and conditions set forth herein, we have agreed that you
shall be, for the period of this Agreement, a distributor, as our agent, for the
unsold portion of the First Southwest Shares, $.001 par value per share, as may
be effectively registered from time to time under the Securities Act of 1933, as
amended (the "1933 Act"). This Agreement is being entered into pursuant to the
Distribution and Service Plan (the "Plan") adopted by us on behalf of the First
Southwest Shares in accordance with Rule 12b-1 under the Investment Company Act
of 1940, as amended (the "1940 Act").
2. You will make payments from time to time from your fees payable
hereunder and your own resources and past profits for the following purposes:
(a) to compensate First Southwest Company ("FS"), with whom you have a
written contract, for providing assistance in distributing the First
Southwest Shares;
(b) to pay the costs of printing and distributing the Fund's First
Southwest Shares' prospectus to prospective investors; and
(c) to defray the cost of the preparation and printing of brochures
and other promotional materials, mailings to prospective shareholders,
advertising, and other promotional activities, including salaries and/or
commissions of sales personnel in connection with the distribution of the
First Southwest Shares.
The Distributor will in its sole discretion determine the amount of any
payments made by the Distributor pursuant to this Agreement, provided, however,
that no such payment will increase the amount which the Fund, on behalf of the
First Southwest Shares, is required to pay either to the Distributor under this
Agreement or the Shareholder Servicing Agreement or to the Manager under the
Investment Management Contract, the Administrative Services Agreement, or
otherwise.
3. We hereby agree that you will act as our agent, and hereby appoint you
our agent, to offer, and to solicit offers to subscribe to, the unsold balance
of the First Southwest Shares as shall then be effectively registered under the
0000 Xxx. All subscriptions for the First Southwest Shares obtained by you shall
be directed to us for acceptance and shall not be binding on us until accepted
by us. You shall have no authority to make binding subscriptions on our behalf.
We reserve the right to sell First Southwest Shares through other distributors
or directly to investors through subscriptions received by us at our principal
office in New York, New York. The right given to you under this Agreement shall
not apply to First Southwest Shares issued in connection with (a) the merger or
consolidation of any other investment company with us, (b) our 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 our common stock by our
stockholders of dividends or other distributions or any other offering by us of
securities to our stockholders.
4. You will use your best efforts to obtain subscriptions to First
Southwest Shares upon the terms and conditions contained herein and in our
Prospectus, as in effect from time to time. You will send to us promptly all
subscriptions placed with you. We shall furnish you from time to time, for use
in connection with the offering of First Southwest Shares, such other
information with respect to us and First Southwest Shares as you may reasonably
request. We shall supply you with such copies of our Registration Statement and
Prospectus, as in effect from time to time, as you may request. Except as we may
authorize in writing, you are not authorized to give any information or to make
any representation that is not contained in the Registration Statement or
Prospectus, as then in effect. You may use employees, agents and other persons,
at your cost and expense, to assist you in carrying out your obligations
hereunder, but no such employee, agent or other person shall be deemed to be our
agent or have any rights under this agreement. You may sell First Southwest
Shares to or through FS under the Private Class Sub-Distribution and Service
Agreement (the "FS Agreement") provided that FS shall not be appointed or
authorized to act as our agent without our written consent.
With respect to the First Southwest Shares, you have entered into the FS
Agreement which has been approved by our Board of Directors, pursuant to which
FS is authorized to provide distribution assistance to you and to provide
certain shareholder servicing activities for customers of FS in connection with
the First Southwest Shares and
pursuant to which FS will be compensated directly by you for providing such
assistance and services. Pursuant to our Shareholder Servicing Agreement with
you with respect to our First Southwest Shares, you may make payments to FS for
performing shareholder servicing and related administrative functions with
respect to First Southwest Shares. These payments will be made pursuant to the
FS Agreement. It is recognized that we shall have no obligation or liability to
you or to FS for any such payments under the FS Agreement. Our obligation is
solely to make payments to you under this Distribution Agreement and under the
Shareholder Servicing Agreement (with respect to the First Southwest Shares) and
to the Manager under the Investment Management Contract and the Administrative
Services Contract. All sales of our shares effected through you will be made in
compliance with all applicable federal securities laws and regulations and the
Constitution, rules and regulations of the National Association of Securities
Dealers, Inc. ("NASD").
5. We reserve the right to suspend the offering of the First Southwest
Shares at any time, in the absolute discretion of our Board of Directors, and
upon notice of such suspension you shall cease to offer shares of the First
Southwest Shares hereunder.
6. Both of us will cooperate with each other in taking such action as may
be necessary to qualify the First Southwest Shares for sale under the securities
laws of such states as we may designate, provided, that you shall not be
required to register as a broker-dealer or file a consent to service of process
in any such state where you are not now so registered. Pursuant to the
Investment Management Contract in effect between us and the Manager, we will pay
all fees and expenses of registering the First Southwest Shares under the 1933
Act and of qualification of the First Southwest Shares, and to the extent
necessary, our qualification under applicable state securities laws. You will
pay all expenses relating to your broker-dealer qualification.
7. We represent to you that our Registration Statement and Prospectus have
been carefully prepared to date in conformity with the requirements of the 1933
Act and the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "SEC") thereunder. We represent and warrant to you, as
of the date hereof, that our Registration Statement and Prospectus contain all
statements required to be stated therein in accordance with the 1933 Act and the
1940 Act and the SEC's rules and regulations thereunder; that all statements of
fact contained therein are or will be true and correct at the time indicated or
the effective date as the case may be; and that neither our Registration
Statement nor our Prospectus, when they shall become effective or be authorized
for use, 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 the First Southwest Shares. We will
from time to time file such amendment or amendments to our Registration
Statement and Prospectus as, in the light of future development, shall, in the
opinion of our counsel, be necessary in order to have our Registration Statement
and Prospectus at all times contain
all material facts required to be stated therein or necessary to make any
statements therein not misleading to a purchaser of the First Southwest Shares.
If we shall not file such amendment or amendments within fifteen days after our
receipt of a written request from you to do so, you may, at your option,
terminate this agreement immediately. We will not file any amendment to our
Registration Statement or Prospectus without giving you reasonable notice
thereof in advance; provided, however, that nothing in this agreement shall in
any way limit our right to file such amendments to our Registration Statement or
Prospectus, of whatever character, as we may deem advisable, such right being in
all respects absolute and unconditional. We represent and warrant to you that
any amendment to our Registration Statement or Prospectus hereafter filed by us
will be carefully prepared in conformity within the requirements of the 1933 Act
and the 1940 Act and the SEC's rules and regulations thereunder and will, when
it becomes effective, contain all statements required to be stated therein in
accordance with the 1933 Act and the 1940 Act and the SEC's rules and
regulations thereunder; that all statements of fact contained therein will, when
the same shall become effective, be true and correct; and that no such
amendment, when it 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 the
First Southwest Shares.
8. We agree to indemnify, defend and hold you, and any person who controls
you within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which you or any such controlling person
may incur, under the 1933 Act or the 1940 Act, or under common law or otherwise,
arising out of or based upon any alleged untrue statement of a material fact
contained in our Registration Statement or Prospectus in effect from time to
time or arising out of or based upon any alleged omission to state a material
fact required to be stated in either of them or necessary to make the statements
in either of them not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect you against any
liability to us or our security holders to which you would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties under this agreement. Our agreement to indemnify you and
any such controlling person is expressly conditioned upon our being notified of
any action brought against you or any such controlling person, such notification
to be given by letter or by telegram addressed to us at our principal office in
New York, New York, and sent to us 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 so to notify us of any such action shall not
relieve us from any liability which we may have to the person against whom such
action is brought other than on account of our indemnity agreement contained in
this paragraph 8. We 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 us and approved by you. In the event we do elect to assume
the defense of any such suit and retain counsel of good standing approved by
you, the defendant or defendants in such suit shall bear the fees and expenses
of any additional counsel retained by any of them; but in case we do not elect
to assume the defense of any such suit, or in case you, in good faith, do not
approve of counsel chosen by us, we will reimburse you or the controlling person
or persons named as defendant or defendants in such suit, for the fees and
expenses of any counsel retained by you or them. Our indemnification agreement
contained in this paragraph 8 and our representations and warranties in this
Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of you or any controlling person and shall survive the sale
of any First Southwest Shares made pursuant to subscriptions obtained by you.
This agreement of indemnity will inure exclusively to your benefit, to the
benefit of your successors and assigns, and to the benefit of any of your
controlling persons and their successors and assigns. We agree promptly to
notify you of the commencement of any litigation or proceeding against us in
connection with the issue and sale of any First Southwest Shares.
9. You agree to indemnify, defend and hold us, our several officers and
directors, and any person who controls us 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 reasonable counsel fees incurred in
connection therewith) which we, our officers or directors, or any such
controlling person may incur under the 1933 Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by us,
our officers or directors or such controlling person shall arise out of or be
based upon any alleged untrue statement of a material fact contained in
information furnished in writing by you to us for use in our Registration
Statement or Prospectus as in effect from time to time, 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 or
Prospectus or necessary to make such information not misleading. Your agreement
to indemnify us, our officers and directors, and any such controlling person is
expressly conditioned upon your being notified of any action brought against us,
our officers or directors or any such controlling person, such notification to
be given by letter or telegram addressed to you at your principal office in New
York, New York, and sent to you by the person against whom such action is
brought, within ten days after the summons or other first legal process shall
have been served. You shall have a right to control the defense of such action,
with counsel of your own choosing, satisfactory to us, if such action is based
solely upon such alleged misstatement or omission on your part, and in any other
event you and we, our officers or 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 you of any such action shall not
relieve you from any liability which you may have to us, to our officers or
directors, or to such controlling person other than on account of your indemnity
agreement contained in this paragraph 9.
10. We agree to advise you immediately:
(a) of any request by the SEC for amendments to our Registration
Statement or Prospectus or for additional information,
(b) of the issuance by the SEC of any stop order suspending the
effectiveness of our Registration Statement or Prospectus or the initiation
of any proceedings for that purpose,
(c) of the happening of any material event which makes untrue any
statement made in our Registration Statement or Prospectus or which
requires the making of a change in either of them in order to make the
statements therein not misleading, and
(d) of all action of the SEC with respect to any amendments to our
Registration Statement or Prospectus.
11. This Agreement will become effective on the date hereof and shall
continue in effect until April 30, 2003, and thereafter for successive
twelve-month periods (computed from each May 1), provided that such continuation
is specifically approved at least annually by vote of our Board of Directors and
of a majority of those of our directors who are not interested persons (as
defined in the 0000 Xxx) and have no direct or indirect financial interest in
the operation of the Plan or in any agreements related to the Plan, cast in
person at a meeting called for the purpose of voting on this agreement. This
agreement may be terminated at any time, without the payment of any penalty, (a)
on sixty days' written notice to you (i) by vote of a majority of our entire
Board of Directors, and by a vote of a majority of our Directors who are not
interested persons (as defined in the 0000 Xxx) and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan, or (ii) by vote of a majority of the outstanding voting
securities of the First Southwest Shares, as defined in the Act, or (b) by you
on sixty days' written notice to us.
12. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you and this Agreement shall terminate automatically
in the event of any such transfer, assignment, sale, hypothecation or pledge by
you. The terms "transfer", "assignment" and "sale" as used in this paragraph
shall have the meanings ascribed thereto by governing law and in applicable
rules or regulations of the SEC thereunder.
13. Except to the extent necessary to perform your obligations hereunder,
nothing herein shall be deemed to limit or restrict your right, the right of any
of your employees, officers or directors, who may also be a director, officer or
employee of ours, or of a person affiliated with us, as defined in the 1940 Act,
to engage in any other business or to devote time and attention to the
management or other aspects
of any other business, whether of a similar or dissimilar nature, or to render
services of any kind to another corporation, firm, individual or association.
If the foregoing is in accordance with your understanding, will you kindly
so indicate by signing and returning to us the enclosed copy hereof.
Very truly yours,
DAILY TAX FREE INCOME FUND, INC.
First Southwest Tax Free Income Fund Shares
By
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Name:
Title:
Accepted: , 2002
XXXXX & XXXX DISTRIBUTORS, INC.
By: ____________________________
Name:
Title: