Exhibit (e)(3)
FIRST AMERICAN INVESTMENT FUNDS, INC.
DISTRIBUTION AND SERVICE AGREEMENT
FOR
CLASS B SHARES (CONTINGENT DEFERRED SALES CHARGE CLASSES)
THIS AGREEMENT is made as of the 5th day of December, 2001, between
FIRST AMERICAN INVESTMENT FUNDS, INC., a Maryland corporation (the "Fund"), and
QUASAR DISTRIBUTORS, LLC, a Delaware limited liability company (the
"Distributor").
WHEREAS, the Fund is registered as an investment company with the
Securities and Exchange Commission ("SEC") under the Investment Company Act of
1940, as amended ("1940 Act"), and its shares are registered with the SEC under
the Securities Act of 1933, as amended ("1933 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended; and
WHEREAS, the Fund desires to appoint the Distributor to act as
distributor and shareholder servicing agent for the Class B shares of the Fund's
portfolios, as now in existence or hereinafter created from time to time
including Class B shares issued in connection with the consolidation of other
funds or portfolios into the Fund (collectively, the "Shares"), in accordance
with the terms and conditions of this Agreement; and
WHEREAS, this Agreement has been approved by the Fund's Board of
Directors in anticipation of the Distributor's transfer of its rights to receive
the Distribution Fee (as defined in the Class B Distribution Plan for the Shares
attached hereto as Exhibit A) and/or contingent deferred sales charges to one or
more financing parties in order to raise funds to cover distribution
expenditures:
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Fund and Distributor hereby agree as follows:
ARTICLE 1. Distribution Activities.
A. Sale of Shares. The Fund grants to the Distributor the exclusive
right to sell Shares of each portfolio of the Fund (each a "Portfolio"), at net
asset value in accordance with the current prospectus for the Shares, as agent
and on behalf of the Fund, during the term of this Agreement and subject to the
registration requirements of the 1933 Act, the rules and regulations of the SEC
and the laws governing the sale of securities in the various states ("Blue Sky
Laws").
B. Solicitation of Sales. In consideration of these rights granted to
the Distributor, the Distributor agrees to use all reasonable efforts,
consistent with its other business, in connection with the distribution of
Shares; provided, however, that the Distributor shall not be prevented from
entering into like arrangements with other issuers. The provisions of this
paragraph do not obligate the Distributor to register as a broker or dealer
under the Blue Sky Laws of any jurisdiction when it determines it would be
uneconomical for it to do so or to
maintain its registration in any jurisdiction in which it is now registered or
obligate the Distributor to sell any particular number of Shares.
C. Authorized Representations. The Distributor is not authorized by the
Fund to give any information or to make any representations other than those
contained in the current registration statements and prospectuses of the Fund
with respect to the Shares filed with the SEC or contained in Shareholder
reports or other material that may be prepared by or on behalf of the Fund for
the Distributor's use. The Distributor may prepare and distribute sales
literature and other material as it may deem appropriate, provided that such
literature and materials have been approved by the Fund prior to their use.
D. Registration of Shares. The Fund agrees that it will take all action
necessary to register Shares under the federal and state securities laws so that
there will be available for sale the number of Shares the Distributor may
reasonably be expected to sell and to pay all fees associated with said
registration. The Fund shall make available to the Distributor such number of
copies of its currently effective prospectus and statement of additional
information as the Distributor may reasonably request. The Fund shall furnish to
the Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of Shares of the Fund.
ARTICLE 2. Shareholder Servicing Activities.
A. Appointment. The Fund hereby appoints the Distributor as servicing
agent for the Shares of each Portfolio, as agent and on behalf of the Fund in
accordance with and during the term of this Agreement, and the Distributor
hereby accepts such appointment.
B. Shareholder Servicing Activities. As servicing agent for the Shares
of each Portfolio, and in consideration of the compensation payable pursuant to
Article 4 hereof, the Distributor shall provide personal, continuing services to
investors in the Shares of each Portfolio, including but not limited to
providing ongoing servicing and/or maintenance of shareholder accounts with
respect to the Shares of the Portfolios, responding to inquiries of the holders
of Shares regarding their ownership of Shares or their accounts with the Fund,
and providing administrative or accounting services with respect to the Shares
of the Portfolios not otherwise provided by other agents of the Fund.
Notwithstanding the foregoing, if the National Association of Securities
Dealers, Inc. ("NASD") adopts a definition of "service fee" for purposes of
Section 26(d) of the NASD Rules of Fair Practice that differs from the
definition of shareholder servicing activities in this paragraph, or if the NASD
adopts a related definition intended to define the same concept, the definition
of shareholder servicing activities in this paragraph shall be automatically
amended, without further action of the parties, to conform to such NASD
definition.
ARTICLE 3. Compensation for Distribution Activities. As compensation
for providing distribution services pursuant to Article 1 hereof, the Fund shall
pay the Distributor:
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A. Distribution Fee. The Fund will pay to the Distributor in respect of
the Shares of each Portfolio, pursuant to the Fund's Class B Distribution Plan
with respect to Class B Shares adopted by each such class in accordance with
Rule 12b-1 (the "Distribution Plan"), the Distributor's Allocable Portion of the
Distribution Fee (as defined in the Class B Distribution Plan). For purposes of
this Agreement, the Distributor's "Allocable Portion" of the Distribution Fee
shall be 100% of such Distribution Fee unless or until the Fund uses a
distributor other than the Distributor and thereafter the Allocable Portion
shall be the portion of the Distribution Fee attributable to (i) the Shares sold
by the Distributor or a predecessor distributor ("Commission Shares"), plus (ii)
the Shares issued in connection with the exchange of Commission Shares of
another Fund and or Class B shares of another Fund in the First American group
of Funds, plus (iii) the Shares issued in connection with the reinvestment of
dividends and capital gains on Commission Shares.
The Distributor's Allocable Portion of the Distribution Fee and the
contingent deferred sales charges arising in respect of the Shares taken into
account in computing the Distributor's Allocable Portion shall be limited under
Article III, Sections 26(b) and (d) or other applicable regulations of the NASD
as if the Shares taken into account in computing the Distributor's Allocable
Portion themselves constituted a separate class of shares of the Fund.
The services rendered by the Distributor for which the Distributor is
entitled to receive the Distributor's Allocable Portion of the Distribution Fee
shall be deemed to have been completed at the time of the initial purchase of
the Commission Shares (whether of the Fund or another Fund in the First American
Family of Funds) taken into account in computing the Distributor's Allocable
Portion. Notwithstanding anything to the contrary in this Agreement, the
Distributor shall be paid its Allocable Portion of the Distribution Fee
notwithstanding the Distributor's termination as distributor of the Shares, or
any termination of this Agreement other than in connection with a Complete
Termination (as defined in the Distribution Plan) of the Distribution Plan as in
effect on the date of execution of this Agreement. Except as provided otherwise
provided hereunder, the Fund's obligation to pay the Distribution Fee to the
Distributor shall be absolute and unconditional and shall not be subject to any
dispute, offset, counterclaim or defense whatsoever (it being understood that
nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Distributor and to
enforce such claims against any assets (other than its rights to be paid its
Allocable Portion of the Distribution Fee and to be paid the contingent deferred
sales charges) of the Distributor).
B. Contingent Deferred Sales Charge. The Fund will pay to the
Distributor in addition to the fees with respect to the Shares set forth above,
any contingent deferred sales charge imposed on repurchases of Class B shares of
such Portfolio upon the terms and conditions set forth in the then current
prospectus of the Fund. Notwithstanding anything to the contrary in this
Agreement, the Distributor shall be paid such contingent deferred sales charges
in respect of Class B shares of such Portfolio taken into account in computing
the Distributor's Allocable Portion of the Distribution Fee notwithstanding the
Distributor's termination as general distributor of the Shares of the Fund or
any termination of this Agreement other than in connection with a Complete
Termination of the Distribution Plan as in effect on the date of execution of
this Agreement. Except as provided otherwise provided hereunder, the Fund's
obligation to remit such contingent deferred sales charges to the Distributor
shall not be subject
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to any dispute, offset, counterclaim or defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Distributor and to
enforce such claims against any assets (other than its right to be paid its
Allocable Portion of the Distribution Fee and to be paid the contingent deferred
sales charges) of the Distributor). The Fund will not waive any contingent
deferred sales charge except under the circumstances set forth in the Fund's
current prospectus, without the consent of the Distributor (or, if rights to
payment have been transferred, the transferee).
C. Predecessor Distributor. For the avoidance of doubt, the Distributor
shall be entitled to receive under this Agreement the Distributor's Allocable
Portion of the Distribution Fee and such contingent deferred sales charges in
respect of Class B shares of the Fund taken into account in computing the
Distributor's Allocable Portion of the Distribution Fee, including Shares issued
during the periods in which SEI Financial Services Company acted as distributor
and shareholder servicing agent (the "Predecessor Distributor") for the Fund and
all Shares derived from Class B shares distributed by the Predecessor
Distributor, whether pursuant to one or more permitted free exchanges or
otherwise.
D. Payments to Distributor's Transferees. The Distributor may transfer
its right to payments described herein to third persons who provide funding to
the Distributor, provided that any such transfer shall not be deemed a transfer
of the Distributor's obligations under this Agreement. Upon receipt of written
direction from the Distributor to pay such fees to a transferee, the Fund is
authorized to pay all or a part of the Distribution Fee and or contingent
deferred sales charges in respect of the Shares directly to such transferee as
directed by the Distributor.
ARTICLE 4. Compensation for Shareholder Service Activities. (a) As
compensation for providing shareholder services pursuant to Article 2 hereof,
the Distributor shall receive in respect of the Shares of each Portfolio,
pursuant to the Fund's Service Plan with respect to the Shares adopted by each
such class in accordance with shareholder services provided in respect of such
class, calculated and payable monthly, at the annual rate of .25% of the value
of the average daily net assets of such class.
(b) The Distributor may reallow all or any part of, or pay compensation
from, the amounts payable to the Distributor under the Service Plan to such
persons, including employees of the Distributor, and institutions who respond to
inquiries of holders of the Shares of the Portfolios or provide other
administrative or accounting services for the Shares, as the Distributor may
from time to time determine.
ARTICLE 5. Changes in Computation of Fee. As long as the Distribution
Plan is in effect, the Fund shall not change the accounting methodology under
which the Distribution Fee is computed (except as may be required by a change in
applicable law or a change in accounting policy adopted by the Investment
Companies Committee of the AICPA and approved by FASB that results a
determination by the Fund's independent accountants that any of the Sales
Charges in respect of such Fund, which are not Contingent Deferred Sales Charges
and which are not yet due and payable, must be accounted for by such Fund as a
liability in accordance with GAAP).
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ARTICLE 6. Action of Fund Board of Directors. In no way does this
Agreement limit the ability of the Board of Directors, in their sole discretion,
after due consideration of the relevant factors considered when adopting and/or
amending the Distribution Plan including the transactions contemplated in that
certain Purchase or Sale Agreement entered into between the Fund's Distributor
and the commission financing entity, to determine, subject to its fiduciary
duty, that the Plan and the payments thereunder must be changed or terminated.
ARTICLE 7. Expenses. (a) During the period of this Agreement, the Fund
shall pay or cause to be paid all expenses, costs and fees incurred by the Fund
which are not assumed by the Distributor. The Distributor shall pay all of its
own costs incurred in connection with the distribution of the Shares of each
Portfolio pursuant to Article 1 hereof ("Distribution Expenses"). The
Distributor shall also pay all of its own costs incurred in connection with
providing the personal, continuing services to shareholders of the Shares of
each Portfolio pursuant to Article 3 hereof ("Shareholder Servicing Expenses").
Distribution Expenses include, but are not limited to, the following expenses
incurred by the Distributor: initial and ongoing sales compensation (in addition
to sales loads) paid to investment executives of the Distributor and to other
broker-dealers and participating financial institutions which the Distributor
has agreed to pay; expenses incurred in the printing of prospectuses, statements
of additional information and reports used for sales purposes; expenses of
preparation and distribution of sales literature; expenses of advertising of any
type; an allocation of the Distributor's overhead; payments to and expenses of
persons who provide support services in connection with the distribution of Fund
shares; and other distribution-related expenses. Shareholder Servicing Expenses
include all expenses of the Distributor incurred in connection with providing
administrative or accounting services to shareholders of the Shares of each
Portfolio, including, but not limited to, an allocation of the Distributor's
overhead and payments made to persons, including employees of the Distributor,
who respond to inquiries of shareholders regarding their ownership of Shares, or
who provide other administrative or accounting services for the Shares class not
otherwise required to be provided by the applicable Portfolio's investment
adviser, transfer agent or other agent.
(b) In each year during which this Agreement remains in effect, the
Distributor will prepare and furnish to the Board of Directors of the Fund, on a
quarterly basis, written reports complying with the requirements of Rule 12b-1
under the 1940 Act that set forth (i) the amounts expended under this Agreement
and the Distribution Agreement as Distribution Expenses for the Shares of each
Portfolio and the purposes for which those expenditures were made, and (ii) the
amounts expended under this Agreement and the Service Agreement as Shareholder
Servicing Expenses for the Shares of each Portfolio and the purposes for which
those expenditures were made.
(c) Amounts payable to the Distributor under the Distribution Plan or
the Service Plan may exceed or be less than the Distributor's actual costs
incurred in connection with the distribution of the Shares of each such class or
the provision of shareholder services for the Shares. In the event such
Distribution Expenses or Shareholder Servicing Expenses exceed amounts payable
to the Distributor under the Distribution Plan or the Service Plan, the
Distributor shall not be entitled to reimbursement by the Fund.
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ARTICLE 8. Indemnification of Distributor. The Fund agrees to indemnify
and hold harmless the Distributor and each of its directors and officers and
each person, if any, who controls the Distributor within the meaning of Section
15 of the 1933 Act against any loss, liability, claim, damages or expenses
(including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damages or expenses and reasonable counsel fees and
disbursements incurred in connection therewith), arising by reason of any person
acquiring any Shares, based upon the ground that the registration statement,
prospectus, Shareholder reports or other information filed or made public by the
Fund (as from time to time amended) included an untrue statement of a material
fact or omitted to state a material fact required to be stated or necessary in
order to make the statements made not misleading. However, the Fund does not
agree to indemnify the Distributor or hold it harmless to the extent that the
statements or omission was made in reliance upon, and in conformity with,
information furnished to the Fund by or on behalf of the Distributor.
In no case (a) is the indemnity of the Fund to be deemed to protect the
Distributor against any liability to the Fund or its Shareholders to which the
Distributor or such person otherwise would be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement, or (b) is the Fund to be liable to the Distributor under the
indemnity agreement contained in this paragraph with respect to any claim made
against the Distributor or any person indemnified unless the Distributor or
other person shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or such other person (or after the Distributor or the person shall
have received notice of service on any designated agent). However, failure to
notify the Fund of any claim shall not relieve the Fund from any liability which
it may have to the Distributor or any person against whom such action is brought
otherwise than on account of its indemnity agreement contained in this
paragraph.
The Fund shall be entitled to participate at its own expense in the
defense or, if it elects, to assume the defense of any suit brought to enforce
any claims subject to this indemnity provision. If the Fund elects to assume the
defense of any such claim, the defense shall be conducted by counsel chosen by
the Fund and satisfactory to the indemnified defendants in the suits whose
approval shall not be unreasonably withheld. In the event that the Fund elects
to assume the defense of any suit and retain counsel, the indemnified defendants
shall bear the fees and expenses of any additional counsel retained by them. If
the Fund does not elect to assume the defense of a suit, it will reimburse the
indemnified defendants for the reasonable fees and expenses of any counsel
retained by the indemnified defendants.
The Fund agrees to notify the Distributor promptly of the commencement
of any litigation or proceedings against it or any of its officers or Directors
in connection with the issuance or sale of any of its Shares.
ARTICLE 9. Indemnification of Fund. The Distributor covenants and
agrees that it will indemnify and hold harmless the Fund and each of its
Directors and officers and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act, against any loss, liability, damages,
claim or expense (including the reasonable cost of investigating or
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defending any alleged loss, liability, damages, claim or expense and reasonable
counsel fees incurred in connection therewith) based upon the 1933 Act or any
other statute or common law and arising by reason of any person acquiring any
Shares, and alleging a wrongful act of the Distributor or any of its employees
or alleging that the registration statement, prospectus, Shareholder reports or
other information filed or made public by the Fund (as from time to time
amended) included an untrue statement of a material fact or omitted to state a
material fact required to be stated or necessary in order to make the statements
not misleading, insofar as the statement or omission was made in reliance upon
and in conformity with information furnished to the Fund by or on behalf of the
Distributor.
In no case (a) is the indemnity of the Distributor in favor of the Fund
or any other person indemnified to be deemed to protect the Fund or any other
person against any liability to which the Fund or such other person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (b) is the
Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Fund or upon any person (or after the
Fund or such person shall have received notice of service on any designated
agent). However, failure to notify the Distributor of any claim shall not
relieve the Distributor from any liability which it may have to the Fund or any
person against whom the action is brought otherwise than on account of its
indemnity agreement contained in this paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by the Distributor and satisfactory
to the indemnified defendants whose approval shall not be unreasonably withheld.
In the event that the Distributor elects to assume the defense of any suit and
retain counsel, the defendants in the suit shall bear the fees and expenses of
any additional counsel retained by them. If the Distributor does not elect to
assume the defense of any suit, it will reimburse the indemnified defendants in
the suit for the reasonable fees and expenses of any counsel retained by them.
The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it in connection with the issue and
sale of any of the Fund's Shares.
ARTICLE 10. Effective Date. This Agreement shall be effective upon its
execution, and unless terminated as provided, shall continue in force for one
year from the effective date and thereafter from year to year, provided that
such annual continuance is approved by (a) either the vote of a majority of the
Directors of the Fund, or the vote of a majority of the outstanding voting
securities of the Shares of each Portfolio, and (b) the vote of a majority of
those Directors of the Fund who are not parties to this Agreement or the Fund's
Distribution Plan or Service Plan or interested persons of any such party
("Qualified Directors"), cast in person at a meeting called
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for the purpose of voting on the approval. This Agreement shall automatically
terminate in the event of its assignment. As used in this paragraph, the terms
"votes of a majority of the outstanding voting securities," "assignment" and
"interested person" shall have the respective meanings specified in the 1940
Act. In addition, this Agreement may at any time be terminated without penalty
by the Distributor, by a vote of a majority of Qualified Directors or by vote of
a majority of the outstanding voting securities of the Shares class of any
Portfolio upon not less than sixty days' prior written notice to the other
party.
ARTICLE 11. Notices. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Fund, attn: Xxxx Xxxxxx, 000 Xxxxxxxx Xxxx, Xxxxxxxxxxx, XX
00000; and to its Secretary at the following address: Xxxxx X. Xxxxx, 000
Xxxxxxxx Xxxx, Xxxxxxxxxxx, XX 00000; and if to the Distributor, attn: Xxxxx
Xxxxxxxxx, 000 Xxxx Xxxxxxxx Xxxxxx, Xxxxxxxxx, XX 00000.
ARTICLE 12. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Maryland and the applicable provisions
of the 1940 Act. To the extent that the applicable laws of the State of
Maryland, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
ARTICLE 13. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
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IN WITNESS, the Fund and the Distributor have each duly executed this
Agreement, as of the day and year above written.
FIRST AMERICAN INVESTMENT FUNDS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Attest: /s/ Xxxxxxx X. Xxxxxx
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QUASAR DISTRIBUTORS, LLC
By: /s/ Xxxxx Xxxxxxxxx
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Attest: /s/
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