DISTRIBUTION AND SERVICES AGREEMENT
September 3, 2003
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Integrity Small Cap Growth Fund, (the "Fund"), an
open-end, diversified, management investment company organized as a series of
The Integrity Funds, a Delaware statutory trust, has agreed that Integrity
Funds Distributor, Inc., ("Integrity"), shall be, for the period of this
distribution agreement (the "Agreement"), the principal underwriter of shares
issued by the Fund, including such classes of shares as may now or hereafter be
authorized (the "Shares").
SECTION 1. SERVICES AS UNDERWRITER
Section 1.1 Integrity will act as principal underwriter for the
distribution of the Shares covered by the registration statement, prospectus,
and statement of additional information then in effect of the Fund (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"1933 Act"), and the Investment Company Act of 1940, as amended (the "1940
Act").
Section 1.2 Integrity agrees to use its best efforts to solicit orders
for the sale of the Shares at the public offering price, as determined in
accordance with the Registration Statement, and will undertake such advertising
and promotion as it believes is reasonable in connection with such
solicitation. Integrity shall order Shares from the Fund only to the extent
that it shall have received purchase orders therefor.
Section 1.3 All activities by Integrity as underwriter of the Shares
shall comply with all applicable laws, rules, and regulations, including,
without limitation, all rules and regulations made or adopted by the Securities
and Exchange Commission (the "SEC") or by any securities association registered
under the Securities Exchange Act of 1934 and the Fund's Registration
Statement.
Section 1.4 Integrity will provide one or more persons during normal
business hours to respond to telephone questions concerning the Fund.
Section 1.5 Integrity acknowledges that, whenever in the judgment of the
Fund's officers such action is warranted for any reason, including, without
limitation, market, economic, or political conditions, those officers may
decline to accept any orders for, or make any sales of, the Shares until such
time as those officers deem it advisable to accept such orders and to make such
sales.
Section 1.6 Integrity shall be deemed to be an independent contractor
and, except as specifically provided or authorized herein, shall have no
authority to act for or represent the Fund. Integrity will act only on its own
behalf as principal should it choose to enter into selling agreements with
selected dealers or others. Integrity may allow commissions or concessions to
dealers in such amounts as Integrity shall determine from time to time, as set
forth in the Fund's Registration Statement. Except as may otherwise be
determined by Integrity and the Fund from time to time, such commissions or
concessions shall be uniform to all dealers. Shares sold to dealers shall be
for resale by such dealers only at the public offering price(s) set forth in
the Fund's then current Registration Statement. The price the Fund shall
receive for all Shares purchased from the Fund shall be the net asset value
used in determining the public offering price applicable to the sale of such
Shares.
Section 1.7 In consideration of the services rendered pursuant to this
Agreement, Integrity shall receive the excess, if any, of the sales price, as
set forth in the Fund's Registration Statement, over the net asset value of
Shares sold by Integrity, as underwriter. The Fund shall also pay Integrity
any distribution and/or service fees applicable to the Shares as authorized by
the Distribution and Service Plan (the "Plan") adopted by the Fund under Rule
12b-1 of the Investment Company Act of 1940 and set forth in the Fund's
Registration Statement. Such fees shall be payable in the manner and terms set
forth in the Plan.
Section 1.8 Integrity will bear all expenses in connection with the
performance of its services and the incurring of distribution expenses under
this Agreement. For purposes of this Agreement, "distribution expenses" of
Integrity shall mean all expenses borne by Integrity or by any other person
with which Integrity has an agreement approved by the Fund, which expenses
represent payment for activities primarily intended to result in the sale of
Shares, including, but not limited to, the following:
(a) payments made to, and expenses of, persons who provide support
services in connection with the distribution of Shares, including, but not
limited to, office space and equipment, telephone facilities, answering routine
inquiries regarding the Fund, processing shareholder transactions, and
providing any other shareholder services;
(b) costs relating to the formulation and implementation of marketing
and promotional activities, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine, and other mass media
advertising;
(c) costs of printing and distributing prospectuses and reports of the
Fund to prospective shareholders of the Fund;
(d) costs involved in preparing, printing, and distributing sales
literature pertaining to the Fund;
(e) costs involved in obtaining whatever information, analyses, and
reports with respect to marketing and promotional activities that the Fund may,
from time to time, deem advisable; and
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(f) sales commissions and other fees paid, together with related
financing costs to brokers, dealers or other selling entities with a dealer
agreement in effect for the sale of Fund Shares.
Distribution expenses, however, shall not include any expenditures in
connection with services which Integrity, any of its affiliates, or any other
person has agreed to bear without reimbursement.
Section 1.9 Integrity shall prepare and deliver reports to the Treasurer
of the Fund and to the Investment Adviser on a regular, at least quarterly,
basis, showing the distribution expenses incurred pursuant to this Agreement
and the Plan and the purposes therefor, as well as any supplemental reports as
the Trustees, from time to time, may reasonably request.
SECTION 2. DUTIES OF THE FUND
Section 2.1 The Fund agrees at its own expense to execute any and all
documents, to furnish any and all information, and to take any other actions
that may be reasonably necessary in connection with the qualification of the
Shares for sale in those states that Integrity may designate.
Section 2.2 The Fund shall furnish from time to time, for use in
connection with the sale of the Shares, such information reports with respect
to the Fund and its Shares as Integrity may reasonably request, all of which
shall be signed by one or more of the Fund's duly authorized officers; and the
Fund warrants that the statements contained in any such reports, when so signed
by one or more of the Fund's officers, shall be true and correct. The Fund
shall also furnish Integrity upon request with: (a) annual audits of the Fund's
books and accounts made by independent public accountants regularly retained by
the Fund, (b) semi-annual unaudited financial statements pertaining to the
Fund, (c) quarterly earnings statements prepared by the Fund, (d) a monthly
itemized list of the securities in the portfolio of the Fund, (e) monthly
balance sheets as soon as practicable after the end of each month, and (f) from
time to time such additional information regarding the Fund's financial
condition as Integrity may reasonably request.
Section 2.3 The Fund shall pay to Integrity, as set forth in the
Registration Statement, any distribution and service fee authorized by the
Plan.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Section 3.1 The Fund represents to Integrity that all registration
statements, prospectuses, and statements of additional information filed by
the Fund with the SEC under the 1933 Act and the 1940 Act with respect to the
Shares of the Fund have been carefully prepared in conformity with the
requirements of the 1933 Act, the 1940 Act, and the rules and regulations of
the SEC thereunder. As used in this Agreement, the terms "registration
statement," "prospectus," and "statement of additional information" shall mean
any registration statement, prospectus, and statement of additional information
filed by the Fund with the SEC and any amendments and supplements thereto which
at any time shall have been filed with the SEC. The Fund represents and
warrants to Integrity that any registration statement, prospectus, and
statement of additional information, when such registration statement becomes
effective, will include all statements required to be contained therein in
conformity with the 1933 Act, the 1940 Act, and the rules and regulations of
the SEC; that all statements of fact contained in any registration statement,
prospectus, or statement of additional information will be true and correct
when such registration statement becomes effective; and that neither any
registration statement nor any prospectus or statement of additional
information when such registration statement becomes effective will include an
untrue statement of 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. Integrity may, but shall not be obligated to, propose
from time to time such amendment or amendments to any registration statement
and such supplement or supplements to any prospectus or statement of additional
information as, in the light of future developments, may, in the opinion of
Integrity's counsel, be necessary or advisable. If the Fund shall not propose
such amendment or amendments and/or supplement or supplements within fifteen
days after receipt by the Fund of a written request from Integrity to do so,
Integrity may, at its option, terminate this Agreement. The Fund shall not file
any amendment to any registration statement or supplement to any prospectus or
statement of additional information without giving Integrity reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Fund's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus or statement of
additional information, of whatever character, as the Fund may deem advisable,
such right being in all respects absolute and unconditional.
SECTION 4. INDEMNIFICATION
Section 4.1 The Fund authorizes Integrity and any dealers with whom
Integrity has entered into dealer agreements to use any prospectus or statement
of additional information furnished by the Fund from time to time in connection
with the sale of Shares. The Fund agrees to indemnify, defend, and hold
Integrity, its several officers and directors, and any person who controls
Integrity 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 counsel fees incurred in connection therewith) which
Integrity, its officers and directors, or any such controlling person may incur
under the 1933 Act, the 1940 Act, or common law or otherwise, arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement, any prospectus, or any statement of
additional information, or arising out of or based upon any omission or alleged
omission to state a material fact required to be stated in any registration
statement, any prospectus, or any statement of additional information, or
necessary to make the statements in any of them not misleading; provided,
however, that the Fund's agreement to indemnify Integrity, its officers or
directors, and any such controlling person shall not be deemed to cover any
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claims, demands, liabilities, or expenses arising out of or based upon any
statements or representations made by Integrity or its representatives or
agents other than such statements and representations as are contained in any
registration statement, prospectus, or statement of additional information and
in such financial and other statements as are furnished to Integrity pursuant
to paragraph 2.2 hereof; and further provided that the Fund's agreement to
indemnify Integrity and the Fund's representations and warranties hereinbefore
set forth in paragraph 3 shall not be deemed to cover any liability to the Fund
or its shareholders to which Integrity would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of Integrity's reckless disregard of its obligations and
duties under this Agreement. The Fund's agreement to indemnify Integrity, its
officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any action brought
against Integrity, its officers or directors, or any such controlling person,
such notification to be given by letter or by telegram addressed to the Fund at
its principal office in Minot, North Dakota, and sent to the Fund by the person
against whom such action is brought, within ten days after the summons or other
first legal process shall have been served. The failure so to notify the Fund
of any such action shall not relieve the Fund from any liability that the Fund
may have to the person against whom such action is brought by reason of any
such untrue statement or omission or alleged omission otherwise than on account
of the Fund's indemnity agreement contained in this paragraph 4.1. The Fund's
indemnification agreement contained in this paragraph 4.1 and the Fund'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
Integrity, its officers and directors, or any controlling person, and shall
survive the delivery of any Shares. This agreement of indemnity will inure
exclusively to Integrity's benefit, to the benefit of its several officers and
directors, and their respective estates, and to the benefit of the controlling
persons and their successors. The Fund agrees to notify Integrity promptly of
the commencement of any litigation or proceedings against the Fund or any of
its officers or trustees in connection with the issuance and sale of any
Shares.
Section 4.2 Integrity agrees to indemnify, defend, and hold the Fund, its
several officers and trustees, and any person who controls the Fund 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 costs of
investigating or defending such claims, demands, or liabilities and any counsel
fees incurred in connection therewith) that the Fund, its officers or trustees,
or any such controlling person may incur under the 1933 Act, the 1940 Act, or
common law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its officers or trustees, or such controlling person
resulting from such claims or demands shall arise out of or be based upon (a)
any unauthorized sales literature, advertisements, information, statements, or
representations or (b) any untrue or alleged untrue statement of a material
fact contained in information furnished in writing by Integrity to the Fund and
used in the answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus or statement of additional
information, or shall arise out of or be based upon any omission or alleged
omission to state a material fact in connection with such information furnished
in writing by Integrity to the Fund and required to be stated in such answers
or necessary to make such information not misleading. Integrity's agreement to
indemnify the Fund, its officers and trustees, and any such controlling person,
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as aforesaid, is expressly conditioned upon Integrity's being notified of any
action brought against the Fund, its officers or trustees, or any such
controlling person, such notification to be given by letter or telegram
addressed to Integrity at its principal office in Minot, North Dakota, and sent
to Integrity 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 Integrity of any such action shall not relieve Integrity
from any liability that Integrity may have to the Fund, its officers or
trustees, or to such controlling person by reason of any such untrue or alleged
untrue statement or omission or alleged omission otherwise than on account of
Integrity's indemnity agreement contained in this paragraph 4.2. Integrity
agrees to notify the Fund promptly of the commencement of any litigation or
proceedings against Integrity or any of its officers or directors in connection
with the issuance and sale of any Shares.
Section 4.3 In case any action shall be brought against any indemnified
party under paragraph 4.1 or 4.2, and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish to do so, to assume the
defense thereof with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action, the indemnifying
party will not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than (a) reasonable costs of investigation or the
furnishing of documents or witnesses and (b) all reasonable fees and expenses
of separate counsel to such indemnified party if (i) the indemnifying party and
the indemnified party shall have agreed to the retention of such counsel or
(ii) the indemnified party shall have concluded reasonably that representation
of the indemnifying party and the indemnified party by the same counsel would
be inappropriate due to actual or potential differing interests between them
in the conduct of the defense of such action.
SECTION 5. EFFECTIVENESS OF REGISTRATION
Section 5.1 None of the Shares shall be offered by either Integrity or
the Fund under any of the provisions of this Agreement and no orders for the
purchase or sale of the Shares hereunder shall be accepted by the Fund 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 a current prospectus as required by
Section 5(b)(2) of the 1933 Act is not on file with the SEC; provided, however,
that nothing contained in this paragraph 5 shall in any way restrict or have
an application to or bearing upon the Fund's obligation to repurchase Shares
from any shareholder in accordance with the provisions of the Fund's
prospectus, statement of additional information, or articles of incorporation.
SECTION 6. NOTICE TO INTEGRITY
Section 6.1 The Fund agrees to advise Integrity immediately in writing:
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(a) of any request by the SEC for amendments to the registration
statement, prospectus, or statement of additional information then in effect
or for additional information;
(b) in the event of the issuance by the SEC of any stop order suspending
the effectiveness of the registration statement, prospectus, or statement of
additional information then in effect or the initiation of any proceeding for
that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement, prospectus, or statement of
additional information then in effect or that requires the making of a change
in such registration statement, prospectus, or statement of additional
information in order to make the statement therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus, or statement of additional information
which may from time to time be filed with the SEC.
SECTION 7. TERM OF AGREEMENT
Section 7.1 This Agreement shall continue until September 2, 2004, and
thereafter shall continue automatically for successive annual periods ending
on September 2nd, of each year, provided such continuance is specifically
approved at least annually by (a) the Fund's Board of Trustees and (b) a vote
of a majority (as defined in the 1940 Act) of the Fund's Trustees who are not
interested persons (as defined in the 1940 Act) of the Fund and who have no
direct or indirect financial interest in the operation of the Plan, in this
Agreement, or any agreement related to the Plan (the "Qualified Trustees"), by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable with respect to the Fund, without
penalty, (a) on 60 days' written notice, by vote of a majority of the Qualified
Trustees or by vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Fund or (b) on 90 days' written notice by
Integrity. This Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act).
SECTION 8. MISCELLANEOUS
Section 8.1 The Fund recognizes that directors, officers, and employees
of Integrity may from time to time serve as directors, officers, and employees
of corporations and business trusts (including other investment companies) and
that Integrity or its affiliates may enter into distribution or other
agreements with such other corporations and trusts.
Section 8.2 It is expressly agreed that the obligations of the Fund
hereunder shall not be binding upon any of the trustees, shareholders,
nominees, officers, agents, or employees of the Fund, personally, but bind only
the property of the Fund. The execution and delivery of this Agreement have
been authorized by the Trustees and signed by an authorized officer of the
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Fund, acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the property of the Fund.
Section 8.3 This Agreement shall be construed in accordance with the
laws of the State of Kansas.
Section 8.4 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
Section 8.5 This Agreement may not be amended or modified in any manner
except by both parties with the same formality as this Agreement and as may be
permitted or required by the 1940 Act.
Section 8.6 The captions of this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
In Witness Whereof, the parties hereto have caused this Agreement to be
executed as of the date first set forth herein.
Integrity Small Cap Growth Fund
By:/s/ Xxxxxx X. Xxxxxxx
Title: President
Date: September 3, 2003
Accepted:
Integrity Funds Distributor, Inc.
By: /s/ Xxxx X. Xxxxxxxx
Title: President
Date: September 3, 2003
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