DISTRIBUTION AGREEMENT
MONETTA FUND, INC.
0000-X XXXXX XXXXXXXXXX XXXX
XXXXX 000
XXXXXXX, XXXXXXXX 00000
February 1, 1997
Funds Distributor, Inc.
00 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the above-named investment company (the "Fund") has
agreed that you shall be, for the period of this agreement, the distributor of
(a) shares of each Series of the Fund set forth on Exhibit A hereto, as such
Exhibit may be revised from time to time (each, a "Series") or (b) if no Series
are set forth on such Exhibit, shares of the Fund. For purposes of this
agreement the term "Shares" shall mean the authorized shares of the relevant
Series, if any, and otherwise shall mean the Fund's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered by, and
in accordance with, the registration statement and prospectus then in effect
under the Securities Act of 1933, as amended, and will transmit promptly any
orders received by you for purchase or redemption of Shares to the Transfer and
Dividend Disbursing Agent for the Fund of which the Fund has notified you in
writing.
1.2 You agree to use your best efforts to solicit orders for the sale of
Shares. It is contemplated that you may enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitations, all
rules and regulations made or adopted pursuant to the Investment Company Act of
1940, as amended, (the "NASD") Rules of Fair Practice. You represent and warrant
that you are a broker-dealer registered with the Securities and Exchange
Commission and that you are registered with the relevant securities regulatory
agencies in all fifty states, the District of Columbia and Puerto Rico. You also
represent and
warrant that you are a member of the NASD. by the Securities and Exchange
Commission or any securities association registered under the Securities
Exchange Act of 1934, as amended.
1.4 You shall file Fund advertisements, sales literature and other
marketing and sales related materials with the appropriate regulatory agencies
and shall obtain such approvals for their use as may be required by the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. and/or state securities administrators.
1.5 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind
deemed by the parties hereto to render sales of a Fund's Shares not in the best
interest of the Fund, the parties hereto may decline to accept any orders for,
or make any sales of, any Shares until such time as those parties deem it
advisable to accept such orders and to make such sales and each party shall
advise promptly the other party of any such determination.
1.6 The Fund agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Fund hereunder, and all expenses in connection with the preparation and
printing of the Fund's prospectuses and statements of additional information for
regulatory purposes and for distribution to shareholders; provided however, that
the Fund shall not pay any of the costs of advertising or promotion for the sale
of Shares.
1.7 The Fund agrees to execute any and all documents and to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Fund's officers in connection with the
qualification of Shares for sale in such states as you may designate to the Fund
and the Fund may approve, and the Fund agrees to pay all expenses which may be
incurred in connection with such qualification. You shall pay all expenses
connected with your own qualification as a dealer under state or Federal laws
and, except as otherwise specifically provided in this agreement, all other
expenses incurred by you in connection with the sale of Shares as contemplated
in this agreement.
1.8 The Fund shall furnish you from time to time, for use in connection
with the sale of Shares, such information with respect to the Fund or any
relevant Series and the Shares as you 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 information, when so signed
by the Fund's officers, shall be true and correct. The Fund also shall furnish
you upon request with: (a) semi-annual reports and annual audited reports of
the Fund's books and accounts made by independent public accountants regularly
retained by the Fund, (b) quarterly earnings statements prepared by the Fund,
(c) a monthly itemized list of the securities in the Fund's or, if applicable,
each Series' portfolio, (d) monthly balance sheets as soon as practicable after
the end of each month, and (e) from time to time such additional information
regarding the Fund's financial condition as you may reasonably request.
1.9 The Fund represents to you that all registration statements and
prospectuses filed by the Fund with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, with respect to the
2
Shares have been carefully prepared in conformity with the requirements of said
Acts and rules and regulations of the Securities and Exchange Commission
thereunder. As used in this agreement the terms "registration statement" and
"prospectus" shall mean any registration statement and prospectus, including the
statement of additional information incorporated by reference therein, filed
with the Securities and Exchange Commission and any amendments and supplements
thereto which at any time shall have been filed with said Commission. The Fund
represents and warrants to you that any registration statement and prospectus,
when such registration statement becomes effective, will contain all statements
required to be stated therein in conformity with said Acts and the rules and
regulations of said Commission; that all statements of fact contained in any
such registration statement and prospectus will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The Fund 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 as, in the light of future
developments, may, in the opinion of the Fund'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 you to do so, you may, at your option, terminate this
agreement or decline to make offers of the Fund's securities until such
amendments are made. The Fund shall not file any amendment to any registration
statement or supplement to any prospectus without giving you 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, of whatever
character, as the Fund may deem advisable, such right being in all respects
absolute and unconditional.
1.10 The Fund authorizes you and any dealers with whom you have entered
into dealer agreements to use any prospectus in the form furnished by the Fund
in connection with the sale of Shares. The Fund agrees to indemnify, defend and
hold you, your several officers and directors, and any person who controls you
within the meaning of Section 15 of the Securities Act of 1933, as amended, free
and harmless from and against any and all claims, demands, liabilities and
expenses (including the reasonable cost of investigating or defending such
claims, demands or liabilities and any reasonable counsel fees incurred in
connection therewith) which you, your officers and directors, or any such
controlling persons, may incur under the Securities Act of 1933, as amended,
the Investment Company Act of 1940, as amended, or common law or otherwise,
arising out of or on the basis of any untrue statement, or alleged untrue
statement, of a material fact required to be stated in either any registration
statement or 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, except that the Fund's agreement to
indemnify you, your officers or directors, and any such controlling person will
not be deemed to cover any such claim, demand, liability or expense to the
extent that it arises out of or is based upon any such untrue statement, alleged
untrue statement, omission or alleged omission made in any registration
statement, any prospectus or any statement of additional information in reliance
upon information furnished by you, your officers, directors or any such
controlling person to the Fund or its representatives for
3
use in the preparation thereof, and except that the Fund's agreement to
indemnify you and the Fund's representations and warranties set out in paragraph
1.8 of this Agreement will not be deemed to cover any liability to the Funds or
their shareholders 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 ("Disqualifying Conduct"). The Fund's agreement to indemnify you, your
officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Fund's being notified of any action brought
against you, your officers or directors, or any such controlling person, such
notification to be given by letter, by facsimile or by telegram addressed to the
Fund at its address set forth above within a reasonable period of time 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
which the Fund may have to the person against whom such action is brought by
reason of any such untrue, or alleged untrue, statement or omission, or alleged
omission, otherwise than on account of the Fund's indemnity agreement contained
in this paragraph 1.9. The Fund will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability, but, in such case,
such defense shall be conducted by counsel of good standing chosen by the Fund
and approved by you. In the event the Fund elects 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 reasonable fees and expenses of any
additional counsel retained by any of them; but in case the Fund does not elect
to assume the defense of any such suit, the Fund will reimburse you, your
officers and directors, 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. The Fund's indemnification agreement contained in this paragraph
1.9 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 you, your officers and directors, or any controlling person, and
shall survive the delivery of any Shares. This agreement of indemnity will inure
exclusively to your benefit, to the benefit of your several officers and
directors, and their respective estates, and to the benefit of any controlling
persons and their successors. The Fund agrees promptly to notify you of the
commencement of any litigation or proceedings against the Fund or any of its
officers or Board members in connection with the issue and sale of Shares.
1.11 You agree to indemnify, defend and hold the Fund, its several
officers and Board members, and any person who controls the Fund within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the reasonable cost of investigating or defending such claims,
demands or liabilities and any reasonable counsel fees incurred in connection
therewith) which the Fund, its officers or Board members, or any such
controlling person, may incur under the Securities Act of 1933, as amended, the
Investment Company Act of 1940, as amended, or under common law or otherwise,
but only to the extent that such liability or expense incurred by the Fund, its
officers or Board members, or such controlling person resulting from such claims
or demands, (a) shall arise out of or be based upon any unauthorized sales
literature, advertisements, information, statements or representations or any
Disqualifying Conduct in connection with the offering and sale of any Shares, or
(b) shall arise out of or be based upon any untrue, or alleged untrue, statement
of a material fact contained in information furnished in writing by you to the
Fund specifically for use in the Fund's registration statement and used in the
answers to any of the items of the registration statement or in the
corresponding statements
4
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 you to the Fund
and required to be stated in such answers or necessary to make such information
not misleading. Your agreement to indemnify the Fund, its officers and Board
members, and any such controlling person, as aforesaid, is expressly conditioned
upon your being notified of any action brought against the Fund, its officers or
Board members, or any such controlling person, such notification to be given by
letter, by facsimile or by telegram addressed to you at your address set forth
above within a reasonable period of time after the summons or other first legal
process shall have been served. You shall have the right to control the defense
of such action, with counsel of your own choosing, satisfactory to the Fund, if
such action is based solely upon such alleged misstatement or omission on your
part, and in any other event the Fund, its officers or Board members, 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
the Fund, its officers or Board members, 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 your indemnity agreement contained in
this paragraph 1.10. This agreement of indemnity will inure exclusively to the
Fund's benefit, to the benefit of the Fund's officers and Board members, and
their respective estates, and to the benefit of any controlling persons and
their successors. You agree promptly to notify the Fund of the commencement of
any litigation or proceedings against you or any of your officers or directors
in connection with the issue and sale of Shares.
1.12 No Shares shall be offered by either you or the Fund under any of the
provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the 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
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission; provide, however, that nothing contained in
this paragraph 1.11 shall in any way restrict or have an application to or
bearing upon the Fund's obligation to repurchase any Shares from any shareholder
in accordance with the provisions of the Fund's prospectus or charter documents.
1.13. The Fund agrees to advise you immediately in writing:
(a) of any request by the Securities and Exchange Commission for
amendments to the registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the
registration statement or prospectus then in effect or the initiation of
any proceeding for that purpose;
(c) of the happening of any event which makes untrue any statement
of a material fact made in the registration statement or prospectus then in
effect or which requires the making of a change in such registration
statement or prospectus in order to make the statements therein not
misleading; and
5
(d) of all actions of the Securities and Exchange Commission with
respect to any amendments to any registration statement or prospectus which
may from time to time be filed with the Securities and Exchange Commission.
2. Offering Price
Shares of any class of the Fund offered for sale by you at a price per
share (the "offering price") approximately equal to (a) the net asset value
(determined in the manner set forth in the Fund's charter documents) plus (b) a
sales charge, if any and except to those persons set forth in the then-current
prospectus, which shall be the percentage of the offering price of such Shares
as set forth in the Fund's then-current prospectus. The offering price, if not
an exact multiple of one cent, shall be adjusted to the nearest cent. In
addition, Shares of any class of the Fund offered for sale by you may be subject
to a contingent deferred sales charge as set forth in the Fund's then-current
prospectus. You shall be entitled to receive any sales charge or contingent
deferred sales charge in respect of the Shares. Any payments to dealers shall be
governed by a separate agreement between you and such dealer and the Fund's
then-current prospectus.
3. Term
This Agreement shall become effective with respect to the Fund as of the
date hereof and will continue for an initial one-year term and will continue
thereafter so long as such continuance is specifically approved at least
annually (i) by the Fund's Board or (ii) by a vote of a majority of the Shares
of the Fund or the relevant Series, as the case may be, provided that in either
event its continuance also is approved by a majority of the Board members who
are not "interested persons" of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
agreement is terminable with respect to a Fund, without penalty, on not less
than sixty days' notice, by the Fund's Board of Directors, by vote of a majority
of the outstanding voting securities of such Fund, or by you. This Agreement
will automatically and immediately terminate in the event of its "assignment."
(As used in this Agreement, the terms "majority of the outstanding voting
securities," "interested person" and "assignment" shall have the same meanings
as such terms have in the Investment Company Act of 1940). You agree to notify
the Fund immediately upon the event of your expulsion or suspension by the NASD.
This Agreement will automatically and immediately terminate in the event of your
expulsion or suspension by the NASD.
4. Miscellaneous
4.1 The Fund recognizes that, except to the extent otherwise agreed to by
the parties hereto, your directors, officers and employees may from time to time
serve as directors, trustees, officers and employees of corporations and
business trusts (including other investment companies), and that you or your
affiliates may enter into distribution or other agreements with such other
corporations and trusts.
4.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
6
4.3 This Agreement shall be governed by the internal laws of the
Commonwealth of Massachusetts without giving effect to principles of conflicts
of laws.
4.4 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
Please confirm that the foregoing is in accordance with your
understanding and indicate your acceptance hereof by signing below, whereupon it
shall become a binding Agreement between us.
Very truly yours,
MONETTA FUND, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
Accepted:
FUNDS DISTRIBUTOR, INC.
By: ___________________________
Name: _________________________
Title: ________________________
7
EXHIBIT A
Series of Funds
---------------
MONETTA FUND, INC.
8
Dear Sirs:
As the principal underwriter of shares of certain registered
investment companies presently or hereafter managed, advised or administered by
Monetta Financial Services, Inc., shares of which companies are distributed by
us at their respective net asset values plus sales charges as applicable,
pursuant to our Distribution Agreements with such companies (the "Funds"), we
invite you to participate as a non-exclusive agent in the distribution of shares
of any and all of the Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the public offering prices
that shall be currently in effect, in accordance with the terms of the
then current prospectus and statements of additional information of the
Funds subject in each case to the delivery prior to or at the time of such
sales of the then current prospectus. You agree to act only as agent in
such transactions and nothing in this Agreement shall constitute either of
us the agent of the other or shall constitute you or the fund the agent of
the other. In all transactions in these shares between you and us, we are
acting as agent for the Fund and not as principal. All orders are subject
to acceptance by us and become effective only upon confirmation by us. We
reserve the right in our sole discretion to reject any order. The minimum
dollar purchase of shares of the Funds shall be the applicable minimum
amounts described in the then current prospectuses and statements of
additional information and no order for less than such amounts will be
accepted.
2. On each purchase of shares by you from us, the total sales charges and
discount to selected dealer, if any, shall be as in each Fund's then
current prospectus.
Such sales charges and discount to selected dealers are subject to
reductions under a variety of circumstances as described in each Fund's
then current prospectus and statement of additional information. To obtain
these reductions, we must be notified when the sale takes place which would
qualify for the reduced charge.
There is no sales charge or discount to selected dealers on the
reinvestment of any dividends or distributions.
3. All purchases of shares of a Fund made under any cumulative purchase
privilege as set forth in a Fund's then current effective prospectus shall
be considered an individual transaction for the purpose of determining the
concession from the public offering price to which you are entitled as set
forth in paragraph 2 hereof.
4. As an authorized agent to sell shares of the Fund, you agree to purchase
shares of the funds only through us or from your customers. Purchases
through us shall be made only for your own investment purposes or for the
purpose of covering purchase orders already received from your customers,
and we agree that we will not place orders for the purchase of shares from
a Fund except to cover purchase orders already receive by us. Purchases
from your customers shall be at a price not less than the net asset value
quoted by each such Fund at the time of such purchase. Nothing herein
contained shall prevent you from selling any
shares of a Fund for the account of a record holder to us or to such Fund
at the net asset value quoted by us and charging your customer a fair
commission for handling the transaction.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
6. You agree to sell shares of the Funds only (a) to your customers at the
public offering prices then in effect or (b) to us as agent for the Funds
or to each such Fund itself at the redemption price, as described in each
Fund's then current effective prospectus.
7. Settlement shall be made promptly, but in no case later than the time
customary for such payments after our acceptance of the order or, if so
specified by you, we will make delivery by draft on you, the amount of
which draft you agree to pay on presentation to you. If payment is not so
received or made, the right is reserved forthwith to cancel the sale or at
our option to resell the shares to the applicable Fund, at then
prevailing net asset value in which latter case you agree to be responsible
for any loss resulting to such Fund or to us from your failure to make
payment as aforesaid.
8. If any shares sold to you under the terms of this Agreement are repurchased
by a Fund or by us as agent, or purchased for the account of that Fund or
tendered to that Fund for purchase at liquidating value under the terms of
the Articles of Incorporation or Declaration of Trust or other document
governing such Fund within seven (7) business days after the date of
confirmation to your of your original purchase order therefor, you agree to
pay forthwith to us the full amount of the concession allowed to you on the
original sale and we agree to pay such amount to the Fund when received by
us. We shall notify you of such repurchase within ten (10) days of the
effective date of such repurchase.
9. All sales will be subject to receipt of shares by us from the Funds. We
reserve the right in our discretion, without notice to you, to suspend
sales or withdraw the offering of shares entirely, or to modify or cancel
this Agreement.
10. No person is authorized to make any representations concerning the Funds or
shares of the Funds except those contained in each Fund's then current
effective prospectus or statement of additional information and any such
information as may be released by a Fund as information supplemental to
such prospectus or statement of additional information. In purchasing
shares through us you shall rely solely on the representations contained in
each Fund's then current effective prospectus or statement of additional
information and above-mentioned supplemental information.
11. Additional copies of each such prospectus or statement of additional
information and any printed information issued as supplemental to each such
prospectus or statement of additional information will be supplied by us to
you and your selling agents in reasonable quantities upon request.
2
12. With respect to Funds offering shares subject to a front-end sales charge,
shares subject to a contingent deferred sales charge, and/or institutional
class shares not subject to a sales charge, you shall conform to such
written compliance standards as we have provided you in the past or may
from time to time provide to you in the future.
13. We, our affiliates and the Funds shall not be liable for any losses,
expenses, damages, costs or other claims arising out of any redemption or
exchange pursuant to telephone instructions from any person, or our refusal
to execute such instructions for any reason.
14. All notices or other communications hereunder to either party shall be in
writing and shall be deemed sufficient if mailed to such party at the
address of such party set forth on page 5 of this Agreement or at such
other address as such party may be designated by written notice to the
other, or by telex, telecopier, telegram or similar means of same day
delivery (with a confirming copy by mail as provided herein).
15. This Agreement may be terminated upon written notice by either party at any
time, and shall automatically terminate upon its attempted assignment by
you, whether by operation of law or otherwise, or by us otherwise than by
operation of law.
16. By accepting this Agreement, you represent that you are registered as a
broker-dealer under the Securities Exchange Act of 1934, are qualified to
act as a broker or dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National
Association of Securities Dealers, Inc., and you agree that you will
maintain such registrations, qualifications, and membership in good
standing and in full force and effect throughout the term of this
Agreement. You further agree to comply with all applicable Federal laws,
the laws of the states or other jurisdictions concerned, and the rules and
regulations promulgated thereunder and with the Constitution, By-Laws and
Rules of Fair Practice of the National Association of Securities Dealers,
Inc., and that you will not offer or sell shares of the Funds in any state
or jurisdiction where they may not lawfully be offered and/or sold.
If you are offering and selling shares of the Funds in jurisdictions
outside the several states, territories, and possessions of the United
States and are not otherwise required to be registered, qualified, or a
member of the National Association of Securities Dealers, Inc., as set
forth above you nevertheless agree to observe the applicable laws of the
jurisdiction in which such offer and/or sale is made, to comply with the
full disclosure requirements of the Securities Act of 1933 and the
regulations promulgated thereunder, to conduct your business in accordance
with the spirit of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. You agree to indemnify and hold the Funds,
their investment advisor, and us harmless from loss or damage resulting
from any failure on your part to comply with applicable laws.
17. You agree to maintain records of all sales of shares made through you and
to furnish us with copies of each record on request.
3
18. This Agreement and all amendments to this Agreement shall take effect with
respect to and on the date of any orders placed by you after the date set
forth below or, as applicable, after the date of the motive of amendment
sent to you by the undersigned.
19. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and shall be binding upon both parties
hereto when signed and accepted by you in the space provided below.
FOR:
FUNDS DISTRIBUTOR, INC.
00 XXXXX XXXXXX, XXXXX 0000
XXXXXX, XX 00000
-------------------------------------------------------------------------------
By: Date
FOR:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Address of Principal Office
-------------------------------------------------------------------------------
City State Zip Code
BY: ITS:
---------------------------------- ------------------------- ------------
Authorized Signature Title Date
----------------------------------
Print Name
4
