Exhibit 23(e)(2)
DISTRIBUTION AND SERVICES AGREEMENT
April , 2003
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This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Tne Integrity Income Fund, (the "Fund"), an
open-end, non-diversified, management investment company organized as a series
of The Integrity Funds, a Delaware business trust, has agreed that Xxxxxx
Capital Corporation ("Xxxxxx"), 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 Xxxxxx 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 Xxxxxx 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.
Xxxxxx shall order Shares from the Fund only to the extent that it shall have
received purchase orders therefor.
Section 1.3 All activities by Xxxxxx 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 Xxxxxx will provide one or more persons during normal business
hours to respond to telephone questions concerning the Fund.
Section 1.5 Xxxxxx 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 Xxxxxx 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. Xxxxxx will act only on its own behalf as
principal should it choose to enter into selling agreements with selected
dealers or others. Xxxxxx may allow commissions or concessions to dealers in
such amounts as Xxxxxx shall determine from time to time, as set forth in the
Fund's Registration Statement. Except as may otherwise be determined by Xxxxxx
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, Xxxxxx 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 Xxxxxx, as underwriter. The Fund shall also pay Xxxxxx 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 Xxxxxx 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 Xxxxxx shall mean all
expenses borne by Xxxxxx or by any other person with which Xxxxxx 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
(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 Xxxxxx, any of its affiliates, or any other
person has agreed to bear without reimbursement.
Section 1.9 Xxxxxx 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 Xxxxxx 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 Xxxxxx 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
Xxxxxx 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 Xxxxxx may
reasonably request.
Section 2.3 The Fund shall pay to Xxxxxx, 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 Xxxxxx 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 Xxxxxx 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. Xxxxxx 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 Xxxxxx'x 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 Xxxxxx
to do so, Xxxxxx 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 Xxxxxx
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 Xxxxxx and any dealers with whom Xxxxxx 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 Xxxxxx, its several
officers and directors, and any person who controls Xxxxxx 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 Xxxxxx, 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 Xxxxxx,
its officers or directors, and any such controlling person shall not be deemed
to cover any claims, demands, liabilities, or expenses arising out of or based
upon any statements or representations made by Xxxxxx 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 Xxxxxx pursuant to
paragraph 2.2 hereof; and further provided that the Fund's agreement to
indemnify Xxxxxx 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 Xxxxxx would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties, or
by reason of Xxxxxx'x reckless disregard of its obligations and duties under
this Agreement. The Fund's agreement to indemnify Xxxxxx, 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 Xxxxxx,
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
Xxxxxx, its officers and directors, or any controlling person, and shall survive
the delivery of any Shares. This agreement of indemnity will inure exclusively
to Xxxxxx'x 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 Xxxxxx 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 Xxxxxx 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 Xxxxxx 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 Xxxxxx to the Fund and required to be stated in such answers or
necessary to make such information not misleading. Xxxxxx'x agreement to
indemnify the Fund, its officers and trustees, and any such controlling person,
as aforesaid, is expressly conditioned upon Xxxxxx'x 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 Xxxxxx at its principal office in Minot, North Dakota, and sent to
Xxxxxx 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 Xxxxxx of any such action shall not relieve Xxxxxx from any liability
that Xxxxxx 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 Xxxxxx'x indemnity
agreement contained in this paragraph 4.2. Xxxxxx agrees to notify the Fund
promptly of the commencement of any litigation or proceedings against Xxxxxx 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 Xxxxxx 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 XXXXXX
Section 6.1 The Fund agrees to advise Xxxxxx immediately in writing:
(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 April __, 2004, and
thereafter shall continue automatically for successive annual periods ending on
April __, 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 0000 Xxx) of the Fund's Trustees who are not interested
persons (as defined in the 0000 Xxx) 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 0000 Xxx) of the outstanding voting securities
of the Fund or (b) on 90 days' written notice by Xxxxxx. 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
Xxxxxx may from time to time serve as directors, officers, and employees of
corporations and business trusts (including other investment companies) and that
Xxxxxx 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 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.
The Integrity Income Fund
By:
Title:
Date: April , 2003
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Accepted:
Xxxxxx Capital Corporation
By:
Title:
Date: April , 2003
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