UNDERWRITING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this 6th of November, 1996, by and between LifeUSA
Funds, Inc., a Minnesota corporation (the "Fund"), for and on behalf of each
series of the Fund's shares (each such series is referred to hereinafter as a
"Portfolio" or "Portfolios", as appropriate) and LifeUSA Securities, Inc., a
Minnesota corporation ("LSI").
WITNESSETH:
1. UNDERWRITING SERVICES.
The Fund on behalf of each Portfolio hereby engages LSI, and LSI hereby
agrees to act, as principal underwriter for each Portfolio in connection with
the sale and distribution of the shares of each Portfolio of the Fund to the
public, either through dealers or otherwise. LSI agrees to offer such shares for
sale at all times when such shares are available for sale and may lawfully be
offered for sale and sold. The Fund and its Portfolios will include the surname
"LifeUSA" in their names and will have the right to use such name for so long as
LSI serves as principal underwriter.
As used herein, "Portfolios" of the Fund is defined as the Series A,
Series B, Series C, Series D, Series E and Series F Common Shares of the Fund
and any other series which may hereinafter be created by the Fund's Board of
Directors.
2. SALE OF PORTFOLIO SHARES.
The shares of each Portfolio are to be sold only on the following terms:
(a) All subscriptions, offers or sales shall be subject to acceptance or
rejection by the Fund. Any offer or sale shall be conclusively presumed to have
been accepted by the Fund if the Fund shall fail to notify LSI of the rejection
of such offer or sale prior to the computation of the net asset value of the
applicable Portfolio's shares next following receipt by the Fund of notice of
such offer or sale.
(b) No share of a Portfolio shall be sold by LSI (i) for any amount less
than the net asset value of such share, computed as provided in the Bylaws of
the Fund, or (ii) for any consideration other than cash, or, pursuant to any
exchange privilege provided for by such Portfolio's currently effective
Prospectus or Statement of Additional Information, shares of any other
investment company for which LSI acts as an underwriter. In addition, except as
provided below or in the Portfolio's currently effective Prospectus or Statement
of Additional Information, all Portfolio shares that are sold by LSI shall be
sold at the applicable public offering price, as hereinafter defined, provided
that, in the case of sales of such shares to or through bona fide dealers in
securities, LSI may allow, or sell at, a discount from said public offering
price to such dealers, which discount shall be no greater than the "sales load"
hereinafter referred to.
(c) The public offering price of Portfolio shares shall be the current net
asset value thereof (computed as provided in the Bylaws of the Fund) plus the
applicable "sales load" or loading charge, if any, which shall be such
percentage of the public offering price, computed to the nearest cent, as may be
agreed upon by the Fund and LSI and specifically approved by the Board of
Directors of the Fund, provided that no schedule of sales loads shall be
effective until set forth in a Portfolio's prospectus meeting the requirements
of the Securities Act of 1933. Said sales loads may be graduated on a scale
based on the dollar amount of shares sold.
(d) The front-end sales charge, if any, for any Portfolio may, at the
discretion of the Fund and LSI, be increased, reduced or eliminated as permitted
by the Investment Company Act of 1940, and the rules and regulations thereunder,
as they may be amended from time to time, or as set forth elsewhere in this
Agreement, provided that, if necessary, such increase, reduction or elimination
shall be set forth in the Prospectus for such Portfolio, and provided that a
Portfolio shall in no event receive for any shares sold an amount less than the
net asset value thereof.
3. INVESTMENT OF DIVIDEND AND DISTRIBUTIONS.
The Fund may extend to its shareholders the right to purchase shares issued
by each Portfolio of the Fund at the net asset value thereof with the proceeds
of any dividend or capital gain distribution paid or payable by a Portfolio (or
any other fund for which LSI serves as underwriter) to its shareholders.
4. REGISTRATION OF SHARES.
The Fund agrees to make prompt and reasonable efforts to effect and keep in
effect, at its own expense, the registration or qualification of each
Portfolio's shares for sale in such jurisdictions as the Fund may designate. LSI
agrees to provide the Fund with any information the Fund may request to satisfy
the registration or qualification requirements needed to offer Portfolio shares
for sale in each jurisdiction where LSI or any of its agents offers such shares
for sale.
5. INFORMATION TO BE FURNISHED TO LSI.
The Fund agrees that it will furnish LSI with such information with respect
to the affairs and accounts of the Fund (and each Portfolio thereof) as LSI may
from time to time reasonably require, and further agrees that LSI, at all
reasonable times, shall be permitted to inspect the books and records of the
Fund.
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6. ALLOCATION OF EXPENSES.
During the period of this contract, the Fund shall pay or cause to be paid
all expenses, costs and fees incurred by the Fund which are not assumed by LSI
or Investment Advisers, Inc. ("Advisers"). LSI agrees to provide, and shall pay
costs which it incurs in connection with providing personal services to
shareholders (such costs are referred to as "Shareholder Servicing Costs").
Shareholder Servicing Costs include all expenses of LSI incurred in connection
with providing administrative or accounting services to shareholders of each
Portfolio not otherwise provided by Advisers, including, but not limited to, an
allocation of LSI's overhead and payments made to persons, including employees
of LSI, who respond to inquiries of shareholders regarding their ownership of
Portfolio shares, or who provide other administrative or accounting services.
Notwithstanding the foregoing, if the National Association of Securities
Dealers, Inc. ("NASD") adopts a definition of "service fee" for purposes of the
NASD Conduct Rules that differs from the definition of Shareholder Servicing
Costs in this paragraph, or if the NASD adopts a related definition intended to
define the same concept, the definition of Shareholder Servicing Costs in this
paragraph shall be automatically amended, without further action of the parties,
to conform to such NASD definition. LSI shall also pay all costs of distributing
the shares of each Portfolio ("Distribution Expenses"). Distribution Expenses
include, but are not limited to, initial and ongoing sales compensation (in
addition to sales loads) paid to registered representatives of LSI and to other
broker-dealers and participating financial institutions; 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 LSI'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. Advisers, rather than LSI, may bear certain of the expenses referred
to in this paragraph, but LSI shall be primarily liable for such expenses until
paid.
7. COMPENSATION TO LSI.
As compensation for all of its services and its costs assumed under this
contract, LSI shall receive the following forms of and amounts of compensation:
(a) LSI shall be entitled to receive and retain the front-end sales charge
(if any) imposed in connection with the sale of Portfolio shares, as set forth
in the applicable Portfolio's current Prospectus. Up to the entire amount of the
front-end sales charge (if any) with respect to each applicable Portfolio may be
reallowed by LSI to broker-dealers and participating financial institutions in
connection with their sale of Portfolio shares. The amount of the front-end
sales charge (if any) may be retained or deducted by LSI from any sums received
by it in payment for shares so sold. If such amount is not deducted by LSI from
such payments, such amount shall be paid to LSI by a Portfolio within a
reasonable time period after the close of any month during which any such sales
were made by LSI and payment therefor received by a Portfolio.
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(b) LSI shall be entitled to receive the following 12b-1 fees, payable
under the Plan of Distribution adopted by each Portfolio in accordance with Rule
12b-1 under the Investment Company Act of 1940 (the "Plan"):
(i) The Portfolios: Each Portfolio is obligated to pay LSI a total fee in
connection with the distribution-related services and servicing of shareholder
accounts. The total fee paid by each Portfolio shall be calculated and payable
monthly, at an annual rate of .75% of the value of the respective Portfolio's
average daily net assets. All or any portion of such total fee may be payable as
a Distribution Fee, and all or any portion of such total fee may be payable as a
Shareholder Servicing Fee, as determined from time to time by the Fund's Board
of Directors. Until further action by the Board, .50 of 1.00% shall be
designated and payable as a Distribution Fee and .25 of 1.00% shall be
designated and payable as a Shareholder Servicing Fee.
(ii) Future Portfolios: Upon the creation of any new series of shares for
the Fund, the respective levels of sales charges and 12b-1 fees shall be
determined by the Board of Directors of the Fund, subject to any necessary
shareholder approval and only in accordance with any applicable rule or rules
promulgated by the Securities and Exchange Commission and/or the National
Association of Securities Dealers, Inc. All or any portion of the 12b-1 fees
referred to in this paragraph may be payable as a Distribution Fee, and all or
any portion of such 12b-1 fees may be payable as a Shareholder Servicing Fee, as
determined from time to time by the Fund's Board of Directors.
(iii) Other Information: Average daily net assets shall be computed in
accordance with the Prospectus of each applicable Portfolio. Amounts payable to
LSI under the Plan may exceed or be less than LSI's actual distribution expenses
and shareholder servicing costs. In the event such distribution expenses and/or
shareholder servicing expenses exceed amounts payable to LSI under the Plan, LSI
shall not be entitled to reimbursement from a Portfolio.
(c) In each year during which this contract remains in effect, LSI will
prepare and furnish to the Board of Directors of the Fund, and the Board will
review, on a quarterly basis written reports complying with the requirements of
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") that set
forth the amounts expended under this contract and the Plan and the purposes for
which those expenditures were made.
8. LIMITATION OF LSI'S AUTHORITY.
LSI 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. In connection with its role as underwriter of Portfolio
shares, LSI shall at all times be deemed an agent of the Fund and shall sell
Portfolio shares to purchasers thereof as agent and not as principal.
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9. SUBSCRIPTION FOR SHARES - REFUND FOR CANCELED ORDERS.
LSI shall effect the subscription of Portfolio shares as agent for the
Fund. In the event that an order for the purchase of shares of the Portfolio is
placed with LSI by a customer or dealer and subsequently fails or is canceled,
LSI, on behalf of such customer or dealer, shall forthwith cancel the
subscription for such shares entered on the books of the Fund, and, if LSI has
paid the Fund for such shares, shall be entitled to receive from the Fund in
refund of such payment the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of
cancellation by LSI.
If payment for any purchase order is not received in accordance with the
terms of the then current Prospectus or if an order for purchase, redemption,
transfer or registration of shares is changed or altered, each Portfolio
reserves the right, without notice, to cancel the sale, redemption, transfer or
registration and to hold LSI responsible for any loss sustained as a result
thereof.
10. LSI'S UNDERTAKINGS.
No person is authorized to make any representations concerning Portfolio
shares except those contained in the then current Prospectus (and/or Statement
of Additional Information). LSI shall not sell Portfolio shares pursuant to this
Agreement unless the then current Prospectus is furnished to the purchaser prior
to the offer and sale. In offering and selling Portfolio shares, LSI shall rely
solely on the representations contained in the then current Prospectus (and/or
Statement of Additional Information). In offering and selling Portfolio shares
and in preparing any supplemental sales literature, LSI shall comply with all
applicable state and federal laws and regulations and all applicable rules of
the NASD. In the event of the suspension, revocation, cancellation or other
impairment of LSI's membership in the NASD or LSI's registration, license, or
qualification to sell Portfolio shares under any applicable state or federal law
or regulation, LSI shall give the Fund prompt notice of such suspension,
revocation, cancellation or other impairment, and LSI's authority shall
thereupon terminate as provided in paragraph 16.
11. REPRESENTATIONS AND AGREEMENTS OF LSI.
By accepting this Agreement, LSI represents that it: (i) is registered as a
broker-dealer under the Securities Exchange Act of 1934, as amended; (ii) is
qualified to act as a dealer in each jurisdiction in which it will offer
Portfolio shares; (iii) is a member in good standing of the NASD; (iv) will
maintain such registrations, qualifications and memberships throughout the term
of this Agreement.
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12. LSI'S EMPLOYEES.
By accepting this Agreement, LSI assumes full responsibility for the
actions and course of conduct of its registered representatives in the
solicitation of purchases of Portfolio shares. LSI shall provide thorough and
prior training to its registered representatives concerning the selling methods
to be used in connection with the offer and sale of Portfolio shares, giving
special emphasis to the principles of full and fair disclosure to prospective
investors.
13. FIDELITY BOND AND INDEMNIFICATION BY LSI.
LSI represents that all directors, officers, partners, employees or
registered representatives of LSI who are authorized pursuant to this Agreement
to sell Portfolio shares or who have access to monies belonging to the
Portfolios are and shall be covered by a blanket fidelity bond, including
coverage for larceny and embezzlement, issued by a reputable bonding company.
The bond shall be maintained by LSI at its own expense. Such bond shall be at
least of the form, type and amount required under the NASD Conduct Rules. The
Fund may require evidence, satisfactory to it, that such coverage is in force.
LSI shall give prompt written notice to the Fund to the extent of the Fund's
loss due to activities covered by the bond. If there is any deficiency amount,
whether due to a deductible or otherwise, LSI shall promptly pay to the Fund
such amount on demand, and LSI hereby indemnifies and holds harmless the Fund
from any such deficiency and from the costs of collection thereof, including
reasonable attorneys fees.
LSI also agrees to indemnify and hold harmless the Fund, the Portfolios,
and their officers, directors and employees and each person who controls them
within the meaning of Section 15 of the Securities Act of 1933 (hereinafter in
this paragraph referred to as Defendants) against any and all losses, claims,
damages or liabilities, including reasonable attorneys fees, to which they may
become subject under the Securities Act of 1933, the Securities Exchange Act of
1934, or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon: (i) any oral or written
misrepresentations, any unauthorized action or statement, or any other willful,
reckless or negligent violation of any law, regulation, contract or other
arrangement by LSI or its officers, directors, employees or agents, or (ii) the
failure of LSI or its officers, directors, employees or agents to comply with
any applicable provisions of this Agreement provided that this indemnity
agreement is subject to the condition that notice be given as provided below.
Upon the presentation in writing of any claim or the commencement of any suit
against any Defendant in respect of which indemnification may be sought from LSI
on account of its agreement contained in the preceding sentence, such Defendant
shall with reasonable promptness give notice in writing of such suit to LSI, but
failure to so give such notice shall not relieve LSI from any liability that it
may have to the Defendants otherwise than on account of this indemnity
agreement. LSI shall be entitled to participate at its own expense in the
defense, or if it so elects, to assume the defense of any such claim or suit
with counsel chosen by it and satisfactory to the Defendants who are parties to
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such suit or against whom such claim is presented. If the Defendant elects to
assume the defense and retain such counsel as herein provided, such Defendant
shall bear the fees and expenses subsequently incurred of any additional counsel
retained by them, except the reasonable costs of investigation and such other
costs as are approved by LSI; provided, that if counsel for an indemnified
Defendant determines in good faith that there is a conflict which requires
separate representation for the indemnified Defendant, the indemnified Defendant
shall be entitled to indemnification for the reasonable expenses of one
additional counsel and local counsel to the extent provided above. Such counsel
shall, to the fullest extent consistent with its professional responsibilities,
cooperate with LSI and its counsel. LSI's obligations under this paragraph shall
survive the termination of this Agreement.
14. FIRST CLAIM ON EARNINGS AND LEGAL PROCEEDINGS.
In order to secure the full and prompt payment by LSI of any and all
indebtedness due from LSI to the Fund, the Fund will have a first security
interest in and lien on any compensation due at any time to LSI from the Fund
under this Agreement. This means that the Fund, as and when it elects, may
withhold payment to LSI of all or any part of LSI's compensation, and such
withheld amounts will be applied to the reduction of any debt owed by LSI to the
Fund. Release of any part of LSI's compensation while a debt is owed by LSI to
the Fund will not constitute a waiver of the Fund's first security interest in
LSI's compensation. The Fund's claim to LSI's compensation takes precedence over
claims of LSI's other creditors to the full extent permitted by applicable law.
LSI has no right to commence any legal proceedings on behalf of or in the name
of the Fund.
15. FREEDOM TO DEAL WITH THIRD PARTIES.
LSI shall be free to render to others services of a nature either similar
to or different from those rendered under this contract, except such as may
impair its performance of the services and duties to be rendered by it
hereunder.
16. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT.
(a) This Agreement shall be effective as to the Fund and each Portfolio
thereof on November 6, 1996. Unless sooner terminated as hereinafter provided,
this Agreement shall continue in effect only so long as such continuance is
specifically approved at least annually (a) by the Board of Directors of the
Fund, or with respect to a particular Portfolio by the vote of the holders of a
majority of the outstanding voting securities of such Portfolio, and (b) by a
majority of the directors who are not interested persons of LSI or of the Fund,
cast in person at a meeting called for the purpose of voting on such approval;
provided that, if a majority of the outstanding voting securities of any of the
Portfolios approves this Agreement, this Agreement shall continue in effect with
respect to such approving Portfolio whether or not the shareholders of any other
Portfolio of the Fund approve this Agreement.
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(b) This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by LSI, upon sixty
(60) days' written notice to the other party. This Agreement may be terminated
with respect to a particular Portfolio at any time without the payment of any
penalty by the vote of the holders of a majority of the outstanding voting
securities of such Portfolio, upon sixty (60) days' written notice to LSI.
(c) This Agreement shall automatically terminate in the event of its
"assignment" (as defined by the provisions of the 1940 Act).
(d) This Agreement shall automatically terminate in the event of the
suspension, revocation, cancellation, or other impairment of LSI's membership in
the NASD or LSI's registration, license or qualification to sell shares of the
Portfolios under any applicable state or federal law or regulation.
(e) Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities of a Portfolio or the
Fund shall mean the vote of 67% or more of such securities if the holders of
more than 50% of such securities are present in person or by proxy or the vote
of more than 50% of such securities, whichever is less.
17. AMENDMENTS TO AGREEMENT.
No material amendment to this Agreement shall be effective until approved
by a vote of the Board of Directors of the Fund, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in this Agreement, cast in person at a meeting
called for the purpose of voting on such amendment. Additionally, no amendment
to this Agreement that materially increases the distribution fee and/or
shareholder servicing fee payable by any Portfolio hereunder shall be effective
until any necessary amendment to the applicable Rule 12b-1 Plan has been
approved by a vote of the holders of a majority of the outstanding voting
securities of the applicable Portfolio and approved by the Fund's Board of
Directors as required under Rule 12b-1 under the Investment Company Act of 1940.
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18. NOTICES.
Any notice under this Agreement shall be in writing, addressed, delivered
or mailed, postage prepaid to the other party at such address as such other
party may designate in writing for receipt of such notice.
IN WITNESS WHEREOF, the Fund and LSI have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
LIFEUSA FUNDS, INC. LIFEUSA SECURITIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx By: /s/Bardea X. Xxxxxxx
Its President Its: Sr. Vice President
Chief Operating Officer
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