EXHIBIT 99.6A
FORM OF DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT
December 3, 1990
ND Capital, Inc.
000 Xxxxx Xxxxxxxx
Xxxxx, XX 00000
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, ND Insured Income Fund, Inc. (the "Fund"), an open-
end, non-diversified, management investment company organized as a corporation
under the laws of the State of North Dakota, has agreed that ND Capital, Inc.
("Capital"), shall be, for the period of this Agreement, the principal
underwriter of shares issued by the Fund (the "Shares").
1. Services as Underwriter
1.1 Capital 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 (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").
1.2 Capital 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.
1.3 All activities by Capital 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.
1.4 Capital will provide one or more persons during normal business
hours to respond to telephone questions concerning the Fund.
1.5 Capital 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.
1.6 Capital 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. Capital will act only on its own behalf as principal
should it choose to enter into selling agreements with selected dealers or
others.
1.7 Capital shall retain the sales charge resulting from the sale of
Fund Shares from which it shall allow discounts from the applicable public
offering price to investment dealers. The usual discount allowed to dealers is
set forth in the following table. Upon notice to all dealers with whom it has
sales agreements, Capital may reallow up to the full applicable sales charge as
shown in the table during periods or for transactions specified in such notice,
and such reallowances may be based upon attainment of minimum sales levels.
Sales Charge
Allowed to
As a As a Dealers as a
Percentage of Percentage of Percentage of
Offering Price Net Asset Value Offering Price
Amount of Purchase
Less than $100,000 4.50% 4.71% 4.00%
$100,000 but less than 250,000 3.50% 3.63% 3.00%
$250,000 but less than 500,000 2.50% 2.56% 2.25%
$500,000 but less than 1,000,000 2.00% 2.04% 1.75%
$1,000,000 and over .1O% .10% .10%
'Rounded to the nearest one-hundredth percent
1.8 Capital shall also provide information and administrative services for
Fund shareholders and may enter into arrangements with various financial
services firms, such as broker-dealer firms or banks ("firms"), that provide
services and facilities for their customers or clients who are shareholders of
the Fund. Such administrative services and assistance may include, but are not
limited to, establishing and maintaining shareholder accounts and records,
processing purchase and redemption transactions, answering routine inquiries
regarding the Fund, and such other services as may be agreed upon from time to
time and permitted by applicable statute, rule, or regulation. Capital, shall
bear all of its expenses of providing such services, including the payment of
any service fees. In return, the Fund shall pay Capital a fee, payable monthly,
at the annual rate of .10 of 1% of average daily net assets of the Fund.
Capital, in turn, shall pay each firm a service fee at an annual rate of up to
.10 of 1% of net assets of those accounts in the Fund that it maintains and
services. A firm becomes eligible for the service fee based on assets in the
accounts in the month following the month of purchase, and the fee continues
until terminated by Capital or the Fund. The fees shall be calculated monthly
and paid quarterly. Capital may provide some of the above services and may
retain any portion of the fee not paid to firms to compensate itself for
administrative functions performed for the Fund. The administrative service fee
payable to Capital shall be based only upon Fund assets in accounts for which
there is a firm listed on the Fund's records. The effective administrative
service fee rate to be charged against all assets of the Fund
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while this procedure is in effect will depend upon the proportion of Fund assets
that is in accounts for which there is a firm of record. The administrative
service fee may be increased to an annual rate of .25 of 1% of average daily net
assets in the discretion of the Board of Directors and without shareholder
approval.
1.9 Capital 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 Capital shall mean
all expenses borne by Capital or by any other person with which Capital 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; and
(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;
except that distribution expenses shall not include any expenditures in
connection with services which Capital, any of its affiliates, or any other
person has agreed to bear without reimbursement.
1.10 Capital 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
purposes therefor, as well as any supplemental reports as the Directors, from
time to time, may reasonably request.
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2. Duties of the Fund
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 Capital may designate.
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 Capital 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
Capital 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 Shares, (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 Capital may
reasonably request.
3. Representations and Warranties
The Fund represents to Capital 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 Capital 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 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. Capital
may, but shall not be obligated to, propose from time to time such amendment or
amendments to
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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 Capital'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 Capital to do so, Capital may, at is 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 Capital
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.
4. Indemnification
4.1 The Fund authorizes Capital and any dealer with whom Capital 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 Capital, its several
officers and directors, and any person who controls Capital 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 Capital, 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 Capital,
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 Capital 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 Capital pursuant to
paragraph 2.2 hereof; and further provided that the Fund's agreement to
indemnify Capital 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 Capital would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of Capital's reckless disregard of its obligations and
duties under this
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Agreement. The Fund's agreement to indemnify Capital, 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
Capital, 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 or alleged 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 Capital, its officers and directors, or any controlling person,
and shall survive the delivery of any Shares. This Agreement of indemnity will
insure exclusively to Capital'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 Capital
promptly of the commencement of any litigation or proceedings against the Fund
or any of its officers or directors in connection with the issuance and sale of
any Shares.
4.2 Capital agrees to indemnify, defend, and hold the Fund, its
several officers and directors, 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 directors,
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 directors, 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 Capital 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 Capital to the Fund and required to be stated in such answers or
necessary to make such information not misleading. Capital's agreement to
indemnify the Fund, its officers and directors, and any such controlling person,
as aforesaid, is expressly conditioned upon Capital's being notified of any
action brought against the Fund, its officers or di-
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rectors, or any such controlling person, such notification be given by letter or
telegram addressed to Capital at its principal office in Minot, North Dakota,
and sent to Capital 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 Capital of any such action shall not relieve Capital
from any liability that Capital may have to the Fund, its officers or directors,
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 Capital's
indemnity agreement contained in this paragraph 4.2. Capital agrees to notify
the Fund promptly of the commencement of any litigation or proceedings against
Capital or any of its officers or directors in connection with the issuance and
sale of any Shares.
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
expanses 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
tile conduct of the defense of such action.
5. Effectiveness of Registration
None of the Shares shall be offered by either Capital 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.
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6. Notice to Capital
The Fund agrees to advise Capital 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 statements 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.
7. Term of Agreement
This Agreement shall continue until December 3, 1992, and thereafter
shall continue automatically for successive annual periods ending on December 3
of each year, provided such continuance is specifically approved at least
annually by (a) the Fund's Board of Directors and (b) a vote of a majority (as
defined in the 0000 Xxx) of the Fund's Directors who are not interested persons
(as defined in the 0000 Xxx) of the Fund and who have no direct or indirect
financial interest in this Agreement (the "Qualified Directors"), 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 Directors 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 Capital. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
8. Miscellaneous
8.1 The Fund recognizes that directors, officers, and employees of
Capital may from time to time serve as directors, officers, and employees of
corporations and business trusts (including other investment companies) and that
Capital or its
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affiliates may enter into distribution or other agreements with such other
corporations and trusts.
8.2 It is expressly agreed that the obligations of the Fund hereunder
shall not be binding upon any of the directors, 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 Directors and signed by an authorized officer of the Fund,
acting as such, and neither such authorization by such Director 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.
8.3 This Agreement shall be construed in accordance with the laws of
the State of North Dakota.
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.
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 0000 Xxx.
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.
ND INSURED INCOME FUND, INC.
By: /Xxxxxx X. Xxxxxxx
Title: President
Date: December 3, 1990
Accepted:
ND CAPITAL, INC.
By: Xxxxxx X. Xxxxxxx
Title: President
Date: December 3, 1990
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