EXHIBIT (E)
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DISTRIBUTION AGREEMENT
WITH
QUESTAR CAPITAL CORPORATION
THE AVALON FUND OF MARYLAND, INC.
DISTRIBUTION AGREEMENT
(AS RESTATED AND REAPPROVED 4/17/00)
This DISTRIBUTION AGREEMENT (the "Agreement") is amended and restated in
the following form as of this 17th day of April, 2000 by and among The Avalon
Company of Maryland, Inc. (the "Company"), a Maryland corporation, and Questar
Capital Corporation (the "Distributor"), a Michigan corporation.
WITNESSETH THAT:
WHEREAS, the Company is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and has registered its shares of common stock (the "Shares") under
the Securities Act of 1933, as amended (the "1933 Act") in one distinct series
of shares known as The Avalon Capital Appreciation Fund, and has authority from
time to time to designate such additional shares as the Board of Directors of
the Company deems advisable (each a "Fund" and together the "Funds").
WHEREAS, the Distributor is a broker-dealer registered with the U.S.
Securities and Exchange Commission (the "SEC") and is a member, in good
standing, of the National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, the Company has adopted a plan of distribution (the "Distribution
Plan") pursuant to Rule 12b-1 under the 1940 Act relating to the payment from
Fund assets of distribution expenses; and
WHEREAS, the Company and the Distributor desire to enter into this
Agreement pursuant to which the Distributor will provide distribution services
for the Funds identified on Schedule A, as may be amended from time to time, on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Company and the Distributor, all intending to
be legally bound hereby, agree as follows:
6. APPOINTMENT OF DISTRIBUTOR. The Company hereby appoints the
Distributor as its exclusive agent for the distribution of Fund
Shares, and the Distributor hereby accepts such appointment under
the terms of this Agreement. The Funds shall not sell any Shares
to any person except to fill orders for the Shares received
through the Distributor; provided, however, that the foregoing
exclusive right shall not apply: (i) to Shares issued or sold in
connection with the merger or consolidation of any other
investment company with any Fund or the acquisition by purchase
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or otherwise of all or substantially all of the assets of any
investment company or substantially all of the outstanding shares
of any such company by any Fund; (ii) to Shares which may be
offered by a Fund to its shareholders for reinvestment of cash
distributed from capital gains realized or net investment income
of the Fund; or (iii) to Shares which may be issued to
shareholders of other funds who exercise any exchange privilege
set forth in a Fund's Prospectus. Notwithstanding any other
provision hereof, the Company may terminate, suspend, or withdraw
the offering of Shares of any one or more of the Funds whenever,
in its sole discretion, it deems such action to be desirable, and
the Distributor shall process no further orders for Shares of the
affected Funds after it receives notice of such termination,
suspension or withdrawal.
7. COMPANY DOCUMENTS. The Company has provided the Distributor with
properly certified or authenticated copies of the following
Company related documents in effect on the date hereof: the
Company's organizational documents, including Article's of
Incorporation and By- Laws; the Company's Registration Statement
on Form N-1A, including all exhibits thereto; the Company's most
current Prospectus and Statement of Additional Information; and
resolutions of the Company's Board of Directors authorizing the
appointment of the Distributor and approving this Agreement. The
Company shall promptly provide to the Distributor copies,
properly certified or authenticated, of all amendments or
supplements to the foregoing. The Company shall provide to the
Distributor copies of all other information which the Distributor
may reasonably request for use in connection with the
distribution of Shares, including, but not limited to, a
certified copy of all financial statements relating to each Fund
prepared by the Company's independent public accountants. The
Company shall also supply the Distributor with such number of
copies of the current Prospectus, Statement of Additional
Information and shareholder reports for each Fund as the
Distributor shall reasonably request.
8. DISTRIBUTION SERVICES. The Distributor shall sell and repurchase
Shares as set forth below, subject to the registration
requirements of the 1933 Act and the rules and regulations
thereunder, and the laws governing the sale of securities in the
various states ("Blue Sky Laws"):
a. The Distributor, as agent for each Fund, shall sell Shares to the
public against orders therefor at the public offering price, which
shall be the net asset value of the Shares then in effect.
b. The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information for each
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Fund. The net asset value of the Shares shall be calculated by the
Company or by another entity on behalf of the Company. The Distributor
shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
c. Upon receipt of purchase instructions, the Distributor shall transmit
such instructions to the Company or its transfer agent for
registration of the Shares purchased.
d. The Distributor shall also have the right to take, as agent for the
Company, all actions which, in the Distributor's judgment, are
necessary to effect the distribution of Shares.
e. Nothing in this Agreement shall prevent the Distributor or any
"affiliated person" of the Distributor from buying, selling or trading
any securities for its or their own account or for the accounts of
others for whom it or they may be acting; provided, however, that the
Distributor expressly agrees that it shall not, for its own account,
purchase any Shares of any Fund except for investment purposes and
that it shall not for its own account sell any such Shares except for
redemption of such Shares by a Fund, and that it shall not undertake
activities which, in its judgment, would adversely affect the
performance of its obligations to the Company on behalf of each Fund
under this Agreement.
f. The Distributor, as agent for the Company, shall repurchase Shares at
such prices and upon such terms and conditions as shall be specified
in the Prospectus of the relevant Fund(s).
9. DISTRIBUTION SUPPORT SERVICES. In addition to the sale and
repurchase of Shares, the Distributor shall perform the
distribution support services set forth on Schedule B attached
hereto, as may be amended from time to time. Such distribution
support services shall include: Review of sales and marketing
material and submission to the NASD; NASD required recordkeeping;
and quarterly reports to the Company's Board of Director s. Such
distribution support services may also include: fulfillment
services, including telemarketing, printing, mailing and
follow-up tracking of sales leads; and licensing Company
personnel as registered representatives of the Distributor and
related supervisory activities.
10. REASONABLE EFFORTS. The Distributor shall use all reasonable
efforts in connection with the distribution of Shares. The
Distributor shall have no obligation to sell any specific number
of Shares and shall only sell Shares against orders received
therefor. The Company shall retain the right to refuse at any
time to sell any Shares for any reason deemed adequate by it.
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11. COMPLIANCE. In furtherance of the distribution services being
provided hereunder, the Distributor and the Company agree as
follows:
a. The Distributor shall comply with the Code of Conduct of the NASD and
the securities laws of any jurisdiction in which it sells, directly or
indirectly, Shares.
b. The Distributor shall require each dealer with whom the Distributor
has a selling agreement to conform to the applicable provisions of the
current Prospectus and Statement of Additional Information for the
relevant Fund(s), with respect to the public offering price of the
Shares.
c. The Company agrees to furnish to the Distributor sufficient copies of
any agreements, plans, communications with the public or other
materials it intends to use in connection with any sales of Shares in
a timely manner in order to allow the Distributor to review, approve
and file such materials with the appropriate regulatory authorities
and obtain clearance for use. The Company agrees not to use any such
materials until so filed and cleared for use by appropriate
authorities and the Distributor.
d. The Distributor, at its own expense, shall qualify and maintain its
qualification as a broker or dealer, or otherwise, under all
applicable Federal or state laws required to permit the sale of Shares
in such states as shall be mutually agreed upon by the parties;
provided, however that the Distributor shall have no obligation to
register as a broker or dealer under the Blue Sky Laws of any
jurisdiction if it determines that registering or maintaining
registration in such jurisdiction would be uneconomical.
Notwithstanding any other terms of the paragraph, the Distributor
represents it is currently registered to do business in the State of
Michigan, and will continue to maintain said registration until this
agreement is terminated.
e. The Distributor shall not, in connection with any sale or solicitation
of a sale of Shares, make or authorize any representative, service
organization, broker or dealer to make, any representations concerning
the Shares except those contained in the current Prospectus covering
the Shares and in communications with the public or sales materials
approved by the Distributor as information supplemental to such
Prospectus.
12. EXPENSES. Expenses shall be allocated as follows:
a. The relevant Fund shall bear the following expenses: preparation,
setting in type, and printing of sufficient copies of the Company
Prospectus and Statement of Additional Information for distribution to
existing shareholders; preparation and printing of reports and other
communications to existing shareholders;
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distribution of copies of the Prospectus, Statement of Additional
Information and all other communications to existing shareholders;
registration of the Shares under the Federal securities laws;
qualification of the Shares for sale in the jurisdictions mutually
agreed upon by the Company and the Distributor; transfer
agent/shareholder servicing agent services; supplying information,
prices and other data to be furnished by the Company with respect to
the Fund under this Agreement; and any original issue taxes or
transfer taxes applicable to the sale or delivery of the Shares or
certificates therefor.
b. The Distributor shall pay all other expenses incident to the sale and
distribution of the Shares sold hereunder, including, without
limitation: printing and distributing copies of the Prospectus,
Statement of Additional Information and reports prepared for use in
connection with the offering of Shares for sale to the public;
advertising in connection with such offering, including public
relations services, sales presentations, media charges, preparation,
printing and mailing of advertising and sales literature; data
processing necessary to support a distribution effort; distribution
and shareholder servicing activities of broker- dealers and other
financial institutions; filing fees required by regulatory authorities
for sales literature and advertising materials, any additional out-of-
pocket expenses incurred in connection with the foregoing and any
other costs of distribution.
13. COMPENSATION. For the distribution and distribution support
services provided by the Distributor pursuant to the terms of
this Agreement, the Distributor shall be entitled to receive and
retain the sales charges applicable to the Shares sold, as
disclosed in the current Prospectus of the relevant Fund(s).
14. USE OF DISTRIBUTOR'S NAME. The Company shall not use the name of
the Distributor or any of its affiliates in any Prospectus,
Statement of Additional Information, sales literature or other
material relating to a Fund in a manner not approved prior
thereto in writing by the Distributor; provided, however, that
the Distributor shall approve all uses of its own and its
affiliates' names that merely refer, in accurate terms, to their
appointments or that are required by the Securities and Exchange
Commission (the "SEC") or any state securities commission; and
further provided, that in no event shall such approval be
unreasonably withheld.
15. USE OF COMPANY'S NAME. Neither the Distributor nor any of its
affiliates shall use the name of the Company or of any Fund or
material relating to the Company or any Fund on any forms
(including any checks, bank drafts or bank statements) for other
than internal use in a manner not approved prior thereto by the
Company; provided, however, that the
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Company shall approve all uses of the name of the Company's and
of any Fund(s) that merely refer in accurate terms to the
appointment of the Distributor hereunder or that are required by
the SEC or any state securities commission; and further provided,
that in no event shall such approval be unreasonably withheld.
16. LIABILITY OF DISTRIBUTOR. The duties of the Distributor shall be
limited to those expressly set forth herein, and no implied
duties are assumed by or may be asserted against the Distributor
hereunder. The Distributor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by any Fund
in connection with the matters to which this Agreement relates,
except to the extent of loss resulting from willful misfeasance,
bad faith, negligence, or reckless disregard of its obligations
and duties under this Agreement. As used in this Section 11 and
in Section 12 (except the second paragraph of Section 12), the
term "Distributor" shall include directors, officers, employees
and other agents of the Distributor.
17. INDEMNIFICATION OF DISTRIBUTOR. Each Fund shall indemnify and
hold harmless the Distributor against any and all liabilities,
losses, damages, claims and expenses (including, without
limitation, reasonable attorneys' fees and disbursements and
investigation expenses incident thereto) which the Distributor
may incur or be required to pay hereafter, in connection with any
action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
the Distributor may be involved as a party or otherwise or with
which the Distributor may be threatened, by reason of the offer
or sale of Fund Shares pursuant to this Agreement, except to the
extent such claim arises out of the Distributor's own willful
misfeasance, bad faith, negligence or reckless disregard of its
obligations under this Agreement.
Any director, officer, employee, shareholder or agent of the Distributor
who may be or become an officer, Director, employee or agent of the Company
shall be deemed, when rendering services to the Company or acting on any
business of the Company (other than services or business in connection with the
Distributor's duties hereunder), to be rendering such services to or acting
solely for the Company and not as a director, officer, employee, shareholder or
agent, or one under the control or direction of the Distributor, even though
receiving a salary from the Distributor.
Each Fund agrees to indemnify and hold harmless the Distributor, and each
person, who controls the Distributor within the meaning of Section 15 of the
1933 Act, or Section 20 of the Securities Exchange Act of 1934, as amended
("1934 Act"), against any and all liabilities, losses, damages, claims and
expenses, joint or several (including, without limitation, reasonable attorneys'
fees and disbursements and investigation expenses incident thereto) to
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which they, or any of them, may become subject under the 1933 Act, the 1934 Act,
the 1940 Act or other Federal or state laws or regulations, at common law or
otherwise, insofar as such liabilities, losses, damages, claims and expenses (or
actions, suits or proceedings in respect thereof) arise out of or relate to any
untrue statement or alleged untrue statement of a material fact contained in a
Prospectus, Statement of Additional Information, supplement thereto, sales
literature or other written information prepared with respect to the Fund and
provided by the Company to the Distributor for the Distributor's use hereunder,
or arise out of or relate to any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading. The Distributor (or any person controlling the
Distributor) shall not be entitled to indemnity hereunder for any liabilities,
losses, damages, claims or expenses (or actions, suits or proceedings in respect
thereof) resulting from (i) an untrue statement or omission or alleged untrue
statement or omission made in the Prospectus, Statement of Additional
Information, or supplement, sales or other literature, in reliance upon and in
conformity with information furnished in writing to the Company by the
Distributor specifically for use therein or (ii) the Distributor's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations in the performance of this Agreement.
The Distributor agrees to indemnify and hold harmless each Fund, and each
person who controls the Company within the meaning of Section 15 of the 1933
Act, or Section 20 of the 1934 Act, against any and all liabilities, losses,
damages, claims and expenses, joint or several (including, without limitation
reasonable attorneys' fees and disbursements and investigation expenses incident
thereto) to which they, or any of them, may become subject under the 1933 Act,
the 1934 Act, the 1940 Act or other Federal or state laws, at common law or
otherwise, insofar as such liabilities, losses, damages, claims or expenses
arise out of or relate to any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus or Statement of Additional Information
or any supplement thereto, or arise out of or relate to any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if based upon
information furnished in writing to the Company by the Distributor specifically
for use therein.
A party seeking indemnification hereunder (the "Indemnitee") shall give
prompt written notice to the party from whom indemnification is sought
("Indemnitor") of a written assertion or claim of any threatened or pending
legal proceeding which may be subject to indemnity under this Section; provided,
however, that failure to notify the Indemnitor of such written assertion or
claim shall not relieve the Indemnitor of any liability arising from this
Section. The Indemnitor shall be entitled, if it so elects, to assume the
defense of any suit brought to enforce a claim subject to this Indemnity and
such defense shall be conducted by counsel chosen by the Indemnitor and
satisfactory to the Indemnitee; provided, however, that if the defendants
include both the Indemnitee and the Indemnitor, and the Indemnitee shall have
reasonably concluded that there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnitor
("conflict of interest"), the Indemnitor shall not have the right to elect to
defend such claim on behalf of the Indemnitee, and the Indemnitee shall have the
right to select separate counsel to defend such claim on behalf of
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the Indemnitee. In the event that the Indemnitor elects to assume the defense of
any suit pursuant to the preceding sentence and retains counsel satisfactory to
the Indemnitee, the Indemnitee shall bear the fees and expenses of additional
counsel retained by it, except for reasonable investigation costs which shall be
borne by the Indemnitor. If the Indemnitor (i) does not elect to assume the
defense of a claim, (ii) elects to assume the defense of a claim but chooses
counsel that is not satisfactory to the Indemnitee or (iii) has no right to
assume the defense of a claim because of a conflict of interest, the Indemnitor
shall advance or reimburse the Indemnitee, at the election of the Indemnitee,
reasonable fees and disbursements of any counsel retained by Indemnitee,
including reasonable investigation costs.
18. FORCE MAJEURE. The Distributor shall not be liable for any delays
or errors occurring by reason of circumstances not reasonably
foreseeable and beyond its control, including, but not limited,
to acts of civil or military authority, national emergencies,
work stoppages, fire, flood, catastrophe, acts of God,
insurrection, war, riot or failure of communica tion or power
supply. In the event of equipment breakdowns which are beyond the
reasonable control of the Distributor and not primarily
attributable to the failure of the Distributor to reasonably
maintain or provide for the maintenance of such equipment, the
Distributor shall, at no additional expense to the Company or any
Fund, take reasonable steps in good faith to minimize service
interruptions, but shall have no liability with respect thereto.
19. SCOPE OF DUTIES. The Distributor and the Company shall regularly
consult with each other regarding the Distributor's performance
of its obligations and its compensation under the foregoing
provisions. In connection therewith, the Company shall submit to
the Distributor at a reasonable time in advance of filing with
the SEC, copies of any amendments or supplements to the
registration statement of any Fund (including exhibits) under the
1940 Act and the 1933 Act, and at a reasonable time in advance of
their proposed use, copies of any amended or supplemented forms
relating to any plan, program or service offered by any Fund. Any
change in such materials that would require any change in the
Distributor's obligations under the foregoing provisions shall be
subject to the Distributor's approval. In the event that a change
in such documents or in the procedures contained therein
increases the cost or burden to the Distributor of performing its
obligations hereunder, the Distributor shall be entitled to
receive additional reasonable compensation therefore.
20. DURATION. This Agreement shall become effective as of the date
first above written, and shall continue in force with respect to
any Fund thereafter from year to year, provided continuance is
approved at least annually by either (1) the vote of a majority
of the Directors of the
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Company, or by the vote of a majority of the outstanding voting
securities of the Fund, and, in either case (2) the vote of a
majority of those Directors of the Company who are not interested
persons of the Company, and who are not parties to this Agreement
or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on the approval.
21. TERMINATION. This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of its
assignment.
b. This Agreement shall terminate upon the failure to approve the
continuance of the Agreement after the initial one year term as set
forth in Section 15 above.
c. This Agreement shall terminate at any time with respect to any one or
more of the Funds upon a vote of the majority of the Directors who are
not interested persons of the Company or by a vote of the majority of
the outstanding voting securities of the Fund(s), upon not less than
60 days prior written notice to the Distributor.
d. The Distributor may terminate this Agreement with respect to any one
or more of the Funds upon not less than 60 days prior written notice
to the Company.
Upon the termination of this Agreement, each Fund shall pay to the
Distributor such out-of-pocket expenses as may be due and payable for the period
prior to the effective date of such termination. In the event that the Company
designates a successor to any of the Distributor's obligations hereunder, the
Distributor shall, at the expense and direction of the Company on behalf of the
relevant Fund(s), transfer to such successor all relevant books, records and
other data established or maintained by the Distributor pursuant to the
foregoing provisions.
Sections 7, 8, 9, 10, 11, 12, 13, 14, 16, 20, 23, 24 and 25 shall
survive any termination of this Agreement.
22. AMENDMENT. The terms of this Agreement shall not be waived,
altered, modified, amended or supplemented in any manner
whatsoever except by a written instrument signed by the
Distributor and the Company.
23. NON-EXCLUSIVE SERVICES. The services of the Distributor rendered
to the Fund(s) are not exclusive. The Distributor may render such
services to any other investment company and have other
businesses and interests.
24. DEFINITIONS. As used in this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignment,"
"interested person" and
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"affiliated person" shall have the respective meanings specified
in the 1940 Act and the rules enacted thereunder as now in effect
or hereafter amended.
25. CONFIDENTIALITY. The Distributor shall treat confidentially and
as proprietary information of the Company and each Fund all
records and other information relating to them and prior, present
or potential shareholders and shall not use such records and
information for any purpose other than performance of its
responsibilities and I duties hereunder, except as may be
required by administrative or judicial tribunals or as requested
by the Company.
26. NOTICE. Any notices and other communications required or
permitted hereunder shall be in writing. and shall be effective
upon delivery by hand or upon receipt if sent by certified or
registered mail (postage prepaid and -return receipt requested)
or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon
transmission if sent by telex or facsimile (with request for
immediate confirmation of receipt in a manner customary for
communications of such respective type and with physical delivery
of the communication being made by one or the other means
specified in this Section 21 as promptly as practicable
thereafter). Notices shall be addressed as follows:
a. If to the Company: The Avalon Fund of Maryland, Inc.
c/o Questar Capital Corporation
0000 Xxxxxxxx Xxxxx, Xxxxx X
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, President
b. If to the Distributor: Questar Capital Corporation
0000 Xxxxxxxx Xxxxx, Xxxxx X
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, CEO
or to such other respective addresses as the parties shall designate by like
notice, provided that notice of a change of address shall be effective only upon
receipt thereof.
27. SEVERABILITY. 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.
28. GOVERNING LAW. This Agreement shall be administered, construed
and enforced in accordance with the laws of the State of Michigan
to the
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extent that such laws are not preempted by the provisions of any
law of the United States heretofore or hereafter enacted, as the
Same May be amended from time to time.
29. ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes
all prior written or oral agreements and understandings with
respect thereto.
30. MISCELLANEOUS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the
purposes hereof. The captions in 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.
This Agreement may be executed in two counterparts, each of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
THE AVALON FUND OF MARYLAND, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx, President
QUESTAR CAPITAL CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx, CEO
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SCHEDULE A
Funds covered by Distribution Agreement:
The Avalon Capital Appreciation Fund
Fees for distribution and distribution support services on behalf of the Fund:
See Fund's current Prospectus for sales load structure.
SCHEDULE B
DISTRIBUTION SUPPORT SERVICES
1. Provide national broker dealer for Company registration.
2. Review and submit for approval all advertising and promotional materials.
3. Maintain all books and records required by the NASD.
4. License personnel as registered representatives of the Distributor to
distribute Fund Shares.
5. Telemarketing services (additional cost to be negotiated).
6. Company fulfillment services, including sampling prospective shareholders
inquiries and related mailings (additional cost to be negotiated).
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