Document:

SUBSCRIPTION
AGREEMENT

 

 

This Subscription
Agreement (this "Agreement") is made and entered into as of the
date set forth on the signature page hereto (the "Effective
Date") by and between Integrity Mutual Funds, Inc., a North
Dakota corporation (the "Company"), and
__________________________________________________("Investor"). 
The Company and Investor are collectively referred to hereinafter
as the "Parties".

 

 

RECITALS

 

Whereas, the
Company is offering (the "Offering") for sale by private
placement up to $2,000,000 in 91⁄4% Subordinated Corporate
Notes (the "Notes") at par (100% of face value) for a total
offering price of $2,000,000; and

 

Whereas, the
Company desires to accept an investment from the Investor in the
amount set forth herein below.

 

 

AGREEMENT

 

Now, Therefore,
for and in consideration of the mutual covenants, agreements,
understandings, undertakings, representations, warranties and
promises, and subject to the conditions hereinafter set forth,
and intending to be legally bound thereby, the parties do hereby
covenant and agree that the recitals set forth above are true and
accurate and are hereby incorporated in and made a part of this
Agreement, and further covenant and agree as follows:

 

1.                      
Investment.  Subject to the terms and conditions of this
Agreement and of the Private Placement Memorandum dated
________________, 2005 (the "Memorandum"), the Investor hereby
agrees to purchase Notes in the principal amount of
_____________________________________________ Dollars
($___________).

 

2.                       
Payment.  All subscription funds shall be payable in the
form of a check (personal or cashiers check) to the order of
Integrity Mutual Funds, Inc.  A completed Purchaser
Questionnaire (and Purchaser Representative Questionnaire, if
applicable), a completed Subscription Agreement and check should
be sent to the Selling Agent, Capital Financial Services, Inc.,
at the following address:

 

Capital Financial
Services, Inc.

1 North Main

Minot, North Dakota 
58703

Attn:  Mark
Anderson

 

Alternatively,
Investor may submit payment for Notes via wire transfer to the
following account:

 

First Western Bank &
Trust

900 South Broadway

Minot, North Dakota 
58703

ABA No.
______________

Acct. No.
______________

Acct. Name - Integrity
Mutual Funds, Inc. Escrow Account

 

3.                           
Incorporation of Private Placement Memorandum.  This
transaction is subject to the terms and conditions of the
Memorandum and the representations set forth therein and, unless
otherwise stated, all terms having their first letters
capitalized in this Agreement shall have the same meanings as are
set forth in the Memorandum, a copy of which has been provided to
the undersigned.

 

4.                          
Subordination of Notes.  The Investor has been advised and
hereby acknowledges that the Notes are not secured by any bond,
mortgage, sinking fund, or other security; are not guaranteed or
insured by any agency of the any state or the United States of
America; and are subordinate to creditors of the Company holding
mortgages or other security interests in specific Company
properties.  The Notes are general obligations of the
Company, and, as such, the holder  will have priority over
the Company's owners, but would possess only the rights of and
have an equal standing with all other  general creditors in
the event of the insolvency or liquidation of the Company.

 

5.                           
Notes Callable.   The Investor further has been advised
and hereby acknowledges that the Notes may be called at the
option of the Company at any time after December 1, 2007, upon
payment by the Company of 100% of the unpaid principal amount
plus accrued interest thereon.

 

6.                          
Representations and Warranties of the Investor.  The
Investor hereby represents and warrants to the Company as
follows:

 

6.1                           
Investor Status.   The Investor understands that
the Notes are being offered and sold to an unlimited number of
"Accredited Investors" (as that term is defined under Rule 501(a)
of Regulation D) and up to thirty five (35) "sophisticated"
non-accredited investors as defined below.  The Investor
represents that the Investor is either an Accredited Investor or
a "sophisticated" non-accredited investor.  The Investor's
representation that he/she/it is either an Accredited Investor or
a "sophisticated" non-accredited investor is based upon one of
the following grounds (please check the applicable
box):

 

   
Private business development company as defined in Section
202(a)(22) of the Investment Advisors Act of 1940;

 

   
Organization as described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
five million dollars ($5,000,000);

 

   
Director or executive officer of the Company;

 

   
Natural person whose individual net worth, or joint net worth
with that person's spouse, exceeds one million dollars
($1,000,000);

 

   
Natural person who has an individual income in excess of two
hundred thousand dollars ($200,000) in each of the two (2) most
recent years and has a reasonable expectation of reaching the
same income level in the current year;

 

   
Natural person who has a joint income with that person's spouse
in excess of three hundred thousand dollars ($300,000) in each of
the two (2) most recent years and has a reasonable expectation of
reaching the same income level in the current year;

 

   
Trust, with total assets in excess of five million dollars
($5,000,000), not formed for the specific purpose of acquiring
the securities offered, whose purchase is directed by a
sophisticated person as defined by Rule 506(b)(2)(ii) of the
Securities Act; or

 

   
Entity in which all of the equity owners are accredited
investors.

 

In the event the Investor does not meet one
of the categories of an Accredited Investor listed above, the
Investor may invest in the Offering, subject to the limitation of
no more than thirty five (35) such investors and provided that
the Investor has the ability to evaluate the risks and merits of
the investment and thus is able to protect his, her or its
interests as a result of:

 

(i)   
his, her or its business or financial experience;

 

(ii)   
the business or financial experience of his, her or its
professional advisors who are unaffiliated with and who are not
compensated by the Company or any affiliate or Selling Agent of
the Company directly or indirectly; and/or

 

(iii)   
his, her or its pre-existing business relationship with the
Company or its officers, directors or controlling persons.

 

Additionally, the
Investor understands that if he, she or it does not meet one of
the categories of an Accredited Investor listed above, the
investment by such non-accredited investor will not exceed ten
percent (10%) of his, her  or its net worth.  The value
of a non-accredited investor's home, furnishings and automobiles
shall not be included in calculating the net worth of a
non-accredited investor.

 

The Investor
understands that the Company is relying on the Investor with
respect to the accuracy of this representation and understands
the significance of the Investor's representation to the Company
that the Investor is  an Accredited Investor or a
sophisticated non-accredited investor.  In addition, the
Investor agrees to notify the Company of any material changes
affecting investor's  status prior to the Company's
acceptance of the subscription.

 

6.2                           
Authorization.  This Agreement constitutes a valid
and legally binding obligation of the Investor, enforceable in
accordance with its terms, except, in each case, as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws relating to
or affecting the enforcement of creditors' rights generally in
effect from time to time and by general principles of
equity.  The Investor has full power and authority to enter
into this Agreement. 

 

6.3                          
Purchase for Own Account.  The Notes will be acquired
for investment purposes only for the Investor's own account, not
as a nominee or agent, and not with a view to the immediate
resale or distribution of any part thereof, and the Investor has
no present intention of selling, granting any participation in,
or otherwise distributing the same; provided, however, it being
expressly agreed that upon a registration statement being
declared effective, Investor shall have the right, at its/his/her
sole discretion, to sell the any or all of the securities
comprising the Notes.  By executing this Agreement, the
Investor further represents and warrants that the Investor does
not have any contract, undertaking, agreement, or arrangement
with any person to sell, transfer, or grant participations to
such person or to any third person, with respect to the
Notes.

 

6.4                           
Independent Investigation; Independent
Advisors.  The Investor represents and warrants that the
Investor has had a reasonable opportunity to review this
Agreement and the Memorandum.  In addition, the Investor
represents and warrants that the Investor has had a reasonable
opportunity to ask questions of and receive answers from the
Company, and all such questions, if any, have been answered to
the full satisfaction of the Investor.  The Investor further
represents and warrants that the Investor has had the opportunity
to review this Agreement and the Memorandum with the Investor's
legal counsel or business or tax advisor.  The Investor is
relying solely on such counsel or business or tax advisor, if
any, and not on any statements or representations of the Company
or any of its agents for tax or legal advice with respect to this
investment or the transactions contemplated by this Agreement and
the Memorandum.

 

6.5                          
Restricted Securities.  The Investor understands that
the Notes are illiquid and are characterized as "restricted
securities" under the federal securities laws inasmuch as the
Notes are being acquired from the Company in a transaction not
involving a public offering and that, under such laws and
applicable regulations, such securities may only be resold
without registration under the Securities Act of 1933, as amended
(the "Securities Act") in certain limited circumstances.  In
this regard, the Investor represents that he/she/it is familiar
with Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act. 
Without in any way limiting the representations set forth above,
the Investor agrees not to make any disposition of all or any
portion of the Notes unless there is then in effect a
registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance
with such registration statement; or the Investor shall have
notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances
surrounding the proposed disposition, and, if reasonably
requested by the Company, the Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration
of the Notes under the Securities Act.

 

6.6                           
Legends.   The Investor understands that the
Notes shall bear the following legend:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY
NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE
ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENT
OF SAID ACT AND COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES
LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.

 

6.7                           
Risk of Loss.  The Investor represents and warrants
that the Investor:  (a) is able to bear the loss of the
Investor's entire investment without any material adverse effect
on the Investor's economic stability; (b) understands that an
investment in the Company involves substantial risks; and (c) has
such knowledge and experience in financial and business matters
that the Investor is capable of evaluating the merits and risks
of the investment to be made by the Investor pursuant to this
Agreement.

 

6.8       No
Solicitation.  The Investor represents and warrants that
the Investor was not solicited to purchase the Notes by any means
of general solicitation, including but not limited to the
following:  (a) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio; or (b) any meeting
where attendees were invited by any general solicitation or
general advertising.

 

7.                          
General Provisions

 

7.1                          
Attorneys' Fees.  If any arbitration or other legal
proceeding is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any
other relief to which he/she/it may be entitled.

 

7.2                          
Survival of Warranties.  The warranties,
representations, and covenants of the Investor contained in or
made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf
of the Investor or the Company.

 

7.3                          
Successors and Assigns.  Nothing in this Agreement,
express or implied, is intended to confer upon any party other
than the signatories hereto any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.  The
Investor may not assign any of the Investor's rights or interests
in and under this Agreement without the prior written consent of
the Company, and any attempted assignment without such consent
shall be null and void and without any force or effect
whatsoever.

 

7.4                          
Governing Law; Venue.  This Agreement shall be
governed by and construed under the law of the State of North
Dakota, disregarding any principles of conflicts of law that
would otherwise provide for the application of the substantive
law of another jurisdiction.  The Company and the Investor
each: (a) agrees that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted
exclusively in North Dakota State Court, or in the United States
District Court for the District of North Dakota; (b) waives any
objection to the venue of any such suit, action or proceeding and
the right to assert that such forum is not a convenient forum;
and (c) irrevocably consents to the jurisdiction of the North
Dakota State Court or the United States District Court for the
District of North Dakota in any such suit, action or
proceeding. 

 

7.5                          
Counterparts.  This Agreement may be executed at
different times and in one or more counterparts, each of which
shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

7.6                          
Titles and Subtitles.  The titles and subtitles used
in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.

 

7.7                          
Notices.  All notices and other communications under
this Agreement to any party shall be in writing and shall be
deemed given when delivered personally to that party, transmitted
via facsimile (with electronic confirmation) to that party at the
facsimile number for that party, mailed by certified mail
(postage prepaid and return receipt requested) to that party, or
delivered by Federal Express or any similar nationally recognized
express delivery service for delivery to that party.  Any
notice to the Company and the Investor shall be sent to their
respective facsimile numbers and addresses set forth on the
signature page hereof, or at such other facsimile number or
address as a party may designate by ten (10) days' advance
written notice to the other parties.

 

7.8                          
Entire Agreement; Amendments and Waivers.  This
Agreement constitutes the full and entire understanding and
agreement between the parties with regard to the subject matter
herein.  This Agreement may be amended and may be waived
(either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of
the Company and the Investor. 

 

7.9                           
Severability.  If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such
provision shall be excluded from this Agreement and the balance
of the Agreement shall be interpreted as if such provision was so
excluded and shall be enforceable in accordance with its
terms.  In addition, if any such provision, or any part
thereof, is held to be unenforceable, the parties agree that the
court, regulatory agency or other governmental body making such
determination shall have the power to delete or add specific
words or phrases, so that such provision shall then be
enforceable to the fullest extent permitted by law.

 

7.10                          
Neutral Interpretation.  This Agreement shall be
construed in accordance with its intent and without regard to any
presumption or any other rule requiring construction against the
party causing the same to be drafted.

 

8.                           
Title.  The Investor desires to take title to the Notes as
follows (initial one):

 

______
(a)    Individually, as a single person;

(initial)

______
(b)    Husband Wife, as community property;

(initial)

______
(c)    Joint tenants;

(initial)

______
(d)    Tenants in common;

(initial)

______
(e)    Separate property;

(initial)

______
(f)    As custodian of
_______________________________ under

(initial)    the Uniform Gifts to Minors Act;
or

______
(g)    Other (e.g. corporation, partnership,
custodian, trustee, etc.).

(initial)

 

9.                           
Acceptance.  Execution of this Agreement and tender of the
payment referenced in Paragraph 1 above shall constitute an
irrevocable offer which the Company may accept or reject;
acceptance by the Company shall be indicated by the signature of
one of the authorized officers thereof.

 

The undersigned
subscriber (1) attests he, she or it is a bona fide resident of,
or is domiciled in, the state listed as subscriber's address
below; (2) certifies that the information contained in this
Subscription Agreement is complete, true and correct; (3) affirms
that the subscriber's income is derived in no part from illegal
or criminal activities; and (4) states that the investment will
not be used for any type of money laundering or other such
activities in violation of any state of Federal regulation.

 

In witness whereof,
the Investor has executed this Agreement as of
_____________________________, 2005.

 

	
Investor

	
 

	
Address

	
 

	
Amount

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
$______________

	
(INSERT NAME)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Telephone:

	

(           
) ______-___________

	
 

	
 

	
Its:

	
 

	
 

	
Facsimile:

	

(           
) ______-___________

	
 

	
 

	
 

	
(IF APPLICABLE)

	
 

	
 

	
 

	
 

									

 

Joint Purchaser/Additional Signatory (if
applicable)

 

	
Investor

	
 

	
Address

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(INSERT NAME)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Telephone:

	

(           
) ______-___________

	
 

	
Its:

	
 

	
 

	
Facsimile:

	

(           
) ______-___________

	
 

	
 

	
(IF APPLICABLE)

	
 

	
 

	
 

 

 

 

Name(s) in Which Notes Shall Be
Registered:                               
_________________________________________________

                               
_________________________________________________

 

BROKER CERTIFICATION

 

I certify that I am
the Broker (Account Representative) of Record with respect to the
foregoing Subscription Agreement, that the subscriber(s) has
attested that he/she/it is an Accredited Investor or is otherwise
qualified by adequate income, substantial net worth and
sufficient liquidity and that the investment in the Notes meets
the subscribers stated investment objectives.

 

__________________________               
__________________________               
__________________________

Print Broker of Record
Name               
Broker of Record
Signature               
Broker of Record CRD No.

 

 

__________________________               
__________________________

Print Firm
Name               
Broker-Dealer CRD No.

 

 

ACCEPTANCE OF SUBSCRIPTION AGREEMENT

 

On ____________________, 2005, Integrity
Mutual Funds, Inc., a North Dakota corporation, accepted the
offer of the Investor to purchase Notes, in the amount set forth
above, on the terms contained herein and in the Memorandum.

 

 

	
INTEGRITY MUTUAL FUNDS, INC.,

a North Dakota Corporation

	
 

	
 

	
By:

	
 

	
 

	
 

	
Its:

	
 

	
 

	
 

	
Address:

	
One North Main

	
 

	
Minot, North Dakota  58703

	
 

	
 

	
Telephone:

	
(701) 852-5292 (Local) or 1-800-276-1262
(Toll Free)

	
 

	
 

	
Facsimile:

	
(701) 838-4902Date of Instrument
____ __ Subordinated Note  No. _____

 

Integrity Mutual Funds,
Inc.

91⁄4%
Subordinated Corporate Note (the "Note" or "Notes")

 

Integrity Mutual Funds, Inc., a corporation
organized and existing under the laws of the State of North
Dakota (the "Corporation"), for value received, hereby promises
to pay to
                          
 ("Investor") the principal sum of   
               
 and no/100 Dollars ($ 
               
) - subject to the provisions of that certain Private
Placement Memorandum dated     
               
, 2005, which terms are incorporated herein by reference
- five (5) years from the date hereof, or on
               
               
, 2011; and to pay interest on such principal sum from the date
hereof at the rate of nine and one-quarter percent (91⁄4%)
per annum (based on a three hundred sixty five (365) day year) on
an annual basis beginning on
      
               
, 2006, and thereafter on
               
th of each year thereafter until the principal balance is
paid.  All payments will be applied first to interest and
any remainder to reduction of principal.

 

Unregistered Security.  This
Note is being issued by the Corporation pursuant to exemptions
and from federal registration.  No application to register
the Notes and no registration statement covering the Notes has
been filed with the United States Securities and Exchange
Commission.  There is no market for the Notes and there is
no assurance a market will develop.  The Corporation has no
obligation to register the Notes or any other security of the
Corporation.

 

Unsecured, Uninsured, and
Subordinated.  This Note is a general obligation of the
Corporation which is not secured by any bond, mortgage, sinking
fund, or any other security.  In addition, this Note is not
guaranteed or insured by any agency of any state or the United
States of America.  Creditors of the Corporation holding
mortgages or other security interests in specific Corporation
properties will have priority over the holder of this Note in the
event of the insolvency or liquidation of the Corporation. 
However, the holder of this Note, as a general creditor of the
Corporation, will have priority over the Corporation's owners and
would have an equal standing with all other general creditors of
the Corporation.

 

Default.  Without notice, except
as expressly provided herein, the following will be deemed to be
events of default:

 

a.   
Default in the payment of principal or interest under the Note as
and when the same becomes due and payable and the continuance of
such default for a period of more than ten (10) days after notice
as described in paragraph b below.

 

b.   
Failure on the part of the Corporation to duly observe or perform
any other of the covenants or agreements on the part of the
Corporation contained in this Note and written notice of such
failure, requiring the Corporation to remedy the same, has been
delivered by certified mail, return receipt requested, to the
Corporation (Attention: President) and the Corporation has
refused and failed to remedy the same within thirty (30) days of
the receipt of such notice.  Upon default, Investor is
entitled to acceleration of principal payment and payment of all
accrued interest on the Note.

 

Failure to Pay.  If the
Corporation fails to make payment to Investor as provided in the
preceding section, Investor will be entitled and empowered to
take such measures as may be appropriate to enforce Investor's
expectations under the Note, by judicial proceedings or
otherwise.

 

Governing Law.  This instrument
is to be construed under the laws of the State of North
Dakota.  Any legal proceeding with respect to this Note
shall be subject to the jurisdiction and venue of the U.S.
District Court, District of North Dakota.  Any action
brought with respect to this Note shall be venued in Fargo, North
Dakota.

 

This Note is issued in reliance on
exemptions from registration provided by provisions of the
Securities Act of 1933 providing exemptions for nonpublic sales
of securities.  Securities sold under exemption from
registration cannot be resold without registration under the
Securities Act of 1933 or an exemption thereof.  This Note
has not been registered under the Securities Act of 1933 and
therefore cannot be resold unless it is registered under the
Securities Act of 1933 or unless an exemption from registration
is available.  The Corporation has no intention or
obligation to register this Note.

 

 

Executed on  at Minot, North
Dakota.

 

INTEGRITY MUTUAL FUNDS, INC.

 

 

By:

 

Its:

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