EXHIBIT 99.3
DISTRIBUTION AGREEMENT
AGREEMENT made this 1st day of January, 1996, between Paragon
Portfolio (the "Trust"), a Massachusetts business trust having its principal
place of business at 0000 Xxxxx Xxxxx, Xxxxxxx, XX 00000, and The One Group
Services Company ("Distributor") having its principal place of business at 0000
Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000.
WHEREAS, the Trust is an open-end management investment company,
organized as a Massachusetts business trust and registered with the Securities
and Exchange Commission (the "Commission") under the Investment Company Act of
1940 (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
shares of beneficial interest ("Shares") of each of the series of the Trust
identified in Schedule A hereto as such Schedule may be amended from time to
time (such series being referred to individually as a "Fund" and collectively as
the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and
covenants herein set forth, the parties agree as follows:
1. Services as Distributor.
-----------------------
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectus of the Trust then in effect
under the Securities Act of 1933, as amended (the "Securities Act"). As used in
this Agreement, the term "registration statement" shall mean Parts A (the
prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term
"prospectus" shall mean each form of prospectus and Statement of Additional
Information used by the Funds for delivery to shareholders and prospective
shareholders after the effective dates of the above referenced registration
statements, together with any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders
for the sale of the Shares and will undertake such advertising and promotion as
it believes reasonable in connection with such solicitation. The Trust
understands that Distributor is now and may in the future be the distributor of
the shares of several investment companies or series (together, "Companies")
including Companies having investment objectives similar to those of the Trust.
The Trust further understands that investors and potential investors in the
Trust may invest in shares of such other Companies. The Trust agrees that
Distributor's duties to such Companies shall not be deemed in conflict with its
duties to the Trust under this paragraph 1.2.
Distributor may finance appropriate activities which it deems
reasonable which are primarily intended to result in the sale of the Shares,
including, but not limited to, advertising, and the compensation of
underwriters, dealers and sales personnel.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
1.4 Distributor will transmit any orders received by it for purchase
or redemption of the Shares to the transfer agent and custodian for the Funds.
1.5 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's 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 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.7 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.8 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Trust warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Trust shall also furnish Distributor
upon request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Trust, (b) a monthly itemized list of the securities in
the Funds, (c) monthly balance sheets as soon as practicable after the end of
each month, and (d) from time to time such additional information regarding the
financial condition of the Funds as Distributor may reasonably request.
1.9 The Trust represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the Trust with the
Commission under the Securities Act have been carefully prepared in conformity
with requirements of said Act and rules and regulations of the Commission
thereunder. The registration statement and prospectus contain all statements
required to be stated therein in conformity with said Act and the rules and
regulations of said Commission and all statements of fact contained in any such
registration statement and prospectus are true and correct. Furthermore,
neither any registration statement nor any prospectus includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading to a
purchaser of the Shares. The Trust may, but shall not be obligated to, propose
from time to time such amendment or amendments to any registration statement and
such supplement or supplements to any prospectus
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as, in the light of future developments, may, in the opinion of the Trust's
counsel, be necessary or advisable. If the Trust shall not propose such
amendment or amendments and/or supplement or supplements within fifteen days
after receipt by the Trust of a written request from Distributor to do so,
Distributor may, at its option, terminate this Agreement. The Trust shall not
file any amendment to any registration statement or supplement to any prospectus
without giving Distributor reasonable notice thereof in advance; provided,
however, that nothing contained in this Agreement shall in any way limit the
Trust's right to file at any time such amendments to any registration statement
and/or supplements to any prospectus, of whatever character, as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
1.10 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its
several officers and employees, and any person who controls Distributor within
the meaning of Section 15 of the Securities 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 Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under 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 or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading; provided, however, that the Trust's
agreement to indemnify Distributor, its partners or employees, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of any statements or representations as are contained in
any prospectus and in such financial and other statements as are furnished in
writing to the Trust by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Trust's agreement to indemnify Distributor and the Trust's
representations and warranties hereinbefore set forth in paragraph 1.9 shall not
be deemed to cover any liability to the Trust or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
Agreement. The Trust's agreement to indemnify Distributor, its officers and
employees and any such controlling person, as aforesaid, is expressly
conditioned upon the Trust being notified of any action brought against
Distributor, its officers or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Trust at its
principal office in Chicago, Illinois and sent to the Trust by the person
against whom such action is brought, within 10 days after the summons or other
first legal process shall have been served. The failure to so notify the Trust
of any such action shall not relieve the Trust from any liability which the
Trust may have to the person against whom such action is brought by reason of
any such untrue, or allegedly untrue, statement or omission, or alleged
omission, otherwise than on account of the Trust's indemnity agreement contained
in this paragraph 1.10. The Trust will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability, but, in such case,
such defense shall be conducted by counsel of good standing chosen by the Trust
and approved by Distributor, which approval shall not be
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unreasonably withheld. In the event the Trust elects to assume the defense of
any such suit and retain counsel of good standing approved by Distributor, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Trust does not elect
to assume the defense of any such suit, or in case Distributor reasonably does
not approve of counsel chosen by the Trust, the Trust will reimburse
Distributor, its officers and employees, or the controlling person or persons
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by Distributor or them. The Trust's indemnification agreement
contained in this paragraph 1.10 and the Trust'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 Distributor, its partners and
employees, or any controlling person, and shall survive the delivery of any
Shares.
This Agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several officers and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Trust agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Trust or any of its officers or
Trustees in connection with the issue and sale of any Shares.
1.11 Distributor agrees to indemnify, defend and hold the Trust, its
several officers and Trustees and any person who controls the Trust within the
meaning of Section 15 of the Securities 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) which the Trust, its officers or Trustees
or any such controlling person, may incur under the Securities Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Trust, its officers or Trustees or such controlling person
resulting from such claims or demands, shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material fact contained in information
furnished in writing by Distributor to the Trust and used in the answers to any
of the items of the registration statement or in the corresponding statements
made in the prospectus, 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 Distributor to the Trust required to be stated in such
answers or necessary to make such information not misleading. Distributor's
agreement to indemnify the Trust, its officers and Trustees, and any such
controlling person, as aforesaid, is expressly conditioned upon Distributor
being notified of any action brought against the Trust, its officers or
Trustees, or any such controlling person, such notification to be given by
letter or telegram addressed to Distributor at its principal office in Columbus,
Ohio, and sent to Distributor by the person against whom such action is brought,
within 10 days after the summons or other first legal process shall have been
served. Distributor shall have the right of first control of the defense of
such action, with counsel of its own choosing, satisfactory to the Trust, if
such action is based solely upon such alleged misstatement or omission on
Distributor's part, and in any other event the Trust, its officers or Trustees
or such controlling person shall each have the right to participate in the
defense or preparation of the defense of any such action. The failure to so
notify Distributor of any such action shall not relieve Distributor from any
liability which Distributor may have to the Trust, its officers or Trustees, or
to such controlling person by reason of any such untrue or alleged untrue
statement, or omission or alleged omission, otherwise than on account of
Distributor's indemnity agreement contained in this paragraph 1.11.
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1.12 No Shares shall be offered by either Distributor or the Trust
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Trust 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
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.12 shall in any way restrict or have an
application to or bearing upon the Trust's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Trust's prospectus,
Declaration of Trust, or Bylaws.
1.13 The Trust agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for additional
information;
(b) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or prospectus then in
effect or the initiation by service of process on the Trust 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 or prospectus then in effect or
which requires the making of a change in such registration statement or
prospectus in order to make the statements therein not misleading; and
(d) of all action of the Commission with respect to any amendment to
any registration statement or prospectus which may from time to time be filed
with the Commission.
For purposes of this section, informal requests by or acts of the
Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.14 Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and its prior, present
or potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except, after prior notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be withheld where
Distributor may be exposed
to civil or criminal contempt proceedings for failure to comply, when requested
to divulge such information by duly constituted authorities, or when so
requested by the Trust.
1.15 This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts.
2. Term, Duration and Termination.
------------------------------
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This Agreement shall become effective January 1, 1996 and, unless
sooner terminated as provided herein, shall continue until December 31, 1996.
Thereafter, if not terminated, this Agreement shall continue automatically for
successive one-year terms, provided that such continuance is specifically
approved at least annually by (a) by the vote of a majority of those members of
the Trust's Board of Trustees who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting for the
purpose of voting on such approval and (b) by the vote of the Trust's Board of
Trustees or the vote of a majority of the outstanding voting securities of such
Fund. This Agreement is terminable without penalty, on not less than sixty-days
prior written notice, by the Trust's Board of Trustees, by vote of a majority of
the outstanding voting securities of the Trust or by the Distributor. This
Agreement will also terminate automatically in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities", "interested persons" and "assignment" shall have the same meanings
as ascribed to such terms in the 1940 Act.)
3. Sale of Shares Subject to a Front-End Sales Load
------------------------------------------------
3.1 Under this Agreement, the following provisions shall apply with
respect to the sale of and payment of those Shares sold at an offering price
which includes a front-end sales load ("Class A Shares") as described in the
prospectuses of the Funds identified on Schedule B hereto (collectively, the
"Front-End Load Funds"; individually a "Front-End Load Fund"):
(a) The Distributor shall have the right to purchase Class A Shares
from the Front-End Load Funds at their net asset value and to sell such Shares
to the public against orders therefor at the applicable offering price, as
defined in Section 3.2 below. The Distributor shall also have the right to sell
Class A Shares to dealers against orders therefor at the public offering price
less a concession determined by the Distributor, which concession shall not
exceed the amount of the sales charge or underwriting discount, if any, referred
to in Section 3.2 below.
(b) Prior to the time of delivery of any Class A Shares by a Front-End
Load Fund to, or on the order of, the Distributor, the Distributor shall pay or
cause to be paid to the Front-End Load Fund or to its order an amount in Boston
or New York clearing house funds equal to the applicable net asset value of such
Shares. The Distributor may retain so much of any sales load or underwriting
discount as it not allowed by the Distributor as a concession to dealers.
3.2 The public offering price of a Class A Share of a Front-End Load
Fund shall be the net asset value of the Share, plus any applicable sales
charge, all as set forth in the current prospectus of the Front-End Load Fund.
The net asset value of Class A Shares shall be determined in accordance with the
provisions of the Declaration of Trust and Bylaws of the Trust and the then
current prospectus of the Front-End Load Fund.
3.3 The Front-End Load Funds reserve the right to issue, transfer or
sell Class A Shares at net asset value (a) in connection with merger or
consolidation of the Trust or the Front-End Load Fund(s) with any other
investment company or the acquisition by the Trust or the Front-End Load Fund(s)
of all or substantially all of the assets or of the outstanding Shares of any
other investment company; (b) in connection with a pro rata distribution
directly to the holders of Shares in the nature of a stock dividend or split;
(c) upon the exercise of subscription
6
rights granted to the holders of Shares on a pro rata basis; (d) in connection
with the issuance of Shares pursuant to any exchange and reinvestment privileges
described in any then current prospectus of the Front-End Load Fund; and (e)
otherwise in accordance with any then current prospectus of the Front-End Load
Fund.
4. Sale of Shares Subject to a Traditional Rule 12b-1 Fee
------------------------------------------------------
4.1 Under this Agreement, the following provisions shall apply with
respect to Shares of Classes of the Trust's Shares, other than those of a Class
featuring a contingent deferred sales charge, that are subject to a fee under a
Distribution and Shareholder Services Plan under Rule 12b-1 as described in the
prospectuses of the Funds and identified on Schedule C hereto (collectively, the
"Distribution Plan Classes;" individually a "Distribution Plan Class"):
(a) The Distributor shall receive from the Trust all distribution and
service fees, as applicable, at the rate and under the terms and conditions set
forth in each Distribution and Shareholder Services Plan adopted by each
Distribution Plan Class of each Fund, as such Plans may be amended from time to
time, and subject to any further limitations on such fees as the Board may
impose.
(b) The Distributor may reallow any or all of the distribution or
service fees which it is paid by the Trust with respect to each Distribution
Plan Class of each Fund to such brokers, dealers and other financial
institutions and intermediaties as the Distributor may from time to time
determine.
5. Sale of Shares Subject to a Contingent Deferred Sales Charge
------------------------------------------------------------
5.1 The Trust may offer Shares subject to a contingent deferred sales
charge (a "CDSC"). The Distributor may pay brokers, dealers and other financial
institutions and intermediaries commissions with regard to the sale of CDSC
Shares. Under this Agreement, the following provisions shall apply with respect
to Shares of a Class featuring a CDSC (a "CDSC Class") as described in the
prospectus(es) of the Funds and identified on Schedule D hereto.
(a) The Distributor shall be entitled to receive all CDSC payments on
Shares of a CDSC Class. The Distributor may assign or sell to a third party (a
"CDSC Financing Entity") all or a part of the CDSC payments on Shares of a CDSC
Class that the Distributor is
entitled to receive under this Agreement. The Distributor's right to payment on
such Shares, if assigned or sold to a CDSC Financing Entity, shall continue
after termination of this Agreement.
(b) (i) The Distributor shall be entitled to receive all distribution
and service fees at the rate and under the terms and conditions set forth in the
Distribution Plan adopted by the CDSC Class (the "Plan") on all Shares, so long
as the Plan is in effect. The Distributor may assign or sell to a CDSC
Financing Entity all or a part of the distribution and service fees the
Distributor is entitled to receive from the Trust under the Plan. The
Distributor's right to payment on such Shares, if assigned or sold to a CDSC
Financing Entity, shall continue after termination of this Agreement.
Otherwise, the right to receive all distribution and service fee payments in
respect of periods subsequent to the termination of this Agreement shall
terminate
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upon termination of this Agreement.
(ii) The Distributor shall not be required to offer or sell Shares of
a CDSC Class unless and until it has received a binding commitment from a CDSC
Financing Entity (a "Commitment") satisfactory to the Distributor which
Commitment shall cover all expenses and fees related to the offer and sale of
such Shares of the CDSC Class including but not limited to dealer reallowances,
financing commitment fees, and legal fees. If at any time during the term of
this Agreement the then current CDSC financing is terminated through no fault of
the Distributor, the Distributor has the right to immediately suspend CDSC
Shares sales until substitute financing becomes effective.
(iii) The Distributor may enter into arrangements regarding the
financing of commissions pertaining to the sale of shares of a CDSC Class only
upon written approval of the Trust's Treasurer, or his or her designee, such
approval not to be unreasonably withheld.
(c) The Distributor and the Trust hereby agree that the terms and
conditions set forth herein regarding the offer and sale of Shares of a CDSC
Class may be amended upon approval of both parties in order to comply with the
terms and conditions of any agreement with a CDSC Financing Entity to finance
the costs for the offer and sale of Shares of a CDSC Class so long as such terms
and conditions are in compliance with the Plan.
6. Limitation of Liability of the Trustees and Shareholders.
--------------------------------------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust. The execution and delivery of this Agreement have been
authorized by the Trustees, and this Agreement has been signed and delivered by
an authorized officer of the Trust, acting as such, and neither such
authorization by the Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in the Trust's Agreement and Declaration of Trust. No
series of the Trust shall be liable for the obligations of any other series
under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
PARAGON PORTFOLIO THE ONE GROUP SERVICES COMPANY
By: Xxxxxxx X. Xxxxxxx By: Xxxxxxx X. Xxxxxx
Title: Secretary of the Trust Title: Vice President
--------------------------- ----------------------------
Date: January 2, 1996 Date: January 2, 1996
--------------------------- ----------------------------
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Schedule A
to the Distribution Agreement
between Paragon Portfolio and
The One Group Services Company
Name of Fund
------------
Paragon Treasury Money Market Fund
Paragon Short-Term Government Fund
Paragon Intermediate-Term Bond Fund
Paragon Louisiana Tax-Free Fund
Paragon Value Growth Fund
Paragon Value Equity Income Fund
Paragon Gulf South Growth Fund
PARAGON PORTFOLIO THE ONE GROUP SERVICES COMPANY
By: Xxxxxxx X. Xxxxxxx By: Xxxxxxx X. Xxxxxx
Title: Secretary of the Trust Title: Vice President
------------------------- ----------------------------
Date: January 2, 1996 Date: January 2, 1996
------------------------- ----------------------------
A-1
Schedule B
to the Distribution Agreement
between Paragon Portfolio and
The One Group Services Company
Front-End Load Funds
--------------------
Paragon Short-Term Government Fund
Paragon Intermediate-Term Bond Fund
Paragon Louisiana Tax-Free Fund
Paragon Value Growth Fund
Paragon Value Equity Income Fund
Paragon Gulf South Growth Fund
PARAGON PORTFOLIO THE ONE GROUP SERVICES COMPANY
By: Xxxxxxx X. Xxxxxxx By: Xxxxxxx X. Xxxxxx
Title: Secretary of the Trust Title: Vice President
------------------------- ----------------------------
Date: January 2, 1996 Date: January 2, 1996
------------------------- ----------------------------
B-1
Schedule C
to the Distribution Agreement
between Paragon Portfolio and
The One Group Services Company
Distribution Plan Shares
------------------------
Name of Fund
------------
Paragon Treasury Money Market Fund
Paragon Short-Term Government Fund
Paragon Intermediate-Term Bond Fund
Paragon Louisiana Tax-Free Fund
Paragon Value Growth Fund
Paragon Value Equity Income Fund
Paragon Gulf South Growth Fund
PARAGON PORTFOLIO THE ONE GROUP SERVICES COMPANY
By: Xxxxxxx X. Xxxxxxx By: Xxxxxxx X. Xxxxxx
Title: Secretary of the Trust Title: Vice President
------------------------- ----------------------------
Date: January 2, 1996 Date: January 2, 1996
------------------------- ----------------------------
C-1
Schedule D
to the Distribution Agreement
between Paragon Portfolio and
The One Group Services Company
CDSC Funds
----------
Paragon Short-Term Government Fund
Paragon Intermediate-Term Bond Fund
Paragon Louisiana Tax-Free Fund
Paragon Value Growth Fund
Paragon Value Equity Income Fund
Paragon Gulf South Growth Fund
PARAGON PORTFOLIO THE ONE GROUP SERVICES COMPANY
By: Xxxxxxx X. Xxxxxxx By: Xxxxxxx X. Xxxxxx
Title: Secretary of the Trust Title: Vice President
------------------------- ----------------------------
Date: January 2, 1996 Date: January 2, 1996
------------------------- ----------------------------
D-1
