DISTRIBUTION CONTRACT
THIS DISTRIBUTION CONTRACT (this "Agreement"), dated this ____ day of
____________, 1998, between The Sierra Variable Trust, a Massachusetts business
trust (the "Trust"), on behalf of each of its series which are listed on the
signature page of this Agreement (each a "Fund" and collectively the "Funds"),
and Composite Funds Distributor, Inc., a Washington corporation doing business
at Seattle, Washington, herein sometimes referred to as the "Distributor."
RECITALS
--------
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and the Funds are separate series of the Trust;
WHEREAS, each Fund and the Distributor desire to enter into an
agreement that sets forth standard terms and conditions for distribution and
other services for Trust shares; the shareholders of each Fund are and will be
separate accounts in unit investment trust form ("Eligible Separate Accounts")
of insurance companies or portfolios holding interests in such Funds in
connection with asset allocation programs;
WHEREAS, variable annuity and insurance product ("Variable Products")
net premiums and considerations will be allocated to Eligible Separate Accounts
for investment in each Fund;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. APPOINTMENT. The Trust hereby affirms the appointment of Composite
Funds Distributor, Inc. as the agent for distribution of Trust shares and grants
Distributor the right to sell Trust shares on behalf of each Fund and on terms
set forth in this Agreement. The Distributor accepts such appointment and agrees
to render the services herein set forth for the payments herein provided
(including reimbursement of expenses).
2. The Trust has approved a Memorandum of "Procedures for Monitoring
Potential Conflicts Among Insurance Company Shareholders" (the "Procedures").
This Distribution Contract shall be subject to the provisions of the Procedures,
the terms of which are incorporated herein by reference, made a part hereof and
controlling. The procedures may be amended or superseded, without prior notice,
and this Agreement shall be deemed amended to the extent the Procedures are
amended or superseded. The Distributor represents and warrants that it will act
in a manner consistent with such Procedures as so set forth and as they may be
amended or superseded, so long as it is a Distributor of the Trust. This
provision shall survive the termination of this Agreement.
1
3. The Distributor is hereby authorized, from time to time, to enter
into separate written agreements ("Participation Agreements" or, individually, a
"Participation Agreement"), on terms and conditions not inconsistent with this
Agreement, with insurance companies which have Eligible Separate Accounts and
which agree to participate in the distribution of Trust shares, directly or
through affiliated broker-dealers (collectively, with the insurance companies
the "Participating Insurance Companies"), by means of distribution of Variable
Products and to use their best efforts to solicit applications for Variable
Products. Each Participation Agreement shall be entered into jointly with the
Participating insurance Company and the Eligible Separate Account. The
Distributor may not enter into any Participation Agreement with any
Participating Insurance Company that is more favorable than that maintained with
any other Participating Insurance Company and Eligible Separate Account.
4. Such Participating Insurance Companies and their agents or
representatives soliciting applications for Variable Products shall be duly and
appropriately licensed, registered or otherwise qualified for the sale of
Variable Products under any applicable insurance laws and any applicable
securities of one or more states or other jurisdictions in which Variable
Products may be lawfully sold. Each such Participating Insurance Company shall
be both registered as a broker-dealer under the Securities Exchange Act and a
member of the NASD. Each such Participating Insurance Company shall agree to
comply with all laws and regulations, whether federal or state, and whether
relating to insurance, securities or other general areas, including but not
limited to the record-keeping and sales supervision requirements of such laws
and regulations.
5. DELIVERY OF DOCUMENTS. The Trust and/or each Fund has furnished the
Distributor with copies of:
(a) Agreement and Declaration of Trust and all amendments thereto
for the Trust (as amended from time to time, the "Declaration of
Trust");
(b) Bylaws and all amendments thereto for the Trust (as amended from
time to time, the "Bylaws"); and
(c) The Trust's 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
1940 Act.
From time to time, the Trust will furnish the Distributor with current
copies of all amendments or supplements to the foregoing, if any, and all
documents, notices and reports filed with the Securities and Exchange Commission
(the "SEC") and will make available, upon request, evidence of payment of
registration fees imposed from time to time by the States in which securities of
each Fund are sold by the Distributor.
2
6. DUTIES OF THE DISTRIBUTOR. The Distributor shall provide each Fund
with the benefit of its best judgment, efforts and facilities in rendering its
services as Distributor. The Distributor will act as the exclusive Distributor
of the Trust's shares, subject to the supervision of the Trust's Board of
Trustees and the following understandings: (i) the Trust's Board of Trustees
shall be responsible for and control the conduct of each Fund's affairs; (ii) in
all matters relating to the performance of this Agreement, the Distributor will
act in conformity with the Declaration of Trust and Bylaws of the Trust and the
Registration Statement of each Fund and with the instructions and directions of
the Trust's Board of Trustees; (iii) the Distributor will conform to and comply
with applicable requirements of the 1940 Act, the 1933 Act and all other
applicable federal or state laws and regulations. In carrying out its
obligations hereunder, the Distributor shall:
(a) Provide to the Trust's Board of Trustees, at least quarterly, a
written report of the amounts expended in connection with all
distribution services rendered pursuant to this Agreement, including an
explanation of the purposes for which such expenditures were made; and
(b) Take, on behalf of each Fund, all actions which appear to be
necessary to carry into effect the distribution of each Fund's shares
as provided in paragraph 4.
7. DISTRIBUTION OF SHARES. It is mutually understood and agreed that
the Distributor does not undertake to sell all or any specific portion of the
Trust shares. The Trust shall not sell any of its shares except through the
Distributor. Notwithstanding the provisions of the foregoing sentence:
(a) The Distributor may, and when requested by the Trust, shall,
suspend its efforts to effectuate sales of the Trust shares at any time
when in the opinion of the Distributor or of the Trust no sales should
be made because of a need to revise a Registration Statement, or
because of market or other economic considerations or abnormal
circumstances of any kind. Either party in its sole discretion may
reject orders for the purchase of such shares;
(b) The Trust may withdraw the offering of its shares (i) at any
time with the consent of the Distributor or (ii) without such consent
when so required by the provisions of any statute or of any order, rule
or regulation of any governmental body having jurisdiction;
(c) Purchases and redemptions of Trust shares shall be at the net
asset value of the appropriate Fund, computed as set forth in the most
recent Prospectus and Statement of Additional Informations relating to
the Trust contained in its Registration Statement on Form N-1A, File
No. 33-57732, or any amendments thereto, and any supplements thereto
("Registration Statement"). Trust shares may not be sold or transferred
except to an Eligible Separate Account or a Fund with the prior
approval of the Trust's Board of Trustees.
3
(d) The Distributor is not authorized by the Trust to provide any
information or to make any representations other than those contained
in the appropriate Registration Statements, or contained in shareholder
reports or other material that may be prepared by or on behalf of the
Trust for Distributor's use. This shall not be construed to prevent the
Distributor from preparing and distributing sales literature or other
material as it may deem appropriate.
8. The Trust shall not pay any compensation to the Distributor for
services as principal underwriter herein, nor shall the Trust reimburse the
Distributor for any expenses related to such services. The Distributor may, but
need not, pay or charge other Participating Insurance Companies pursuant to
agreements as described in 3.
9. EXPENSES. The expenses connected with distribution shall be
allocable between the Trust and the Distributor as follows:
(a) The Distributor shall furnish the services of personnel to the
extent that such services are required to carry out its obligations
under this Agreement.
(b) The Trust assumes and shall pay or cause to be paid the
following expenses incurred on its behalf:
Registration of shares including the expense of printing and
distributing prospectuses to existing shareholders; expenses incurred for
maintaining the Trust's or Fund's existence, taxes and expenses related to
portfolio transactions; charges and expenses of any registrar, custodian or
depository for portfolio securities and other property, and any stock transfer,
dividend or account agent or agents; all taxes, including securities issuance
and transfer taxes, and fees payable to federal, state or other governmental
agencies; costs and expenses in connection with the registration and maintenance
of registration of the Trust and its shares with the SEC and various states and
other jurisdictions (including filing fees, legal fees and disbursements of
counsel); expenses of shareholders' and directors' meetings and preparing,
printing, and mailing of proxy statements and reports to shareholders; fees and
travel expenses of directors who are not "interested persons" as that term is
defined in the 1940 Act; expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Trust's shares; fees
and expenses of legal counsel and of independent accountants; membership dues of
industry associations; postage (excluding postage for promotional and sales
literature); insurance premiums on property of personnel (including, but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the Trust's
operation unless otherwise explicitly provided herein.
(c) The Distributor will bear all expenses incurred in connection
with its performance of the services described herein and the incurring
of distribution expenses under this Agreement. For purposes of this
Agreement, "distribution expenses" of the Distributor shall mean all
expenses borne by the Distributor which represent payment for
activities primarily intended to result in the sale of Trust shares.
4
10. NON-EXCLUSIVITY. The services of the Distributor are not exclusive
and the Distributor shall be entitled to render distribution or other services
to others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers of the Distributor may
serve as officers or trustees of the Trust, and that officers or trustees of the
Trust may serve as officers of the Distributor to the extent permitted by law;
and that officers of the Distributor are not prohibited from engaging in any
other business activity or from rendering services to any other person, or from
serving as partners, officers or directors of any other firm or corporation,
including other investment companies and broker/dealers.
11. TERM AND APPROVAL. This Agreement shall become effective as of the
date first above written for an initial period of two years, and shall continue
in force and effect from year to year thereafter, provided that, with respect to
the Trust or the Trust shares, such continuance is specifically approved at
least annually:
(a) By the Trust's Board of Trustees, including the
affirmative vote of a majority of the Board of Trustees of the Trust
who are not (i) parties to this Agreement, (ii) interested persons of
any such party (as defined in Section 2(a)(19) of the 1940 Act), or
(iii) persons having a direct or indirect financial interest in the
operation of this Agreement or any agreement related to this Agreement
(the "Qualified Trustees") by votes cast in person at a meeting called
for the purpose of voting on such approval, or
(b) By the vote of a majority of the outstanding voting
securities of the Fund (as defined in Section 2(a)(42) of the 1940
Act).
12. TERMINATION. This Agreement may be terminated, with respect to the
Trust or the Trust share, at any time, without the payment of any penalty, on
sixty (60) days' written notice, by vote of the Board of Trustees of the Trust,
or by a vote of a majority of the Qualified Trustees, or by a vote of a majority
of the outstanding voting securities of the Fund (as defined in Section 2(a)(42)
of the 1940 Act), or by the Distributor on sixty (60) days' written notice to
the Fund. The notice provided for herein may be waived by either party. This
Agreement shall automatically terminate in the event of its assignment, the term
"assignment" for this purpose having the meaning set forth in Section (a)(4) of
the 1940 Act.
13. REPRESENTATIONS AND WARRANTIES. The Trust represents and warrants
to the Distributor 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 when such
Registration Statement becomes effective will include an untrue statement of a
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. The Distributor 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
5
to any prospectus or statement of additional information as, in the light of
future developments, may, in the opinion of the Distributor's counsel, be
necessary or advisable. If the Trust shall not propose such amendment or
amendments and/or supplement or supplements within fifteen (15) days after
receipt by the Trust of a written request from the Distributor to do so, the
Distributor may, at its option, terminate this Agreement. The Trust shall not
file any amendment to any registration statement or supplement to any prospectus
or statement of additional information without giving the 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 or
statement of additional information, of whatever character, as the Trust may
deem advisable, such right being in all respects absolute and unconditional.
14. AMENDMENTS. This Agreement may be amended, with respect to any Fund
or Class, by the parties hereto only if such amendment is specifically approved
(i) by the Board of Trustees of the Trust or by the vote of majority of
outstanding voting securities of the Fund, and (ii) by a majority of the
Qualified Trustees, which vote must be cast in person at a meeting called for
the purpose of voting on such approval.
15. INDEMNIFICATION.
15.1 The Trust authorizes the Distributor and any
dealers with whom Distributor has entered into dealer agreements to
use any prospectus or statement of additional information furnished
by the Trust from time to time, in connection with the sale of
shares of each Fund. The Trust agrees to indemnify, defend and hold
Distributor, its several officers and directors, and any person who
controls Distributor 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
Distributor, 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 Trust's agreement to indemnify the Distributor, 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 Distributor
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 the Distributor
pursuant to paragraph 2 hereof; and further
6
provided that the Trust's agreement to indemnify the Distributor
and the Trust's representations and warranties 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' reckless disregard of its
obligations and duties under this Agreement. The Trust's agreement
to indemnify Distributor, its officers and directors, and any such
controlling person, as aforesaid, is expressly conditioned upon the
Trust's being notified of any action brought against Distributor,
its officers or directors, or any such controlling person, such
notification to be given by letter or by telegram addressed to the
Trust at its principal office stated herein and sent to the Trust
by the person against whom such action is brought, within ten (10)
days after the summons or other first legal process shall have been
served. The failure so to notify the Trust of any such action shall
not relieve the Trust from any liability that the Trust 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 Trust's indemnity
agreement contained in this paragraph 12.1. The Trust's
indemnification agreement contained in this paragraph 12.1 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 officers and
directors, 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 directors and their respective estates, and to the
benefit of the controlling persons and their successors. The Trust
agrees to notify Distributor promptly of the commencement of any
litigation or proceedings against the Trust or any of its officers
or trustees in connection with the issuance and sale of any shares.
15.2 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 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 Trust,
its officers or trustees 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
Trust, its officers or trustees 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
allegedly untrue statement of a material fact contained in
information furnished in writing by the 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 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
Distributor to the Trust and required to be stated in such answers
or necessary to make such information
7
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
as stated herein and sent to Distributor 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 Distributor of any such action shall not relieve
Distributor from any liability that the 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 12.2. The
Distributor agrees to notify the Trust promptly of the commencement
of any litigation or proceedings against Distributor or any of its
officers or directors in connection with the issuance and sale of
any shares.
15.3 In case any action shall be brought against any
indemnified party under paragraph 12.1 or 12.2, 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 expenses 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 the conduct
of the defense of such action.
16. LIABILITY OF THE DISTRIBUTOR. In the performance of its duties
hereunder, the Distributor shall be obligated to exercise care and diligence and
to act in good faith and to use its best efforts within reasonable limits to
insure the accuracy of all services performed under this Agreement, but the
Distributor shall not be liable for any act or omission which does not
constitute willful misfeasance, bad faith or gross negligence on the part of the
Distributor or reckless disregard by the Distributor of its duties under this
Agreement.
17. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Trust
shall be 000 Xxxx Xxxx Xxxxxx, Xxxxxxx, XX 00000, and the address of the
Distributor shall be 0000 Xxxxx Xxxxxx, Xxxxxxx, XX 00000.
8
18. DECLARATION OF TRUST AND LIMITATION OF LIABILITY. A copy of the
Declaration of Trust of the Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts, and notice is hereby given that this Agreement is
executed by an officer of the Trust on behalf of the trustees of the Trust, as
trustees and not individually, on further behalf of each Fund, and that the
obligations of this Agreement with respect to each Fund shall be binding upon
the assets and properties of the Fund only and shall not be binding upon the
assets and properties of any other Fund or series of the Trust or upon any of
the trustees, officers, employees, agents or shareholders of the Fund or the
Trust individually.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
THE SIERRA VARIABLE TRUST, on behalf of its series
SHORT TERM HIGH QUALITY BOND FUND,
GROWTH FUND,
EMERGING GROWTH FUND
INTERNATIONAL GROWTH FUND
MONEY MARKET FUND
U.S. GOVERNMENT FUND
CORPORATE INCOME FUND
GROWTH AND INCOME FUND
BOND & STOCK FUND
NORTHWEST FUND
CAPITAL GROWTH PORTFOLIO
GROWTH PORTFOLIO
BALANCED PORTFOLIO
VALUE PORTFOLIO
INCOME PORTFOLIO
By:
-----------------------------
Name:
Title:
Attest:
By:
----------------------------
Name:
Title:
9
COMPOSITE FUNDS DISTRIBUTOR, INC.
By:
----------------------------------
Xxxxxxx X. Xxxxxx
President
Attest:
By:
-----------------------------
Xxxxxx X. Xxxxxxx
Secretary
10
