EXHIBIT 99(E)(1)
DISTRIBUTION AGREEMENT
AGREEMENT made this 14th day of June, 2005, between The Coventry Group
(the "Trust"), having an office at 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000 and
BISYS Fund Services Limited Partnership ("Distributor"), having an office at 000
Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 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, as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
shares of beneficial interest ("Shares") of each series of the Trust, as listed
on Schedule A, and such series as are hereafter created (all of the foregoing
series individually referred to herein 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 of Trust on behalf of each Fund for
the distribution of the Shares covered by the registration statement of Trust
then in effect under the Securities Act of 1933, as amended (the "Securities
Act") and the 1940 Act. As used in this Agreement, the term "registration
statement" shall mean the registration statement of the Trust and any amendments
thereto, then in effect, including Parts A (the Prospectus), B (the Statement of
Additional Information) and C of each registration statement, as filed on Form
N-1A, or any successor thereto, with the Commission, together with any
amendments thereto. The term "Prospectus" shall mean the then-current form of
Prospectus and Statement of Additional Information used by the Funds, in
accordance with the rules of the Commission, 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 Consistent with the understanding between the Funds and the
Distributor, Distributor may solicit orders for the sale of the Shares and may
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 many other investment companies
or series, including investment companies having investment objectives similar
to those of the Trust. The Trust further understands that shareholders and
potential shareholders in the Trust may invest in shares of such other
investment companies. The Trust agrees that Distributor's duties to other
investment companies shall not be deemed in conflict with its duties to the
Trust under this Section 1.2.
1.3 Consistent with the understanding between the Funds and the
Distributor, and subject to the last sentence of this Section 1.3, Distributor
may engage in such activities as it deems appropriate in connection with the
promotion and sale of the Shares, which may include advertising, compensation of
underwriters, dealers and sales personnel, the printing and mailing of
Prospectuses to prospective shareholders other than current shareholders, and
the printing and mailing of sales literature. Distributor may enter into dealer
agreements and other selling agreements with broker-dealers and other
intermediaries; provided, however, that Distributor shall have no obligation to
make any payments to any third parties, whether as finder's fees, compensation
or otherwise, unless (i) Distributor has received a corresponding payment from
the applicable Fund's Distribution Plan (as defined in Section 2 of this
Agreement), the Fund's investment adviser (the "Adviser") or from another source
as may be permitted by applicable law, and (ii) such corresponding payment has
been approved by the Trust's Board of Trustees.
1.4 In its capacity as distributor of the Shares, all activities of the
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all applicable rules and regulations promulgated by the Commission
thereunder, and all applicable rules and regulations adopted by any securities
association registered under the Securities Exchange Act of 1934.
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 upon reasonable notice instruct the Distributor
to 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 The Trust agrees to inform the Distributor from time to time of the
states in which the Fund or its administrator has registered or otherwise
qualified shares for sale, and 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 the Distributor may
designate.
1.7 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such supplemental 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 supplemental information will
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 the
Distributor may reasonably request.
1.8 The Trust represents and warrants to Distributor that all
registration statements, and each Prospectus, filed by the Trust with the
Commission under the
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Securities Act and the 1940 Act shall be prepared in conformity with
requirements of said Acts and rules and regulations of the Commission
thereunder. The registration statement and Prospectus shall contain all
statements required to be stated therein in conformity with said Acts and the
rules and regulations of the Commission thereunder, and all statements of fact
contained in any such registration statement and Prospectus are true and correct
in all material respects. 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 foregoing
representations and warranties shall continue throughout the term of this
Agreement and be deemed to be of a continuing nature, applicable to all Shares
distributed hereunder. 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 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 any 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. In such case, the Distributor will be held harmless
from, and indemnified by Trust for, any liability or loss resulting from the
failure to implement such amendment. 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.
1.9 The Trust authorizes the Distributor and dealers to use any
Prospectus in the form furnished by the Trust from time to time in connection
with the sale of the Shares.
1.10 The Distributor may utilize agents in its performance of its
services and, with prior notice to the Trust, appoint in writing other parties
qualified to perform specific administration services reasonably acceptable to
the Trust (individually, a "Sub-Agent") to carry out some or all of its
responsibilities under this Agreement; provided, however, that a Sub-Agent shall
be the agent of the Distributor and not the agent of the Trust, and that the
Distributor shall be fully responsible for the acts of such Sub-Agent and shall
not be relieved of any of its responsibilities hereunder by the appointment of a
Sub-Agent.
1.11 The Distributor shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the Distributor's part in the
performance of its duties, from reckless disregard by the Distributor of its
obligations and duties under this Agreement, or from the Distributor's failure
to comply with laws, rules and regulations applicable to it in connection with
its activities hereunder. The Trust agrees to indemnify, defend and hold
harmless the Distributor, its officers, partners, employees, and any person who
controls
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the Distributor within the meaning of Section 15 of the Securities Act
(collectively, "Distributor Indemnitees"), from and against any and all claims,
demands, liabilities and expenses (including the reasonable cost of
investigating or defending such claims, demands or liabilities and any
reasonable counsel fees incurred in connection therewith) (collectively,
"Claims") which the Distributor Indemnitees may incur under the Securities Act
or under common law or otherwise (a) as the result of the Distributor acting as
distributor of the Funds and entering into selling agreements, participation
agreements, shareholder servicing agreements or similar agreements with
financial intermediaries on behalf of the Trust; (b) arising out of or based
upon (i) any untrue statement, or alleged untrue statement, of a material fact
contained in any registration statement or any Prospectus, (ii) any omission, or
alleged omission, to state a material fact required to be stated in any
registration statement or any Prospectus or necessary to make the statements
therein not misleading, or (iii) any untrue statement, or alleged untrue
statement, of a material fact in any Trust-related advertisement or sales
literature, or any omission, or alleged omission, to state a material fact
required to be stated therein to make the statements therein not misleading, in
either case notwithstanding the exercise of reasonable care in the preparation
or review thereof by the Distributor; or (c) arising out of or based upon the
electronic processing of orders over the internet at the Trust's request;
provided, however, that the Trust's agreement to indemnify the Distributor
Indemnitees pursuant to this Section 1.11 shall not be construed to cover any
Claims (A) pursuant to subsection (b) above to the extent such untrue statement,
alleged untrue statement, omission, or alleged omission, was furnished in
writing, or omitted from the relevant writing furnished, as the case may be, to
the Trust by the Distributor for use in the registration statement or in
corresponding statements made in the Prospectus, advertisement or sales
literature; (B) arising out of or based upon the willful misfeasance, bad faith
or gross negligence of the Distributor in the performance of its duties or the
Distributor's reckless disregard of its obligations and duties under this
Agreement; or (C) arising out of or based upon the Distributor's failure to
comply with laws, rules and regulations applicable to it in connection with its
activities hereunder.
In the event of a Claim for which the Distributor Indemnitees may be
entitled to indemnification hereunder, the Distributor shall provide the Trust
with written notice of the Claim, identifying the persons against whom such
Claim is brought, promptly following receipt of service of the summons or other
first legal process, and in any event within ten (10) days of such receipt. The
Trust will be entitled to assume the defense of any suit brought to enforce any
such Claim if such defense shall be conducted by counsel of good standing chosen
by the Trust and approved by the Distributor, which approval shall not be
unreasonably withheld. In the event any such suit is not based solely on an
alleged untrue statement, omission, or wrongful act on the Trust's part, the
Distributor shall have the right to participate in the defense. In the event the
Trust elects to assume the defense of any such suit and retain counsel of good
standing so approved by the Distributor, the Distributor Indemnitees in such
suit shall bear the fees and expenses of any additional counsel retained by any
of them, but in any case where the Trust does not elect to assume the defense of
any such suit or in case the Distributor reasonably withholds approval of
counsel chosen by the Trust, the Trust will reimburse the Distributor
Indemnitees named as defendants in such suit, for the reasonable fees and
expenses of any counsel retained by them to the extent related to a Claim
covered under
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this Section 1.11. The Trust's indemnification agreement contained in this
Section 1.11 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Distributor Indemnitees, and shall
survive the delivery of any Shares.
1.12 The Distributor agrees to indemnify, defend and hold harmless the
Trust, its officers, Trustees, employees, and any person who controls the Trust
within the meaning of Section 15 of the Securities Act (collectively, Trust
Indemnitees), from and against any and all Claims which the Trust Indemnitees
may incur under the Securities Act or under common law or otherwise, arising out
of or based upon (a) any untrue statement, or alleged untrue statement, of a
material fact contained in any registration statement, Prospectus, or
Trust-related advertisement or sales literature, or upon any omission, or
alleged omission, to state a material fact in such materials that would be
necessary to make the information therein not misleading, which untrue
statement, alleged untrue statement, omission, or alleged omission, was
furnished in writing, or omitted from the relevant writing furnished, as the
case may be, to the Trust by the Distributor for use in the registration
statement or in corresponding statements made in the Prospectus, or
advertisement or sales literature; (b) the willful misfeasance, bad faith or
gross negligence of the Distributor in the performance of its duties, or the
Distributor's reckless disregard of its obligations and duties under this
Agreement, or (c) the Distributor's failure to comply with laws, rules and
regulations applicable to it in connection with its activities hereunder (other
than in respect of Trust-related advertisements or sales literature that fails
to comply with applicable laws notwithstanding the exercise of reasonable care
in the preparation and review thereof by the Distributor).
In the event of a Claim for which the Trust Indemnitees may be entitled
to indemnification hereunder, the Trust shall provide the Distributor with
written notice of the Claim, identifying the persons against whom such Claim is
brought, promptly following receipt of service of the summons or other first
legal process, and in any event within ten (10) days of such receipt. The
Distributor will be entitled to assume the defense of any suit brought to
enforce any such Claim if such defense shall be conducted by counsel of good
standing chosen by the Distributor and approved by the Trust, which approval
shall not be unreasonably withheld. In the event any such suit is not based
solely on an alleged untrue statement, omission, or wrongful act on the
Distributor's part, the Trust shall have the right to participate in the
defense. In the event the Distributor elects to assume the defense of any such
suit and retain counsel of good standing so approved by the Trust, the Trust
Indemnitees in such suit shall bear the fees and expenses of any additional
counsel retained by any of them, but in any case where the Distributor does not
elect to assume the defense of any such suit or in case the Trust reasonably
withholds approval of counsel chosen by the Distributor, the Distributor will
reimburse the Trust Indemnitees named as defendants in such suit, for the
reasonable fees and expenses of any counsel retained by them to the extent
related to a Claim covered under this Section 1.12. The Distributor's
indemnification agreement contained in this Section 1.12 shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of the Trust Indemnitees, and shall survive the delivery of any Shares.
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1.13 No Shares shall be offered by either the 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: (a) the Distributor will not be obligated to cease offering shares until
it has received from the Trust written notice of such events, and (b) nothing
contained in this Section 1.13 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,
Agreement and Declaration of Trust, or Bylaws.
1.14 The Trust agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor:
(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 any 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, which could reasonably be expected to
have a material negative impact upon the offering of
Shares.
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
unless they would reasonably be expected to have a material negative impact upon
the offering of Shares.
2. Fees.
2.1 Attached as Schedule B to this Agreement are all plans of
distribution under Rule 12b-1 under the 1940 Act approved by the Funds and in
effect (collectively, the "Distribution Plan"). The Funds will deliver to
Distributor promptly after any changes thereto updated copies of the
Distribution Plan. For its services under this Agreement, the Distributor shall
be compensated as set forth on Schedules C and D to
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this Agreement. If the Funds have a Distribution Plan that permits them to
compensate the Distributor and required board approvals have been given, then
the Funds shall be responsible for all such compensation or such portions of it
as have been authorized under the Distribution Plan. If the Funds are not
authorized to compensate the Distributor in full in accordance with Schedules C
and D, then the Adviser shall agree with the Distributor in a separate
instrument that the Adviser shall compensate the Distributor in accordance with
Schedules C and D to the extent that the Funds are not so authorized. The fees
set forth on Schedules C and D are subject to change by Distributor upon 30 days
advance notice.
2.2 If: (i) the Distributor properly receives fees from the Funds under
the Distribution Plan, other than for services rendered or expenses incurred,
that the Distributor is not obligated to pay to third party broker-dealers, plan
administrators or others ("Retained Fees"), and (ii) the Funds have authority
under the Distribution Plan to pay for some or all of the Distributor's services
under this Agreement ("Permitted Services"), then all of the Retained Fees will
either be (a) returned to the funds and/or (b) credited against the compensation
payable by the funds to the Distributor for Permitted Services; provided,
however, that in no event shall any Retained Fees be applied in a manner that
results in a reduction of any obligation of the Adviser to compensate the
Distributor for services under this Distribution Agreement.
3. Sale and Payment.
3.1 Shares of a Fund may be subject to a sales load and may be subject
to the imposition of a distribution fee pursuant to the Distribution Plan
referred to above. To the extent that Shares of a Fund are sold at an offering
price which includes a sales load or subject to a contingent deferred sales load
with respect to certain redemptions (either within a single class of Shares or
pursuant to two or more classes of Shares), such Shares shall hereinafter be
referred to collectively as "Load Shares" (and in the case of Shares that are
sold with a front-end sales load, "Front-end Load Shares", or Shares that are
sold subject to a contingent deferred sales load, "CDSL Shares"). Funds that
issue Front-End Load Shares shall hereinafter be referred to collectively as
"Front-End Load Funds." Funds that issue CDSL Shares shall hereinafter be
referred to collectively as "CDSL Funds." Front-end Load Funds and CDSL Funds
may individually or collectively be referred as "Load Funds." Under this
Agreement, the following provisions shall apply with respect to the sale of, and
payment for, Load Shares.
3.2 The Distributor shall have the right to offer Load Shares at their
net asset value and to sell such Load Shares to the public against orders
therefor at the applicable public offering price, as defined in Section 4
hereof. The Distributor shall also have the right to sell Load 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 4
below.
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3.3 Prior to the time of delivery of any Load Shares by a Load Fund to,
or on the order of, the Distributor, the Distributor shall pay or cause to be
paid to the Load Fund or to its order an amount in New York cleared funds equal
to the applicable net asset value of such Shares. The Distributor may retain so
much of any sales charge or underwriting discount as is not allowed by the
Distributor as a concession to dealers.
4. Public Offering Price.
The public offering price of a Load Share shall be the net asset value
of such Load Share next determined, plus any applicable sales charge, all as set
forth in the current Prospectus of the Load Fund. The net asset value of Load
Shares shall be determined in accordance with the then-current Prospectus of the
Load Fund.
5. Issuance of Shares.
The Trust reserves the right to issue, transfer or sell Load Shares at
net asset values (a) in connection with the merger or consolidation of the Trust
or the Load Fund(s) with any other investment company or the acquisition by the
Trust or the 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 rights granted to the
holders of Shares on a pro rata basis; (d) in connection with the issuance of
Load Shares pursuant to any exchange and reinvestment privileges described in
any then-current Prospectus of the Load Fund; and (e) otherwise in accordance
with any then-current Prospectus of the Load Fund.
6. Term, Duration and Termination.
This Agreement shall become effective with respect to each Fund as of
the date first written above (the "Effective Date") (or, if a particular Fund is
not in existence on such date, on the earlier of the date an amendment to
Schedule A to this Agreement relating to that Fund is executed or the
Distributor begins providing services under this Agreement with respect to such
Fund) and, unless sooner terminated as provided herein, shall continue for a two
year period following the Effective Date. Thereafter, if not terminated, this
Agreement shall continue with respect to a particular Fund automatically for
successive one-year terms, provided that such continuance is specifically
approved at least annually (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 with 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 meaning as ascribed to
such terms in the 1940 Act.)
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7. Privacy.
Nonpublic personal financial information relating to consumers or
customers of the Funds provided by, or at the direction of, the Trust to the
Distributor, or collected or retained by the Distributor to perform its duties
as distributor, shall be considered confidential information. The Distributor
shall not disclose or otherwise use any nonpublic personal financial information
relating to present or former shareholders of the Funds other than for the
purposes for which that information was disclosed to the Distributor, including
use under an exception in Rules 13, 14 or 15 of Securities and Exchange
Commission Regulation S-P in the ordinary course of business to carry out those
purposes. The Distributor shall have in place and maintain physical, electronic
and procedural safeguards reasonably designed to protect the security,
confidentiality and integrity of, and to prevent unauthorized access to or use
of, records and information relating to consumers and customers of the Funds.
The Trust represents to the Distributor that it has adopted a Statement of its
privacy policies and practices as required by Securities and Exchange Commission
Regulation S-P and agrees to provide the Distributor with a copy of that
statement annually.
8. Anti-Money Laundering Compliance.
8.1 Each of Distributor and the Trust acknowledges that it is a
financial institution subject to the USA Patriot Act of 2001 and the Bank
Secrecy Act (collectively, the "AML Acts"), which require, among other things,
that financial institutions adopt compliance programs to guard against money
laundering. Each represents and warrants to the other that it is in compliance
with and will continue to comply with the AML Acts and applicable regulations in
all relevant respects. The Distributor shall also provide written notice to each
person or entity with which it entered an agreement prior to the date hereof
with respect to sale of the Trust's Shares, such notice informing such person of
anti-money laundering compliance obligations applicable to financial
institutions under applicable laws and, consequently, under applicable
contractual provisions requiring compliance with laws.
8.2 The Distributor shall include specific contractual provisions
regarding anti-money laundering compliance obligations in agreements entered
into by the Distributor with any dealer that is authorized to effect
transactions in Shares of the Trust.
8.3 Each of Distributor and the Trust agrees that it will take such
further steps, and cooperate with the other as may be reasonably necessary, to
facilitate compliance with the AML Acts, including but not limited to the
provision of copies of its written procedures, policies and controls related
thereto ("AML Operations"). Distributor undertakes that it will grant to the
Trust, the Trust's anti-money laundering compliance officer and regulatory
agencies, reasonable access to copies of Distributor's AML Operations, books and
records pertaining to the Trust only. It is expressly understood and agreed that
the Trust and the Trust's compliance officer shall have no access to any of
Distributor's AML Operations, books or records pertaining to other clients of
Distributor.
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9. Notices.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such notice
at the following address: if to the Trust, to it at 0000 Xxxxxxx Xxxx, Xxxxxxxx,
Xxxx 00000 Attention: President, The Coventry Group, with a copy to Xxxx
Xxxxxxxx, President, Signal Capital Management, Inc., Xxx Xxxx Xxxxxx, 0xx
Xxxxx, Xxxxxxxxxx, XX 00000; and if to Distributor, to it at 000 Xxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000, Attn: Broker Dealer Chief Compliance Officer, with
a copy to BISYS Distribution Services, 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000,
attn: President, or at such other address as such party may from time to time
specify in writing to the other party pursuant to this Section.
10. Confidentiality.
During the term of this Agreement, the Distributor and the Adviser may
have access to confidential information relating to such matters as either
party's business, trade secrets, systems, procedures, manuals, products,
contracts, personnel, and clients. As used in this Agreement, "Confidential
Information" means information belonging to the Distributor or the Adviser which
is of value to such party and the disclosure of which could result in a
competitive or other disadvantage to either party, including, without
limitation, financial information, business practices and policies, know-how,
trade secrets, market or sales information or plans, customer lists, business
plans, and all provisions of this Agreement. Confidential Information includes
information developed by either party in the course of engaging in the
activities provided for in this Agreement, unless: (i) the information is or
becomes publicly known without breach of this Agreement, (ii) the information is
disclosed to the other party by a third party not under an obligation
confidentiality to the party whose Confidential Information is at issue of which
the party receiving the information should reasonably be aware, or (iii) the
information is independently developed by a party without reference to the
other's Confidential Information. Each party will protect the other's
Confidential Information with at least the same degree of care it uses with
respect to its own Confidential Information, and will not use the other party's
Confidential Information other than in connection with its duties and
obligations hereunder. Notwithstanding the foregoing, a party may disclose the
other's Confidential Information if (i) required by law, regulation or legal
process or if requested by any Agency; (ii) it is advised by counsel that it may
incur liability for failure to make such disclosure; (iii) requested to by the
other party; provided that in the event of (i) or (ii) the disclosing party
shall give the other party reasonable prior notice of such disclosure to the
extent reasonably practicably and cooperate with the other party (at such other
party's expense) in any efforts to prevent such disclosure.
10. Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the 1940 Act.
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11. Prior Agreements
This Agreement constitutes the complete agreement of the parties as to
the subject matter covered by this Agreement, and supersedes all prior
negotiations, understandings and agreements bearing upon the subject matter
covered by this Agreement.
12. Amendments
No amendment to this Agreement shall be valid unless made in writing
and executed by both parties hereto.
13. Matters Relating to the Trust as a Massachusetts Business Trust
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 them personally, but shall bind only the trust property of the
Trust as provided in the Trust's Declaration of Trust.
* * * * * *
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.
The Coventry Group
By:
------------------------------------
Name:
Title:
BISYS Fund Services, Limited Partnership
By: BISYS Fund Services, Inc., its
general partner
By:
------------------------------------
Name:
Title:
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SCHEDULE A
FUNDS
Signal Large Cap Growth Fund
Signal Income Fund
Signal Tax-Exempt Income Fund
Signal Tax-Exempt Money Market Fund
Signal Money Market Fund
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SCHEDULE B
DISTRIBUTION AND SHAREHOLDER SERVICES PLAN
Introduction: It has been determined that the Funds, each of which is a
series of The Coventry Group, will pay for certain costs and expenses incurred
in connection with the distribution of certain classes of their shares and
servicing of shareholders of certain classes, and adopts this Service and
Distribution Plan for Class A and Class B Shares (the "Plan") as set forth
herein pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"Act").
The Board of Trustees, in considering whether the Funds should implement the
Plan, has requested and evaluated such information as it deemed necessary to
make an informed determination as to whether the Plan should be implemented and
has considered such pertinent factors as it deemed necessary to form the basis
for a decision to use assets of the Funds for such purposes.
In voting to approve the implementation of the Plan, the Trustees have
concluded, in the exercise of their reasonable business judgment and in light of
their respective fiduciary duties, that there is a reasonable likelihood that
the Plan will benefit the Funds and the shareholders of each of their classes of
shares.
The Plan: The material aspects of the financing by the Funds of
distribution expenses to be incurred in connection with securities of which each
is the issuer are as follows:
1. The Funds will compensate the distributor for services provided and expenses
incurred in connection with the distribution and marketing of shares of Class A
and Class B of each Fund and servicing of shareholders of each such class.
Distribution and servicing costs and expenses may include (1) printing and
advertising expenses; (2) payments to employees or agents of the distributor who
engage in or support distribution of each Fund's shares, including salary,
commissions, travel and related expenses; (3) the costs of preparing, printing
and distributing prospectuses and reports to prospective investors; (4) expenses
of organizing and conducting sales seminars; (5) expenses related to selling and
servicing efforts, including processing new account applications, transmitting
customer transaction information to each Fund's transfer agent and answering
questions of shareholders; (6) payments of fees to one or more broker-dealers
(which may include the distributor itself), financial institutions or other
industry professionals, such as investment advisers, accountants and estate
planning firms (severally, a "Service Organization"), based on the average daily
value of a Fund's shares owned by shareholders for whom the Service Organization
is the dealer of record or holder of record, or owned by shareholders with whom
the Service Organization has a servicing relationship; (7) costs and expenses
incurred in implementing and operating the Plan; and (8) such other similar
services as the Board of Trustees determines to be reasonably calculated to
result in the sale of each Fund's shares.
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Subject to the limitations of applicable law and regulation, including
rules of the National Association of Securities Dealers ("NASD"), the
distributor will be compensated monthly for such costs, expenses or payments at
an annual rate of up to but not more than 0.25% of the average daily net assets
of Class A shares of each Fund and 1.00% of the average daily net assets of
Class B shares of each Fund, provided however, that up to 0.25% of each such
amount may be used as a "service fee" as defined in applicable rules of the
NASD.
2. The distributor may periodically pay to one or more Service Organizations
(which may include the distributor itself) a fee in respect of a Fund's shares
owned by shareholders for whom the Service Organizations are the dealers of
record or holders of record, or owned by shareholders with whom the Service
Organizations have servicing relationships. Such fees will be computed daily and
paid quarterly by the distributor at an annual rate not exceeding 0.25% of the
average net asset value of shares of each class of the Fund owned by
shareholders for whom the Service Organizations are the dealers of record or
holders of record, or owned by shareholders with whom the Service Organizations
have servicing relationships. Subject to the limits herein and the requirements
of applicable law and regulations, including rules of the NASD, the distributor
may designate as "service fees," as that term is defined by applicable rules and
regulatory interpretations applicable to payments under a plan such as the Plan,
some or all of any payments made to Service Organizations (including the
distributor itself) for services that may be covered by "service fees," as so
defined.
The payment to a Service Organization is subject to compliance by the Service
Organization with the terms of a Service Agreement or Dealer Agreement between
the Service Organization and the distributor (the "Agreement"). If a shareholder
of a Fund ceases to be a client of a Service Organization that has entered into
an Agreement with the distributor, but continues to hold shares of the Fund, the
distributor will be entitled to receive a similar payment in respect of the
servicing provided to such investors. For the purposes of determining the fees
payable under the Plan, the average daily net asset value of a Fund's shares
shall be computed in the manner specified in the Declaration of Trust of The
Coventry Group and current prospectus for the computation of the value of the
Fund's net asset value per share.
3. The Plan will become effective immediately upon approval by a majority of the
Board of Trustees, including a majority of the Trustees who are not "interested
persons" (as defined in the Act) of the Funds and have no direct or indirect
financial interest in the operation of the Plan or in any agreements entered
into in connection with the Plan (the "Plan Trustees"), pursuant to a vote cast
in person at a meeting called for the purpose of voting on the approval of the
Plan, or upon such later date as the Trustees determine.
4. The Plan shall continue with respect to each applicable class of shares of
the Funds for a period of one year from its effective date, unless earlier
terminated in accordance with its terms, and thereafter shall continue
automatically with respect to each applicable class of shares of the Funds for
successive annual periods, provided such continuance is approved by a majority
of the Board of Trustees, including a majority of
14
the Plan Trustees pursuant to a vote cast in person at a meeting called for the
purpose of voting on the continuance of the Plan.
5. The Plan may be amended at any time by the Board of Trustees provided that
(a) any amendment to increase materially the costs which a class may bear for
distribution pursuant to the Plan shall be effective only upon approval by a
vote of a majority of the outstanding voting securities of that class and (b)
any material amendments of the terms of the Plan shall become effective only
upon approval as provided in paragraph 3 hereof.
6. The Plan is terminable without penalty at any time by (a) vote of a majority
of the Plan Trustees, or (b) vote of a majority of the outstanding voting
securities of the Funds.
7. Any person authorized to direct the disposition of monies paid or payable by
the Funds pursuant to the Plan or any agreement entered into in connection with
the Plan shall provide to the Board of Trustees, and the Board of Trustees shall
review, at least quarterly, a written report of the amounts expended pursuant to
the Plan and the purposes for which such expenditures were made.
8. While the Plan is in effect, the selection and nomination of Trustees who are
not "interested persons" (as defined in the Act) of the Funds shall be committed
to the discretion of the Trustees who are not "interested persons".
9. The Funds shall preserve copies of the Plan, any agreement in connection with
the Plan, and any report made pursuant to paragraph 7 hereof, for a period of
not less than six years from the date of the Plan or such agreement or report,
the first two years in an easily accessible place.
15
SCHEDULE C
COMPENSATION OF THE DISTRIBUTOR
1. BASIC DISTRIBUTION SERVICES. For providing the distribution entity and
related infrastructure and platform, including requisite registrations and
qualifications, premises, personnel, compliance, ordinary fund board meeting
preparation, maintenance of selling agreements, clearance of advertising and
sales literature with regulators, filing appropriate documentation for advisory
representatives to qualify as registered representatives of the Distributor
(provided that the Adviser is solely responsible for its representatives'
meeting examination requirements) and their related registrations and fees,
ordinary supervisory services, overhead, Financial Research Corporation's Mutual
Fund Views on the News and Monitor publications, and return on investment, the
Distributor shall receive an annual fee of $18,750, billed monthly.
2. SPECIAL DISTRIBUTION SERVICES. For special distribution services, including
those set forth on Schedule D to this Agreement, such as additional personnel,
registrations, marketing services, printing and fulfillment, website services,
proprietary distribution expertise for particular circumstances, and any other
services in addition to the basic distribution services covered by Paragraph 1
above, the Distributor shall be reimbursed promptly upon invoicing its expenses
for such services, including: (a) all costs to support additional personnel; (b)
regulatory fees including NASD CRD costs associated with marketing materials;
and (c) printing, postage and fulfillment costs, and (d) amounts payable under
additional agreements to which Distributor is a party.
3. SPECIAL CONDUIT SITUATIONS. If the Distribution Plan, or any other Fund plans
of distribution under Rule 12b-1 that contemplate up front and/or recurring
commission and/or service payments to broker dealers, retirement plan
administrators or others by the Distributor with respect to back-end loads,
level loads, or otherwise, unless expressly agreed otherwise in writing between
the parties, all such payments shall be made to the Distributor, which shall act
as a conduit for making such payments to such broker-dealers, retirement plan
administrators or others.
4. OTHER PAYMENTS BY THE DISTRIBUTOR. If the Distributor is required to make any
payments to third parties in respect of distribution, which payments are
contemplated by the parties to the distribution agreement or otherwise arise in
the ordinary course of business, the Distributor shall be promptly reimbursed
for such payments upon invoicing them.
5. FEE ADJUSTMENTS. The fixed fees and other fees expressed as stated dollar
amounts in this Schedule C and in this Agreement are subject to annual
increases, commencing on the one-year anniversary date of the date of this
Agreement, in an amount equal to the percentage increase in consumer prices for
services as measured by the United States Consumer Price Index entitled "All
Services Less Rent of Shelter," or a similar index should such index no longer
be published, since such one-year anniversary or since the date of the last fee
increase, as applicable.
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SCHEDULE D
SPECIAL DISTRIBUTION SERVICES AND FEES
SERVICES
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1. WHOLESALING PERSONNEL SERVICES
Wholesaling Personnel may be external wholesalers and/or internal
wholesalers.
Services include soliciting support of the Funds with selling broker dealers;
participating in promotional meetings, presentations, conferences and other and
forums; identifying high potential personnel of the Adviser and selling broker
dealers; and assisting with mail solicitations and literature fulfillment.
FEES
---------------------------------------------------------------
WHOLESALING PERSONNEL SERVICES FEES
For each individual constituting the Wholesaling Personnel
employed by the Distributor pursuant to this Agreement, the
Distributor shall receive annually an amount equal to the sum
of:
(i) all compensation paid annually by the Distributor to the
employee; plus
(ii) a management oversight fee equal to:
(a) if one to four Wholesaling Personnel are employed,
30% of the salary compensation and 5% of the bonus
or commission compensation, or
(b) if five or more Wholesaling Personnel are employed,
25% of the salary compensation and 5% of the bonus
or commission compensation;
plus
(iii) 18% of the total compensation (covering costs of the
Distributor's employee benefits that are provided by the
Distributor).
In addition, the Distributor shall be reimbursed
for all related costs to support, educate and
train and maintain compliance oversight of
Wholesaling Personnel and other personnel such as
sales management, marketing and performance
reporting personnel (including time and expenses,
continuing education, seminars, rent, supplies,
phone, computers, firm element, license,
registration)
Upon any termination of Wholesaling Personnel at
the request of the Funds or upon termination of
this Agreement by the Funds for any reason other
than cause, the Distributor will be reimbursed its
severance costs with respect to such terminated
Wholesaling Personnel.
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2. MARKETING AND RELATED SERVICES
Marketing Execution: services include identification and development of
appropriate marketing and communications programs, projects and other
initiatives; collaboration on initiating, researching, developing, and
delivering appropriate sales and marketing materials; and management of
marketing and advertising projects.
Performance Reporting: services include creation of templates for monthly fact
sheets and quarterly fact sheets; populating templates with performance data
obtained from third parties; and coordinating steps needed for final printing
and distribution.
Creative Communication and Editorial Services: services include preparing drafts
of textual commentary and management discussion and analysis for annual; and
semi-annual reports, including portfolio manager interviews; providing creative
design and direction; and coordinating production, including typesetting
(initial composition and changes to composition), charts and ancillary items.
Production Timing:
o No timing guarantees can be made for completion of monthly
and quarterly fact sheets where any of the information needed
to produce the reports is generated by service providers other
than the Distributor. However, a basic estimate of turnaround
time may be given based upon when the unit receives all
necessary data in good order. Under normal conditions, the
Performance Reporting unit expects to make proofs ready for
review (either printed or electronic PDF format) by the 4th
business day after the final piece of data is received. If
compliance review is necessary (e.g., when Morningstar ratings
data is used) an additional 2 days may be required for review.
o Printing turnaround (once the factsheets are signed-off by the client) is
usually approximately 4-5 calendar days with most jobs shipping by the 5th
day.
o If requested, final electronic PDF files may be generated and e-mailed on
the day the job is signed-off on by the client. These PDFs may be
distributed and printed as necessary until the final printed pieces arrive.
MARKETING AND RELATED SERVICES FEES
Marketing Execution: Quote available upon request.
Performance Reporting
Monthly Reports
Monthly Updating and Typesetting -- $850 - $1,000 per sheet per month (for
an All-in-One style report)
Initial Design and Setup (1-time charge) -- $500 per sheet
Quarterly Reports
Quarterly Updating and Typesetting -- $300 - $350 per Fund sheet per Share
Class per quarter
Initial Design and Setup per Fund sheet (1-time charge) -- $500 per Fund
sheet
Annual & Semi-Annual Reports
Coordination:
o $3,000 Initial Fee (includes Chairman's Letter and 1st Fund)
o $500 for each additional Fund
NOTE: The above charges do not include the typesetting, printing, shipping,
fulfillment, Xxxxx filing or quick-turnaround charges that may be incurred
from the financial printer. The above fees are for coordinating the project
only.
Creative Communication and Editorial Services
Quote available upon request.
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3. FRC SERVICES
(must be evidenced by separate amendment to this Agreement)
FRC's program components include:
-Market Analytics Publications
-Advanced Research Publications
-Analyst Support
-SME Direct Access
FRC SERVICES FEES
Market Analytics Publications: Quote available upon request.
Advanced Research Publications:
o Topic Briefs
o FRC Focus (typical cost is around $1,500)
White Papers - FRC Vision (typical cost is around $2,500)
o Research Studies (costs vary, however typically range between $3,500
and $12,500)
Analyst Support: Quote available upon request
SME Direct Access: Quote available upon request
Other FRC Fees:
o Client participation in funding FRC Franchise Level program: $12,500
o All subsequent content and support hours may be purchased at a 20%
discount from standard pricing.
Expenses Applicable to Special Distribution Services
Except as expressly set forth above, out-of-pocket expenses incurred by
Distributor in the performance of its services under this Agreement are not
included in the above fees. Such out-of-pocket expenses may include, without
limitation:
o reasonable travel and entertainment costs;
o expenses incurred by the Distributor in qualifying, registering and
maintaining the registration of the Distributor and each individual
comprising Wholesaling Personnel as a registered representative of the
Distributor under applicable federal and state laws and rules of the NASD,
e.g., CRD fees and state fees;
o sponsorships, Promotions, Sales Incentives;
o any and all compensation to be paid to a third party as paying agent for
distribution activities (platform fees, finders fees, sub-TA fees, 12b-1
pass thru, commissions, etc.);
o costs and expenses incurred for telephone service, photocopying and office
supplies;
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o advertising costs;
o costs for printing, paper stock and costs of other materials,
electronic transmission, courier, talent utilized in sales materials
(e.g. models), design output, photostats, photography, and
illustrations;
o packaging, shipping, postage, and photocopies; and
o taxes that are paid or payable by the Distributor or its affiliates in
connection with its services hereunder, other than taxes customarily and
actually imposed upon the income that the Distributor receives hereunder.
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