ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 31st day of May, 1997 between Active Assets
California Tax-Free Trust, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust"), and Xxxx Xxxxxx
Distributors Inc., a Delaware corporation (the "Distributor");
W I T N E S S E T H:
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a diversified open-end investment company and it
is affirmatively in the interest of the Trust to offer its shares to the
participants in the Active Assets Account program (the "AAA" program) on the
terms described in its Registration Statement filed under the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies; and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Trust's transferable
shares of beneficial interest, without par value ("Shares"), in order to promote
the growth of the Trust and facilitate the distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR. The Trust hereby appoints the
Distributor as the distributor of the Trust to sell Shares to participants in
the AAA program on the terms contained in the currently effective prospectus of
the Trust under the 1933 Act, as amended from time to time (the "Prospectus"),
and the Distributor hereby accepts such appointment. The Trust, during the term
of this Agreement, shall sell Shares to the Distributor and securities dealers,
including Xxxx Xxxxxx Xxxxxxxx Inc. ("DWR"), an affiliate of the Distributor,
upon the terms and conditions set forth herein.
SECTION 2. PURCHASE OF SHARES FROM THE TRUST.
(a) The Distributor shall have the right to buy from the Trust the Shares
needed, but not more than the Shares needed (except for clerical errors in
transmission) to fill unconditional orders for Shares placed through the
Distributor by eligible participants in the AAA program and securities dealers.
The price which the Distributor shall pay for the Shares so purchased from the
Trust shall be the current public offering price described below on which such
orders were based.
(b) The public offering price of the Shares, i.e., the price per Share at
which the Distributor may sell Shares to participants in the AAA program, or to
securities dealers including DWR, who have entered into selected dealer
agreements with the Distributor pursuant to Section 7 ("Selected Dealers") shall
be the net asset value, determined as set forth in the Prospectus, used in
determining the public offering price on which such orders were based.
(c) The Trust, or any agent of the Trust designated in writing by the
Trust, shall be promptly advised of all purchase orders for Shares received by
the distributor. All issuances of Shares to participants in the AAA program
shall be deemed issued pursuant to Section 2 hereof. Any order may be rejected
by the Trust or the Distributor, provided, however, that neither will
arbitrarily or without reasonable cause refuse to accept orders for the purchase
of Shares. The Trust (or its agent) will confirm orders upon their receipt, or
in accordance with any exemptive order of the Securities and Exchange
Commission, and will make appropriate book entries pursuant to the instructions
of the Distributor. Purchase orders are effective when Federal Funds become
available to the Trust. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Trust (or its agent).
With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Trust's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors.
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The Distributor is also authorized to instruct the transfer agent to receive
payment directly from the Selected Dealer on behalf of the Distributor, for
prompt transmittal to the Trust's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 3. REPURCHASE OF SHARES BY THE TRUST.
(a) Any of the outstanding Shares may be tendered for redemption at any
time, and the Trust shall redeem the shares so tendered in accordance with its
obligations and rights as set forth in the Declaration of Trust, and in
accordance with the applicable provisions set forth in the Prospectus. The price
to be paid to redeem the Shares shall be equal to the net asset value as set
forth in the Prospectus. Shares redeemed due to an unauthorized use of a Visa
card of a Shareholder shall be reinstated by the Trust at the cost of the
Distributor as set forth in Section 5(d) hereof.
With respect to Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of the Trust to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Trust to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer and
maintain a record of such orders. The Distributor is further authorized to
obtain from the Trust, and shall maintain, a record of payments made directly to
the Selected Dealer on behalf of the Distributor.
SECTION 4. DUTIES OF THE TRUST.
(a) The Trust shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares of the Trust,
including one certified copy, upon request by the Distributor, of all financial
statements prepared by the Trust and examined by independent accountants. The
Trust shall, at the expense of the Distributor, make available to the
Distributor such number of copies of the Prospectus as the Distributor shall
reasonably request.
(b) The Trust shall take, from time to time, all necessary action to
register Shares under the 1933 Act, to the end that there will be available for
sale such number of shares as participants in the AAA program may reasonably be
expected to purchase.
(c) The Trust shall use its best efforts to pay the filing fees for an
appropriate number of the Shares for sale under the securities laws of such
states as the Distributor and the Trust may approve. Any such qualification to
sell its Shares in a state may be withheld, terminated or withdrawn by the Trust
at any time in its discretion. As provided in Section 6(c) hereof, such filing
fees shall be borne by the Trust. The Distributor shall furnish such information
and other material relating to its affairs and activities as may be required by
the Trust in connection with the sale of its Shares in any state.
(d) The Trust shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports of the Trust.
SECTION 5. DUTIES OF THE DISTRIBUTOR.
(a) The Distributor shall sell shares of the Trust through DWR and may sell
shares through other securities dealers and its own Account Executives and shall
devote reasonable time and effort to promote sales of the Shares of the Trust,
but shall not be obligated to sell any specific number of Shares. The services
of the Distributor hereunder are not to be deemed exclusive and nothing herein
contained shall prevent the Distributor from entering into distribution
arrangements with other investment companies so long as the performance of its
obligations hereunder is not impaired thereby. It is understood that Selected
Dealers, including DWR, may also sell shares for other registered investment
companies.
(b) In selling the Shares of the Trust, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all federal and
state laws and regulations and the regulations of the National Association of
Securities Dealers, Inc. (the "NASD") relating to the sale of such securities.
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Neither the Distributor nor any other person is authorized by the Trust to give
any information or to make any representations, other than those contained in
the Registration Statement or related Prospectus and any sales literature
specifically approved by the Trust.
(c) The Distributor shall adopt and follow procedures, as approved by the
Trust, for the confirmation of sales to participants in the AAA program, the
collection of amounts payable by investors on such sales, and the cancellation
of unsettled transactions, as may be necessary to comply with the requirements
of the NASD, as such requirements may from time to time exist.
(d) Through the AAA program, the Trust is linked to securities and Visa
accounts of customers of the Distributor and automatic purchases and redemptions
of Shares of the Trust will be effected by the Distributor pursuant to the AAA
program. Free credit cash balances in the securities accounts of customers of
the Distributor will automatically be invested by the Distributor in Shares of
the Trust on the terms described in the Prospectus. Shares of the Trust will
automatically be redeemed by the Distributor to satisfy debit balances in such
securities accounts or amounts owing in the Visa card accounts on the terms
described in the Prospectus. AAA program participants may be liable for the
unauthorized use of their Visa card in an amount not to exceed $50. In the event
of the unauthorized use of the Visa card or cards held by AAA program
participants after the Visa processing agent has been notified orally or in
writing of the loss, theft or possible unauthorized use of such card or cards,
and the redemption of Trust Shares due to such unauthorized use, the Trust
agrees to reinstate such Shares in the account of the AAA program participant as
if never redeemed and the Distributor hereby agrees to indemnify the Trust
against any losses caused thereby and all costs associated therewith.
SECTION 6. PAYMENT OF EXPENSES.
(a) The Trust shall bear all costs and expenses of the Trust, including
fees and disbursements of its counsel and independent accountants, in connection
with the preparation and filing of any required Registration Statements and
Prospectuses under the 1933 Act, and the 1940 Act, and all amendments and
supplements thereto, and the expense of preparing, printing, mailing and
otherwise distributing prospectuses, annual or interim reports or proxy
materials to shareholders.
(b) After the Prospectuses and annual and interim reports have been
prepared, set in type and mailed to shareholders, the Distributor shall bear the
costs and expenses of printing and distributing any copies thereof which are
used in connection with the offering of Shares or the AAA program. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor in
connection with the offering of the Shares for sale or the AAA program. Any
expense of advertising incurred in connection with such offering will also be
the obligation of the Distributor.
(c) The Trust shall pay the filing fees of the Shares for sale in such
states of the United States or other jurisdictions as shall be selected by the
Trust and the Distributor pursuant to Section 4(c) hereof and the cost and
expenses payable to each such state for continuing to offer Shares therein until
the Trust decides to discontinue selling Shares pursuant to Section 4(c) hereof.
(d) The Distributor agrees that it will comply with the terms and
limitations of the Rules of the Association of the NASD.
SECTION 7. SELECTED DEALER AGREEMENTS. (a) The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public offering
price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales of Shares to investors and Selected Dealers,
the collection of amounts payable by investors and Selected Dealers on such
sales, and the cancellation of unsettled transactions, as may be necessary to
comply with the requirements of the NASD, as such requirements may from time to
time exist.
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SECTION 8. INDEMNIFICATION. (a) The Trust shall indemnify and hold
harmless the Distributor and each person, if any, who controls the Distributor,
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage or
expense and reasonable counsel fees incurred in connection therewith) arising by
reason of any person acquiring any Shares, which may be based upon the 1933 Act,
or on any other statute or at common law, on the ground that the Registration
Statement or related Prospectus, as from time to time amended and supplemented,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Trust in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of the Trust in favor of the Distributor and any such
controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Trust or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Trust to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case may be, shall have notified
the Trust in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Trust of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Trust will be entitled to participate
at its own expense in the defense or if it so elects, to assume the defense, of
any suit brought to enforce any such liability, but if the Trust elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Trust elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Trust does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Trust shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or Trustees in
connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless the Trust and
each of its Trustees and officers and each person, if any, who controls the
Trust against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Trust in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus, as from time to time amended, and against any losses and all costs
in connection with the redemption of shares due to unauthorized use of a Visa
card or due to any error, fault or breakdown of the AAA computer programs or
operating procedures. In case any action shall be brought against the Trust or
any person so indemnified, in respect of which indemnity may be sought against
the Distributor, the Distributor shall have the rights and duties given to the
Trust, and the Trust and each person so indemnified shall have the rights and
duties given to the Distributor by the provisions of subsection (a) of this
Section 8.
(ii) The Distributor shall indemnify and hold harmless the Fund and Fund's
transfer agent, individually and in its capacity as the Fund's transfer agent,
from and against any claims, damages and liabilities which arise as a result of
actions taken pursuant to instructions from, or on behalf of, the Distributor
to: (1) redeem all or a part of shareholder accounts in the Fund pursuant to
subsection 4(c) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to subsection 3(e).
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(iii) In case any action shall be brought against the Fund or any person so
indemnified by this subsection 8(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to the Fund, and the Fund and each person so indemnified shall have the rights
and duties given to the Distributor by the provisions of subsection (a) of this
Section 8.
(c) If the indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Fund on the one hand and the Distributor on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Fund on the one hand and
the Distributor on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Fund on the one hand and
the Distributor on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Fund bear to the total compensation received by the Distributor, in each case as
set forth in the Prospectus. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Fund or the Distributor and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Fund and the Distributor agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such claim.
Notwithstanding the provisions of this subsection (c), the Distributor shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Shares distributed by it to the public were offered to the
public exceeds the amount of any damages which it has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 0000 Xxx) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
SECTION 9. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
become effective as of the date first above written and shall remain in force
until April 30, 1998, and thereafter, but only so long as such continuance is
specifically approved at least annually by (i) the Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities of the Trust, cast
in person or by proxy, and (ii) a majority of those Trustees who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting upon such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Trustees of the Trust, or by vote of a majority of the
outstanding voting securities of the Trust, or by the Distributor, on sixty
days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 10. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Trustees
of the Trust, or by the vote of a majority of outstanding voting securities of
the Trust, and (ii) a majority of those Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
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SECTION 11. 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. To the extent the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
SECTION 12. PERSONAL LIABILITY. The Declaration of Trust establishing
Active Assets California Tax-Free Trust, dated July 9, 1991, a copy of which,
together with all amendments thereto (the "Declaration"), is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that the
name Active Assets California Tax-Free Trust, refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of Active Assets California
Tax-Free Trust shall be held to any personal liability, nor shall resort be had
to their private property for the satisfaction of any obligation or claim or
otherwise, in connection with the affairs of said Active Assets California
Tax-Free Trust but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
ACTIVE ASSETS CALIFORNIA TAX-FREE TRUST
By:
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XXXX XXXXXX DISTRIBUTORS INC.
By:
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