DISTRIBUTION AGREEMENT
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AGREEMENT made as of October 1, 1997, by and between North American
Funds (the "Trust"), a Massachusetts business trust which intends to engage in
business as an open-end investment company under the Investment Company Act of
1940, as amended (the "Investment Company Act"), and CypressTree Funds
Distributors, Inc. (the "Distributor"), a Delaware corporation registered under
the Securities Exchange Act of 1934, as amended, as a broker-dealer.
1. Appointment of Distributor. The Trust hereby appoints the Distributor
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as the principal underwriter and exclusive distributor of shares of each series
of shares of beneficial interest of the Trust (the "Shares") and the Distributor
hereby accepts that appointment.
2. Sale of Shares Through Distributor.
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(a) The Trust hereby grants to the Distributor the exclusive right to
sell, as agent for the Trust not as principal, and to arrange for the sale of
Shares upon the terms herein set forth. The exclusive right hereby granted
shall not apply to Shares issued or transferred or sold: (i) in connection with
the merger or consolidation of any other investment company or personal holding
company with the Trust or one of its portfolio series or the acquisition by
purchase or otherwise of all (or substantially all) the assets or the
outstanding shares of any such company by the Trust or one of its portfolio
series; or (ii) pursuant to reinvestment of dividends or capital gains
distributions; or (iii) pursuant to any reinstatement privilege afforded
redeeming shareholders. It is understood that shares may be purchased directly
through the Trust's transfer and dividend disbursing agent in the manner set
forth in the Trust's prospectus.
(b) The Distributor, either directly or through a promotional agent
selected and compensated by the Distributor, will devote research, time and
effort to effect sales of Shares through dealers, and will assist those dealers
and their associated persons to the extent and in whatever manner the
Distributor deems appropriate in order to enhance the sale of Shares, but the
Distributor does not undertake to arrange for the sale of any specific number of
Shares.
Neither the Distributor nor any selected dealer 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 statement of additional information and any sales literature specifically
approved by the Trust. The services of the Distributor to the Trust hereunder
are not to be deemed exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment companies
so long as the performance of its obligations hereunder is not impaired thereby.
(c) The Distributor shall have the right, as agent of the Trust, to
order from the Trust the Shares needed, but not more than the Shares needed
(except for reasonable allowances for clerical errors, delays and errors of
transmission and cancellation of orders), to fill unconditional orders for
Shares received by the Distributor from dealers and investors. The price which
shall be paid to the Trust for the Shares so purchased shall be the net asset
value, determined as set forth in Section 2(e) hereof.
(d) The price at which the Distributor or dealer purchasing shares
through the Distributor may sell Shares to the public shall be the public
offering price determined in accordance with the method set forth in the Trust's
prospectus and statement of additional information.
(e) The net asset value of Shares of the Trust shall be determined by
the Trust or any agent of the Trust in accordance with the method set forth in
the prospectus and statement of additional information of the Trust and
guidelines established by the trustees of the Trust (the "Trustees").
(f) The Trust shall have the right to suspend the sale of its Shares
at times when redemption is suspended pursuant to the conditions set forth in
Section 8(c) hereof. The Trust shall also have the right to suspend the sale of
its Shares if a banking moratorium shall have been declared by federal or
applicable state authorities, or if there shall have been some other event,
which, in the judgment of the Trustees, makes it impracticable or inadvisable to
sell the Shares.
(g) The Trust, or any agent of the Trust designated in writing by the
Trust, shall be advised promptly of all purchase orders for Shares received by
the Distributor. Any
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order may be rejected by the Trust; provided, however, that the Trust will not
arbitrarily or without reasonable cause refuse to accept or confirm orders for
the purchase of Shares. The Trust (or its agent) will confirm orders upon their
receipt, will make appropriate book entries and, upon receipt by the Trust (or
its agent) of payment therefor, will deliver deposit receipts or certificates
for such Shares pursuant to the instructions of the Distributor.
3. Sales Charges.
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(a) For the purposes of this Section 3, "Distribution Fees" shall mean,
collectively, (A) the sales charges payable to the Distributor as set forth in
Section 3(b), below, and (B) the amounts payable to the Distributor under the
Distribution Plans as set forth in Section 3(c) and "Effective Date" shall mean
the date hereof.
(b) The Distributor shall have the right to receive the sales charges
(including, without limitation, contingent deferred sales charges) in respect of
Shares sold during the term of this Agreement or any continuation hereof
(including Shares into which such Shares convert) (collectively, "New
Distributor Shares") under the circumstances, upon the terms and conditions and
in the amounts set forth in the Trust's prospectus at the time of the sale, but
excluding "Former Distributor Shares" (as that term is defined in Section 3 of
the Distribution Agreement between NASL Financial Services, Inc. and the Trust
dated January 1, 1996, as amended on September 30, 1997 and as in effect on the
date hereof). The Distributor shall have no right to receive sales charges
(including, without limitation, contingent deferred sales charges) in respect of
Former Distributor Shares.
(c) So long as the Trust's Distribution Plans pursuant to Rule 12b-1
under the Investment Company Act remain in effect:
(i) with respect to assets attributable to Former Distributor Shares,
the Distributor, in its capacity as distributor, shall not have the right to
receive any amounts payable under such Distribution Plans; and
(ii) with respect to assets attributable to New Distributor Shares,
the Distributor shall have the right to receive one hundred percent (100%) of
the amounts payable under such Distribution Plans.
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(d) The Distributor may transfer its right to receive Distribution
Fees (but not its obligations under this Agreement), and such transfer shall be
effective upon written notice from the Distributor to the Trust. In connection
with the foregoing, the Trust is authorized to pay all or a part of the
Distribution Fees directly to such transferee of the Distributor.
(e) The right of the Distributor to receive Distribution Fees shall
survive the termination of this Agreement.
4. Duties of the Trust. The Trust shall:
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(a) Furnish to the Distributor copies of its prospectus and statement
of additional information, its annual and interim reports, and other
information, financial statements and papers, including one certified copy of
all financial statements prepared for the Trust by independent public
accountants, to the extent reasonably requested by the Distributor for use in
connection with the distribution of Shares of the Trust.
(b) Take, from time to time, any steps necessary to register the
Shares under the Securities Act of 1933 (the "Securities Act"), so that there
will be available for sale as many Shares as the Distributor reasonably may be
expected to sell.
(c) Use its best efforts to qualify and maintain the qualification of
an appropriate number of its Shares for sale under the securities laws of those
states approved by the Distributor and the Trust, and, if necessary or
appropriate in connection therewith, to qualify and maintain the qualification
of the Trust as a broker-dealer in those states; provided that any such
qualification may be terminated or withdrawn by the Trust at any time in its
discretion. The Distributor shall furnish information and other material
relating to its affairs and activities reasonably required by the Trust in
connection with any such qualification(s).
5. Duties of the Distributor. The Distributor shall:
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(a) Use its best efforts in all respects duly to conform with the
requirements of all federal and state laws relating to the sale of the Shares of
the Trust and with all applicable rules and regulations of all regulatory
bodies, including the National Association of Securities Dealers, Inc. (the
"NASD").
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(b) Use its best efforts to obtain any approval or clearance required
from the NASD or other regulatory authorities with respect to sales material for
the Trust or any of its portfolio series.
6. Selected Dealer Agreements. The Distributor shall:
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(a) Have the right to enter into a promotional agent agreement with
Xxxx Xxxxx Associates, Inc. ("WLA") and selected dealer agreements with
securities dealers of its choice ("selected dealers") for the sale of Shares.
Shares sold to selected dealers shall be for resale by the selected dealers only
at the public offering price determined as set forth in Section 2(d) hereof. Any
agreement with WLA and the standard form of agreement with selected dealers
pertaining to sales of the Shares shall be approved by the Trustees.
(b) Offer and sell Shares, within the United States, only to selected
dealers that are members in good standing of the NASD.
(c) Act only as principal and not as agent for the Trust in making
agreements with selected dealers.
7. Payment of Expenses.
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(a) The Trust shall bear all costs and expenses of the Trust, except
for those expenses assumed by any investment adviser or subadviser of the Trust
or any other party contracting with the Trust or by the Distributor pursuant to
Section 7(b) of this Agreement.
(b) The Distributor shall bear the costs and expenses of: (i) any
payments made to WLA and to selected dealers; (ii) the printing and distributing
of any copies of prospectuses, statements of additional information and annual
and interim reports to be used in connection with the offering of Shares to
selected dealers or prospective investors pursuant to this Agreement after the
same have been prepared and set in type and copies have been printed and
distributed to regulatory bodies and existing shareholders as deemed necessary;
(iii) preparing, printing and distributing any other literature used by the
Distributor or furnished by it for use by selected dealers in connection with
the offering of the Shares for sale to the public; (iv) any advertising expenses
incurred by the Distributor in connection with the offering; and (v) the
registration or qualification of the Distributor as a broker-dealer under
federal and states laws and of continuing those registrations or qualifications.
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8. Redemption of Shares. Any of the outstanding Shares may be tendered
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for redemption at any time, and the Trust agrees to redeem the Shares so
tendered in accordance with its obligations as set forth in Article IV of its
Agreement and Declaration of Trust, as amended from time to time, in accordance
with the applicable provisions set forth in the prospectus and statement of
additional information of the Trust, and subject to the following conditions:
(a) The price to be paid to redeem the Shares shall be equal to the
net asset value calculated in accordance with the provisions of Section 2(e)
hereof.
(b) The Trust shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the Distributor
on or before the seventh day subsequent to receiving the notice of redemption in
proper form.
(c) Redemption of Shares or payment may be suspended at times when the
New York Stock Exchange is closed, when trading on that Exchange is suspended or
restricted, when an emergency exists as a result of which disposal by a
portfolio series of the Trust of its investment securities is not reasonably
practicable or it is not reasonably practicable for a portfolio series of the
Trust fairly to determine the value of its net assets, or during any other
period when the Securities and Exchange Commission, by order, so permits.
9. Repurchase of Shares. The Trust hereby authorizes the Distributor to
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repurchase upon the terms and conditions set forth in the Trust's prospectus and
statement of additional information (as supplemented by written instructions
given by the Trust to the Distributor from time to time), as the Trust's agent
and for the Trust's account, such Shares as may be offered for sale to the Trust
from time to time by holders of those Shares or their agents. No offers for
sale of Shares to the Trust shall be accepted by the Distributor during any time
when the redemption of Shares by the Trust shall have been suspended.
10. Indemnification.
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(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),
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arising by reason of any person acquiring any Shares, which may be based upon
the Securities Act, or on any other statute or at common law, on the ground that
the registration statement or related prospectus and statement of additional
information, as from time to time amended and supplemented, or an annual or
interim report to shareholders of the Trust, includes an untrue statement of
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 that
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/or its controlling persons to be deemed to
protect the Distributor or any controlling persons thereof against any liability
to the Trust or its security holders to which the Distributor or any of its
controlling persons would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of their duties or by reason of
the reckless disregard of their 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 its
controlling persons, unless the Distributor or its 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 its controlling
persons (or after the Distributor or its controlling persons shall have received
notice of service on any designated agent), but failure to notify the Trust of
any claim shall not relieve the Trust from any liability which it may have to
the person against whom the action is brought otherwise than on account of the
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, that defense shall be conducted by counsel chosen
by it and satisfactory to the Distributor or the Distributor's controlling
person or persons, defendant or defendants in the suit. In the event the Trust
elects to assume the defense of a suit and retain satisfactory counsel, the
Distributor or its controlling person or persons, defendant or defendants in the
suit, shall bear the fees and expenses of any additional counsel retained by
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them, but, in case the Trust does not elect to assume the defense of such a
suit, it will reimburse the Distributor or the Distributor's 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 any
of the Shares.
(b) 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 10, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Trust by or on behalf of the Distributor for
use in connection with the registration statement or related prospectus and
statement of additional information, as from time to time amended, or the annual
or interim reports to shareholders. 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 10.
11. Continuation, Amendment or Termination of the Agreement.
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(a) This Agreement shall become effective as of the date first
written above and shall continue in full force and effect from year to year so
long as continuance is approved at least annually (i) by the Trustees or by vote
of a majority of the outstanding voting securities of the Trust and (ii) by vote
of a majority of the Trustees who are not interested persons of the Distributor
or of the Trust cast in person at a meeting called for the purpose of voting on
such approval, provided, however, that (a) this Agreement may at any time be
terminated without the payment of any penalty either by vote of the Trustees or
by vote of a majority of the outstanding voting securities of the Trust, on
sixty (60) days' notice to the Distributor; (b) this Agreement shall immediately
terminate in the event of its assignment; and (c) this Agreement may be
terminated by the Distributor on ninety (90) days' written notice to the Trust.
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(b) This Agreement may be amended at any time by mutual consent of the
parties, provided that the consent on the part of the Trust shall have been
approved (i) by the Trustees or by vote of a majority of the outstanding voting
securities of the Trust and (ii) by vote of a majority of the Trustees who are
not interested persons of the Distributor or of the Trust cast in person at a
meeting called for the purpose of voting on the amendment.
(c) Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed post-paid, to the other party at the
principal office of the other party.
12. Definitions. For the purposes of this Agreement, the terms "vote of a
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majority of the outstanding voting securities," "interested person" and
"assignment" shall have the respective meanings specified in the Investment
Company Act.
13. Agreement and Declaration of Trust. The Agreement and Declaration of
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Trust establishing the Trust, dated September 28, 1988, 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 "North American Security 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 the 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, in connection with the affairs of
the Trust or any portfolio series thereof, but only the assets belonging to the
Trust, or to the particular portfolio series with which the obligee or claimant
dealt, shall be liable.
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IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
NORTH AMERICAN FUNDS
By:
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CYPRESSTREE FUNDS DISTRIBUTORS, INC.
By:
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