DISTRIBUTION AGREEMENT
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DISTRIBUTION AGREEMENT, dated as of March 1, 2006, by and between
CONSTELLATION FUNDS, a Delaware business trust (the "Trust"), with respect to
each of its series of shares of beneficial interest ("Shares") (each series of
shares is a "Fund"), and TOUCHSTONE SECURITIES, INC., a Nebraska corporation
("Touchstone" or the Distributor").
W I T N E S S E T H
WHEREAS, the Trust is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940 (collectively with
the rules and regulations promulgated thereunder, the "1940 Act");
WHEREAS, the Trust wishes to engage Touchstone to provide certain services
with respect to the distribution of Shares of each Fund, and Touchstone is
willing to provide such services to the Trust, with respect to the Funds, on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. APPOINTMENT OF DISTRIBUTOR; DUTIES.
(a) The Trust grants to the Distributor the right, as agent of the
Trust, to sell Shares upon the terms herein below set forth during the term of
this Agreement. While this Agreement is in force, the Distributor agrees to use
its best efforts to find purchasers for the Shares.
(b) The Distributor shall have the right, as agent of the Trust, to
order Shares as needed, but not more than the Shares needed (except for clerical
errors and errors of transmission), to fill unconditional orders for Shares
placed with the Distributor, all such orders to be made in the manner set forth
in the respective Fund's then-current prospectus (the "Prospectus") and
then-current statement of additional information (the "Statement of Additional
Information"). The price which shall be paid to the Fund for the Shares so
purchased shall be that Fund's net asset value per Share as determined in
accordance with the provisions of the Trust's Declaration of Trust and By-Laws,
as each may from time to time be amended, and that Fund's Prospectus and
Statement of Additional Information (collectively, the "Governing Instruments").
In addition to the price of the Shares, the Distributor shall collect any
applicable sales charge on Shares sold, from each purchaser thereof, as provided
in the respective Fund's Prospectus and Statement of Additional Information,
after taking into account any applicable reductions or elimination of sales
charges described therein. The Distributor shall retain the sales charge less
any applicable commissions or transaction or agency fees paid to any
broker-dealer, bank, trust company or other financial institution having a
selling, servicing or agency agreement with the Distributor (an "Agent"),
through which such Shares have been sold. The Distributor or its Agent shall
notify the custodian of the respective Fund at the end of each business day, or
as soon thereafter as the orders placed with the Distributor have been compiled,
of the number of Shares and the prices thereof which have been ordered through
the Distributor since the end of the previous business day.
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(c) The right granted to the Distributor to place orders for Shares
shall be exclusive, except that this exclusive right shall not apply to Shares
issued in the event that an investment company (whether a regulated or private
investment company or a personal holding company) is merged with and into or
consolidated with a Fund or the Trust or in the event that the Trust acquires,
on behalf of a Fund, by purchase or otherwise, all or substantially all of the
assets or the outstanding shares of any such company; nor shall it apply to
Shares issued by the Trust as a dividend or stock split. The exclusive right to
place orders for Shares, as hereby granted to the Distributor, may be waived by
the Distributor by notice to the Trust in writing, either unconditionally or
subject to such conditions and limitations as may be set forth in such notice to
the Trust. The Trust hereby acknowledges that the Distributor may render
distribution and other services to other parties, including other investment
companies. In connection with its duties hereunder, the Distributor shall also
arrange for computation of performance statistics with respect to each Fund and
arrange for publication of current price information in newspapers and other
publications.
(d) The Trust retains the ultimate right to control the sale of the
Shares, including the right to suspend sales in any jurisdiction, to appoint and
discharge agents of the Trust in connection with the Shares, and to refuse to
sell Shares to any person for any reason whatsoever.
2. TRUST DUTIES.
(a) The net asset value of Shares shall be determined by the Trust,
or by an agent of the Trust, as of the times and in accordance with the method
established pursuant to the Governing Instruments (and on such other days as the
Trustees deem necessary in order to comply with Rule 22c-1 under the 1940 Act).
The Trust shall have right to suspend the sale of Shares if, because of some
extraordinary condition, trading in the securities in which such Fund invests)
is suspended or restricted or if conditions existing render such action
advisable or for any other reason deemed adequate by the Trust.
(b) The Trust will, from time to time, but subject to the necessary
approval, if any, of the Fund's shareholders, take all necessary action to
register such number of Shares under the Securities Act of 1933, as amended (the
"1933 Act"), as the Distributor may reasonably be expected to sell.
3. RELATIONSHIP BETWEEN TRUST AND DISTRIBUTOR. The Distributor shall be an
independent contractor and neither the Distributor nor any of its directors,
officers or employees, as such, is or shall be considered an employee of the
Trust pursuant to this Agreement. It is understood that the Trustees, officers
and shareholders of the Trust are or may become interested in the Distributor as
directors, officers, employees, or otherwise and that directors, officers and
employees of the Distributor are or may become interested in the Trust as
shareholders or otherwise. The Distributor is responsible for its own conduct
and the employment, control and conduct (but only with respect to the duties and
obligations of the Distributor hereunder) of its agents and employees and for
any injury to any person through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employer taxes thereunder.
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4. BEST EFFORTS. The Distributor covenants and agrees that, in selling
Shares, it will use its best efforts in all respects duly to conform with the
requirements of all state and federal laws and the Rules of Conduct of the
National Association of Securities Dealers, Inc. (the "NASD") relating to the
sale of shares.
The Distributor will use its best efforts to assure that no person uses any
sales aids, promotional material or sales literature regarding the Shares that
have not been specifically approved in advance by the Distributor and the Trust.
The Distributor will use its best efforts to assure that no person, in
connection with the offer or sale of the Shares, makes any representations
regarding the Shares, the Trust or the Distributor which are not either then
authorized by the Trust and the Distributor or contained in a then-effective
registration statement relating to any of the Funds and the offering of the
Shares (the "Registration Statement").
5. INDEMNIFICATION
(a) The Distributor will indemnify and hold harmless the Trust and
each of its Trustees and officers and each person, if any, who controls the
Trust within the meaning of Section 15 of the Act (the "Indemnified Parties")
against all losses, liabilities, damages, claims or expenses (including the
reasonable cost of investigating or defending any alleged loss, liability,
damages, claim or expense and reasonable counsel fees incurred in connection
therewith) arising from any claim, demand, action or suit (individually a
"Claim" and, collectively, "Claims") made by any person who shall have acquired
any of the Shares through the Distributor, which Claim is based upon the 1933
Act or any other statute or common law and arises either:
(i) by reason of any wrongful act of the Distributor or any of its
employees (including any failure to conform with any requirement of any
state or federal law or the Rules of Conduct of the NASD relating to the
sale of Shares), or
(ii) on the ground that the Registration Statement under the 1933
Act, including all amendments thereto, or the respective Prospectus or
Statement of Additional Information or previous prospectus or statement of
additional information, with respect to such Shares, includes or included
an untrue statement of a material fact or omits or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, but if and only if any such act,
statement or omission was made in reliance upon information furnished by
the Distributor to the Trust.
(b) In no event (i) is the indemnity of the Distributor in favor of
any Indemnified Party pursuant to paragraph (a), above to be deemed to protect
any such Indemnified Party against liability to which such Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of his, her or its duties or by reason of his, her
or its reckless disregard of his, her or its obligations and duties under this
Agreement, or (ii) is the Distributor to be liable under or pursuant to
paragraph (a), above, with respect to any Claim made against any Indemnified
Party unless such Indemnified Party shall have notified the Distributor in
writing within a reasonable time after the summons or other first legal process
giving information as to the nature of the Claim shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but the failure of the
Indemnified Party to notify the Distributor of any such Claim shall not relieve
the Distributor from any liability which it may have to any Indemnified Party
otherwise than pursuant to this Agreement.
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(c) The Distributor shall 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 Claim, and, if the Distributor elects to assume the
defense, such defense shall be conducted by counsel chosen by it and reasonably
satisfactory to each Indemnified Party. If the Distributor elects to assume the
defense of any such suit and retain such counsel, each Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, provided,
however, that if the Distributor does not elect to assume the defense of any
such suit, it shall reimburse the Indemnified Parties for the reasonable fees
and expenses of any counsel retained by them.
(d) Except with the prior written consent of the Distributor, no
Indemnified Party shall confess any Claim or make any compromise in any case in
which the Distributor is or will be asked to indemnify such Indemnified Party.
(e) The Distributor agrees promptly to notify the Trust of the
commencement of any litigation or proceeding against it in connection with the
issuance and sale of any of the Shares.
(f) Neither the Distributor nor any Agent nor any other person is
authorized to give any information or to make any representation on behalf of
the Trust in connection with the sale of Shares, other than those contained in
the Trust's Registration Statement or Prospectus or Statement of Additional
Information relating to the respective Fund.
6. EXPENSES
(a) The Trust will pay, by causing the appropriate Fund(s) to pay:
(i) all costs and expenses of the Trust and of the Funds, including
fees and disbursements of the Trust's counsel, in connection with the
preparation and filing of the Registration Statement, Prospectuses and
Statements of Additional Information, and preparing and mailing to
existing shareholders Prospectuses, Statements of Additional Information
and, with respect to Shares, statements of confirmation and periodic
reports (including the entire expense of setting in type the Registration
Statements, Prospectuses and Statements of Additional Information or any
periodic report with respect to Shares);
(ii) the cost of preparing temporary or permanent certificates for
Shares;
(iii) the cost and expenses of delivering to the Distributor at its
office in Cincinnati, Ohio all Shares purchased through it as agent
hereunder;
(iv) all fees and disbursements of any transfer agent and custodian
of a Fund;
(v) all fees of each shareholder servicing agent to a Fund, if any;
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(vi) all fees of any administrator or fund accounting agent of a
Fund;
(vii) all fees of the investment advisor, if any, of a Fund; and
(viii) such other costs and expenses as shall be determined, by
agreement of the parties, to properly be chargeable to and borne by the
Trust.
(b) The Distributor, with respect to the sale of Shares, but subject
to the Trust's obligations under clause (iv) of subsection (a) above, will (i)
after the Prospectus and Statement of Additional Information and periodic
reports with respect to each Fund have been set in type, bear the expense (other
than the cost of printing and mailing to existing shareholders of such Fund) of
printing and distributing any copies thereof ordered by it which are to be used
in connection with the offering or sale of Shares to any Agent or prospective
investor, (ii) bear the expenses of preparing, printing and distributing any
other literature used by the Distributor or furnished by it for use by any Agent
in connection with the offering of Shares for sale to the public and any expense
of sending confirmations and statements to any Agent and (iii) bear the cost of
any compensation paid to Agents in connection with the sale of Shares.
7. COMPENSATION. As compensation to the Distributor for assuming the
expenses and performing the distribution services to be assumed and performed by
it pursuant to this Agreement, the Distributor will receive from the Trust such
amounts and at such times as are set forth in Schedule A to this Agreement (as
the same may from time to time be amended by agreement between the parties
hereto).
8. AMENDMENTS. If, at any time during the term of this Agreement, the
Trust shall deem it necessary or advisable in the best interests of any Fund
that any amendment of this Agreement be made in order to comply with any
recommendation or requirement of the Securities and Exchange Commission (the
"SEC") or other governmental authority or to obtain any advantage under Ohio,
Massachusetts or other applicable state law or under the federal tax laws, it
shall notify the Distributor of the form of amendment which it deems necessary
or advisable and the reasons therefor. If the Distributor declines to assent to
such amendment (after a reasonable time), the Trust may terminate this Agreement
forthwith by written notice to the Distributor without payment of any penalty.
If, at any time during the term of this Agreement, the Distributor requests the
Trust to make any change in the Governing Instruments or in its methods of doing
business which are necessary in order to comply with any requirement of federal
law or regulations of the SEC or of a national securities association of which
the Distributor is or may become a member, relating to the sale of Shares, the
Distributor may terminate this Agreement forthwith by written notice to the
Trust without payment of any penalty.
9. OWNERSHIP OF SHARES. The Distributor agrees that it will not take any
long or short position in the Shares and that, so far as it can control the
situation, it will prevent any of its Directors or officers from taking any long
or short positions in the Shares, except as permitted by the Governing
Instruments.
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10. TERMINATION. This Agreement shall become effective upon its execution
and shall continue in force indefinitely, provided that such continuance is
"specifically approved at least annually" by the vote of a majority of the
Trustees of the Trust who are not "interested persons" of the Trust or of the
Distributor at a meeting specifically called for the purpose of voting on such
approval, and by the Board of Trustees of the Trust. The aforesaid requirement
that continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the 1940 Act.
This Agreement may be terminated as to any Fund at any time by (i) the
Trust, (a) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or the Distributor, (b) by the vote of the
Board of Trustees of the Trust, or (c) by the "vote of a majority of the
outstanding voting securities" of the Fund, or (ii) by the Distributor, in any
case without payment of any penalty on not more than 60 days' nor less than 30
days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment.
11. DEFINITIONS. The terms "vote of a majority of the outstanding voting
securities", "interested persons", "assignment" and "specifically approved at
least annually" shall have the respective meanings specified in, and shall be
construed in a manner consistent with, the 1940 Act, subject, however, to such
exemptions as may be granted by the SEC thereunder.
12. MISCELLANEOUS.
(a) If any provision of this Agreement becomes or is found to be
invalid by any court having jurisdiction or by any statute, rule or
regulation, the remainder of this Agreement shall not be affected thereby.
(b) Any notices under this Agreement shall be in writing addressed
and delivered personally or mailed postage-paid, to the other party at
such address as such other party may designate in accordance with this
paragraph for the receipt of such notice. Until further notice to the
other party given in accordance with this paragraph, it is agreed that the
address of the Trust and of the Distributor for this purpose shall be ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
(c) Each party will perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. This
Agreement shall be construed and enforced in accordance with and governed
by the laws of the State of Ohio. The captions in the Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names on their behalf by the undersigned,
thereunto duly authorized as of the day and year first above written. The
Distributor acknowledges that, under the Trust's Declaration of Trust, the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of a Fund individually, but bind only the Trust estate.
CONSTELLATION FUNDS
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
TOUCHSTONE SECURITIES, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇
President
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Compensation. As compensation for providing the services under this
------------ Agreement:
(a) The Distributor shall receive from the Trust:
(1) all distribution and service fees, as applicable, at the rate and
under the terms and conditions set forth in each Distribution and/or
Shareholder Services Plan adopted by the appropriate class of each
of the Portfolios, as such Plans may be amended from time to time,
and subject to any further limitations on such fees as the Board of
Trustees of the Trust may impose;
(2) all contingent deferred sales charges ("CDSCs") applied on
redemptions of CDSC Class Shares of each Portfolio on the terms and
subject to such waivers as are described in the Trust's Registration
Statement and current prospectuses, as amended from time to time, or
as otherwise required pursuant to applicable law; and
(3) all front-end sales charges, if any, on purchases of class A Shares
of each Portfolio sold subject to such charges as described in the
Trust's Registration Statement and current prospectuses, as amended
from time to time. The Distributor, or brokers, dealers and other
financial institutions and intermediaries that have entered into
sub-distribution agreements with the Distributor, may collect the
gross proceeds derived from the sale of such Class A Shares, remit
the net asset value thereof to the Trust upon receipt of the
proceeds and retain the applicable sales charge.
(b) The Distributor may re-allow any or all of the distribution or service
fees, contingent deferred sales charges and front-end sales charges which
it is paid by the Trust to such brokers, dealers and other financial
institutions and intermediaries as the Distributor may from time to time
determine.
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