Exhibit 5
DISTRIBUTION AGREEMENT
AGREEMENT made as of October 30, 2000 between MERCURY TARGET SELECT EQUITY
FUND, INC., a Maryland corporation (the "Corporation") and FAM DISTRIBUTORS,
INC., a Delaware corporation (the "Distributor").
WITNESSETH
WHEREAS, the Corporation offer separate classes of shares of common stock,
par value $0.0001 per share (the "Shares") and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Corporation to offer its
shares for sale continuously; and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
financial intermediaries, including, without limitation, brokers, dealers,
retirement plans, financial consultants, registered investment advisers and
mutual fund supermarkets ("financial intermediaries"); and
WHEREAS, the Corporation and the Distributor wish to enter into an
agreement with each other with respect to the continuous offering of each class
of the Corporation's Shares;
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Corporation hereby appoints
the Distributor as the principal underwriter and distributor of to sell the
Shares to eligible investors (as defined below) and hereby agrees during the
term of this Agreement to sell the Shares to the Distributor upon the terms and
conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the
Corporation's exclusive representative to act as principal underwriter and
distributor of the Shares, except that:
1. The Corporation may, upon written notice to the Distributor, from time
to time designate other principal underwriters and distributors of the Shares
with respect to areas other than the United States as to which the Distributor
may have expressly waived in writing its right to act as such. If such
designation is deemed exclusive, the right of the Distributor under this
Agreement to sell the Shares in the areas so designated shall terminate, but
this Agreement shall remain
otherwise in full effect until terminated in accordance with the other
provisions hereof.
2. The exclusive rights granted to the Distributor to purchase Shares from
the Corporation shall not apply to Shares issued in connection with the merger
or consolidation of any other investment company or personal holding company
with the Corporation or the Corporation's acquisition by purchase or otherwise
of all (or substantially all) the assets or the outstanding shares of any such
company.
3. Such exclusive rights also shall not apply to Shares issued by the
Corporation pursuant to reinvestment of dividends or capital gains
distributions.
4. Such exclusive rights also shall not apply to Shares issued by the
Corporation pursuant to any conversion, exchange or reinstatement privilege
afforded redeeming shareholders or to any other Shares as shall be agreed
between the Corporation and the Distributor from time to time.
Section 3. Purchase of Shares from the Corporation.
1. Prior to the continuous offering of the Shares, commencing on a date
agreed upon by the Corporation and the Distributor, the Distributor may solicit
subscriptions for Shares during a subscription period which shall last for such
period as may be agreed upon by the parties hereto. If so, the subscriptions
will be payable within three business days after the termination of the
subscription period, at which time the Shares will be issued against payment and
such Fund will commence operations.
2. After the Corporation commences operations, it will commence an offering
of Shares and thereafter the Distributor shall have the right to buy from the
Corporation the Shares needed, but not more than the Shares needed (except for
clerical errors in transmission) to fill unconditional orders for Shares placed
with the Distributor by eligible investors or financial intermediaries.
Investors eligible to purchase each class of Shares of the Corporation shall be
those persons so identified in the currently effective prospectus and statement
of additional information of the Corporation (the "prospectus" and "statement of
additional information," respectively) under the Securities Act of 1933, as
amended (the "Securities Act"), relating to such class of Shares ("eligible
investors"). The price that the Distributor shall pay for Shares so purchased
shall be the net asset value, determined as set forth in Section 3(e) hereof,
used in determining the public offering price on which such orders were based.
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3. The Shares are to be resold by the Distributor to eligible investors at
the public offering price, as set forth in Section 3(d) hereof, or to financial
intermediaries having agreements with the Distributor pursuant to Section 7
hereof.
4. The public offering price of each class of Shares, i.e., the price per
share at which the Distributor or financial intermediaries may sell the Shares
to eligible investors, shall be the public offering price as set forth in the
prospectus and statement of additional information relating to such class of
Shares, or as otherwise permissible under the federal and state securities laws.
If the public offering price does not equal an even cent, the public offering
price may be adjusted to the nearest cent. All payments to the Corporation
hereunder shall be made in the manner set forth in Section 3(g).
5. The net asset value of Shares shall be determined by the Corporation or
any agent of the Corporation in accordance with the method set forth in the
Corporation's prospectus and statement of additional information and guidelines
established by the directors of the Corporation (the "Directors").
6. The Corporation shall have the right to suspend the sale of the Shares
at any time. In addition, the Corporation shall have the right to suspend the
sale of Shares at times when redemption is suspended pursuant to the conditions
set forth in Section 4(b) hereof. The Corporation shall also have the right to
suspend the sale of Shares if trading on the New York Stock Exchange shall have
been suspended, if a banking moratorium shall have been declared by Federal or
New York authorities, or if there shall have been some other event that, in the
judgment of the Corporation, makes it impracticable or inadvisable to sell the
Shares.
7. The Corporation, or any agent of the Corporation designated in writing
by the Corporation, shall be promptly advised of all purchase orders for Shares
received by the Distributor. Any order may be rejected by the Corporation;
provided, however, that the Corporation will not arbitrarily or without
reasonable cause refuse to accept or confirm orders for the purchase of Shares.
The Corporation (or its agent) will confirm orders upon their receipt, will make
appropriate book entries and, upon receipt by the Corporation (or its agent) of
payment therefor, will deliver deposit receipts or certificates for such Shares
pursuant to the instructions of the Distributor. Payment shall be made to the
Corporation through National Securities Clearing Corporation ("NSCC"), in New
York Clearing House funds or by Federal Funds wire. The Distributor agrees to
cause such payment and such instructions to be delivered promptly to the
Corporation (or its agent).
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Section 4. Repurchase or Redemption of Shares by the Corporation.
1. Any of the outstanding Shares may be tendered for redemption at any
time, and the Corporation agrees to repurchase or redeem the Shares so tendered
in accordance with its obligations as set forth in Article VI of the
Corporation's Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the prospectus and
statement of additional information of the Corporation. The price to be paid to
redeem or repurchase the Shares shall be equal to the net asset value calculated
in accordance with the provisions of Section 3(e) hereof, less any contingent
deferred sales charge ("CDSC"), redemption fee or other charge(s), if any, set
forth in the prospectus and statement of additional information of the
Corporation. All payments by the Corporation hereunder shall be made in the
manner set forth below. The redemption or repurchase of any of the Shares
purchased by or through the Distributor will not affect the sales charge secured
by the Distributor or any financial intermediary in the course of the original
sale, except that if any Shares are tendered for redemption or repurchase within
seven business days after the date of the confirmation of the original purchase,
the right to the sales charge shall be forfeited by the Distributor and the
financial intermediary that sold such Shares.
The Corporation shall pay the total amount of the redemption price as
defined in the above paragraph pursuant to the instructions of the Distributor
through NSCC, in New York Clearing House funds or by Federal Funds wire on or
before the seventh business day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Shares shall be
paid by the Corporation as follows: (i) any applicable CDSC shall be paid to the
Distributor, and (ii) the balance shall be paid to or for the account of the
shareholder, in each case in accordance with the applicable provisions of the
prospectus and statement of additional information.
2. Redemption of Shares or payment may be suspended at times when the New
York Stock Exchange is closed, when trading on said Exchange is closed, when
trading on said Exchange is suspended, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by the
Corporation of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Corporation fairly to determine the value of its
net assets, or during any other period when the Securities and Exchange
Commission, by order, so permits.
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Section 5. Duties of the Corporation.
1. The Corporation shall furnish to the Distributor copies of all
information, financial statements and other papers that the Distributor may
reasonably request for use in connection with the distribution of the Shares,
and this shall include, upon request by the Distributor, one certified copy of
all financial statements prepared for the Corporation by independent public
accountants. The Corporation shall make available to the Distributor such number
of copies of the Corporation's prospectus and statement of additional
information as the Distributor shall reasonably request.
2. The Corporation shall take, from time to time, but subject to any
necessary approval of its shareholders, all necessary action to fix the number
of authorized Shares and such steps as may be necessary to register the same
under the Securities Act to the end that there will be available for sale such
number of Shares as the Distributor reasonably may be expected to sell.
3. The Corporation shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Shares for sale under the
securities laws of such states as the Distributor and the Corporation may
approve. Any such qualification may be withheld, terminated or withdrawn by the
Corporation at any time in its discretion. As provided in Section 8(c) hereof,
the expense of qualification and maintenance of qualification shall be borne by
the Corporation. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the
Corporation in connection with such qualification.
4. The Corporation will furnish, in reasonable quantities upon request by
the Distributor, copies the Corporation's annual and interim reports.
Section 6. Duties of the Distributor.
1. The Distributor shall devote reasonable time and effort to effect sales
of Shares but shall not be obligated to sell any specific number of Shares. The
services of the Distributor to the Corporation 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.
2. In selling the Shares, the Distributor shall use its best efforts in all
respects duly to conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the Distributor nor any
financial intermediary having an agreement with the Distributor to offer and
sell shares pursuant to Section 7 hereof, nor any other
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person is authorized by the Corporation 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 Corporation.
3. The Distributor shall adopt and follow procedures, as approved by the
officers of the Corporation, for the confirmation of sales to eligible investors
and financial intermediaries, the collection of amounts payable by eligible
investors and financial intermediaries on such sales, and the cancellation of
unsettled transactions, as may be necessary to comply with the requirements of
the National Association of Securities Dealers, Inc. (the "NASD"), as such
requirements may from time to time exist.
Section 7. Agreements with Financial Intermediaries.
1. The Distributor shall have the right to enter into agreements with
financial intermediaries of its choice for the sale of Shares and to fix therein
the portion of the sales charge that may be allocated to the financial
intermediaries on such terms and conditions as the Distributor shall deem
necessary or appropriate; provided, however, that the Distributor shall
periodically inform the Directors of the nature and substance of such
agreements. Shares sold to financial intermediaries shall be for resale by such
intermediaries only at the public offering price(s) set forth in the applicable
prospectus and statement of additional information or as otherwise permissible
under the federal and state securities laws.
2. With respect to financial intermediaries who are acting as brokers or
dealers within the United States, the Distributor shall offer and sell Shares
only to such financial intermediaries who are members in good standing of the
NASD.
Section 8. Payment of Expenses.
1. The Corporation shall bear all costs and expenses of the Corporation, as
incurred, including fees and disbursements of its counsel and auditors, in
connection with the preparation and filing of any required registration
statement and/or prospectus and statement of additional information under the
Investment Company Act, the Securities Act, and all amendments and supplements
thereto, and preparing and mailing annual and interim reports and proxy
materials to shareholders (including but not limited to the expense of setting
in type any such registration statement, prospectus, statement of additional
information, annual or interim reports or proxy materials).
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2. The Distributor shall be responsible for any payments made to financial
intermediaries. In addition, after the prospectuses, statements of additional
information and annual and interim reports have been prepared and set in type,
the Distributor shall bear the costs and expenses of printing and distributing
any copies thereof to be used in connection with the offering of Shares to
financial intermediaries or eligible investors pursuant to this Agreement. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by it for
use by financial intermediaries in connection with the offering of the Shares
for sale to eligible investors and any expenses of advertising incurred by the
Distributor in connection with such offering. It is understood and agreed that
so long as any Distribution Plan pursuant to Rule 12b-1 under the Investment
Company Act with respect to a particular class of Shares remains in effect, any
expenses incurred by the Distributor hereunder in connection with distribution
and/or account maintenance activities for such class of Shares, as applicable,
may be paid from amounts recovered by it from the Corporation under such Plan.
3. The Corporation shall bear the cost and expenses of qualification of the
Shares for sale pursuant to this Agreement and, if necessary or advisable in
connection therewith, of qualifying the Corporation as a broker or dealer in
such states of the United States or other jurisdictions as shall be selected by
the Corporation and the Distributor pursuant to Section 5(c) hereof and the cost
and expenses payable to each such state for continuing qualification therein
until the Corporation decides to discontinue such qualification pursuant to
Section 5(c) hereof.
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Section 9. Indemnification.
1. The Corporation 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), as incurred, 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 the
Corporation's shareholders, 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 Corporation in connection therewith by or on behalf of the
Distributor; provided, however, that in no case (i) is the indemnity of the
Corporation 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 Corporation 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
their duties or by reason of the reckless disregard of their obligations and
duties under this Agreement; or (ii) is the Corporation 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
Corporation 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 Corporation of any
such claim shall not relieve it from any liability that 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 Corporation 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 Corporation 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
Corporation 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, as
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incurred, of any additional counsel retained by them, but in case the
Corporation 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, as incurred, of
any counsel retained by them. The Corporation shall promptly notify the
Distributor of the commencement of any litigation or proceedings against it or
any of its officers or Directors in connection with the issuance or sale of any
of the Shares.
2. The Distributor shall indemnify and hold harmless the Corporation and
each of its Directors and officers, and each person, if any, who controls the
Corporation against any loss, liability, claim, damage or expense, as incurred,
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 Corporation in writing 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 Corporation 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
Corporation, and the Corporation and each person so indemnified shall have the
rights and duties given to the Distributor by the provisions of subsection (a)
of this Section 9.
Section 10. Fee-Based or Other Programs. In connection with certain
fee-based or other programs offered by the Corporation's investment adviser or
its affiliates or by financial intermediaries having agreements with the
Distributor pursuant to Section 7 hereof, the Distributor and its affiliates are
authorized to offer and sell Shares of the Corporation, as agent for the
Corporation, to participants in such programs. Similarly, any Shares of the
Corporation sold through a fee-based or other program offered by a financial
intermediary shall be sold by such intermediary acting as agent. The terms of
this Agreement shall apply to such sales, including terms as to the offering
price of Shares, the proceeds to be paid to the Corporation, the duties of the
Distributor, the payment of expenses and indemnification obligations of the
Corporation and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force for two years and thereafter, but only for so long as such
continuance is specifically approved at least annually by (i) the Directors or
by the vote of a majority of the outstanding voting securities of the
Corporation and (ii) by the vote of a majority of those
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Directors 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.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding voting
securities of the Corporation, 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," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 12. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Directors
or by the vote of a majority of outstanding voting securities of the Corporation
and (ii) by the vote of a majority of those Directors 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.
Section 13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written. This Agreement may be executed by the
parties hereto on any number of counterparts, all of which together shall
constitute one and the same instrument.
MERCURY TARGET SELECT EQUITY FUND, INC.
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Name: Xxxxx X. Xxxxx
Title: Executive Vice President
FAM DISTRIBUTORS, INC.
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Name: Xxxxx X. Xxxxx
Title: President
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