Exhibit 5(a)
AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
AGREEMENT made as of the date set forth in Schedule A attached hereto
between the investment company named on Schedule A (the "Corporation"), on
behalf of each of its series listed on Schedule A (the "Funds"), and the
division of PRINCETON FUNDS DISTRIBUTOR, INC., a Delaware corporation, set forth
on Schedule A (the "Distributor").
W I T N E S S E T H
WHEREAS, the Directors of the Corporation (the "Directors") are authorized
to establish separate series relating to separate portfolios of securities, and
the Directors have established and designated the Funds as series of the
Corporation; and
WHEREAS, each of the Funds may offer one or more separate classes of shares
of common stock, with the par value per share set forth on Schedule A (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 Funds to offer their
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 subscription offering and the
continuous offering of each class of each Fund'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 each
Fund 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
--------------------------
Funds' exclusive representative to act
as principal underwriter and distributor of the Shares, except that:
1. The Corporation may, with respect to any Fund, 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
each Fund shall not apply to Shares issued in connection with the merger or
consolidation of any other investment company or personal holding company with a
Fund or a Fund'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 a Fund
pursuant to reinvestment of dividends or capital gains distributions.
4. Such exclusive rights also shall not apply to Shares issued by a Fund
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 of a Fund, 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 subscription offering, if any such
3
offering is made, or at such other time agreed to by the Distributor and the
Corporation, each Fund 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 of a Fund placed with the Distributor by
eligible investors or financial intermediaries. Investors eligible to purchase
each class of Shares of each Fund shall be those persons so identified in the
currently effective prospectus and statement of additional information of a Fund
(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 of such Fund ("eligible investors"). The
price that the Distributor shall pay for Shares so purchased from a Fund 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.
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 Funds 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 each
Fund's prospectus and statement of additional information and guidelines
established by the Directors.
6. The Corporation shall have the right to suspend the sale of Shares of
any Fund at any time. In addition, the
4
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).
Section 4. Repurchase or Redemption of Shares by the Corporation.
-----------------------------------------------------
5
1. Any of the outstanding Shares may be tendered for redemption at any
time, and each Fund 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 relating to the applicable Fund. 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 relating to the
applicable Fund. All payments by a Fund hereunder shall be made in the manner
set forth below. The redemption or repurchase by a Fund 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.
Each Fund 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 each
Fund 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 a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Corporation fairly to determine the value of the net assets
of the Fund, or during any other
6
period when the Securities and Exchange Commission, by order, so permits.
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 Shares of any
Fund, 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 each Fund'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 a Fund's 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 Funds. 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 of the Funds' annual and interim reports.
Section 6. Duties of the Distributor.
-------------------------
7
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 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.
8
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. Each Fund shall bear all costs and expenses of the Fund, as incurred,
including fees and disbursements of its counsel and auditors, in connection with
the preparation and filing of any required registration statements and/or
prospectuses and statements 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 statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
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
9
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 of a Fund 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 Fund under such Plan.
10
3. The Funds 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.
Section 9. Indemnification.
---------------
1. Each Fund 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
Fund'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
Fund in connection therewith by or on behalf of the Distributor; provided,
however, that in no case (i) is the indemnity of the Fund 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
Fund 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 Fund 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,
11
shall have notified the Fund 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 Fund 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. Each Fund 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 Fund
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 a Fund 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 incurred, of any additional counsel retained by them,
but in case the Fund 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. Each Fund 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, the applicable Fund, 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 Fund
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
12
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 a Fund'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 Funds, as agent for the Corporation, to
participants in such programs. Similarly, any Shares of a Fund 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 Funds, the duties of the Distributor, the payment of expenses and
indemnification obligations of the Funds and the Distributor.
Section 11. Duration and Termination of this Agreement. This Agreement
------------------------------------------
shall become effective as of the date indicated on Schedule A and shall remain
in force with respect to any Fund until the second anniversary of the inception
date with respect to such Fund as set forth on Schedule A, and thereafter, but
only for so long as such continuance is specifically approved at least annually
by (i) the Directors or, with respect to any one Fund, by the vote of a majority
of the outstanding voting securities of that Fund 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.
13
This Agreement may be terminated at any time, without the payment of any
penalty, with respect to any Fund or Funds by the Directors or by vote of a
majority of the outstanding voting securities of the applicable Fund(s), 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 with respect to a Fund only if such amendment is specifically
approved by (i) the Directors or by the vote of a majority of outstanding voting
securities of the applicable Fund 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.
14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERCURY QA EQUITY SERIES, INC.,
on behalf of each of its series listed on Schedule A
-------------------------------------
Title:
MERCURY FUNDS DISTRIBUTOR, a division of
PRINCETON FUNDS DISTRIBUTOR, INC.
-------------------------------------
Title:
15
SCHEDULE A
Date of Agreement (preamble): May 12, 2000
Termination date of Agreement (Section 11): May 30, 2002
Name of Corporation (preamble): Mercury QA Equity Series, Inc.
Name of Fund (preamble): Inception Date with respect to Fund (Section 11):
Mercury QA Large Cap Core Fund May 17, 2000
Mercury QA Large Cap Value Fund May 17, 2000
Mercury QA Large Cap Growth Fund May 17, 2000
Mercury QA Mid Cap Fund May 17, 2000
Mercury QA Small Cap Fund May 17, 2000
Mercury QA International Fund May 17, 2000
Par Value of shares (recitals): $0.0001
Division of Princeton Funds Distributor, Inc. (preamble): Mercury Funds
Distributor
16