EX - 99.(e)(1)
DISTRIBUTION AGREEMENT
AGREEMENT made this 16th day of May, 2003, between Mercantile Funds,
Inc. (the "Company"), a Maryland corporation, having its principal place of
business at Xxx Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000, and BISYS FUND
SERVICES, L.P. d/b/a BISYS FUND SERVICES ("Distributor"), having its principal
place of business at 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000.
WHEREAS, the Company and Distributor (f/k/a The Winsbury Company
Limited Partnership) entered into a Distribution Agreement dated May 28, 1993 as
subsequently amended (the "1993 Agreement"), whereby Distributor agreed to
perform distribution services for the Company, which has continued in effect
through the date hereof;
WHEREAS, the Company desires that Distributor continue to act as the
distributor of the shares of common stock ("Shares") for the Company and each
investment portfolio of the Company, as now in existence and listed on Schedule
A, or as hereafter may be established from time to time (individually referred
to herein as the "Fund" and collectively as the "Funds"), and the Funds offer
shares of one or more classes (each such class together with all other classes
subsequently established by a Fund being herein referred to as a "Class," and
collectively as the "Classes"); and
WHEREAS, the Company is an open-end management investment company and
registered with the Securities and Exchange Commission (the "Commission") under
the Investment Company Act of 1940, as amended (the "1940 Act").
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein set forth, the parties agree as follows:
1. Duties and Covenants of the Distributor.
2. Distributor will act as agent of Company on behalf of each Fund for
the distribution of the Shares covered by the registration statement and
prospectus of Company then in effect under the Securities Act of 1933, as
amended (the "Securities Act"). As used in this Agreement, the term
"registration statement" shall mean the registration statement and any
amendments thereto, then in effect, including Parts A (the prospectus), B (the
Statement of Additional Information) and C of each registration statement, as
filed on Form N-1A, or any successor thereto, with the Commission, together with
any amendments thereto. The term "prospectus" shall mean the then-current form
of prospectus and statement of additional information used by the Funds, in
accordance with the rules of the Commission, for delivery to shareholders and
prospective shareholders after the effective dates of the above-referenced
registration statement together with any amendments and supplements thereto.
3. Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in
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connection with such solicitation. The Company understands that Distributor is
now and may in the future be the distributor of the shares of many other
investment companies or series (together, "Companies") including Companies
having investment objectives similar to those of the Company. The Company
further understands that investors and potential investors in the Company may
invest in shares of such other Companies. The Company agrees that Distributor's
duties to such Companies shall not be deemed in conflict with its duties to the
Company under this Paragraph 1.2.
Distributor shall engage in, at its own expense (except as provided in
Section 4 herein), appropriate activities which it deems reasonable, which are
primarily intended to result in the sale of the Shares, including, but not
limited to, advertising, the compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
4. In its capacity as distributor of the Shares, all activities of the
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, all rules and regulations promulgated by the Commission thereunder and all
rules and regulations adopted by any securities association registered under the
Securities Exchange Act of 1934.
5. Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Funds.
6. Distributor will transmit any orders received by it for purchase or
redemption of Shares to the transfer agent and custodian for the Funds.
7. The Distributor may sell Shares to securities dealers, depository
institutions or other financial intermediaries, but shall act only on its own
behalf as principal if it chooses to enter into selling agreements ("Selling
Agreements") with any such party.
8. No Shares shall be offered by either the Distributor or the Company
under any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder shall be accepted by the Company if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(b)(2) of said Act is not on file with the Commission, provided, however, that
nothing contained in this Section 1.7 shall in any way restrict or have an
application to or bearing upon the Company's obligation to repurchase Shares
from a Shareholder in accordance with the provisions of the Company's
prospectus, Articles of Incorporation, or Bylaws
9. The Distributor agrees on behalf of itself and its partners and
employees to treat confidentially and as proprietary information of the Company
all records and other information relative to the Company and its prior, present
or potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder
except after prior notification to and approval in
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writing by the Company, which approval shall not be unreasonably withheld, but
such approval shall not be required where the Distributor may be exposed to
civil or criminal liability for failure to disclose such information, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Company.
10. The Distributor shall provide the Board with a written report of
the amounts expended in connection with this Agreement as request by the Board.
11. The Distributor shall be responsible for reviewing and making such
filings, as required, of advertisements and sales literature relating to the
Fund that have been furnished to the Distributor.
12. Duties and Covenants of the Company.
13. The Company agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
14. The Company shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and the
Shares as Distributor may reasonably request; and the Company warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Company shall also furnish Distributor
upon request with: (a) unaudited semi-annual statements of the Funds' books and
accounts prepared by the Company, (b) a monthly itemized list of the securities
in the Funds, (c) monthly balance sheets as soon as practicable after the end of
each month, and (d) from time to time such additional information regarding the
financial condition of the Funds as Distributor may reasonably request.
15. The Company represents and warrants to Distributor that, with
respect to the Shares, all registration statements and prospectuses filed by the
Company with the Commission under the Securities Act have been prepared in
conformity with requirements of the Securities Act and rules and regulations of
the Commission thereunder. The registration statement and prospectus contain all
statements required to be stated therein in conformity with said Act and the
rules and regulations of the Securities Act and the rules and regulations of the
Commission, and all statements of fact contained in any such registration
statement and prospectus are true and correct. Furthermore, neither any
registration statement nor any prospectus includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of the
Shares. The foregoing representations and warranties shall continue throughout
the term of this Agreement and be deemed to be of a continuing nature,
applicable to all Shares distributed hereunder. The Company may, but shall not
be obligated to, propose from time to time such amendment or amendments to any
registration statement and such supplement or supplements to any prospectus as,
in the light of future developments, may, in the opinion of the Company's
counsel, be necessary or advisable. If the
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Company shall not propose any amendment or amendments and/or supplement or
supplements with in fifteen days after receipt by the Company of a written
request from Distributor to do so, Distributor may, at its option, terminate
this Agreement. In such case, the Distributor will be held harmless from, and
indemnified by Company for, any liability or loss resulting from the failure to
implement such amendment. The Company shall not file any amendment to any
registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Company's right
to file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Company may deem
advisable, such right being in all respects absolute and unconditional.
16. The Company agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor:
17. of any request by the Commission for amendments to the registration
statement or prospectus then in effect or for additional information;
18. in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or prospectus then in
effect or the initiation by service of process on the Company of any proceeding
for that purpose;
19. of the happening of any event that makes untrue any statement of a
material fact made in the registration statement or prospectus then in effect or
which requires the making of a change in such registration statement or
prospectus in order to make the statements therein not misleading; and
20. of all action of the Commission with respect to anys statement or
prospectus which may from time to time be filed with the Commission.
For purposes of this section, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
21. The Company may request Distributor to use an electronic processing
system over the internet in which electronically transmitted orders are
forwarded electronically for processing by a third party known to the Company
under circumstances in which Distributor will not review the orders. Under such
circumstances, the Company acknowledges and agrees that it will independently
determine that the third party is a satisfactory service provider and that the
Distributor's review will not be necessary.
22. Indemnification.
22.1 3.1 The Company authorizes the Distributor and dealers to use
any prospectus in the form furnished from time to time in connection with the
sale of the Shares. The Distributor shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Company in connection
with the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the Distributor's part in
the performance of its duties, from reckless
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disregard by the Distributor of its obligations and duties under this Agreement,
or from the Distributor's failure to comply with laws, rules and regulations
applicable to it in connection with its distribution of the Shares. The Company
agrees to indemnify, defend and hold the Distributor, its several partners and
employees, and any person who controls the Distributor within the meaning of
Section 15 of the Securities Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Distributor, its partners and employees or
any such controlling person, may incur (a) as the result of acting as
distributor of the Funds; (b) under the Securities Act or under common law or
otherwise, arising out of or based upon (i) any untrue statement, or alleged
untrue statement, of a material fact contained in any registration statement or
any prospectus, (ii) any omission, or alleged omission, to state a material fact
required to be stated in any registration statement or any prospectus or
necessary to make the statements in either of such documents not misleading or
(iii) any Company related advertisement or sales literature that is not in
compliance with applicable laws, rules or regulations (including, but not
limited to the Conduct Rules of the National Association of Securities Dealers,
Inc.) to the extent such non-compliance arises from information furnished to the
Distributor in writing by the Company for use in advertisements or sales
literature; or (c) arising out of or based upon the electronic processing of
orders over the internet. The Company's agreement herein to indemnify the
Distributor, its partners or employees, and any such controlling person shall
not be deemed to cover any claims, demands, liabilities or expenses (x) arising
out of any statements or representations as are contained in any prospectus,
advertisement or sales literature and in such financial and other statements as
are furnished in writing to the Company by the Distributor for such use and used
in the registration statement or in corresponding statements made in the
prospectus, advertisement or sales literature, or (y) arising out of or based
upon any omission or alleged omission to state a material fact in such
information furnished by the Distributor which is required to be stated or
necessary to make the information not misleading; and further provided that the
Company's agreement to indemnify the Distributor and the Company's
representations and warranties set forth in Paragraph 2.3 shall not be deemed to
cover any liability to the Company or its shareholders to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, by reason of the Distributor's
reckless disregard of its obligations and duties under this Agreement, or by the
Distributor's failure to comply with any laws, rules or regulations applicable
to it in connection with its distribution of the Shares.
In the event of a formal legal action, the Company's agreement to
indemnify the Distributor, it partners and employees and any such controlling
person, as aforesaid, is expressly conditioned upon the Company being provided
with written notice of an action brought against Distributor, its partners and
employees, or any such controlling person, and identifying the person against
whom such action is brought, promptly following receipt of service of the
summons or other first legal process, and in any event within ten (10) days of
such receipt. Any failure to promptly notify the Company will not relieve the
Company from any liability which the Company may have to the person against whom
such action is brought, or to any other person, by reason of any such untrue, or
alleged untrue, statement or omission, or alleged omission, otherwise than on
account of
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the Company's indemnity obligations under this Paragraph 3.1. The Company will
be entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability if such defense shall be conducted by counsel of good
standing chosen by the Company approved by the Distributor, which approval shall
not be unreasonably withheld. In the event the Company elects to assume the
defense of any such suit and retain counsel of good standing so approved by the
Distributor, the defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but in any case
where the Company does not elect to assume the defense of any such suit or in
case the Distributor reasonable withholds approval of counsel chosen by the
Company, the Company will reimburse the Distributor, its partners and employees,
or the controlling person or persons named as defendant or defendants in such
suit, for the fees and expenses of any counsel retained by the Distributor or
them. The Company's indemnification agreement contained in this Section 3.1 and
the Company's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Distributor, its partners and employees, or any controlling
person, and shall survive the delivery of any Shares.
22.2 This indemnity will inure exclusively to the Distributor's
benefit, to the benefit of its several partners and employees and their
respective estates, and to the benefit of the controlling persons and their
successors. The Company agrees promptly to notify the Distributor of the
commencement of any litigation of proceedings against the Company or any of its
officers or Directors that may involve the Distributor or otherwise impact its
duties under this Agreement.
22.3 3.2 The Distributor agrees to indemnify, defend and hold the
Company, it's several officers and Directors, and any person who controls the
Company within the meaning of Section 15 of the Securities Act free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands or
liabilities and any reasonable counsel fees incurred in connection therewith)
which the Company, its officers or Directors or any such controlling person may
incur arising out of any breach of the duties and covenants in Section 1 hereof
or under the Securities Act or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Company, its officers or
Directors or such controlling person resulting from such claims or demands shall
arise directly out any untrue, statement of a material fact contained in
information furnished in writing by the Distributor to the Company and used in
response to required items of the registration statement or in the corresponding
statements made in the prospectus or any omission, or alleged omission, to state
material fact required to be stated in such information or necessary to make
such information not misleading.
22.4 The Distributor's agreement to indemnify the Company, its
officers and Directors and any such controlling person, as aforesaid, is
expressly conditioned upon the Distributor being provided with written notice of
an action brought against the Company, its officers and Directors, or any such
controlling person, and identifying the person against whom such action is
brought, and sent to the Distributor identifying the person against whom such
action is brought promptly following the indemnified person's receipt
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of service of the summons or other first legal process, and in any event within
ten (10) days of such receipt. The Distributor will be entitled to assume the
defense of any suit brought to enforce any such claim, demand or liability to
the extent the same is based on an alleged misstatement or omission on the
Distributor's part, if such defense shall be conducted by counsel of good
standing chosen by the Distributor and approved by the Company, which approval
shall not be unreasonably withheld. In the event any such claim, demand or
liability is not based solely on an alleged misstatement or omission on the
Distributor's part, the Company, it's officers and Directors, or any controlling
person, shall have the right to participate in the defense, and the Distributor
shall have the right of first control thereof. In the event the Distributor
elects to assume the defense of any such suit and retain counsel of good
standing so approved by the Company, the Company and any other defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in any case where the Distributor does not
elect to assume the defense of any such suit, the Distributor will reimburse the
Company, its officers, directors, employees and controlling persons or other
persons named as defendant or defendants in such suit for the reasonable fees
and expenses of any counsel retained by the Company or them to the extent
related to a claim, demand, liability or expense covered under this Section 3.2.
This indemnity will inure exclusively to the Company's benefit, to the
benefit of its officers and Directors and their respective estates, and to the
benefit of the controlling persons and their successors. The Distributor agrees
promptly to notify the Company of the commencement of any litigation of
proceedings against the Distributor or any of its officers or Directors that may
involve the Company.
23. Compensation.
24. In consideration of the Distributor's services in connection with
the distribution of Shares of the Fund and each Class thereof, the Distributor
shall receive: (i) any applicable sales charge assessed upon investors in
connection with the purchase of Shares; (ii) from the Fund, any applicable
contingent deferred sales charge ("CDSC") assessed upon investors in connection
with the redemption of Shares; (iii) from the Fund, the distribution and service
fees with respect to the Shares of those Classes as identified in a Distribution
and Service Plan under Rule 12b-1 under the 1940 Act attached as Schedule B
hereto (the "Plan") at the rate and upon the terms and conditions set forth in
such a Plan.
25. The distribution and service fees shall be accrued daily and shall
be paid on the fifteenth business day of each month, or at such time(s) as the
Distributor shall reasonably request.
26. Except as specified in Sections 4.1 and 4.2 of this Agreement, the
Distributor shall be entitled to no compensation or reimbursement of expenses
for the services provided by the Distributor pursuant to this Agreement.
27. Distributor acknowledges that Shares may be sold pursuant to
programs that provide for reductions in sales charges investors are assessed
based upon the dollar
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amounts invested ("breakpoints"). Distributor agrees to require that all Selling
Agreements entered into by the Distributor after the date of this Agreement for
the sale of Shares contain provisions providing that that selected dealers and
agents (as defined in Section 8) will be responsible for knowing the provisions
of any breakpoint programs adopted by the Funds and for appropriately applying
the provisions of those programs to the sales of Shares to their customers.
28. Sale and Payment.
The Company reserves the right to suspend the offering of Shares of any
Class at any time in the absolute discretion of the Company's Board of Directors
or officers, and will make reasonable notice to instruct the Distributor to
decline to accept any orders for or make any sales of, the Shares until such
time as those Directors or officers deem it advisable to accept such orders and
to make such sales.
29. The Company shall cause its transfer agent (the "Transfer Agent")
to withhold, from redemption proceeds payable to holders of Shares of the Funds
and the Classes thereof, all CDSCs properly payable by the shareholders in
accordance with the terms of the applicable prospectus and shall cause the
Transfer Agent to pay such amounts over to the Distributor as promptly as
possible after each month end.
30. Shares of a Fund may be subject to a sales load and may be subject
to the imposition of a distribution fee pursuant to the Plan referred to above.
To the extent that Shares of a Fund are sold at an offering price which includes
a sales load or subject to a contingent deferred sales load with respect to
certain redemptions (either within a single class of Shares or pursuant to two
or more classes of Shares), such Shares shall hereinafter be referred to
collectively as "Load Shares" (and in the case of Shares that are sold with a
front-end sales load, "Front-end Load Shares," or Shares that are sold subject
to a CDSC, "CDSC Shares"). Funds that issue Front-End Load Shares shall
hereinafter be referred to collectively as "Front-End Load Funds." Funds that
issue CDSC Shares shall hereinafter be referred to collectively as "CDSC Funds."
Front-end Load Funds and CDSC Funds may individually or collectively be referred
as "Load Funds." Under this Agreement, the following provisions shall apply with
respect to the sale of, and payment for, Load Shares.
31. The Distributor shall have the right to purchase Load Shares at
their net asset value and to sell such Load Shares to the public against orders
therefore at the applicable public offering price, as defined in Section 6
hereof. The Distributor shall also have the right to sell Load Shares to dealers
against orders therefore at the public offering price less a concession
determined by the Distributor, which concession shall not exceed the amount of
the sales charge or underwriting discount, if any, referred to in Section 4
below.
32. Prior to the time of delivery of any Load Shares by a Load Fund to,
or on the order of, the Distributor, the Distributor shall pay or cause to be
paid to the Load Fund or to its order an amount in New York cleared funds equal
to the applicable net asset value of such Shares.
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33. Public Offering Price.
The public offering price of a Load Share shall be the net asset value
of such Load Share, plus any applicable sales charge, all as set forth in the
current prospectus of the Load Fund. The net asset value of Load Shares shall be
determined in accordance with the then-current prospectus of the Load Fund.
34. Issuance of Shares.
The Company reserves the right to issue, transfer or sell Load Shares
at net asset values (a) in connection with the merger or consolidation of the
Company or the Load Fund(s) with any other investment company or the acquisition
by the Company or the Load Fund(s) of all or substantially all of the assets or
of the outstanding Shares of any other investment company (b) in connection with
a pro rata distribution directly to the holders of Shares in the nature of a
stock dividend or split; (c) upon the exercise of subscription rights granted to
the holders of Shares on a pro rata basis; (d) in connection with the issuance
of Load Shares pursuant to any exchange and reinvestment privileges described in
any then-current prospectus of the Load Fund; and (e) otherwise in accordance
with any then-current prospectus of the Load Fund.
35. Selected Dealer and Selected Agent Selling Agreements
The Distributor shall have the right to enter into Selling Agreements
with securities dealers of its choice ("selected dealers") and with depository
institutions and other financial intermediaries of its choice ("selected
agents") for the sale of Shares and to fix therein the portion of the sales
charge, if any, that may be allocated to the selected dealers or selected
agents; provided, that all Selling Agreements entered into by the Distributor
after the date of this Agreement shall be in substantially the form of agreement
as set forth in Schedule C hereto or such other form as approved by the Fund.
All future Selling Agreements shall specify that Shares of each Fund or Class
thereof shall be resold by selected dealers or selected agents only at the
public offering prices(s) set forth in the prospectus relating to the Shares.
The Distributor shall offer and sell Shares of the Fund to selected dealers only
if they are members in good standing of the NASD, and the Distributor will
monitor, from time to time, whether disciplinary proceedings or disclosures have
been reported concerning selected dealers, and take such action (which may
include reporting such information to the Fund), in its reasonable discretion,
as may be consistent with its obligations hereunder.
The Distributor will establish the Fund's relationship with selected
dealers and agents, will monitor the relationship as may be appropriate to
fulfill its obligations hereunder and may make payments to those selected
dealers and agents in such amounts as the Distributor may determine from time to
time in its sole discretion. The amount of payments to selected dealers and
agents by the Distributor may be reviewed by the Board from time to time;
provided, however, that no payment by the Distributor to any selected dealer or
agent with respect to a Share shall exceed the amount of payments made to the
Distributor hereunder with respect to that Share.
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36. Anti-Money Laundering Program
The Distributor and the Company each acknowledge that it is a financial
institution subject to the USA Patriot Act of 2001 and the Bank Secrecy Act,
which require among other things, that financial institutions adopt compliance
programs to guard against money laundering. Each of Distributor and the Company
agrees that it will take such further steps, and cooperate with the other to
facilitate such compliance. The Distributor acknowledges that it is a "Covered
Service Provider" as defined in the Company's Anti-Money Laundering Program
("AML Program") and shall assume responsibility for the implementation of the
requirements of the AML Program with respect to the services provided under this
Agreement. The Distributor represents and warrants that it has adopted policies
and procedures reasonably designed to detect and prevent money laundering
activities in compliance with applicable laws, regulations and regulatory
interpretations. The Distributor undertakes that it shall (a) conduct its
operations in accordance with the provisions of the AML Program and applicable
laws, regulations and regulatory interpretations, provided that the Distributor
shall not be required to comply with any changes, amendment or supplements to
the AML Program without its prior written consent; (b) provide access to its
books, records and operations relating to its anti-money laundering compliance
only with respect to the Funds, by appropriate regulatory authorities, the
Funds, and the Company's anti-money laundering Compliance Officer (the Company's
Compliance Officer shall have no access to any of Distributor's anti-money
laundering operations, books or records pertaining to other clients of
Distributor); (c) certify, in writing, no less frequently than annually, that it
is in compliance with applicable anti-money laundering laws, rules, regulations
and regulatory interpretations with respect to the services provided under this
Agreement; (d) upon request, provide a copy of its anti-money laundering program
(or a summary of its program) to the Company's anti-money laundering Compliance
Officer; (e) provide periodic reports to the Company's Board of Directors
concerning anti-money laundering activities and compliance exceptions, as the
parties may agree from time to time; and (f) ensure that Selling Agreements
entered into after the date of this Agreement require selected dealers and
agents to adopt, as applicable, reasonable anti-money laundering procedures and
otherwise comply with applicable anti-money laundering regulations and
regulatory interpretations with respect to the sale and redemption of Fund
shares. The Company represents and warrants that it will conduct its operations
in accordance with the provisions of the AML Program and applicable laws,
regulations and regulatory interpretations.
37. Term, Duration and Termination.
This Agreement shall become effective with respect to each Fund as of
the date first written above (the "Effective Date") (or, if a particular Fund is
not in existence on such date, on the earlier of the date an amendment to
Schedule A to this Agreement relating to that Fund is executed or the
Distributor begins providing services under this Agreement with respect to such
Fund). Upon effectiveness of this Agreement, it shall supersede all previous
agreements between the parties hereto covering the subject matter hereof insofar
as such Agreement may have been deemed to relate to the Fund and, unless sooner
terminated as provided herein, shall continue for a one year period
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following the Effective Date. Thereafter, if not terminated, this Agreement
shall continue with respect to a particular Fund automatically for successive
one-year terms, provided that such continuance is specifically approved at least
annually by (a) by the vote of a majority of those members of the trust's Board
of Directors who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting for the purpose of voting on such
approval and (b) by the vote of the Company's Board of Directors or the vote of
a majority of the outstanding voting securities of such Fund. This Agreement is
terminable without penalty with sixty days' prior written notice, by the
Company's Board of Directors, by vote of a majority of the outstanding voting
securities of the Company, or by the Distributor. This Agreement will also
terminate automatically in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignments" shall have the same meaning as ascribed
to such terms in the 1940 Act.)
38. Privacy.
Nonpublic personal financial information relating to consumers or
customers of the Funds provided by, or at the direction of, the Company to the
Distributor, or collected or retained by the Distributor to perform its duties
as distributor, shall be considered confidential information. The Distributor
shall not disclose or otherwise use a nonpublic personal financial information
relating to present or former shareholders of the Funds other than for the
purposes for which that information was disclosed to the Distributor, including
use under an exception in Rules 14 or 15 of Securities and Exchange Commission
Regulation S-P in the ordinary course of business to carry out those purposes.
The Distributor shall have in place and maintain physical, electronic and
procedural safeguards reasonably designed to protect the security,
confidentiality and integrity of, and to prevent unauthorized access to or use
of records and information relating to consumers of the Funds. The Company
represents to the Distributor that it has adopted a Statement of its privacy
policies and practices as required by Securities and Exchange Commission
Regulation S-P and agrees to provide the Distributor with a copy of that
statement annually.
39. Notices.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such notice
at the following address: if to the Company, to it at to Xxxx X. Xxxxxxx,
President, c/o Mercantile Capital Advisors, Inc., Two Xxxxxxx Xxxxx, Xxxxxxxxx,
Xxxxxxxx 00000; with a copy to Xxxxxxxx Xxxxxxx, Esq., c/o Mercantile Capital
Advisors, Inc., Two Xxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000; and if to BISYS,
to it at 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000, Attn: President, or at such
other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
40. Assignment.
This Agreement will also terminate automatically in the event of its
assignment.
28
41. Modification/Binding Effect.
This Agreement shall not be changed, modified, terminated or discharged
in whole or in part, except by an instrument in writing signed by both parties
hereto, or their respective successors. This Agreement shall bind any successors
of the parties hereto.
42. Separability.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder shall not be thereby
affected to the full extent possible.
43. Applicable Law.
The laws of the State of Ohio shall control all matters relating to
this Agreement and shall apply to the extent not preempted by Federal law.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
MERCANTILE FUNDS, INC.
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxx
Title: President
BISYS FUND SERVICES, L.P.
By: BISYS Fund Services,Inc.,
its General Partner
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
29
SCHEDULE A
TO THE DISTRIBUTION AGREEMENT
BETWEEN MERCANTILE FUNDS, INC.
AND BISYS FUND SERVICES, L.P.
FUNDS
Prime Money Market Fund Institutional Shares
Prime Money Market Fund Class A
Prime Money Market Fund Class B
Prime Money Market Fund Class C
Government Money Market Fund Institutional Shares
Government Money Market Fund Class A
Government Money Market Fund Class B
Government Money Market Fund Class C
Tax-Exempt Money Market Fund Institutional Shares
Tax-Exempt Money Market Fund Class A
Tax-Exempt Money Market Fund Class B
Tax-Exempt Money Market Fund Class C
Growth & Income Fund Institutional Shares
Growth & Income Fund Class A
Growth & Income Fund Class B
Growth & Income Fund Class C
Limited Maturity Bond Fund Institutional Shares
Limited Maturity Bond Fund Class A
Limited Maturity Bond Fund Class B
Limited Maturity Bond Fund Class C
Maryland Tax-Exempt Bond Fund Institutional Shares
Maryland Tax-Exempt Bond Fund Class A
Maryland Tax-Exempt Bond Fund Class B
Maryland Tax-Exempt Bond Fund Class C
International Equity Fund Institutional Shares
International Equity Fund Class A
International Equity Fund Class B
International Equity Fund Class C
Diversified Real Estate Fund Class Institutional Shares
Diversified Real Estate Fund Class A
Diversified Real Estate Fund Class B
Diversified Real Estate Class C
National Tax-Exempt Bond Fund Class Institutional Shares
National Tax-Exempt Bond Fund Class A
National Tax-Exempt Bond Fund Class B
National Tax-Exempt Bond Fund Class C
Total Return Bond Fund Institutional Shares
Total Return Bond Fund Class A
Total Return Bond Fund Class B
Total Return Bond Fund Class C
Equity Growth Fund Institutional Shares
Equity Growth Fund Class A
Equity Growth Fund Class B
Equity Growth Fund Class C
Equity Income Fund Institutional Shares
Equity Income Fund Class A
Equity Income Fund Class B
Equity Income Fund Class C
Intermediate Tax-Exempt Bond Fund Institutional Shares
Intermediate Tax-Exempt Bond Fund Class A
Intermediate Tax-Exempt Bond Fund Class B
Intermediate Tax-Exempt Bond Fund Class C
Capital Opportunities Fund Institutional Shares
Capital Opportunities Fund Class A
Capital Opportunities Fund Class B
Capital Opportunities Fund Class C
30
SCHEDULE B
TO THE DISTRIBUTIONAGREEMENT
BETWEEN MERCANTILE FUNDS, INC.
AND BISYS FUND SERVICES, L.P.
MERCANTILE FUNDS, INC.
(formerly, M.S.D. & T. Funds, Inc.)
DISTRIBUTION AND SERVICES PLAN
FOR CLASS A SHARES
This Distribution and Services Plan (the "Plan") has been
adopted by the Board of Directors of Mercantile Funds, Inc. (the "Company") in
connection with the Class A Shares of each of the following investment
portfolios of the Company: Prime Money Market Fund, Government Money Market
Fund, Tax-Exempt Money Market Fund, Limited Maturity Bond Fund, Total Return
Bond Fund, Maryland Tax-Exempt Bond Fund, Intermediate Tax-Exempt Bond Fund,
National Tax-Exempt Bond Fund, Growth & Income Fund, Equity Income Fund, Equity
Growth Fund, Capital Opportunities Fund, International Equity Fund and
Diversified Real Estate Fund (collectively, the "Funds"). The Plan has been
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act").
Section 1. Expenses. The Company may incur expenses under the
Plan in an amount not to exceed 0.50% annually of the average daily net assets
attributable to the outstanding Class A Shares of each of the Funds.
Section 2. Distribution Payments. (a) The Company may pay the
distributor of the Company (the "Distributor") (or any other person) a fee (a
"Distribution Fee") of up to 0.25% annually of the average daily net assets
attributable to the Class A Shares of each of the Funds. The Distribution Fee
shall be calculated and accrued daily, paid monthly and shall be in
consideration for distribution services and the assumption of related expenses
(including the payment of commissions and transaction fees) in conjunction with
the offering and sale of Class A Shares of the Funds. In determining the amounts
payable on behalf of a Fund under the Plan, the net asset value of the Fund's
Class A Shares shall be computed in the manner specified in the Company's then
current Prospectuses and Statements of Additional Information describing such
Class A Shares.
(b) Payments to the Distributor under subsection (a) above
shall be used by the Distributor to cover expenses and activities primarily
intended to result in the sale of Class A Shares of the Funds. Such expenses and
activities may include but are not limited to: (i) direct out-of-pocket
promotional expenses incurred by the Distributor in advertising and marketing
Class A Shares of the Funds; (ii) expenses incurred in connection with
preparing, printing, mailing, and distributing or publishing advertisements and
sales literature; (iii) expenses incurred in connection with printing and
mailing Prospectuses and Statements of Additional Information to other than
current shareholders; (iv) periodic payments or commissions to one or more
securities dealers, brokers, financial institutions or other industry
professionals, such as investment advisors, accountants, and estate planning
firms (each a "Distribution Organization") with respect to a Fund's Class A
Shares beneficially owned by customers for whom the Distribution Organization is
the Distribution Organization of record or shareholder of record; or (v) such
other services as may be construed by any court or governmental agency or
commission, including the Securities and Exchange Commission (the "Commission"),
to constitute distribution services under the 1940 Act or rules and regulations
thereunder.
Section 3. Service Payments. (a) The Company may also pay the
Distributor a fee (a "Service Fee"), as defined by Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc., which shall be
calculated and accrued daily and paid monthly, of up to 0.25% annually of the
average daily net assets attributable to the Class A Shares of each of the
Funds. In determining the amounts payable on behalf of a Fund under the Plan,
the net asset value of the Fund's Class A Shares shall be computed in the manner
specified in the Company's then current Prospectuses and statements of
Additional Information describing such Class A Shares.
(b) Payments to the Distributor under subsection (a) above
shall be used by the Distributor to make periodic payments or commissions to one
or more securities dealers, brokers, financial institutions, or other industry
31
professional, such as investment advisors, accountants, and estate planning
firms (each a "Service Organization") in order to cover expenses and activities
primarily intended to result in the sale of Class A Shares of the Funds.
Section 4. Expenses Allocated; Compliance. Amounts paid by a
Fund under the Plan must be for services rendered for or on behalf of such
Fund's Class A Shares. However, joint distribution financing or other services
rendered with respect to such Class A Shares (which may involve other investment
funds or companies that are affiliated persons of the Company or affiliated
persons of the Distributor) is authorized to the extent permitted by law.
Section 5. Reports to Company. So long as this Plan is in
effect, the Distributor shall provide the Company's Board of Directors, and the
Directors shall review, at least quarterly, a written report of the amounts
expended pursuant to the Plan and the purposes for which such expenditures were
made.
Section 6. Approval of Plan. This Plan will become effective
with respect to a particular Fund on the date the public offering of Class A
Shares of such Fund commences upon the approval by a majority of the Board of
Directors, including a majority of those directors who are not "interested
persons" (as defined in the 0000 Xxx) of the Company and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
entered into in connection with the Plan (the "Disinterested Directors"),
pursuant to a vote cast in person at a meeting called for the purpose of voting
on the approval of the Plan.
Section 7. Continuance of Plan. Unless sooner terminated in
accordance with the terms hereof, this Plan shall continue until July 26, 2003,
and thereafter for so long as its continuance is specifically approved at least
annually by the Company's Board of Directors in the manner described in Section
6 hereof.
Section 8. Amendments. This Plan may be amended at any time
by the Board of Directors provided that (a) any amendment to increase materially
the costs which the Class A Shares of a Fund may bear for distribution pursuant
to the Plan shall be effective only upon approval by a vote of a majority of the
outstanding Class A Shares of the Fund affected by such matter, and (b) any
material amendments of the terms of the Plan shall become effective only upon
approval in the manner described in Section 6 hereof.
Section 9. Termination. This Plan, as to any Fund, is
terminable without penalty at any time by (a) a vote of a majority of the
Disinterested Directors, or (b) a vote of a majority of the outstanding Class A
Shares of such Fund.
Section 10. Selection/Nomination of Directors. While this Plan
is in effect, the selection and nomination of those Disinterested Directors
shall be committed to the discretion of such Disinterested Directors.
Section 11. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
Adopted: July 26, 2002, as amended February 7, 2003
32
MERCANTILE FUNDS, INC.
(formerly, M.S.D. & T. Funds, Inc.)
DISTRIBUTION AND SERVICES PLAN
FOR CLASS B SHARES
This Distribution and Services Plan (the "Plan") has been
adopted by the Board of Directors of Mercantile. Funds, Inc. (the "Company") in
connection with the Class B Shares of each of the following investment
portfolios of the Company: Prime Money Market Fund, Government Money Market
Fund, Tax-Exempt Money Market Fund, Limited Maturity Bond Fund, Total Return
Bond Fund, Maryland Tax-Exempt Bond Fund, Intermediate Tax-Exempt Bond Fund,
National Tax-Exempt Bond Fund, Growth & Income Fund, Equity Income Fund, Equity
Growth Fund, Capital Opportunities Fund, International Equity Fund and
Diversified Real Estate Fund (collectively, the "Funds"). The Plan has been
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act").
Section 1. Expenses. The Company may incur expenses under the
Plan in an amount not to exceed 1.00% annually of the average daily net assets
attributable to the outstanding Class B Shares of each of the Funds.
Section 2. Distribution Payments. (a) The Company may pay the
distributor of the Company (the "Distributor") (or any other person) a fee (a
"Distribution Fee") of up to 0.75% annually of the average daily net assets
attributable to the Class B Shares of each of the Funds. The Distribution Fee
shall be calculated and accrued daily, paid monthly and shall be in
consideration for distribution services and the assumption of related expenses
(including the payment of commissions and transaction fees) in conjunction with
the offering and sale of Class B Shares of the Funds. In determining the amounts
payable on behalf of a Fund under the Plan, the net asset value of the Fund's
Class B Shares shall be computed in the manner specified in the Company's then
current Prospectuses and Statements of Additional Information describing such
Class B Shares.
(b) Payments to the Distributor under subsection (a) above
shall be used by the Distributor to cover expenses and activities primarily
intended to result in the sale of Class B Shares of the Funds. Such expenses and
activities may include but are not limited to: (i) direct out-of-pocket
promotional expenses incurred by the Distributor in advertising and marketing
Class B Shares of the Funds; (ii) expenses incurred in connection with
preparing, printing, mailing, and distributing or publishing advertisements and
sales literature; (iii) expenses incurred in connection with printing and
mailing Prospectuses and Statements of Additional Information to other than
current shareholders; (iv) periodic payments or commissions to one or more
securities dealers, brokers, financial institutions or other industry
professionals, such as investment advisors, accountants, and estate planning
firms (each a "Distribution Organization") with respect to a Fund's Class B
Shares beneficially owned by customers for whom the Distribution Organization is
the Distribution Organization of record or shareholder of record; (v) the direct
or indirect cost of financing the payments or expenses included in (i) and (iv)
above; or (vi) such other services as may be construed by any court or
governmental agency or commission, including the Securities and Exchange
Commission (the "Commission"), to constitute distribution services under the
1940 Act or rules and regulations thereunder.
Section 3. Service Payments. (a) The Company may also pay the
Distributor a fee (a "Service Fee"), as defined by Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc., which shall be
calculated and accrued daily and paid monthly, of up to 0.25% annually of the
average daily net assets attributable to the Class B Shares of each of the
Funds. In determining the amounts payable on behalf of a Fund under the Plan,
the net asset value of the Fund's Class B Shares shall be computed in the manner
specified in the Company's then current Prospectuses and statements of
Additional Information describing such Class B Shares.
(b) Payments to the Distributor under subsection (a) above
shall be used by the Distributor to make periodic payments or commissions to one
or more securities dealers, brokers, financial institutions, or other industry
professional, such as investment advisors, accountants, and estate planning
firms (each a "Service Organization") in order to cover expenses and activities
primarily intended to result in the sale of Class B Shares of the Funds.
Section 4. Expenses Allocated; Compliance. Amounts paid by a
Fund under the Plan must be for services rendered for or on behalf of such
Fund's Class B Shares. However, joint distribution financing or other
33
services rendered with respect to such Class B Shares (which may involve other
investment funds or companies that are affiliated persons of the Company or
affiliated persons of the Distributor) is authorized to the extent permitted by
law.
Section 5. Reports to Company. So long as this Plan is in
effect, the Distributor shall provide the Company's Board of Directors, and the
Directors shall review, at least quarterly, a written report of the amounts
expended pursuant to the Plan and the purposes for which such expenditures were
made.
Section 6. Approval of Plan. This Plan will become effective
with respect to a particular Fund on the date the public offering of Class B
Shares of such Fund commences upon the approval by a majority of the Board of
Directors, including a majority of those directors who are not "interested
persons" (as defined in the 0000 Xxx) of the Company and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
entered into in connection with the Plan (the "Disinterested Directors"),
pursuant to a vote cast in person at a meeting called for the purpose of voting
on the approval of the Plan.
Section 7. Continuance of Plan. Unless sooner terminated in
accordance with the terms hereof, this Plan shall continue until July 26, 2003,
and thereafter for so long as its continuance is specifically approved at least
annually by the Company's Board of Directors in the manner described in Section
6 hereof.
Section 8. Amendments. This Plan may be amended at any time
by the Board of Directors provided that (a) any amendment to increase materially
the costs which the Class B Shares of a Fund may bear for distribution pursuant
to the Plan shall be effective only upon approval by a vote of a majority of the
outstanding Class B Shares of the Fund affected by such matter, and (b) any
material amendments of the terms of the Plan shall become effective only upon
approval in the manner described in Section 6 hereof.
Section 9. Termination. This Plan, as to any Fund, is
terminable without penalty at any time by (a) a vote of a majority of the
Disinterested Directors, or (b) a vote of a majority of the outstanding Class B
Shares of such Fund.
Section 10. Selection/Nomination of Directors. While this Plan
is in effect, the selection and nomination of those Disinterested Directors
shall be committed to the discretion of such Disinterested Directors.
Section 11. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
Adopted: July 26, 2002, as amended February 7, 2003.
34
MERCANTILE FUNDS, INC.
(formerly, M.S.D. & T. Funds, Inc.)
DISTRIBUTION AND SERVICES PLAN
FOR CLASS C SHARES
This Distribution and Services Plan (the "Plan") has been
adopted by the Board of Directors of Mercantile Funds, Inc. (the "Company") in
connection with the Class C Shares of each of the following investment
portfolios of the Company: Prime Money Market Fund, Government Money Market
Fund, Tax-Exempt Money Market Fund, Limited Maturity Bond Fund, Total Return
Bond Fund, Maryland Tax-Exempt Bond Fund, Intermediate Tax-Exempt Bond Fund,
National Tax-Exempt Bond Fund, Growth & Income Fund, Equity Income Fund, Equity
Growth Fund, Capital Opportunities Fund, International Equity Fund and
Diversified Real Estate Fund (collectively, the "Funds"). The Plan has been
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act").
Section 1. Expenses. The Company may incur expenses under the
Plan in an amount not to exceed 1.00% annually of the average daily net assets
attributable to the outstanding Class C Shares of each of the Funds.
Section 2. Distribution Payments. (a) The Company may pay the
distributor of the Company (the "Distributor") (or any other person) a fee (a
"Distribution Fee") of up to 0.75% annually of the average daily net assets
attributable to the Class C Shares of each of the Funds. The Distribution Fee
shall be calculated and accrued daily, paid monthly and shall be in
consideration for distribution services and the assumption of related expenses
(including the payment of commissions and transaction fees) in conjunction with
the offering and sale of Class C Shares of the Funds. In determining the amounts
payable on behalf of a Fund under the Plan, the net asset value of the Fund's
Class C Shares shall be computed in the manner specified in the Company's then
current Prospectuses and Statements of Additional Information describing such
Class C Shares.
(b) Payments to the Distributor under subsection (a) above
shall be used by the Distributor to cover expenses and activities primarily
intended to result in the sale of Class C Shares of the Funds. Such expenses and
activities may include but are not limited to: (i) direct out-of-pocket
promotional expenses incurred by the Distributor in advertising and marketing
Class C Shares of the Funds; (ii) expenses incurred in connection with
preparing, printing, mailing, and distributing or publishing advertisements and
sales literature; (iii) expenses incurred in connection with printing and
mailing Prospectuses and Statements of Additional Information to other than
current shareholders; (iv) periodic payments or commissions to one or more
securities dealers, brokers, financial institutions or other industry
professionals, such as investment advisors, accountants, and estate planning
firms (each a "Distribution Organization") with respect to a Fund's Class C
Shares beneficially owned by customers for whom the Distribution Organization is
the Distribution Organization of record or shareholder of record; or (v) such
other services as may be construed by any court or governmental agency or
commission, including the Securities and Exchange Commission (the "Commission"),
to constitute distribution services under the 1940 Act or rules and regulations
thereunder.
Section 3. Service Payments. (a) The Company may also pay the
Distributor a fee (a "Service Fee"), as defined by Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc., which shall be
calculated and accrued daily and paid monthly, of up to 0.25% annually of the
average daily net assets attributable to the Class C Shares of each of the
Funds. In determining the amounts payable on behalf of a Fund under the Plan,
the net asset value of the Fund's Class C Shares shall be computed in the manner
specified in the Company's then current Prospectuses and statements of
Additional Information describing such Class C Shares.
(b) Payments to the Distributor under subsection (a) above
shall be used by the Distributor to make periodic payments or commissions to one
or more securities dealers, brokers, financial institutions, or other industry
professional, such as investment advisors, accountants, and estate planning
firms (each a "Service Organization") in order to cover expenses and activities
primarily intended to result in the sale of Class C Shares of the Funds.
Section 4. Expenses Allocated; Compliance. Amounts paid by a
Fund under the Plan must be for services rendered for or on behalf of such
Fund's Class C Shares. However, joint distribution financing or other services
rendered with respect to such Class C Shares (which may involve other investment
funds or companies that are affiliated persons of the Company or affiliated
persons of the Distributor) is authorized to the extent permitted by law.
35
Section 5. Reports to Company. So long as this Plan is in
effect, the Distributor shall provide the Company's Board of Directors, and the
Directors shall review, at least quarterly, a written report of the amounts
expended pursuant to the Plan and the purposes for which such expenditures were
made.
Section 6. Approval of Plan. This Plan will become effective
with respect to a particular Fund on the date the public offering of Class C
Shares of such Fund commences upon the approval by a majority of the Board of
Directors, including a majority of those directors who are not "interested
persons" (as defined in the 0000 Xxx) of the Company and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
entered into in connection with the Plan (the "Disinterested Directors"),
pursuant to a vote cast in person at a meeting called for the purpose of voting
on the approval of the Plan.
Section 7. Continuance of Plan. Unless sooner terminated in
accordance with the terms hereof, this Plan shall continue until July 26, 2003,
and thereafter for so long as its continuance is specifically approved at least
annually by the Company's Board of Directors in the manner described in Section
6 hereof.
Section 8. Amendments. This Plan may be amended at any time
by the Board of Directors provided that (a) any amendment to increase materially
the costs which the Class C Shares of a Fund may bear for distribution pursuant
to the Plan shall be effective only upon approval by a vote of a majority of the
outstanding Class C Shares of the Fund affected by such matter, and (b) any
material amendments of the terms of the Plan shall become effective only upon
approval in the manner described in Section 6 hereof.
Section 9. Termination. This Plan, as to any Fund, is
terminable without penalty at any time by (a) a vote of a majority of the
Disinterested Directors, or (b) a vote of a majority of the outstanding Class C
Shares of such Fund.
Section 10. Selection/Nomination of Directors. While this Plan
is in effect, the selection and nomination of those Disinterested Directors
shall be committed to the discretion of such Disinterested Directors.
Section 11. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
Adopted: July 26, 2002, as amended February 7, 2003
36
SCHEDULE C
TO THE DISTRIBUTION AGREEMENT
BETWEEN MERCANTILE FUNDS, INC.
AND BISYS FUND SERVICES, L.P.
SELLING AGREEMENT
Mercantile Funds, Inc.
Dear Sirs:
As the principal underwriter of shares of the investment
portfolios of Mercantile Funds, Inc., (the "Funds") an open-end management
investment company, shares of which companies are distributed by us, BISYS Fund
Services Limited Partnership ("BISYS") at their respective net asset values plus
sales charges as applicable, pursuant to our Distribution Agreement with the
Funds, BISYS invites you to participate as a non-exclusive principal in the
distribution of shares of any and all of the Funds upon the following terms and
conditions:
1. You are to offer and sell such shares only at the public offering
prices which shall be currently in effect, in accordance with the terms
of the then current prospectuses and statements of additional
information of the Funds subject in each case to the delivery prior to
or at the time of such sales of the then current prospectus. You agree
to act only as principal in such transactions and nothing in this
Agreement shall constitute either of us the agent of the other or shall
constitute you or the Fund the agent of the other. All orders are
subject to acceptance by us and become effective only upon confirmation
by us. BISYS reserves the right in our sole discretion to reject any
order. The minimum dollar purchase of shares of the Funds shall be the
applicable minimum amounts described in the then current prospectuses
and statements of additional information and no order for less than
such amounts will be accepted.
2. If BISYS and a Fund accept a purchase order and you settle the order by
making payment for the shares, you will be entitled to receive the
following:
(a) With respect to shares subject to an initial sales load, such Fund
will allow directly to you the applicable percentage of the initial
sales load from the amount paid by your customer. The initial sales
loads for any shares and the applicable percentages of the initial
sales loads payable to you for such shares shall be as set forth in
Schedule 1 hereto.
(b) With respect to shares subject to a contingent deferred sales
charge ("CDSC"), BISYS will pay to you the applicable percentage of any
advance commission as set forth in Schedule 1 hereto . In no event
shall BISYS deduct the amount of any advance commission from the public
offering price of the shares that must be forwarded to the Fund. In
order to receive advance commissions from us on shares subject to a
CDSC, you must:
(i) open investor accounts with the Fund on a fully-disclosed basis;
or
(ii) agree in writing to collect and remit the applicable CDSC in a
manner acceptable to us and the Funds.
37
(c) If at any time during the applicable CDSC holding period (as
described in the prospectus for such shares), you no longer satisfy the
requirements set forth above (whether by transfer of record ownership
or otherwise), you agree to pay to us the amount of CDSC that would
have been payable upon redemption of such shares.
(d) From time to time during the term of this Selling Agreement BISYS
may make payments to you pursuant to one or more of the distribution
and/or service plans adopted by certain of the Funds pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "Act") in
consideration of your furnishing distribution and/or shareholder
services hereunder with respect to each such Fund. BISYS has no
obligation to make any such payments and you waive any such payments
until BISYS receives monies therefor from the Fund. Any such payments
made pursuant to this Section 2(d) shall be subject to the following
terms and conditions:
(i) Any such payments shall be in such amounts as set forth on
Schedule 1 hereto, but in any event not in excess of the amounts
permitted by the plan in effect with respect to each particular Fund
and will be based on the dollar amount of Fund shares which are owned
of record by your firm as nominee for your customers or which are owned
by those customers of your firm whose records, as maintained by the
Funds or their agents, designate your firm as the customer's dealer of
record. Any such payments shall be in addition to the selling
concession, if any, allowed to you pursuant to this Agreement. No such
fee will be paid to you with respect to shares purchased by you and
redeemed by the Funds or by us as agent within seven business days
after the dates of confirmation of such purchase. The fee rate stated
on Schedule 1 hereto may be prospectively increased or decreased by us
in our sole discretion, at any time upon notice to you.
(ii) Provisions of this Section 2(d) relate
to the plan adopted by a particular Fund
pursuant to Rule 12b-1. In accordance with
Rule 12b-1, any person authorized to direct
the disposition of monies paid or payable by
a Fund pursuant to this Section 2(d) shall
provide the Fund's Board of Directors, and
the Directors shall review, at least
quarterly, a written report of the amounts
so expended and the purposes for which such
expenditures were made.
(iii) The provisions of this Section 2(d)
applicable to each Fund shall remain in
effect for not more than a year and
thereafter for successive annual periods
only so long as such continuance is
specifically approved at least annually in
conformity with Rule 12b-1 and the Act. The
provisions of this Section 2(d) shall
automatically terminate with respect to a
particular Plan in the event of the
assignment (as defined by the Act) of this
Agreement, in the event such Plan terminates
or is not continued or in the event this
Agreement terminates or ceases to remain in
effect. In addition, the provisions of this
Section 2(d) may be terminated at any time,
without penalty, by either party with
respect to any particular Plan or not more
than 60 days' nor less than 30 days' written
notice delivered or mailed by registered
mail, postage prepaid, to the other party.
(e) Such sales charges and discount to selected dealers are subject to
reductions under a variety of circumstances as described in each Fund's
then current prospectus and statement of additional information. To
obtain these reductions, BISYS must be notified when the sale takes
place which would qualify for the reduced charge.
38
(f) There is no sales charge or discount to selected dealers on the
reinvestment of any dividends or distributions.
3. All purchases of shares of a Fund made under any cumulative purchase
privilege as set forth in a Fund's then current effective prospectus
shall be considered an individual transaction for the purpose of
determining the concession from the public offering price to which you
are entitled as set forth in section 2 hereof.
4. As a member of the Selling Group, you agree to purchase shares of the
Funds only through us or from your customers. Purchases through us
shall be made only for your own investment purposes or for the purpose
of covering purchase orders already received from your customers, and
BISYS agrees that BISYS will not place orders for the purchase of
shares from a Fund except to cover purchase orders already received by
us. Purchases from your customers shall be at a price not less than the
net asset value quoted by each such Fund at the time of such purchase.
Nothing herein contained shall prevent you from selling any shares of a
Fund for the account of a record holder to us or to such Fund at the
net asset value quoted by us and charging your customer a fair
commission for handling the transaction.
5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.
6. You agree to sell shares of the Funds only (a) to your customers at the
public offering prices then in effect or (b) to us as agent for the
Funds or to each such Fund itself at the redemption price, as described
in each Fund's then current effective Prospectus.
7. Settlement shall be made promptly, but in no case later than the time
customary for such payments after our acceptance of the order or, if so
specified by you, BISYS will make delivery by draft on you, the amount
of which draft you agree to pay on presentation to you. If payment is
not so received or made, the right is reserved forthwith to cancel the
sale or at our option to resell the shares to the applicable Fund, at
the then prevailing net asset value in which latter case you agree to
be responsible for any loss resulting to such Fund or to us from your
failure to make payment as aforesaid.
8. (a) If any shares sold to you under the terms of this Agreement are
repurchased by a Fund or by us as agent, or for the account of that
Fund or are tendered to that Fund for purchase at liquidating value
under the terms of the Agreement and declaration of Trust or other
document governing such Fund within seven (7) business days after the
date of confirmation to you of your original purchase order therefor,
you agree to pay forthwith to us the full amount of the concession
allowed to you on the original sale and BISYS agrees to pay such amount
to the Fund when received by us. BISYS shall notify you of such
repurchase within ten (10) days of the effective date of such
repurchase.
(b) If you hold shares in an omnibus account for two or more customers,
you will be responsible for determining, in accordance with the
prospectus, whether, and the extent to which, a CDSC is applicable to a
purchase of shares from such a customer, and you agree to transmit
immediately to us any CDSC to which such purchase was subject. You
hereby represent that if you hold shares subject to a CDSC, you have
the capability to track and account for such charge, and BISYS reserves
the right, at our discretion, to verify that capability by inspecting
your tracking and accounting system or otherwise.
9. All sales will be subject to receipt of shares by us from the Funds.
BISYS reserves the right in our discretion without notice to you to
suspend sales or withdraw the offering of shares entirely, or to modify
or cancel this Agreement.
10. No person is authorized to make any representations concerning the
Funds or shares of the Funds except those contained in each Fund's then
current effective prospectus or statement of additional
39
information and any such information as may be released by a Fund as
information supplemental to such prospectus or statement of additional
information. In purchasing shares through us you shall rely solely on
the representations contained in each Fund's then current effective
prospectus or statement of additional information and supplemental
information above-mentioned.
11. You understand that certain series of the Funds presently have the
authority to offer multiple classes of shares and that in granting such
authority, the Securities and Exchange Commission has required that all
persons selling shares of any such series agree to conform to certain
dealer compliance standards adopted by us and annexed hereto as
Appendix A. You hereby agree that the entry by you of an order for the
purchase of shares of any series offering multiple classes shall
constitute your agreement to conform to such standards.
12. You understand and acknowledge that each Fund offers its Shares in
multiple classes, each subject to differing sales charges and financing
structures. You hereby represent and warrant that you have established
compliance procedures designed to ensure that Customers are made aware
of the terms of each available class of the applicable Fund's Shares,
to ensure that each Customer is offered only Shares that are suitable
investments of that Customer, to ensure that each Customer is availed
the opportunity of applicable sales charge break-points as detailed in
each Fund Prospectus, and to ensure proper supervision of your
registered representatives in recommending and offering multiple
classes of Shares to its Customers.
13. (a) Upon request by a customer or Shareholder, you will send a copy of
the current prospectus of any shares (including the statement of
additional information if expressly requested) and the annual or
semi-annual report for any Fund ("Disclosure Documents") to the
customer within three business days of such request.
(b) Additional copies of each such prospectus or statement of
additional information and any printed information issued as
supplemental to each such prospectus or statement of additional
information will be supplied by us to members of the Selling Group in
reasonable quantities upon request.
14. You agree to provide all necessary information to comply properly with
all federal, state and local reporting and backup withholding
requirements for your customer accounts including, without limitation,
those requirements that apply by treating shares as readily tradable
instruments. You represent and agree that all Taxpayer Identification
Numbers ("TINS") provided are certified, and that no account which
requires a certified TIN will be established without such certified
TIN.
15. BISYS, its affiliates and the Funds shall not be liable for any loss,
expense, damages, costs or other claim arising out of any redemption or
exchange pursuant to telephone instructions from any person or our
refusal to execute such instructions for any reason.
16. All communications to us shall be sent to us at BISYS Fund Services
Limited Partnership, 0000 Xxxxxxx Xxxx, Xxxxxxxx, Xxxx 00000, Attn:
Chief Compliance Officer, BD Compliance. Any notice to you shall be
duly given if mailed or telegraphed to you at your address given below
or as registered from time to time with the National Association of
Securities Dealers, Inc.
17. This Agreement may be terminated upon written notice, without penalty,
by either party at any time. In addition, this Agreement shall
automatically terminate in the event of its assignment, in the event
that our distribution agreement with the Funds is terminated, or in the
event that you are expelled as a member of the National Association of
Securities Dealers, Inc.
18. By accepting this Agreement, you represent that you are registered as a
broker-dealer under the Securities Exchange Act of 1934, are qualified
to act as a dealer in the states or other jurisdictions where you
transact business, and are a member in good standing of the National
Association of
40
Securities Dealers, Inc., and you agree that you will maintain such
registrations, qualifications, and membership in good standing and in
full force and effect throughout the term of this Agreement. You
further agree to comply with all applicable Federal laws, the laws of
the states or other jurisdictions concerned, and the rules and
regulations promulgated thereunder and with the Constitution, By-Laws
and Conduct Rules of the National Association of Securities Dealers,
Inc., and that you will not offer or sell shares of the Funds in any
state or jurisdiction where they may not lawfully be offered and/or
sold.
If you are offering and selling shares of the Funds in jurisdictions
outside the several states, territories, and possessions of the United
States and are not otherwise required to be registered, qualified, or a
member of the National Association of Securities Dealers, Inc., as set
forth above you, you nevertheless agree to observe the applicable laws
of the jurisdiction in which such offer and/or sale is made, to comply
with the full disclosure requirements of the Securities Act of 1933 and
the regulations promulgated thereunder, to conduct your business in
accordance with the spirit of the Conduct Rules of the National
Association of Securities Dealers, Inc. You agree to indemnify and hold
the Funds, their investment advisor, and us harmless from loss or
damage resulting from any failure on your part to comply with
applicable laws.
19. The parties acknowledge that they are financial institutions subject to
the USA Patriot Act of 2001 and the Bank Secrecy Act (collectively, the
AML Acts), which require among other things, that financial
institutions adopt compliance programs to guard against money
laundering. The parties further acknowledge that they are in compliance
and will continue to comply with the AML Acts and applicable anti-money
laundering rules of self-regulatory organizations, including 3011 of
the NASD, in all relevant respects.
20. (a) BISYS will indemnify and hold you harmless from any claim, demand,
loss, or cause of action resulting from the misconduct or negligence,
as measured by industry standards, of us, our agents and employees, in
carrying out our obligations under this Agreement. Such indemnification
will survive the termination of this Agreement.
(b) You will indemnify and hold us harmless from any claim, demand,
loss, expense, or cause of action resulting from the misconduct or
negligence, as measured by industry standards, of you, your agents and
employees, in carrying out your obligations under this Agreement. Such
indemnification will survive the termination of this Agreement.
21. You agree to maintain records of all sales of shares made through you
and to furnish us with copies of each record on request.
22. This Agreement may be amended by us from time to time by the following
procedure. BISYS will mail a copy of the amendment to you at your
address as written below. If you do not object to the amendment within
fifteen (15) days after its receipt, the amendment will become a part
of the Agreement. Your objection must be in writing and be received by
us within such fifteen days. In addition, if any provision of this
Agreement is held to be invalid, the remaining provisions of the
Agreement shall continue to be valid and enforceable.
23. This Agreement shall be construed in accordance with the laws of the
State of Ohio and shall be binding upon both parties hereto on the date
a fully executed copy of this Agreement is received by us.
----------------------------------------- ---------------------
By: Date
41
FOR BISYS FUND SERVICES LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc., General Partner
For:
--------------------------------------------------------------------------------
(Name of broker/dealer firm)
--------------------------------------------------------------------------------
Address of Principal Office
--------------------------------------------------------------------------------
City State Zip Code
By: Its:
------------------------------ ----------------------------- --------------
Authorized Signature Title Date
------------------------------
Print Name
42
43.1 Appendix A
BISYS FUND SERVICES LIMITED PARTNERSHIP ("BISYS")
COMPLIANCE/SUITABILITY STANDARDS
Because shares of the Mercantile Family of Funds distributed by BISYS Fund
Services Limited Partnership are being offered through a multiple class
distribution system pursuant to which two or more classes of shares of an
investment portfolio (a "Fund") may be available for purchase, it is essential
that the following Compliance/Suitability Standards are adhered to in offering
and selling shares of the Funds to investors. All dealers offering shares of the
Funds ("Dealer") and their representatives are required to comply with these
standards. By selling shares of the Funds, Dealers shall be deemed to have
agreed to the following procedures:
I. Applicable Standards
Because multiple classes of shares of the Funds are available it is important
that each investor purchases not only the portfolio that best suits his or her
investment objective, but also the class of shares that offers the most
beneficial distribution financing method for the investor based upon his or her
particular situation and preferences. To assist you and your clients in making
these decisions and to ensure proper supervision of mutual fund purchase
recommendations given to your clients, Fund share purchase recommendations and
orders must be carefully reviewed by your organization and its registered
representatives in light of all the facts and circumstances to ascertain that
the class of shares to be purchased by your client is appropriate and suitable
for such client based upon:
(a) the dollar amount of the proposed investment;
(b) the anticipated length of time the investor expects to hold his or her
shares; and
(c) any other relevant circumstances such as the availability of reduced
sales charges under letters of intent and/or rights of accumulation.
There are instances when one distribution financing method may be more
appropriate than another. For example, shares subject to front-end sales charges
("FESC") may be more appropriate than shares subject to a contingent deferred
sales charge ("CDSC") for large investors who qualify for a significant quantity
discount on the FESC. Conversely, shares subject to CDSC may be more appropriate
for investors whose orders would not qualify for quantity discounts and who,
therefore, may prefer to defer salescharges and also for investors who determine
it to be advantageous to have all of their funds invested without deduction of a
FESC. If, however, it is anticipated that an investor may redeem his or her
shares within a short period of time, the investor may, depending on the amount
of his or her purchase, bear higher distribution expenses by purchasing CDSC
shares than if he or she purchased shares subject to a FESC.
It is the obligation of your representatives to have, or to obtain from each
client, sufficient information regarding the circumstances of such client's
proposed investment, and to discuss such circumstances with the client as
necessary, so that the representative and the client may determine that the
particular class of shares to be purchased is appropriate for the client.
II. Compliance
Dealers' supervisory procedures should be adequate to assure that a branch
office manager or other appropriate reviewing officer ("Reviewing Officers")
monitors compliance with the foregoing standards and to assure that appropriate
consideration has been given to the choice of available distribution financing
methods offered by the Funds and to the impact of choosing one method over
another. In certain instances, it may be appropriate for Reviewing Officers to
discuss the purchase directly with the client. The foregoing standards as well
as the examples cited above, should assist your representatives and Reviewing
Officers in reviewing purchase orders and in supervising purchase
recommendations.
III. Effectiveness
Effective immediately, these Compliance/Suitability Standards shall be followed
by Dealers in connection with the offering and sale of shares of the Funds.
Copies should be provided to your registered representatives and to Reviewing
Officers.
Questions of representatives and Reviewing Officers regarding these
Compliance/Suitability Standards should be directed to Dealers' national mutual
fund sales and marketing groups legal departments or compliance directors, as
appropriate. BISYS' Compliance Department will respond to all questions Dealers
may have regarding these standards and will advise Dealers of any changes in
these standards.
43
SCHEDULE 1
TO THE
MERCANTILE FUNDS, INC. SELLING AGREEMENT
43.2 As of (date)___________________________
The following lists the Funds and Shares subject to the Selling Agreement and
any compensation payable to Dealer pursuant to the Selling Agreement. Dealer
Reallowances of the initial sales loads and Advance Commissions are paid as a
percentage of public offering price. Distribution Fees, Service Fees and any
supplemental payments are paid at an annual rate on the average net asset value
of shares held in Fund accounts attributed to Dealer pursuant to the Selling
Agreement. Each Fund's Prospectus and Statement of Additional Information shall
control in case of any conflict with this Schedule. BISYS reserves the right to
modify this schedule at any time.
EQUITY FUNDS: BOND FUNDS:
Growth & Income Fund Limited Maturity Bond Fund
Equity Income Fund Total Return Bond Fund
Equity Growth Fund Maryland Tax-Exempt Bond Fund
Capital Opportunities Fund Intermediate Tax-Exempt Bond Fund
International Equity Fund National Tax-Exempt Bond Fund
Diversified Real Estate Fund
MONEY MARKET FUNDS:
Prime Money Market Fund
Government Money Market Fund
Tax-Exempt Money Market Fund
44
44. CLASS A SHARES
PURCHASE AMOUNT BREAKPOINTS DEALER REALLOWANCE - PAID MONTHLY
----------------------------------------------------------------------------
EQUITY FUNDS BOND FUNDS
----------------------------------
Less than $100,000 4.25% 3.75%
$ 100,000 - $249,999 3.00 2.50
$ 250,000 - $499,999 2.00 1.50
$ 500,000 - $999,999 1.50 1.00
$1,000,000 and over 1.00 0.50
ALL FUNDS:
12b-1 Service Fee 0.25% - paid monthly
45. CLASS B SHARES
45.1 All Funds
Advance Commission 4.00% - paid monthly
12b-1 Service Fee 0.25% paid monthly beginning at the
13th month
46. CLASS C SHARES
ALL FUNDS
Advance Commission 1.00% - paid monthly
12b-1 Distribution Fee 0.75% paid monthly beginning at the
13th month
12b-1 Service Fee 0.25% paid monthly beginning at the
13th month
