EXHIBIT (e)(1)(v)
DISTRIBUTION AND SERVICE AGREEMENT
THIS DISTRIBUTION AND SERVICE AGREEMENT dated as of March 22, 2006,
(the "Agreement") by and between XXX XXXXXX EQUITY TRUST II, a Delaware business
trust (the "Trust"), on behalf of its series, XXX XXXXXX Equity Premium Income
Fund (the "Fund"), and XXX XXXXXX FUNDS INC., a Delaware corporation (the
"Distributor").
1. Appointment of Distributor. The Fund appoints the Distributor as a
principal underwriter and exclusive distributor of each class of its shares of
beneficial interest (the "Shares") offered for sale from time to time pursuant
to the then current prospectus of the Fund, subject to different combinations of
front-end sales charges, distribution fees, service fees and contingent deferred
sales charges. Classes of shares, if any, subject to a front-end sales charge
and a distribution and/or service fee are referred to herein as "FESC Classes"
and the Shares of such classes are referred to herein as "FESC Shares." Classes
of shares, if any, subject to a contingent-deferred sales charge and a
distribution and/or a service fee are referred to herein as "CDSC Classes" and
Shares of such classes are referred to herein as "CDSC Shares." Classes of
shares, if any, subject to a front-end sales charge, a contingent-deferred sales
charge and a distribution and/or service fee are referred to herein as
"Combination Classes" and Shares of such class are referred to herein as
"Combination Shares." The Fund reserves the right to refuse at any time or times
to sell Shares hereunder for any reason deemed adequate by the Board of Trustees
of the Fund.
The Distributor will use its best efforts to sell, through its
organization and through other dealers and agents, the Shares which the
Distributor has the right to purchase under Section 2 hereof, but the
Distributor does not undertake to sell any specific number of Shares.
The Distributor agrees that it will not take any long or short
positions in the Shares, except for long positions in those Shares purchased by
the Distributor in accordance with any systematic sales plan described in the
then current Prospectus of the Fund and except as permitted by Section 2 hereof,
and that so far as it can control the situation, it will prevent any of its
trustees, officers or shareholders from taking any long or short positions in
the Shares, except for legitimate investment purposes.
2. Sale of Shares to Distributor. The Fund hereby grants to the
Distributor the exclusive right, except as herein otherwise provided, to
purchase Shares directly from the Fund upon the terms herein set forth. Such
exclusive right hereby granted shall not apply to Shares issued or transferred
or sold at net asset value: (a) in connection with the merger or consolidation
of the Fund with any other investment company or the acquisition by the Fund of
all or substantially all of the assets of or the outstanding Shares of any
investment company; (b) in connection with a pro rata distribution directly to
the holders of Fund Shares in the nature of a stock dividend or stock split or
in connection with any other recapitalization approved by the Board of Trustees;
(c) upon the exercise of purchase or subscription rights granted to the holders
of Shares on a pro rata basis; (d) in connection with the automatic reinvestment
of dividends and distributions from the Fund; or (e) in connection with the
issue and sale of Shares to trustees, officers and employees of the Fund; to
directors, officers and employees of the investment adviser of the Fund or any
principal underwriter (including the Distributor) of the Fund; to retirees of
the Distributor that purchased shares of any mutual fund distributed by the
Distributor prior to retirement; to directors, officers and employees of Xxx
Xxxxxx Investments Inc. (formerly The Xxx Xxxxxx American Capital, Inc.) (the
parent of the Distributor) and to the subsidiaries of Xxx Xxxxxx Investments
Inc.; and to any trust, pension, profit-sharing or other benefit plan for any of
the aforesaid persons as permitted by Rule 22d-1 under the Investment Company
Act of 1940, as amended (the "1940 Act").
The Distributor shall have the right to buy from the Fund the Shares
needed, but not more than the Shares needed (except for reasonable allowances
for clerical errors, delays and errors of transmission and cancellation of
orders) to fill unconditional orders for Shares received by the Distributor from
dealers, agents and investors during each period when particular net asset
values and public offering prices are in effect as provided in Section 3 hereof;
and the price which the Distributor shall pay for the Shares so purchased shall
be the respective net asset value used in determining the public offering price
on which such orders were based. The Distributor shall notify the Fund at the
end of each such period, or as soon thereafter on that business day as the
orders received in such period have been compiled, of the number of Shares of
each class that the Distributor elects to purchase hereunder.
3. Public Offering Price. The public offering price per Share shall be
determined in accordance with the then current Prospectus of the Fund. In no
event shall the public offering price exceed the net asset value per Share,
plus, with respect to the FESC Shares, a front-end sales charge not in excess of
the applicable maximum sales charge permitted under the Conduct Rules of the
National Association of Securities Dealers, Inc., as in effect from time to
time. The net asset value per share for each class of Shares, respectively,
shall be determined in the manner provided in the Declaration of Trust and
By-Laws of the Trust as then amended, the Certificate of Designation with
respect to the Fund, as amended, and in accordance with the then current
Prospectus of the Fund consistent with the terms and conditions of the Fund's
Multi-Class Plan, as it may be amended from time to time or succeeded by
exemptive orders or rules promulgated by the Securities and Exchange Commission
under the 1940 Act. The Fund will cause immediate notice to be given to the
Distributor of each change in net asset value as soon as it is determined.
Discounts to dealers purchasing FESC Shares from the Distributor for resale and
to brokers and other eligible agents making sales of FESC Shares to investors
and compensation payable from the Distributor to dealers, brokers and other
eligible agents making sales of CDSC Shares and Combination Shares shall be set
forth in the selling agreements between the Distributor and such dealers or
agents, respectively, as from time to time amended, and, if such discounts and
compensation are described in the then current Prospectus for the Fund, shall be
as so set forth.
4. Compliance with NASD Rules, SEC Orders, etc. In selling Fund Shares,
the Distributor will in all respects duly comply with all state and federal laws
relating to the sale of such securities and with all applicable rules and
regulations of all regulatory bodies, including without limitation the Conduct
Rules of the National Association of Securities Dealers, Inc., and all
applicable rules and regulations of the Securities and Exchange Commission under
the 1940 Act, and will indemnify and save the Fund harmless from any damage or
expense on account of any unlawful act by the Distributor or its agents or
employees. The Distributor is not, however, to be responsible for the acts of
other dealers or agents, except to the extent that they shall be acting for the
Distributor or under its direction or authority. None of the Distributor, any
dealer, any agent or any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in the
Registration Statement or Prospectus heretofore or hereafter filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "1933 Act") (as any such Registration Statement and Prospectus may have
been or may be amended from time to time), covering the Shares, and in any
supplemental information to any such Prospectus approved by the Fund in
connection with the offer or sale of Shares. None of the Distributor, any
dealer, any broker or any other person is authorized to act as agent for the
Fund in connection with the offering or sale of Shares to the public or
otherwise. All such sales shall be made by the Distributor as principal for its
own account.
5. Expenses.
(a) The Fund will pay or cause to be paid:
(i) all expenses in connection with the registration of Shares
under the federal securities laws, and the Fund will
exercise its best efforts to obtain said registration and
qualification;
(ii) all expenses in connection with the printing of any notices
of shareholders' meetings, proxy and proxy statements and
enclosures therewith, as well as any other notice or
communication sent to shareholders in connection with any
meeting of the shareholders or otherwise, any annual,
semiannual or other reports or communications sent to the
shareholders, and the expenses of sending prospectuses
relating to the Shares to existing shareholders;
(iii) all expenses of any federal or state original-issue tax or
transfer tax payable upon the issuance, transfer or delivery
of Shares from the Fund to the Distributor; and
(iv) the cost of preparing and issuing any Share certificates
which may be issued to represent Shares.
(b) The Distributor will also permit its officers and employees to
serve without compensation as trustees and officers of the Fund if duly elected
to such positions.
(c) The Fund shall reimburse the Distributor for out-of-pocket costs
and expenses actually incurred by it in connection with distribution of each
class of Shares respectively in accordance with the terms of a plan (the "12b-1
Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act as such
12b-1 Plan may be in effect from time to time; provided, however, that no
payments shall be due or paid to the Distributor hereunder with respect to a
class of Shares unless and until this Agreement shall have been approved for
each such class by a majority of the Board of Trustees of the Fund and by a
majority of the "Disinterested Trustees" (as such term is defined in such 12b-1
Plan) by vote cast in person at a meeting called for the purpose of voting on
this Agreement. A copy of such 12b-1 Plan as in effect on the date of this
Agreement is attached as Exhibit I hereto. The Fund reserves the right to
terminate such 12b-1 Plan with respect to a class of Shares at any time, as
specified in the Plan. The persons authorized to direct the payment of funds
pursuant to this Agreement and the 12b-1 Plan shall provide to the Fund's Board
of Trustees, and the Trustees shall review, at least quarterly, a written report
with respect to each of the classes of Shares of the amounts so paid and the
purposes for which such expenditures were made for each such class of Shares.
(d) The Fund shall compensate the Distributor for providing services
to, and the maintenance of, shareholder accounts in the Fund (including
prepaying service fees to eligible brokers, dealers and financial intermediaries
and expenses incurred in connection therewith) and the Distributor may pay as
agent for and on behalf of the Fund a service fee with respect to each class of
Shares to brokers, dealers and financial intermediaries for the provision of
shareholder services and the maintenance of shareholder accounts in the Fund in
the amount with respect to each class of Shares set forth from time to time in
the Fund's prospectus. The Fund shall compensate the Distributor for such
expenses in accordance with the terms of a service plan (the "Service Plan"), as
such Service Plan may be in effect from time to time; provided, however, that no
service fee payments shall be due or paid to the Distributor hereunder with
respect to a class of Shares unless and until this Agreement shall have been
approved for each such class by a majority of the Board of Trustees of the Fund
and by a majority of the Disinterested Trustees by vote cast in person at a
meeting called for the purpose of voting on this Agreement. A copy of such
Service Plan as in effect on the date of this Agreement is attached as Exhibit
II hereto. The Fund reserves the right to terminate such Service Plan with
respect to a class of Shares at any time, as specified in the Plan. The persons
authorized to direct the payment of funds pursuant to this Agreement and the
Service Plan shall provide to the Fund's Board of Trustees, and the Trustees
shall review, at least quarterly, a written report with respect to each of the
classes of Shares of the amounts paid as service fees for each such class of
Shares.
6. Redemption of Shares. In connection with the Fund's redemption of its
Shares, the Fund hereby authorizes the Distributor to repurchase, upon the terms
and conditions hereinafter set forth, as the Fund's agent and for the Fund's
account, such Shares as may be offered for sale to the Fund from time to time by
holders of such Shares or their agents.
(a) Subject to and in conformity with all applicable federal and state
legislation, any applicable rules of the National Association of Securities
Dealers, Inc., and any applicable rules and regulations of the Securities and
Exchange Commission under the 1940 Act, the Distributor may accept offers of
holders of Shares to resell such Shares to the Fund on such terms and conditions
and at such prices as described and provided for in the then current Prospectus
of the Fund.
(b) The Distributor agrees to notify the Fund at such times as the Fund
may specify of the number of each class of Shares, respectively, repurchased for
the Fund's account and the time or times of such repurchases, and the Fund shall
notify the Distributor of the prices and, in the case of a class of CDSC Shares
or Combination Shares, of the deferred sales charge as described below, if any,
applicable to repurchases of Shares of such class.
(c) The Fund shall have the right to suspend or revoke the foregoing
authorization at any time; unless otherwise stated, any such suspension or
revocation shall be effective forthwith upon receipt of notice thereof by
telegraph or by written instrument from any of the Fund's officers. In the event
that the Distributor's authorization is, by the terms of such notice, suspended
for more than twenty-four hours or until further notice, the authorization given
by this Section 6 shall not be revived except by vote of the Board of Trustees
of the Fund.
(d) The Distributor agrees that all repurchases of Shares made by the
Distributor shall be made only as agent for the Fund's account and pursuant to
the terms and conditions herein set forth.
(e) The Fund agrees to authorize and direct its Custodian to pay, for
the Fund's account, the repurchase price (together with any applicable
contingent deferred sales charge) of any Shares so repurchased for the Fund
against the authorized transfer of book shares from an open account and against
delivery of any other documentation required by the Board of Trustees of the
Fund or, in the case of certificated Shares, against delivery of the
certificates representing such Shares in proper form for transfer to the Fund.
(f) The Distributor shall receive no commissions or other compensation
in respect of any repurchases of FESC Shares for the Fund under the foregoing
authorization and appointment as agent. With respect to any repurchase of CDSC
Shares or Combination Shares, the Distributor shall receive the deferred sales
charge, if any, applicable to the respective class of Shares that have been held
for less than a specified period of time with respect to such class as set forth
from time to time in the Fund's Prospectus. The Distributor shall receive no
other commission or other compensation in respect of any repurchases of CDSC
Shares or Combination Shares for the Fund under the foregoing authorization and
appointment as agent.
(g) If any FESC Shares sold to the Distributor under the terms of this
Agreement are redeemed or repurchased by the Fund or by the Distributor as agent
or are tendered for redemption within seven business days after the date of the
Distributor's confirmation of the original purchase by the Distributor, the
Distributor shall forfeit the amount above the net asset value received by it in
respect of such Shares, provided that the portion, if any, of such amount
re-allowed by the Distributor to dealers or agents shall be repayable to the
Fund only to the extent recovered by the Distributor from the dealer or agent
concerned. The Distributor shall include in agreements with such dealers and
agents a corresponding provision for the forfeiture by them of their concession
with respect to FESC Shares purchased by them or their principals and redeemed
or repurchased by the Fund or by the Distributor as agent within seven business
days after the date of the Distributor's confirmation of such initial purchases.
7. Indemnification. The Fund agrees to indemnify and hold harmless the
Distributor and each of its trustees and officers and each person, if any, who
controls the Distributor within the meaning of Section 15 of the 1933 Act
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),
arising by reason of any person acquiring any Shares, based upon the ground that
the registration statement, Prospectus, shareholder reports or other information
filed or made public by the Fund (as from time to time amended) included an
untrue statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading under the 1933 Act
or any other statute or the common law. However, the Fund does not agree to
indemnify the Distributor or hold it harmless to the extent that the statement
or omission was made in reliance upon, and in conformity with, information
furnished to the Fund by or on behalf of the Distributor. In no case (i) is the
indemnity of the Fund in favor of the Distributor or any person indemnified to
be deemed to protect the Distributor or any person against any liability to the
Fund or its securityholders to which the Distributor or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Fund to be liable under its indemnity agreement contained in this Section with
respect to any claim made against the Distributor or any person indemnified
unless the Distributor or any such person shall have notified the Fund in
writing of the claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim shall have
been served upon the Distributor or any such person (or after the Distributor or
the person shall have received notice of service on any designated agent).
However, failure to notify the Fund of any claim shall not relieve the Fund from
any liability which it may have to the Distributor or any person against whom
such action is brought otherwise than on account of its indemnity agreement
contained in this paragraph. The Fund shall be entitled to participate at its
own expense in the defense, or, if it so elects, to assume the defense, of any
suit brought to enforce any claims, but if the Fund elects to assume the
defense, the defense shall be conducted by counsel chosen by it and satisfactory
to the Distributor or person or persons, defendant or defendants in the suit. In
the event the Fund elects to assume the defense of any suit and retain counsel,
the Distributor, officers or trustees or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them. If the Fund does not elect to assume the
defense of any suit, it will reimburse the Distributor, officers or trustees or
controlling person or persons, defendant or defendants in the suit for the
reasonable fees and expenses of any counsel retained by them. The Fund agrees to
notify the Distributor promptly 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.
The Distributor also covenants and agrees that it will indemnify and
hold harmless the Fund and each of its trustees and officers and each person, if
any, who controls the Fund within the meaning of Section 15 of the 1933 Act
against any loss, liability, damage, claim or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, damage, claim or
expense and reasonable counsel fees incurred in connection therewith) arising by
reason of any person acquiring any Shares, based upon the 1933 Act or any other
statute or common law, alleging any wrongful act of the Distributor or any of
its employees or alleging that the registration statement, Prospectus,
shareholder reports or other information filed or made public by the Fund (as
from time to time amended) included an untrue statement of a material fact or
omitted to state a material fact required to be stated or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, insofar as the statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund by or on behalf
of the Distributor. In no case (i) is the indemnity of the Distributor in favor
of the Fund or any person indemnified to be deemed to protect the Fund or any
such person against any liability to which the Fund or such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligation and duties under this Amended Agreement, or (ii) is
the Distributor to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or person, as the case may be, shall have notified
the Distributor in writing of the claim within a reasonable time after the
summons or other first written notification giving information of the nature of
the claim shall have been served upon the Fund or person (or after the Fund or
such person shall have received notice of service on any designated agent).
However, failure to notify the Distributor of any claim shall not relieve the
Distributor from any liability which it may have to the Fund or any person
against whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. In the case of any notice to the
Distributor, it shall be entitled to participate, at its own expense, in the
defense, or, if it so elects, to assume the defense, of any suit brought to
enforce the claim, but if the Distributor elects to assume the defense, the
defense shall be conducted by counsel chosen by it and satisfactory to the Fund,
to its officers and trustees and to any controlling person or persons, defendant
or defendants in the suit. In the event that the Distributor elects to assume
the defense of any suit and retain counsel, the Fund or controlling persons,
defendants in the suit, shall bear the fees and expenses of any additional
counsel retained by them. If the Distributor does not elect to assume the
defense of any suit, it will reimburse the Fund, officers and trustees or
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. The Distributor
agrees to notify the Fund promptly of the commencement of any litigation or
proceedings against it in connection with the issue and sale of any of the
Shares.
8. Essential Personnel. The Distributor and the Fund agree that the
retention of (i) the chief executive officer, president, chief financial officer
and secretary of the Distributor and (ii) each director, officer and employee of
the Distributor or any of its Affiliates (as defined in the Investment Company
Act of 1940, as amended (the "1940 Act")) who serves as an officer of the Fund
(each person referred to in (i) or (ii) hereinafter being referred to as an
"Essential Person"), in his or her current capacities, is in the best interest
of the Fund and the Fund's shareholders. In connection with the Distributor's
acceptance of employment hereunder, the Distributor hereby agrees and covenants
for itself and on behalf of its Affiliates that neither the Distributor nor any
of its Affiliates shall make any material or significant personnel changes or
replace or seek to replace any Essential Person or cause to be replaced any
Essential Person, in each case without first informing the Board of Trustees of
the Fund in a timely manner. In Addition, neither the Distributor nor any
Affiliate of the Distributor shall change or seek to change or cause to be
changed, in any material respect, the duties and responsibilities of any
Essential Person, in each case without first informing the Board of Trustees of
the Fund in a timely manner.
9. Continuation, Amendment or Termination of This Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force for the two-year period from the effective date hereof
unless sooner terminated as hereinafter provided, and this Agreement shall
continue in full force and effect year to year thereafter with respect to each
class of Shares so long as such continuance is approved at least annually (i) by
the Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the respective class of Shares of the Fund, and (ii) by
vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Independent Trustee") cast in person
at a meeting called for the purpose of voting on such approval, provided,
however, that (a) this Agreement may at any time be terminated with respect to
either class of Shares of the Fund without the payment of any penalty either by
vote of a majority of the Disinterested Trustees, or by vote of a majority of
the outstanding voting securities of the respective class of Shares of the Fund,
on written notice to the Distributor; (b) this Agreement shall immediately
terminate in the event of its assignment; and (c) this Agreement may be
terminated by the Distributor on ninety (90) days' written notice to the Fund.
Upon termination of this Agreement with respect to either class of Shares of the
Fund, the obligations of the parties hereunder shall cease and terminate with
respect to such class of Shares as of the date of such termination, except for
any obligation to respond for a breach of this Agreement committed prior to such
termination.
This Agreement may be amended with respect to either class of Shares at
any time by mutual consent of the parties, provided that such consent on the
part of the Fund shall have been approved (i) by the Board of Trustees of the
Fund, or by a vote of the majority of the outstanding voting securities of the
respective class of Shares of the Fund, and (ii) by vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.
For the purpose of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall have
the meanings defined in the 1940 Act, as amended.
10. Limited Liability of Shareholder. Notwithstanding anything to the
contrary contained in this Agreement, you acknowledge and agree that, as
provided by Section 8.1 of the Agreement and Declaration of Trust of the Trust,
this Agreement is executed by the Trustees of the Trust and/or Officers of the
Fund by them not individually but as such Trustees and/or Officers, and the
obligations of the Fund hereunder are not binding upon any of the Trustees,
Officers or Shareholders individually, but bind only the trust estate.
11. Notice. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office of
such party or at such other address as such party shall have designated in
writing.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE GOVERNED BY, THE
LAW OF THE STATE OF ILLINOIS WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
XXX XXXXXX EQUITY TRUST, on behalf of its
series, XXX XXXXXX EQUITY PREMIUM INCOME FUND
/s/ Xxxxxx X. Xxxxxxx
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and Principal Executive
Officer
XXX XXXXXX FUNDS INC.
/s/ Xxxxxx X. Xxxx, III
By:
--------------------------------------
Name: Xxxxxx X. Xxxx, III
Title: Managing Director, Chief Administrative
Officer and Chief Operating Officer
