Exhibit 5(a)
CLASS A SHARES
DISTRIBUTION AGREEMENT
AGREEMENT made as of April 30, 1999 between MERCURY ASSET MANAGEMENT V.I.
FUNDS, INC., a Maryland corporation (the "Corporation"), on behalf of its series
MERCURY V.I. U.S. LARGE CAP FUND (the "Fund") and MERCURY FUNDS DISTRIBUTOR, a
division of PRINCETON FUNDS DISTRIBUTOR, INC., a Delaware corporation (the
"Distributor").
W I T N E S S E T H :
WHEREAS, the Directors of the Corporation (the "Directors") are authorized
to establish separate series relating to separate portfolios of securities, each
of which may offer separate classes of shares of common stock, par value $0.0001
per share; and
WHEREAS, the Directors have established and designated the Fund as a
series of the Corporation, offering separate classes of shares of common stock,
as described above; and
WHEREAS, the Corporation is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as an open-end investment
company, and it is affirmatively in the interest of the Fund to offer its shares
for sale continuously to separate accounts ("Separate Accounts") of certain
insurance companies (the "Participating Insurance Companies"); and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
other securities dealers; and
WHEREAS, the Corporation and the Distributor wish to enter into an
agreement with each other with respect to the continuous offering of Class A
shares of common stock in the Fund (the "Class A Shares") to Separate Accounts
of Participating Insurance Companies;
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Corporation hereby appoints
the Distributor as the Fund's principal underwriter and distributor to sell the
Class A Shares to the Separate Accounts of Participating Insurance Companies and
hereby agrees during the term of this Agreement to sell the Class A Shares to
the Distributor upon the terms and conditions herein set forth.
Section 2. Exclusive Nature of Duties. The Distributor shall be the Fund's
exclusive representative to act as principal underwriter and distributor of the
Class A Shares, except that:
a. The Corporation may, upon written notice to the Distributor, from time
to time designate other principal underwriters and distributors of the Class A
Shares with respect to areas other than the United States as to which the
Distributor may have expressly waived in writing its right to act as such. If
such designation is deemed exclusive, the right of the Distributor under this
Agreement to sell the Class A Shares in the areas so designated shall terminate,
but this Agreement shall remain otherwise in full effect until terminated in
accordance with the other provisions hereof.
b. The exclusive rights granted to the Distributor to purchase Class A
Shares from the Fund shall not apply to Class A Shares issued in connection with
the merger or consolidation of any other investment company or personal holding
company with the Fund or the Fund's
2
acquisition by purchase or otherwise of all (or substantially all) the assets or
the outstanding Class A shares of any such company.
c. Such exclusive rights also shall not apply to Class A Shares issued by
the Fund pursuant to reinvestment of dividends or capital gains distributions.
d. Such exclusive rights also shall not apply to Class A Shares issued by
the Fund pursuant to any conversion, exchange or reinstatement privilege, if
any, afforded redeeming shareholders or to any other Class A Shares as shall be
agreed between the Corporation and the Distributor from time to time.
Section 3. Purchase of Class A Shares from the Corporation.
a. The Fund will offer its Class A Shares and the Distributor shall have
the right to buy from the Corporation the Class A Shares needed, but not more
than the Class A Shares needed (except for clerical errors in transmission) to
fill unconditional orders for Class A Shares placed with the Distributor by the
Participating Insurance Companies on behalf of their respective Separate
Accounts. The price that the Distributor shall pay for the Class A Shares so
purchased from the Fund shall be the net asset value, determined as set forth in
Section 3(c) hereof, used in determining the public offering price on which such
orders were based.
b. The Class A Shares are to be resold by the Distributor to the
respective Separate Accounts of Participating Insurance Companies at net asset
value, as set forth in Section 3(c) hereof.
c. The net asset value of the Class A Shares shall be determined by the
Corporation or any agent of the Corporation in accordance with the method set
forth in the Fund's current prospectus and statement of additional information
and guidelines established by the Directors.
3
d. The Corporation shall have the right to suspend the sale of Class A
Shares at times when redemption is suspended pursuant to the conditions set
forth in Section 4(b) hereof. The Corporation shall also have the right to
suspend the sale of Class A Shares if trading on the New York Stock Exchange
shall have been suspended, if a banking moratorium shall have been declared by
Federal or New York authorities, or if there shall have been some other event
that, in the judgment of the Corporation, makes it impracticable or inadvisable
to sell the Class A Shares.
e. The Corporation, or any agent of the Corporation designated in writing
by the Corporation, shall be promptly advised of all purchase orders for Class A
Shares received by the Distributor. Any order may be rejected by the
Corporation; provided, however, that the Corporation will not arbitrarily or
without reasonable cause refuse to accept or confirm orders for the purchase of
Class A Shares. The Corporation (or its agent) will confirm orders upon their
receipt, will make appropriate book entries and, upon receipt by the Corporation
(or its agent) of payment therefor, will deliver deposit receipts or
certificates for such Class A Shares pursuant to the instructions of the
Distributor. Payment shall be made to the Corporation in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Corporation (or its agent).
Section 4. Repurchase or Redemption of Class A Shares by the Corporation.
a. Any of the outstanding Class A Shares may be tendered for redemption at
any time, and the Fund agrees to repurchase or redeem the Class A Shares so
tendered in accordance with its obligations as set forth in Article VI of the
Corporation's Articles of Incorporation, as amended from time to time, and in
accordance with the applicable provisions set forth in the current prospectus
and statement of additional information relating to the Fund. The price to be
4
paid to redeem or repurchase the Class A Shares shall be equal to the net asset
value calculated in accordance with the provisions of Section 3(c) hereof, less
any other charge(s), if any, set forth in the current prospectus and statement
of additional information relating to the Fund. All payments by the Fund
hereunder shall be made in the manner set forth below.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor in New York
Clearing House funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form.
b. Redemption of Class A Shares or payment may be suspended at times when
the New York Stock Exchange is closed, when trading on said Exchange is closed,
when trading on said Exchange is suspended, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Corporation fairly to determine the value of the net assets
of the Fund, or during any other period when the Securities and Exchange
Commission, by order, so permits.
Section 5. Duties of the Corporation.
a. The Corporation shall furnish to the Distributor copies of all
information, financial statements and other papers that the Distributor may
reasonably request for use in connection with the distribution of Class A
Shares, and this shall include, upon request by the Distributor, one certified
copy of all financial statements prepared for the Corporation by independent
public accountants. The Corporation shall make available to the Distributor such
number of copies of
5
the Fund's current prospectus and statement of additional information as the
Distributor shall reasonably request.
b. The Corporation shall take, from time to time, but subject to any
necessary approval of the Fund's Class A shareholders, all necessary action to
fix the number of authorized Class A Shares and such steps as may be necessary
to register the same under the Securities Act of 1933, as amended (the
"Securities Act"), to the end that there will be available for sale such number
of Class A Shares as the Distributor reasonably may be expected to sell.
c. The Corporation shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Class A Shares for sale under the
securities laws of such states as the Distributor and the Corporation may
approve. Any such qualification may be withheld, terminated or withdrawn by the
Corporation at any time in its discretion. As provided in Section 7(b) hereof,
the expense of qualification and maintenance of qualification shall be borne by
the Fund. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Corporation in
connection with such qualification.
d. The Corporation will furnish, in reasonable quantities upon request by
the Distributor, copies of the Fund's annual and interim reports.
Section 6. Duties of the Distributor.
a. The Distributor shall devote reasonable time and effort to effect sales
of Class A Shares but shall not be obligated to sell any specific number of
Class A Shares. The services of the Distributor to the Corporation hereunder are
not to be deemed exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other
6
investment companies so long as the performance of its obligations hereunder is
not impaired thereby.
b. In selling the Class A Shares, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all Federal and
state laws and regulations and the regulations of the National Association of
Securities Dealers, Inc. (the "NASD"), relating to the sale of such securities.
Neither the Distributor nor any other person is authorized by Corporation to
give any information or to make any representations, other than those contained
in the current registration statement or related prospectus and statement of
additional information and any sales literature specifically approved by the
Corporation.
Section 7. Payment of Expenses.
a. The Fund shall bear all costs and expenses of the Fund, as incurred,
including fees and disbursements of its counsel and auditors, in connection with
the preparation and filing of any required registration statements and/or
prospectuses and statements of additional information under the Investment
Company Act, the Securities Act, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy materials to Class A
shareholders (including but not limited to the expense of setting in type any
such registration statements, prospectuses, statements of additional
information, annual or interim reports or proxy materials).
b. The Fund shall bear the cost and expenses of qualification of the Class
A Shares for sale pursuant to this Agreement and, if necessary or advisable in
connection therewith, of qualifying the Corporation as a broker or dealer in
such states of the United States or other jurisdictions as shall be selected by
the Corporation and the Distributor pursuant to Section 5(c)
7
hereof and the cost and expenses payable to each such state for continuing
qualification therein until the Fund decides to discontinue such qualification
pursuant to Section 5(c) hereof.
Section 8. Indemnification.
a. The Corporation shall, for the account of the Fund, indemnify and hold
harmless the Distributor and each person, if any, who controls the Distributor
against any loss, liability, claim, damage or expense (including the reasonable
cost of investigating or defending any alleged loss, liability, claim, damage or
expense and reasonable counsel fees incurred in connection therewith), as
incurred, arising by reason of any person acquiring any Class A Shares, which
may be based upon the Securities Act, or on any other statute or at common law,
on the ground that the registration statement or related prospectus and
statement of additional information, as from time to time amended and
supplemented, or an annual or interim report to the Fund's Class A shareholders,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of the Fund in favor of the Distributor and any such
controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the
8
Distributor or any such controlling persons, unless the Distributor or such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability that it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit shall bear the fees and expenses, as
incurred, of any additional counsel retained by them, but in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses, as incurred, of any counsel
retained by them. The Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or Directors in connection with the issuance or sale of any of the Class A
Shares.
b. The Distributor shall indemnify and hold harmless the Corporation and
each of its Directors and officers, the Fund, and each person, if any, who
controls the Corporation against
9
any loss, liability, claim, damage or expense, as incurred, described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the registration statement or related
prospectus and statement of additional information, as from time to time
amended, or the annual or interim reports to Class A shareholders. In case any
action shall be brought against the Corporation or any person so indemnified, in
respect of which indemnity may be sought against the Distributor, the
Distributor shall have the rights and duties given to the Corporation, and the
Corporation and each person so indemnified shall have the rights and duties
given to the Distributor by the provisions of subsection (a) of this Section 8.
Section 9. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force for two years and thereafter, but only for so long as such continuance is
specifically approved at least annually by (i) the Directors or by the vote of a
majority of the outstanding Class A voting securities of the Fund and (ii) by
the vote of a majority of those Directors who are not parties to this Agreement
or interested persons of any such party cast in person at a meeting called for
the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Directors or by vote of a majority of the outstanding Class A
voting securities of the Fund, or by the Distributor, on sixty days' written
notice to the other party. This Agreement shall automatically terminate in the
event of its assignment.
10
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
Section 10. Amendments of this Agreement. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Directors
or by the vote of a majority of outstanding Class A voting securities of the
Fund and (ii) by the vote of a majority of those Directors who are not parties
to this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
Section 11. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
as at the time in effect and the applicable provisions of the Investment Company
Act. To the extent that the applicable law of the State of New York, or any of
the provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERCURY ASSET MANAGEMENT V.I. FUNDS, INC., on behalf of its series,
MERCURY V.I. U.S. LARGE CAP FUND
By: /s/ Xxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Treasurer
MERCURY FUNDS DISTRIBUTOR, a division of
PRINCETON FUNDS DISTRIBUTOR, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President and Treasurer
12
