Exhibit 99.B6(b)
DISTRIBUTION AGREEMENT
between
PBHG ADVISOR FUNDS, INC.
(CLASS B SHARES)
and
PBHG FUND DISTRIBUTORS
THIS AGREEMENT made as of this 1st day of April, 1998, by and between
PBHG ADVISOR FUNDS, INC., a Maryland corporation (the "Company"), with respect
to the Class B shares ("Shares") of each portfolio of the Company set forth on
Schedule A to this agreement (the "Portfolios" and each individually a
"Portfolio"), and PBHG FUND DISTRIBUTORS, a Pennsylvania business trust (the
"Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
1. Appointment of Distributor. The Company hereby appoints the
Distributor as its exclusive agent for the sale of Shares to the public directly
and through investment dealers and other financial institutions in the United
States and throughout the world in accordance with the terms of the current
prospectus applicable thereto. If subsequent to the termination of the
Distributor's services to the Company pursuant to this Agreement, the Company
retains the services of another distributor, the distribution agreement with
such distributor shall contain provisions comparable to paragraphs 4 and 8
hereof and Exhibit A hereto, and without limiting the generality of the
foregoing, will require such distributor to maintain and make available to the
Distributor records regarding sales, redemptions and reinvestments of Shares
necessary to implement the terms of paragraphs 4 and 8 hereof.
2. Sales of Shares. The Company shall not sell any Shares except
through the Distributor and under the terms and conditions set forth in
paragraph 4 below. Notwithstanding the provisions of the foregoing sentence,
however:
(A) The Company may issue Shares otherwise than through the Distributor
in connection with the payment or reinvestment of dividends or distributions;
(B) The Company may issue Shares of a Portfolio to any other investment
company or personal holding company, or to the shareholders thereof, in exchange
for all or a majority of the shares or assets of any such company;
(C) The Company shall have the right to specify minimum amounts for
initial and subsequent orders for the purchase of Shares of a Portfolio.
3. Acceptance of Appointment. The Distributor hereby accepts
appointment as exclusive agent for the sale of Shares and agrees that it will
use its best efforts to sell Shares; provided, however, that:
(A) The Distributor may, and when requested by the Company on behalf of
any Portfolio shall, suspend its efforts to effectuate sales of Shares of such
Portfolio at any time when, in the opinion of the Distributor or of the Company,
no sales should be made because of market or other economic considerations or
abnormal circumstances of any kind;
(B) The Company may withdraw the offering of Shares of any Portfolio
(i) at any time with the consent of the Distributor, or (ii) without such
consent when so required by the provisions of any statute or of any order, rule
or regulation of any governmental body having jurisdiction; and
(C) The Distributor, as agent, does not undertake to sell any specific
amount of Shares.
4. Offering and Redemption of Shares.
(A) The public offering price of Shares shall be the net asset value
per share of Shares of the applicable Portfolio plus any sales charge set forth
in the prospectus. Net asset value per share shall be determined in accordance
with the provisions applicable to such Portfolio in the then current prospectus
and statement of additional information with respect to Shares. The Distributor
may establish a schedule of contingent deferred sales charges to be imposed at
the time of redemption of Shares (the "CDSC"), and such schedule shall be
disclosed in the current prospectus with respect to Shares. Such schedule of the
CDSC may reflect variations in or waivers of such charges on redemptions of
Shares, either generally to the public or to any specified class of shareholders
and/or in connection with any specified class of transactions, in accordance
with applicable
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rules and regulations and/or exemptive relief granted by the Securities and
Exchange Commission, and as set forth in the current prospectus with respect to
Shares. The Distributor and the Company shall apply any then applicable
scheduled variation in or waiver of the CDSC uniformly to all shareholders
and/or all transactions belonging to a specified class.
(B) The Distributor may pay to investment dealers and other financial
institutions through whom Shares are sold, such sales commission as the
Distributor may specify from time to time. Payment of any such sales commissions
shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by the Company to the Distributor or by the Company or the Distributor
to investment dealers and financial institutions where such payments are made
under a distribution plan adopted by the Company pursuant to Rule 12b-1 under
the 1940 Act.
(D) The Company shall redeem Shares from shareholders in accordance
with the terms set forth from time to time in the current prospectus and
statement of additional information with respect to Shares. The price to be paid
to a shareholder to redeem Shares shall be equal to the net asset value of
Shares being redeemed ("gross redemption proceeds"), less any applicable CDSC,
calculated pursuant to the then applicable schedule of the CDSC ("net redemption
proceeds"). The Distributor shall be entitled to receive the amount of the CDSC
that has been subtracted from gross redemption proceeds, provided that Shares
being redeemed were (i) issued by a Portfolio during the term of this Agreement
and any predecessor agreement between the Company and the Distributor or (ii)
issued by a Portfolio during or after the term of this Agreement or any
predecessor agreement between the Company and the Distributor in one or a series
of free exchanges of Shares for class B shares of another portfolio, which can
be traced to Shares or class B shares of another portfolio initially issued by a
Portfolio or such other portfolio during the term of this Agreement, any
predecessor agreement or any other distribution agreement with the Distributor
with respect to such other portfolio (the "Distributor's Allocable CDSC"). The
Company shall pay or cause the Company's transfer agent to pay the Distributor's
Allocable CDSC to the Distributor on the date net redemption proceeds are
payable to the redeeming shareholder.
(E) The Distributor shall maintain adequate books and records to
identify Shares (i) issued by a Portfolio during the term of this Agreement and
any predecessor agreement between the Company and the Distributor or (ii) issued
by a Portfolio during or after the term of this Agreement or any predecessor
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agreement between the Company and the Distributor in one or a series of free
exchanges of Shares for class B shares of another portfolio, which can be traced
to Shares or class B shares of another portfolio initially issued by a Portfolio
or such other portfolio during the term of this Agreement, any predecessor
agreement or any other distribution agreement with the Distributor with respect
to such other portfolio and shall calculate the Distributor's Allocable CDSC, if
any, with respect to such Shares, upon their redemption. The Company shall be
entitled to rely on the Distributor's books, records and calculations with
respect to Distributor's Allocable CDSC.
5. Distributor as Agent. The Distributor shall act as an agent of the
Company in connection with the sale and redemption of Shares and the provision
of shareholder services pursuant to paragraph 9 hereof. Except with respect to
such sales and redemptions and shareholder services, the Distributor shall act
as principal in all matters relating to the promotion of the sale of Shares and
shall enter into all of its own engagements, agreements and contracts as
principal on its own account. The Distributor shall enter into agreements with
investment dealers and financial institutions selected by the Distributor,
authorizing such investment dealers and financial institutions to offer and sell
Shares to the public upon the terms and conditions set forth therein, which
shall not be inconsistent with the provisions of this Agreement. Each agreement
shall provide that the investment dealer or financial institution shall not act
as an agent of the Company.
6. Company Expenses. The Company shall pay, or arrange for others to
pay, the following expenses:
(A) (i) expenses of preparation, printing and distribution to
shareholders of prospectuses and statements of additional information; (ii)
expenses of preparation, printing and distribution of shareholder reports and
other communications required by law to shareholders; (iii) registration of
Shares under the federal securities laws; (iv) qualification of Shares for sale
in such states as the Distributor and the Company may approve; (v) maintenance
of facilities for the issue and transfer of Shares; (vi) expenses of provision
of information, prices and other data to be furnished by the Company under this
Agreement; and (vii) taxes applicable to the sale or delivery of Shares or
certificates therefor; and
(B) All legal expenses in connection with the foregoing.
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7. Distributor Expenses. Except as otherwise provided herein, the
Distributor shall pay, or arrange for others to pay, all of the following
expenses: (i) the expenses of printing from the final proof and distributing
prospectuses and statements of additional information (including supplements
thereto) relating to public offerings made by the Distributor pursuant to this
Agreement (which shall not include those prospectuses and statements of
additional information, and supplements thereto, to be distributed to
shareholders), and any other promotional or sales literature used by the
Distributor or furnished by the Distributor to dealers in connection with such
public offerings, and expenses of advertising in connection with such public
offerings; (ii) payments to sales representatives of the Distributor and at the
discretion of the Distributor to qualified brokers, dealers and others in
respect of the sale of Shares; (iii) compensation and expenses of employees of
the Distributor who engage in or support distribution of Shares; and (iv) the
cost of obtaining such information, analysis, and reports with respect to
marketing and promotional activities as the Company may from time to time
reasonably request.
8. Distribution Fees.
(A) In consideration of the Distributor's services as principal
distributor of Shares pursuant to this Agreement and the Company's distribution
plan in respect of Shares (the "Plan") the Company agrees: (i) to pay to the
Distributor or, at the Distributor's direction, to a third party, monthly in
arrears on or prior to the 5th Business Day of the following calendar month its
Allocable Portion (as hereinafter defined) of a fee (the "Distribution Fees")
equal to 0.75 of 1% per annum of the average daily net asset value of Shares of
each Portfolio outstanding from time to time, and (ii) to withhold from
redemption proceeds in respect of Shares of each Portfolio the Distributor's
Allocable CDSC payable in respect of such redemption as provided in the
prospectus with respect to Shares and to pay the same over to such Distributor
or at its direction at the time the redemption proceeds in respect of such
redemption are payable to the holder of Shares redeemed.
(B) The Distributor will be deemed to have performed all services
required to be performed in order to be entitled to receive its Allocable
Portion of the Distribution Fees payable in respect of Shares (including
Reinvested Shares, Exchange Shares and Free Appreciation Shares and any other
Shares that derive from a Commission Share as such terms are defined in the
Allocation Schedule attached hereto as Schedule B) upon the settlement of each
sale of a Commission Share of the Company taken into account in determining such
Distributor's Allocable Portion of such Distribution Fees.
(C) Notwithstanding anything to the contrary set forth in this
Agreement or (to the extent waiver thereof is permitted thereby) applicable law,
the
5
Company's obligation to pay the Distributor's Allocable Portion of the
Distribution Fees payable in respect of Shares of a Portfolio shall not be
terminated or modified for any reason (including a termination of this
Agreement) except to the extent required by a change in the 1940 Act or the
Conduct Rules of NASD Regulation, Inc., in either case enacted or promulgated
after February __, 1998, or in connection with a Complete Termination (as
hereinafter defined) of the Plan.
(D) The Company will not take any action to waive or change any CDSC in
respect of Shares of a Portfolio, except as provided in the prospectus or
statement of additional information with respect to Shares as in effect as of
the date hereof, without the consent of the Distributor and the permitted
assigns of all or any portion of its right to the Distributor's Allocable CDSC.
(E) Notwithstanding anything to the contrary set forth in this
Agreement, neither the termination of the Distributor's role as principal
distributor of Shares, nor the termination of this Agreement nor the termination
of the Plan will terminate such Distributor's right to the Distributor's
Allocable CDSC in respect of Shares of the Company.
(F) Notwithstanding anything to the contrary in this Agreement, the
Distributor may assign, sell or pledge (collectively, a "Transfer") its rights
to its Allocable Portion of the Distribution Fees and the Distributor's
Allocable CDSC earned by it (but not its obligations to the Company under this
Agreement) in respect of Shares of a Portfolio to raise funds to make the
expenditures related to the distribution of Shares of such Portfolio and in
connection therewith upon receipt of notice of such Transfer, the Company shall
pay, or cause to be paid to the assignee, purchaser or pledgee (collectively
with their subsequent transferees, "Transferees") such portion of the
Distributor's Allocable Portion of the Distribution Fees and the Distributor's
Allocable CDSC in respect of Shares of any Portfolio so transferred in
connection with such Transfer. Except as provided in clause (C) above and
notwithstanding anything to the contrary in this Agreement, to the extent the
Distributor has transferred its rights as aforesaid, the Company's obligation to
pay the Distributor's Allocable Portion of the Distribution Fees and the
Distributor's Allocable CDSC payable in respect of Shares of a Portfolio shall
be absolute and unconditional and shall not be subject to dispute, offset,
counterclaim or any defense whatsoever, at law or equity, including without
limitation, any of the foregoing based on the insolvency or bankruptcy of the
Distributor (it being understood that such provision is not a waiver of the
Company's right to pursue the Distributor and enforce such claims against the
assets of the Distributor other than the Distributor's right to the
Distributor's Allocable Portion of the Distribution Fees and the Distributor's
Allocable CDSC in respect of Shares of any Portfolio transferred in connection
with such Transfer). The Company agrees that each
6
such Transferee is a third party beneficiary of the provisions of this clause
(F) but only insofar as these provisions relate to Distribution Fees and CDSCs
transferred to such Transferee.
(G) For purposes of this Agreement, the term Allocable Portion of
Distribution Fees payable in respect of Shares of a Portfolio shall mean the
portion of such Distribution Fees allocated to the Distributor in accordance
with the Allocation Schedule attached hereto as Schedule B.
(H) For purposes of this Agreement, the term Complete Termination in
respect of the Plan means a termination of the Plan involving the complete
cessation of the payment of Distribution Fees in respect of all Shares of a
Portfolio, and the complete cessation of the payment of distribution fees
pursuant to the Plan in respect of Shares of a Portfolio and of shares of any
successor fund or any fund acquiring a substantial portion of the assets of such
Portfolio and for every future class of shares which has substantially similar
characteristics to Shares of such Portfolio including the manner of payment and
amount of sales charge, contingent deferred sales charge or other similar
charges borne directly or indirectly by the holders of such shares.
(I) The Distributor shall maintain adequate books and records to permit
calculations periodically (but not less than monthly) of, and shall calculate on
a monthly basis, the Distributor's Allocable Portion of Distribution Fees and
the Distributor's Allocable CDSC to be paid to the Distributor. The officers of
the Company may modify the allocation procedures set forth in paragraph 4 and
Schedule B hereof in order to permit the Company's transfer agent to maintain
the data necessary to implement the substance of such allocation procedures and
to permit the Transfer of the Distributor's rights to the Distributor's
Allocable Portion of the Distribution Fees and the Distributor's Allocable CDSC.
The Company shall be entitled to rely on the Distributor's books, records and
calculations relating to the Distributor's Allocable Portion of Distribution
Fees and the Distributor's Allocable CDSC.
9. Shareholder Service Agreements and Fees.
(A) Pursuant to the Plan and this Agreement, the Distributor, as agent,
may enter into shareholder service agreements (each a "Shareholder Service
Agreement") with investment dealers and financial institutions (collectively
"Service Providers") selected by the Distributor for the provision of certain
continuing personal services to customers of such Service Providers who have
purchased Shares. Such agreements shall authorize Service Providers to provide
continuing personal shareholder services to their customers upon the terms and
7
conditions set forth therein, which shall not be inconsistent with the
provisions of this Agreement. Each Shareholder Service Agreement shall provide
that the Service Provider shall not act as an agent of the Company.
(B) Each Shareholder Service Agreement may provide that the Service
Provider may receive a service fee in the amount of 0.25% of the average daily
net assets of Shares of a Portfolio held by customers of such Service Provider,
provided that such Service Provider furnishes continuing personal shareholder
services to its customers in respect of such Shares. The continuing personal
services to be rendered by Service Providers under a Shareholder Service
Agreement may include, but shall not be limited to, some or all of the
following: distributing sales literature; answering routine customer inquiries
concerning the Company; assisting customers in changing dividend elections,
options, account designations and addresses, and in enrolling in any of several
special investment plans offered in connection with the purchase of Shares;
assisting in the establishment and maintenance of or establishing and
maintaining customer accounts and records and the processing of purchase and
redemption transactions; performing subaccounting; investing dividends and any
capital gains distributions automatically in Shares; providing periodic
statements showing a customer's account balance and the integration of such
statements with those of other transactions and balances in the customer's
account serviced by the Service Provider; forwarding applicable prospectuses,
proxy statements, reports and notices to customers who hold Shares and providing
such other information and services as the Company or the customers may
reasonably request.
(C) The Distributor may advance service fees payable to Service
Providers pursuant to the Plan or any other distribution plan adopted by the
Company with respect to Shares of one or more of the Portfolios pursuant to Rule
12b-1 under the 1940 Act; and thereafter the Distributor may be reimbursed for
such advances through retention of service fee payments during the period for
which the service fees were advanced.
10. Limitation on Order Acceptance. The Distributor will accept orders
for the purchase of Shares only to the extent of purchase orders actually
received and not in excess of such orders, and it will not avail itself of any
opportunity of making a profit by expediting or withholding orders. It is
mutually understood and agreed that the Company may reject purchase orders
where, in the judgment of the Company, such rejection is in the best interest of
the Company.
11. Compliance with Laws. The Company and the Distributor shall each
comply with all applicable provisions of the 1940 Act, the Securities Act of
1933,
8
as amended, and of all other federal and state laws, rules and regulations
governing the issuance and sale of Shares.
12. Indemnification.
(A) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company shall indemnify the Distributor against any and all
claims, demands, liabilities and expenses which the Distributor may incur under
the Securities Act of 1933, as amended, or common law or otherwise, arising out
of or based upon any alleged untrue statement of a material fact contained in
any registration statement or prospectus with respect to Shares, or any omission
to state a material fact therein, the omission of which makes any statement
contained therein misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Company in
connection therewith by or on behalf of the Distributor. The Distributor shall
indemnify the Company against any and all claims, demands, liabilities and
expenses which the Company or Shares may incur arising out of or based upon (i)
any act or deed of the Distributor or its sales representatives which has not
been authorized by the Company in any prospectus or in this Agreement and (ii)
the Company's reliance on the Distributor's books, records, calculations and
notices hereunder.
(B) The Distributor shall indemnify the Company against any and all
claims, demands, liabilities and expenses which the Company may incur under the
Securities Act of 1933, as amended, or common law or otherwise, arising out of
or based upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus with respect to Shares, or any omission to
state a material fact therein if such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Company in connection
therewith by or on behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the transfer agent(s) of the
Shares, or for any failure of any such transfer agent to perform its duties.
13. No Conflict with Laws. Nothing herein contained shall be deemed to
require the Company or the Distributor to take any action contrary to its
Articles of Incorporation or By-Laws or Trust Instrument, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Directors of its responsibility for
and control of the conduct of the affairs of the Company.
9
14. Effective Date. This Agreement shall become effective with respect
to Shares of each Portfolio upon its approval by the Board of Directors of the
Company and by vote of a majority of the Company's directors who are not parties
to this Agreement or interested persons (as defined in Section 2(a)(19) of the
0000 Xxx) of any party to this Agreement, cast in person at a meeting called for
such purpose; shall continue in force and effect until two years from the
effective date, and from year to year thereafter, provided, that such
continuance is specifically approved with respect to Shares of each Portfolio at
least annually (a)(i) by the Board of Directors of the Company or (ii) by the
vote of a majority of the outstanding Shares of such Portfolio, and (b) by vote
of a majority of the Company's directors who are not parties to this Agreement
or "interested persons" (as defined in Section 2(a)(19) of the 0000 Xxx) of any
party to this Agreement, cast in person at a meeting called for such purpose.
15. Termination.
(A) This Agreement may be terminated with respect to Shares of any
Portfolio, at any time, without the payment of any penalty, by vote of the Board
of Directors of the Company or by vote of a majority of the outstanding Shares
of such Portfolio, or by the Distributor, on sixty (60) days' written notice to
the other party.
(B) This Agreement shall also automatically terminate in the event of
its assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
(C) The Transfer of the Distributor's rights to the Distributor's
Allocable Portion of Distribution Fees and the Distributor's Allocable CDSC
shall not cause a termination of this Agreement or be deemed to be an assignment
for purposes of paragraph 15(B) above.
16. Notice. Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, the addresses of both the Company and the
Distributor shall be 000 Xxxxxxxxx Xxxx, Xxxxx, XX 00000.
17. No Personal Liability. Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any trustee, shareholder, officer, employee or agent of the
Distributor individually or personally, but are binding only upon the assets and
property of the Distributor and that the trustees, shareholders, officers,
employees and agents of
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the Distributor shall be entitled, to the fullest extent permitted by applicable
law, to the same limitation on personal liability as stockholders of private
corporations for profit.
18. Governing Law. This Agreement shall be deemed to be a contract made
in the Commonwealth of Pennsylvania and governed by, construed in accordance
with and enforced pursuant to the internal laws of the Commonwealth of
Pennsylvania without reference to its conflicts of laws rules.
19. Independent Contractor. The Distributor shall be an independent
contractor and neither the Distributor nor any of its trustees, officers,
employees or representatives is or shall be an employee of the Company in the
performance of the Distributor's duties hereunder. The Distributor shall be
responsible for its own conduct and the employment, control and conduct of its
agents and employees and for injury to such agents or employees or to others
through its agents or employees. The Distributor assumes full responsibility for
its agents and employees under applicable statutes and agrees to pay all
employee taxes thereunder.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed shall be deemed to be an original,
but such counterparts shall together constitute but one and the same instrument.
(This space intentionally left blank)
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21. Captions. The captions in this Agreement are included for
convenience of reference only and in no other way define or delineate any of the
provisions hereof or otherwise affect construction or effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
PBHG ADVISOR FUNDS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
Attest:
/s/ Xxxx X. Xxxx
-----------------------------------
Name: Xxxx X. Xxxx
Title: General Counsel & Secretary
PBHG FUND DISTRIBUTORS
By: /s/ Xxx X. Xxxxxxxx
-----------------------------
Name: Xxx X. Xxxxxxxx
Title: Vice President
Attest:
/s/ Xxxx X. Xxxx
-----------------------------------
Name: Xxxx X. Xxxx
Title: General Counsel & Secretary
12
SCHEDULE A
PBHG ADVISOR FUNDS, INC.
PBHG Advisor Funds, Inc. consists of the following Funds, each of which
is subject to this Agreement:
PBHG Advisor Core Value Fund
PBHG Advisor Blue Chip Growth Fund
PBHG Advisor Global Technology & Communications Fund
PBHG Advisor Growth II Fund
PBHG Advisor Growth Opportunities Fund
PBHG Advisor High Yield Fund
PBHG Advisor Large Cap Concentrated Fund
PBHG Advisor New Contrarian Fund
PBHG Advisor Trend Fund
PBHG Advisor Cash Reserves Fund
PBHG Advisor Value Opportunities Fund
PBHG Advisor New Opportunities Fund
PBHG Advisor Enhanced Equity Fund
PBHG Advisor Master Fixed Income Fund
PBHG Advisor Short-Term Government Fund
PBHG Advisor REIT Fund
Dated: April 1, 1998
A-1
SCHEDULE B
The Distributor's Allocable Portion of Distribution Fees in respect of
each Portfolio shall be 100 percent until such time as the Distributor shall
cease to serve as exclusive distributor of the Shares of such Portfolio and
thereafter shall be a percentage, recomputed first on the date of any
termination of the Distributor's services as exclusive distributor of Shares of
any Portfolio and thereafter periodically (but not less than monthly),
representing the percentage of Shares of such Portfolio outstanding on each such
computation date allocated to the Distributor in accordance with the following
rules:
1. Definitions. For purposes of this Schedule B defined terms used
herein shall have the meaning assigned to such terms in the Distribution
Agreement and the following terms shall have the following meanings:
"Commission Shares" shall mean shares of the Portfolio or another
portfolio the redemption of which would, in the absence of the application of
some standard waiver provision, give rise to the payment of a CDSC and shall
include Commission Shares which due to the expiration of the CDSC period no
longer bear a CDSC.
"Distributor" shall mean the Distributor.
"Other Distributor" shall mean each person appointed as the exclusive
distributor for the Shares of the Portfolio after the Distributor ceases to
serve in that capacity.
2. Allocation Rules. In determining the Distributor's
Allocable Portion of Distribution Fees in respect of a particular Portfolio:
(a) There shall be allocated to the Distributor and each Other
Distributor all Commission Shares of such Portfolio which were sold while such
Distributor or such Other Distributor, as the case may be, was the exclusive
distributor for the Shares of the Portfolio, determined in accordance with the
transfer records maintained for such Portfolio.
(b) Reinvested Shares: On the date that any Shares are issued by
a Portfolio as a result of the reinvestment of dividends or other distributions,
whether ordinary income, capital gains or exempt-interest dividends or
distributions ("Reinvested Shares"), Reinvested Shares shall be allocated to the
Distributor and each Other Distributor in a number obtained by multiplying the
total
B-1
number of Reinvested Shares issued on such date by a fraction, the numerator of
which is the total number of all Shares outstanding in such Portfolio as of the
opening of business on such date and allocated to the Distributor or Other
Distributor as of such date of determination pursuant to these allocation
procedures and the denominator is the total number of Shares outstanding as of
the opening of business on such date.
(c) Exchange Shares: There shall be allocated to the Distributor
and each Other Distributor, as the case may be, all Commission Shares of such
Portfolio which were issued during or after the period referred to in (a) as a
consequence of one or more free exchanges of Commission Shares of the Portfolio
or of another portfolio (other than Free Appreciation Shares as hereinafter
defined) (the "Exchange Shares"), which in accordance with the transfer records
maintained for such Portfolio can be traced to Commission Shares of the
Portfolio or another portfolio initially issued by the Company or such other
portfolio during the time the Distributor or such Other Distributor, as the case
may be, was the exclusive distributor for the Shares of the Portfolio or such
other portfolio.
(d) Free Appreciation Shares: Shares (other than Exchange Shares)
that were acquired by the holders of such Shares in a free exchange of Shares of
any other Portfolio, which represent the appreciated value of the Shares of the
exiting portfolio over the initial purchase price paid for the Shares being
redeemed and exchanged and for which the original purchase date and the original
purchase price are not identified on an on-going basis, shall be allocated to
the Distributor and each Other Distributor ("Free Appreciation Shares") daily in
a number obtained by multiplying the total number of Free Appreciation Shares
issued by the exiting portfolio on such date by a fraction, the numerator of
which is the total number of all Shares outstanding as of the opening of
business on such date allocated to the Distributor or such Other Distributor as
of such date of determination pursuant to these allocation procedures and the
denominator is the total number of Shares outstanding as of the opening of
business on such date.
(e) Redeemed Shares: Shares (other than Reinvested Shares and
Free Appreciation Shares) that are redeemed will be allocated to the Distributor
and each Other Distributor to the extent such Share was previously allocated to
the Distributor or such Other Distributor in accordance with the rules set forth
in 2(a) or (c) above. Reinvested Shares and Free Appreciation Shares that are
redeemed will be allocated to the Distributor and each Other Distributor daily
in a number obtained by multiplying the total number of Free Appreciation Shares
and Reinvested Shares being redeemed by such Portfolio on such date by a
fraction, the numerator of which is the total number of all Free Appreciation
Shares and Reinvested Shares of such Portfolio outstanding as of the opening of
business on
B-2
such date allocated to the Distributor or such Other Distributor as of such date
of determination pursuant to these allocation procedures and the denominator is
the total number of Free Appreciation Shares and Reinvested Shares of such
Portfolio outstanding as of the opening of business on such date.
The Company shall use its best efforts to assure that the
transfer agents and sub-transfer agents for each Portfolio maintain the data
necessary to implement the foregoing rules. If, notwithstanding the foregoing,
the transfer agents or sub-transfer agents for such Portfolio are unable to
maintain the data necessary to implement the foregoing rules as written, or if
the Distributor shall cease to serve as exclusive distributor of the Shares of
the Portfolio, the Distributor and the Company agree to negotiate in good faith
with each other, with the transfer agents and sub-transfer agents for such
Portfolio and with any third party that has obtained an interest in the
Distributor's Allocable Portion of Distribution Fees in respect of such
Portfolio with a view to arriving at mutually satisfactory modifications to the
foregoing rules designed to accomplish substantially identical results on the
basis of data which can be made available.
B-3
