Exhibit H
PROSPECT STREET(R) HIGH INCOME PORTFOLIO INC.
00000 Xxxx Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
March 4, 2004
X. Xxxxx & Co., Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Re: DISTRIBUTION AGREEMENT
Ladies and Gentlemen:
Prospect Street(R) High Income Portfolio Inc. is a Maryland corporation
operating as a closed-end management investment company (hereinafter referred to
as the "Fund"). The Fund has filed a registration statement on Form N-2 (File
Nos. 333-84598 and 811-5557) (the "Registration Statement") under the Securities
Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of
1940, as amended (the "1940 Act"), to register shares of the Fund which may be
issued and sold from time to time.
You have informed us that X. Xxxxx & Co., Inc. is registered as a
broker-dealer under the provisions of the Securities Exchange Act of 1934 and is
a member in good standing of the National Association of Securities Dealers,
Inc. You have indicated your desire to act as distributor for certain of the
shares of the Fund issued pursuant to the Registration Statement. We have been
authorized by the Fund to execute and deliver this Agreement to you by a
resolution of the Fund's Board of Directors (the "Directors") adopted at a
meeting of the Directors, at which a majority of Directors, including a majority
of the Fund's Directors who are not "interested persons" (as defined in the 0000
Xxx) of the Fund or Highland Capital Management, L.P. ("Highland"), the Fund's
investment adviser, or its affiliates, were present and voted in favor of the
said resolution approving this Agreement.
1. APPOINTMENT OF DISTRIBUTOR. Upon the execution of this Agreement and in
consideration of the agreements on your part herein expressed and upon the terms
and conditions set forth herein, we hereby appoint you as the distributor for
shares of the Fund to be issued pursuant to the Registration Statement (the
"Shares"), and agree that we will deliver to you such Shares as you may sell.
You agree to use reasonable efforts to promote the sale of the Shares, but you
are not obligated to sell any specific number of the Shares. The Shares will
only be sold on such days as shall be agreed to by you and the Fund.
2. SELECTED DEALERS. You may enter into selected dealer agreements, on such
terms and conditions as you determine are not inconsistent with this Agreement,
with broker-dealers for the sale of the Shares. Such selected broker-dealers
shall sell Shares only at the public offering price as set forth in the Fund's
then-current Prospectus under the Registration Statement. This Agreement shall
not be construed as authorizing any dealer or other person to accept orders for
sale on our behalf or to otherwise act as our agent for any purpose. You shall
not be responsible for the acts of other dealers or agents except as and to the
extent that they shall be acting for you or under your direction or authority.
3. OFFERING PRICE. The public offering price per Share shall be determined
in accordance with the then current Prospectus of the Fund under the
Registration Statement. In no event shall the public offering price be less than
the current net asset value per Share plus the per Share amount of the
commission to be paid to you (the "Minimum Price"). You shall suspend the sale
of Shares if the per share price of the Shares is less than the Minimum Price.
4. SALES COMMISSION.
(a) You shall be entitled to receive a fixed sales commission from the
Fund at the rate of $0.05 per Share sold, or $0.03 per Share if sold to
Highland.
(b) In addition, the Fund will pay to you additional compensation as
follows:
1.0% on the first $4,000,000 raised;
1.5% on $4,000,001 through $8,000,000 raised;
2.0% on $8,000,001 through $12,000,000 raised;
2.25% on $12,000,001 through $16,000,000 raised; and
2.5% on any amounts raised above $16,000,000.
For example, if $10 million is raised, you additionally will be paid
$40,000 for the first $4 million, $60,000 for the next $4 million and
$40,000 for the last $2 million.
(c) You may allow selected broker-dealers such commissions or
discounts (not exceeding the total sales commission) as you shall deem
advisable, which shall be payable from the commissions payable to you under
Section 4(a) above.
5. FURNISHING OF INFORMATION. We will furnish you with copies of the
Registration Statement, and we warrant that the statements therein contained are
true and correct as of the date of the Registration Statement, as it may be
amended or supplemented from time to time. We will also furnish you with such
other information which you may reasonably request for use in connection with
the distribution of the Shares, including, at least annually, audited financial
statements of our books and accounts certified by independent public
accountants.
6. CONDUCT OF BUSINESS. Other than the currently effective Prospectus and
Statement of Additional Information, you will not use any sales materials or
statements except literature or advertising which conforms to the requirements
of federal and state securities laws and regulations and which have been filed,
where necessary, with the appropriate regulatory authorities. You will furnish
us with copies of all material prior to their use and no such material shall be
published if we shall reasonably and promptly object.
You shall comply with the applicable federal and state laws and regulations
where our shares are offered for sale and conduct your affairs with us and with
dealers, brokers or investors in accordance with the Conduct Rules of the
National Association of Securities Dealers, Inc.
7. OTHER ACTIVITIES. Your services pursuant to this Agreement shall not be
deemed to be exclusive, and you may render similar services and act as an
underwriter, distributor or dealer for other investment companies in the
offering of their shares.
8. SUSPENSION OF SALES. We reserve the right at all times to suspend or
limit the public offering of the shares upon written notice to you, and to
reject any order in whole or in part.
9. PAYMENT OF EXPENSES.
(a) You shall bear all expenses incurred by you in connection with
your duties and activities under this Agreement including the payment to
selected dealers of any sales commissions for sales of the Fund's Shares.
(b) The Fund shall bear all costs and expenses of the Fund, including
expenses (including legal fees) pertaining to the preparation and filing of
the Registration Statement and Prospectus and any amendment or supplement
thereto, and expenses pertaining to the preparation, printing and
distribution of any reports or communications to shareholders, including
Prospectuses and Statements of Additional Information, annual or interim
reports or proxy materials.
10. TERMINATION. This Agreement may be terminated by the Fund or you at any
time without the payment of any penalty. This Agreement shall remain in full
force and effect unless terminated pursuant to this provision or by the mutual
agreement of the parties.
11. MISCELLANEOUS. This Agreement shall be subject to the laws of the State
of New York and shall be interpreted and construed to further and promote the
operation of the Fund as a closed-end investment company.
12. STANDARD OF CARE. You shall be responsible for exercising reasonable
care in carrying out the provisions of this Agreement.
If the foregoing meets with your approval, please acknowledge your
acceptance by signing each of the enclosed counterparts hereof and returning
such counterparts to us, whereupon this shall constitute a binding agreement as
of the date first above written.
Very truly yours,
PROSPECT STREET(R)HIGH INCOME PORTFOLIO INC.
By:_____________________________
Name:
Title:
Agreed to and Accepted:
X. XXXXX & CO., INC.
By:______________________________
Name:
Title:
