EXHIBIT 5
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____ day of ______, 2000, by and between MERCURY
U.S. HIGH YIELD FUND, INC., a Maryland corporation (the ""Fund"), and MERCURY
FUNDS DISTRIBUTOR, a division of FAM DISTRIBUTORS, INC., a Delaware corporation
(the "Distributor").
W I T N E S S E T H :
WHEREAS, the Fund 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; and
WHEREAS, the Directors of the Fund (referred to herein as the "Directors")
are authorized to establish separate series relating to separate portfolios of
securities, and the Directors have established and designated multiple series of
the Fund; and
WHEREAS, the Fund may offer one or more separate classes of shares of
common stock or beneficial interest, par value of $.10 per share (the "Shares");
and
WHEREAS, the Distributor is a securities firm engaged in the business of
selling shares of investment companies either directly to purchasers or through
financial intermediaries, including, without limitation, brokers, dealers,
retirement plans, financial consultants, registered investment advisers and
mutual fund supermarkets ("financial intermediaries"); and
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WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of each class of the Fund's
shares;
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor. The Fund hereby appoints the
Distributor as its principal underwriter and distributor to sell its Shares to
eligible investors (as defined below) and hereby agrees during the term of this
Agreement to sell the 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 its
Shares, except that:
(a) The Fund may, upon written notice to the Distributor, from time to
time designate other principal underwriters and distributors of 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
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 Shares
from the Fund shall not apply to 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 acquisition by purchase or otherwise of all (or
substantially all) the assets or the outstanding Shares of any such company.
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(c) Such exclusive rights also shall not apply to Shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
(d) Such exclusive rights also shall not apply to Shares of any class
issued by the Fund pursuant to any conversion, exchange or reinstatement
privilege afforded redeeming shareholders or to any other Shares as shall be
agreed between the Fund and the Distributor from time to time.
Section 3. Purchase of Shares from the Fund.
(a) Prior to the continuous offering of the Shares of the Fund, commencing
on a date agreed upon by the Fund and the Distributor, the Distributor may
solicit subscriptions for Shares during a subscription period that shall last
for such period as may be agreed upon by the parties hereto. Subscriptions will
be payable within three business days after the termination of the relevant
subscription period, at which time the Shares will be issued against payment and
such Fund will commence operations.
(b) After the Fund commences operations, the Fund will commence an
offering of its Shares, and thereafter the Distributor shall have the right to
buy from the Fund the Shares needed, but not more than the Shares needed (except
for clerical errors in transmission), to fill unconditional orders for Shares of
the Fund placed with the Distributor by eligible investors or financial
intermediaries. Investors eligible to purchase each class of Shares of the Fund
shall be those persons so identified in the currently effective prospectus and
statement of additional information of the Fund (the "prospectus" and "statement
of additional information,"
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respectively) under the Securities Act of 1933, as amended (the "Securities
Act"), relating to such class of Shares ("eligible investors"). The price that
the Distributor shall pay for Shares so purchased from the Fund shall be the net
asset value, determined as set forth in Section 3(e) hereof, used in determining
the public offering price on which such orders were based.
(c) The Shares are to be resold by the Distributor to eligible investors
at the public offering price, as set forth in Section 3(d) hereof, or to
financial intermediaries having agreements with the Distributor pursuant to
Section 7 hereof.
(d) The public offering price of each class of Shares, i.e., the price per
share at which the Distributor or financial intermediaries may sell the Shares
to eligible investors, shall be the public offering price as set forth in the
prospectus and statement of additional information relating to such class of
Shares, or as otherwise permissible under the federal and state securities laws.
If the public offering price does not equal an even cent, the public offering
price may be adjusted to the nearest cent. All payments to the Fund hereunder
shall be made in the manner set forth in Section 3(g).
(e) The net asset value of Shares shall be determined by the Fund or any
agent of the Fund in accordance with the method set forth in the Fund's
prospectus and statement of additional information and guidelines established by
the Directors.
(f) The Fund shall have the right to suspend the sale of its Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(b) hereof. The Fund shall also have the right to suspend the sale of
its Shares if trading on the New York Stock
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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, which, in the judgment of the Fund, makes it impracticable or
inadvisable to sell the Shares.
(g) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that the
Fund will not arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of Shares from eligible investors. The Fund (or
its agent) will confirm orders upon their receipt, will make appropriate book
entries and, upon receipt by the Fund (or its agent) of payment therefor, will
deliver deposit receipts or certificates for such Shares pursuant to the
instructions of the Distributor. Payment shall be made to the Fund through the
National Securities Clearing Corporation ("NSCC") in New York Clearing House
funds or by Federal Funds wire. The Distributor agrees to cause such payment and
such instructions to be delivered promptly to the Fund (or its agent).
Section 4. Repurchase or Redemption of Shares by the Fund.
(a) Any of the outstanding Shares may be tendered for redemption at any
time, and the Fund agrees to repurchase or redeem the Shares so tendered in
accordance with its obligations as set forth in its Articles of Incorporation,
as amended from time to time, and in accordance with the applicable provisions
set forth in the prospectus and statement of additional information relating to
the Fund. The price to be paid to redeem or repurchase the Shares shall be equal
to the net asset value calculated in accordance with the provisions of Section
3(e) hereof, less any contingent deferred sales charge ("CDSC"), redemption fee
or other charge(s), if
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any, set forth in the 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 redemption or repurchase by the Fund of any of the
Shares purchased by or through the Distributor will not affect the applicable
sales charge, if any, secured by the Distributor or any financial intermediary
in the course of the original sale, except that if any Shares are tendered for
redemption or repurchase within seven business days after the date of the
confirmation of the original purchase, the right to the sales charge, if any,
shall be forfeited by the Distributor and the financial intermediary that sold
such Shares.
The Fund shall pay the total amount of the redemption price as defined in
the above paragraph pursuant to the instructions of the Distributor through
NSCC, in New York Clearing House funds or by Federal Funds wire on or before the
seventh business day subsequent to its having received the notice of redemption
in proper form. The proceeds of any redemption of Shares shall be paid by the
Fund as follows: (i) any applicable CDSC shall be paid to the Distributor, and
(ii) the balance shall be paid to or for the account of the Shareholder, in each
case in accordance with the applicable provisions of the prospectus and
statement of additional information.
(b) Redemption of Shares or payment may be suspended at times when the New
York Stock 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
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the Fund fairly to determine the value of its net assets, or during any other
period when the Securities and Exchange Commission, by order, so permits.
Section 5. Duties of the Fund.
(a) The Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares of the Fund, and
this shall include, upon request by the Distributor, one certified copy of all
financial statements prepared for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of the
prospectus and statement of additional information as the Distributor shall
reasonably request.
(b) The Fund shall take, from time to time, but subject to any necessary
approval of the Fund's shareholders, all necessary action to fix the number of
authorized Shares and such steps as may be necessary to register the same under
the Securities Act, to the end that there will be available for sale such number
of Shares of each class as the Distributor may reasonably be expected to sell.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of its Shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 8(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
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Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund will furnish, in reasonable quantities upon request by the
Distributor, copies of its annual and interim reports.
Section 6. Duties of the Distributor.
(a) The Distributor shall devote reasonable time and effort to effect
sales of Shares of the Fund but shall not be obligated to sell any specific
number of Shares. The services of the Distributor to the Fund hereunder are not
to be deemed exclusive and nothing herein contained shall prevent the
Distributor from entering into like arrangements with other investment companies
so long as the performance of its obligations hereunder is not impaired thereby.
(b) In selling the Shares of the Fund, the Distributor shall use its best
efforts in all respects duly to conform with the requirements of all Federal and
state laws relating to the sale of such securities. Neither the Distributor nor
any financial intermediary having an agreement to offer and sell shares pursuant
to Section 7 hereof, nor any other person is authorized by the Fund to give any
information or to make any representations, other than those contained in its
registration statement or related prospectus and statement of additional
information and any sales literature specifically approved by such Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to eligible investors and
financial intermediaries, the collection of amounts payable by eligible
investors and financial intermediaries on such sales,
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and the cancellation of unsettled transactions, as may be necessary to comply
with the requirements of the National Association of Securities Dealers, Inc.
(the "NASD"), as such requirements may from time to time exist.
Section 7. Agreements with Financial Intermediaries.
(a) The Distributor shall have the right to enter into agreements with
financial intermediaries of its choice for the sale of Shares and to fix therein
the portion of the sales charge that may be allocated to the financial
intermediaries on such terms and conditions as the Distributor shall deem
necessary or appropriate; provided, however, that the Distributor shall
periodically inform the Directors of the nature and substance of such
agreements. Shares sold to financial intermediaries shall be for resale by such
intermediaries only at the public offering price(s) set forth in the applicable
prospectus and statement of additional information or as otherwise permissible
under the federal and state securities laws.
(b) With respect to financial intermediaries who are acting as brokers or
dealers within the United States, the Distributor shall offer and sell Shares
only to such financial intermediaries who are members in good standing of the
NASD and who agree to abide by the Conduct Rules of the NASD, as amended from
time to time.
Section 8. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the Fund, 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
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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 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 Distributor shall be responsible for any payments made to
financial intermediaries. In addition, after the prospectuses, statements of
additional information and annual and interim reports have been prepared and set
in type, the Distributor shall bear the costs and expenses of printing and
distributing any copies thereof which are to be used in connection with the
offering of Shares to financial intermediaries or eligible investors pursuant to
this Agreement. The Distributor shall bear the costs and expenses of preparing,
printing and distributing any other literature used by the Distributor or
furnished by it for use by financial intermediaries in connection with the
offering of the Shares for sale to eligible investors and any expenses of
advertising incurred by the Distributor in connection with such offering. It is
understood and agreed that so long as any Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act with respect to a particular class of
Shares of the Fund remains in effect, any expenses incurred by the Distributor
hereunder in connection with distribution and/or account maintenance activities
for such class of Shares, as applicable, may be paid from amounts recovered by
it from the Fund under such Plan.
(c) The Fund shall bear the cost and expenses of qualification of its
Shares for sale pursuant to this Agreement and, if necessary or advisable in
connection therewith, of qualifying
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the Fund as a broker or dealer in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor pursuant to
Section 5(c) 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 9. Indemnification.
(a) The Fund shall 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 of its 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 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
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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 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 which 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 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 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 Shares.
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(b) The Distributor shall indemnify and hold harmless the Fund and each of
its Directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage or expense 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 shareholders. In case any action shall be brought against
the Fund 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 Fund, and the Fund and each person so indemnified shall have the
rights and duties given to the Distributor by the provisions of subsection (a)
of this Section 9.
Section 10. Fee-Based or Other Programs. In connection with certain
fee-based or other programs offered by the Fund's investment adviser or its
affiliates or by financial intermediaries having agreements with the Distributor
pursuant to Section 7 hereof, the Distributor and its affiliates are authorized
to offer and sell Shares of the Fund, as agent for the Fund, to participants in
such programs. Similarly, any Shares of the Fund sold through a fee-based or
other program offered by a financial intermediary shall be sold by such
intermediary acting as agent. The terms of this Agreement shall apply to such
sales, including terms as to the offering price of Shares, the proceeds to be
paid to the Fund, the duties of the Distributor, the payment of expenses and
indemnification obligations of the Fund and the Distributor.
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Section 11. Duration and Termination of this Agreement. This Agreement
shall become effective as of the date first above written and shall remain in
force until two years after the date first above written, 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 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, with respect to the Fund by the Directors or by vote of a majority of
the outstanding 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.
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 12. 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 voting securities of the Fund and
(ii) by the vote of a majority of those Directors of the Fund 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.
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Section 13. 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MERCURY U.S. HIGH YIELD FUND, INC.
By: _____________________________________
Title:
MERCURY FUNDS DISTRIBUTOR, a division of
FAM DISTRIBUTORS, INC.
By: _____________________________________
Title:
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