PRUDENTIAL MULTI-SECTOR FUND, INC.
Form of
Distribution Agreement
(Class Z Shares)
----------------
Agreement made as of _______, 1995, between Prudential Multi-Sector Fund,
Inc., a Maryland Corporation (the Fund) and Prudential Securities Incorporated,
a Delaware Corporation (the Distributor).
WITNESSETH
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the Investment Company Act), as a diversified open-end, management
investment company and it is in the interest of the Fund to offer its Class Z
shares for sale continuously;
WHEREAS, the Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, and is engaged in the business of selling
shares of registered investment companies either directly or through other
broker-dealers; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other, with respect to the continuous offering of the Fund's Class Z shares
from and after the date hereof in order to promote the growth of the Fund and
facilitate the distribution of its Class Z shares.
NOW, THEREFORE, the parties agree as follows:
Section 1. Appointment of the Distributor
The Fund hereby appoints the Distributor as the principal underwriter and
distributor of the Class Z shares of the Fund to sell Class Z shares to the
public on behalf of the Fund and the Distributor hereby accepts such appointment
and agrees to act hereunder. The Fund hereby agrees during the term of this
Agreement to sell Class Z shares of the Fund through the Distributor on the
terms and conditions set forth below.
Section 2. Exclusive Nature of Duties
The Distributor shall be the exclusive representative of the Fund to act as
principal underwriter and distributor of the Fund's Class Z shares, except that:
2.1 The exclusive rights granted to the Distributor to sell Class Z shares
of the Fund shall not apply to Class Z shares of the Fund issued in connection
with the merger or consolidation of any other investment company or personal
holding company with the Fund or the acquisition by purchase or otherwise of all
(or substantially all) of the assets or the outstanding shares of any such
company by the Fund.
2.2 Such exclusive rights shall not apply to Class Z shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
2.3 Such exclusive rights shall not apply to Class Z shares issued by the
Fund pursuant to the reinstatement privilege afforded redeeming shareholders.
2.4 Such exclusive rights shall not apply to purchases made through the
Fund's transfer and dividend disbursing agent in the manner set forth in the
currently effective Prospectus of the Fund. The term "Prospectus" shall mean the
Prospectus and Statement of Additional Information included as part of the
Fund's Registration Statement, as such Prospectus and Statement of Additional
Information may be amended or supplemented from time to time, and the term
"Registration Statement" shall mean the Registration Statement filed by the Fund
with the Securities and Exchange Commission and effective under the Securities
Act of 1933, as amended (the Securities Act), and the Investment Company Act, as
such Registration Statement is amended from time to time.
Section 3. Purchase of Class Z Shares from the Fund
3.1 The Distributor shall have the right to buy from the Fund on behalf of
investors the Class Z shares needed, but not more than the Class Z shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Class Z shares placed with the Distributor by investors or registered and
qualified securities dealers and other financial institutions (selected
dealers).
3.2 The Class Z shares shall be sold by the Distributor on behalf of the
Fund and delivered by the Distributor or selected
2
dealers, as described in Section 6.4 hereof, to investors at the offering price
as set forth in the Prospectus.
3.3 The Fund shall have the right to suspend the sale of its Class Z shares
at times when redemption is suspended pursuant to the conditions in Section 4.3
hereof or at such other times as may be determined by the Board of Directors.
The Fund shall also have the right to suspend the sale of its Class Z shares if
a banking moratorium shall have been declared by federal or New York
authorities.
3.4 The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Class Z 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 Class Z shares. 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 for such Class Z shares pursuant to the instructions of the
Distributor. Payment shall be made to the Fund in New York Clearing House funds
or federal funds. 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 Class Z Shares by the Fund
4.1 Any of the outstanding Class Z shares may be tendered for redemption at
any time, and the Fund agrees to repurchase or redeem the Class Z shares so
tendered in accordance with its Articles of Incorporation as amended from time
to time, and in accordance with the applicable provisions of the Prospectus. The
price to be paid to redeem or repurchase the Class Z shares shall be equal to
the net asset value determined as set forth in the Prospectus. All payments by
the Fund hereunder shall be made in the manner set forth in Section 4.2 below.
4.2 The Fund shall pay the total amount of the redemption price as defined
in the above paragraph pursuant to the instructions of the Distributor on or
before the seventh day subsequent to its having received the notice of
redemption in proper form. The proceeds of any redemption of Class Z shares
3
shall be paid by the Fund to or for the account of the redeeming shareholder, in
each case in accordance with applicable provisions of the Prospectus.
4.3 Redemption of Class Z shares or payment may be suspended at times when
the New York Stock Exchange is closed for other than customary weekends and
holidays, 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 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
5.1 Subject to the possible suspension of the sale of Class Z shares as
provided herein, the Fund agrees to sell its Class Z shares so long as it has
Class Z shares available.
5.2 The Fund shall furnish 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 Class Z shares, and this
shall include one certified copy, upon request by the Distributor, of all
financial statements examined for the Fund by independent public accountants.
The Fund shall make available to the Distributor such number of copies of its
Prospectus and annual and interim reports as the Distributor shall reasonably
request.
5.3 The Fund shall take, from time to time, but subject to the necessary
approval of the Board of Directors and the shareholders, all necessary action to
fix the number of authorized Class Z 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 Class Z shares as the Distributor reasonably
may expect to sell. The Fund agrees to file from time to time such amendments,
reports and other documents as may be necessary in order that there will be no
untrue statement of a material fact in the Registration Statement, or necessary
in order that there will be no omission to state a material fact in the
Registration Statement which omission would make the statements therein
misleading.
4
5.4 The Fund shall use its best efforts to qualify and maintain the
qualification of any appropriate number of its Class Z shares for sales under
the securities laws of such states as the Distributor and the Fund may approve;
provided that the Fund shall not be required to amend its Articles of
Incorporation or By-Laws to comply with the laws of any state, to maintain an
office in any state, to change the terms of the offering of its Class Z shares
in any state from the terms set forth in its Registration Statement, to qualify
as a foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering of its Class
Z shares. Any such qualification may be withheld, terminated or withdrawn by the
Fund at any time in its discretion. As provided in Section 7.1 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 Fund in connection with
such qualifications.
Section 6. Duties of the Distributor
6.1 The Distributor shall devote reasonable time and effort to effect sales
of Class Z shares of the Fund, but shall not be obligated to sell any specific
number of Class Z shares. Sales of the Class Z shares shall be on the terms
described in the Prospectus. The Distributor may enter into like arrangements
with other investment companies. The Distributor shall compensate the selected
dealers as set forth in the Prospectus.
6.2 In selling the Class Z shares, 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 selected dealer nor 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 and any sales literature approved by
appropriate officers of the Fund.
6.3 The Distributor shall adopt and follow procedures for the confirmation
of sales to investors and selected dealers, the collection of amounts payable by
investors and selected dealers on such sales and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
National Association of Securities Dealers, Inc. (NASD).
5
6.4 The Distributor shall have the right to enter into selected dealer
agreements with registered and qualified securities dealers and other financial
institutions of its choice for the sale of Class Z shares, provided that the
Fund shall approve the forms of such agreements. Within the United States, the
Distributor shall offer and sell Class Z shares only to such selected dealers as
are members in good standing of the NASD. Class Z shares sold to selected
dealers shall be for resale by such dealers only at the offering price
determined as set forth in the Prospectus.
Section 7. Allocation of Expenses
7.1 The Fund shall bear all costs and expenses of the continuous offering
of its Class Z shares, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the Investment Company Act or
the Securities Act, and preparing and mailing annual and periodic reports and
proxy materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual or
periodic reports or proxy materials). The Fund shall also bear the cost of and
expense of qualification of the Class Z shares for sale, and, if necessary or
advisable in connection therewith, of qualifying 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 5.4 hereof and the cost and
expense payable to each such state for continuing qualification therein until
the Fund decides to discontinue such qualification pursuant to Section 5.4
hereof.
Section 8. Indemnification
8.1 The Fund agrees to indemnify, defend and hold the Distributor, its
officers and Directors and any person who controls the Distributor within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Distributor, its officers,
Directors or any such controlling person
6
may incur under the Securities Act, or under common law or otherwise, arising
out of or based upon any untrue statement of a material fact contained in the
Registration Statement or Prospectus or arising out of or based upon any alleged
omission to state a material fact required to be stated in either thereof or
necessary to make the statements in either thereof not misleading, except
insofar as such claims, demands, liabilities or expenses arise out of or are
based upon any such untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information furnished in
writing by the Distributor to the Fund for use in the Registration Statement or
Prospectus; provided, however, that this indemnity agreement shall not inure to
the benefit of any such officer, Director or controlling person unless a court
of competent jurisdiction shall determine in a final decision on the merits,
that the person to be indemnified was not liable 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 under this Agreement
(disabling conduct), or, in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the indemnified person was
not liable by reason of disabling conduct, by (a) a vote of a majority of a
quorum of Directors who are neither "interested persons" of the Fund as defined
in Section 2(a)(19) of the Investment Company Act nor parties to the proceeding,
or (b) an independent legal counsel in a written opinion. The Fund's agreement
to indemnify the Distributor, its officers and Directors and any such
controlling person as aforesaid is expressly conditioned upon the Fund's being
promptly notified of any action brought against the Distributor, its officers or
Directors, or any such controlling person, such notification to be given in
writing addressed to the Fund at its principal business office. The Fund agrees
promptly to notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors in connection with
the issue and sale of any Class Z shares.
8.2 The Distributor agrees to indemnify, defend and hold the Fund, its
officers and Directors and any person who controls the Fund, if any, within the
meaning of Section 15 of the Securities Act, free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending against such claims, demands or liabilities and any
counsel fees incurred in connection therewith)
7
which the Fund, its officers and Directors or any such controlling person may
incur under the Securities Act or under common law or otherwise, but only to the
extent that such liability or expense incurred by the Fund, its Directors or
officers or such controlling person resulting from such claims or demands shall
arise out of or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Distributor to the Fund for
use in the Registration Statement or Prospectus or shall arise out of or be
based upon any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or Prospectus or
necessary to make such information not misleading. The Distributor's agreement
to indemnify the Fund, its officers and Directors and any such controlling
person as aforesaid, is expressly conditioned upon the Distributor's being
promptly notified of any action brought against the Fund, its officers and
Directors/Trustees or any such controlling person, such notification to be given
to the Distributor in writing at its principal business office.
Section 9. Duration and Termination of this Agreement
9.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class Z shares of the Fund
and (b) by the vote of a majority of those Directors who are not parties to this
Agreement or interested persons of any such parties and who have no direct or
indirect financial interest in this Agreement.
9.2 This Agreement may be terminated at any time, without the payment of
any penalty, by a majority of the Rule 12b-1 Directors or by vote of a majority
of the outstanding voting securities of the Class Z shares of the Fund, or by
the Distributor, on sixty (60) days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
9.3 The terms "affiliated person," "assignment," "interested person" and
"vote of a majority of the outstanding voting securities," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act.
8
Section 10. Amendments to this Agreement
This Agreement may be amended by the parties only if such amendment is
specifically approved by the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Class Z shares of the Fund.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year above written.
Prudential Securities
Incorporated
By: ________________________________
Xxxxxx X. Xxxxx
Senior Vice President
Prudential Multi-Sector Fund, Inc.
By: ________________________________
Xxxxxxx X. Xxxxxxx
President
9
