Exhibit (h)(1)
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ________ day of ________________ 2000, between
MERCURY SENIOR FLOATING RATE FUND, INC., a Maryland corporation (the "Fund"),
and PRINCETON FUNDS 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 a continuously offered,
closed-end, non-diversified, management investment company and it is
affirmatively in the interest of the Fund to offer its shares for sale
continuously; 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
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 shares in order
to promote the growth of the Fund and facilitate the distribution of its 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 Fund to sell
shares of common stock of the Fund (sometimes herein referred to as the
"shares") to the public and hereby agrees during the
term of this Agreement to sell shares of the Fund to the Distributor on the
terms and conditions hereinafter set forth.
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 shares, except that:
(a) The Fund may, on written notice to the Distributor, from time to time
designate other principal underwriters and distributors of its 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 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) the assets or the outstanding shares of any such company by
the Fund.
(c) Such exclusive rights also shall not apply to shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions.
Section 3. Purchase of Shares from the Fund.
(a) 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 investors or financial
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intermediaries. The price which the Distributor shall pay for the shares so
purchased from the Fund shall be the net asset value, determined as set forth in
Section 3(c) hereof.
(b) The shares are to be resold by the Distributor to investors at net
asset value, as set forth in Section 3(c) hereof, or to financial intermediaries
having agreements with the Distributor upon the terms and conditions set forth
in Section 7 hereof.
(c) The net asset value of shares of the Fund shall be determined by the
Fund or any agent of the Fund in accordance with the method set forth in the
Prospectus of the Fund and guidelines established by the Board of Directors.
(d) The Fund shall have the right to suspend the sale of its shares at
times when repurchase 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 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.
(e) 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. 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 by wire transfer of immediately available
funds to a bank account designated by the Fund. The
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Distributor agrees to cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
Section 4. Repurchase of Shares by the Fund.
(a) Any of the outstanding shares may be tendered for repurchase pursuant
to a tender offer made by the Fund, and the Fund agrees to repurchase the shares
so tendered in accordance with the requirements of the Securities Exchange Act
of 1934, as amended, and the rules thereunder and the applicable tender offer
provisions set forth in the Prospectus of the Fund. The price to be paid to
repurchase the shares shall be equal to the net asset value calculated in
accordance with the provisions of Section 3(c) hereof, less the Early Withdrawal
Charge (as defined in the Prospectus of the Fund), if any, set forth in the
Prospectus of 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 repurchase price as defined in
the above paragraph pursuant to the instructions of the Distributor or return
the tendered shares promptly following the termination or withdrawal of the
tender offer. The proceeds of any repurchase of shares shall be paid by the Fund
as follows: (i) any applicable Early Withdrawal Charge 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 of the Fund.
(b) Repurchases of shares pursuant to a tender offer or payment may be
suspended at such times as may be determined by the Board of Directors of the
Fund as set forth in the Prospectus of the Fund.
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
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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 auditors. The Fund shall make available to
the Distributor such number of copies of its Prospectus as the Distributor shall
reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of the 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 of 1933, as amended (the "Securities Act"), to the end that
there will be available for sale such number of shares as the Distributor
reasonably may 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
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 annual and interim reports of the Fund.
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
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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 securities 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 related prospectus and any sales literature
specifically approved by the Fund.
(c) The Distributor shall adopt and follow procedures, as approved by the
officers of the Fund, for the confirmation of sales to investors and financial
intermediaries, 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. (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 for the sale of the shares; 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 net asset value determined as set forth in
Section 3(c) hereof.
(b) With respect to financial intermediaries who are acting as broker or
dealers within the United States, the Distributor shall offer and sell shares
only to such financial intermediaries
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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 under the Investment Company Act and the Securities Act, and all
amendments and supplements thereto, and in connection with any fees and expenses
incurred with respect to any filings with the NASD 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, 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 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 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 the public and any
expenses of advertising incurred by the Distributor in connection with such
offering.
(c) The Fund shall bear the cost and expenses of qualification of the
shares for sale pursuant to this Agreement, 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
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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 shares, which may be based on the Securities Act, or on any
other statute or at common law, on the ground that the registration statement or
related prospectus, as from time to time amended and supplemented, or an annual
or interim report to shareholders of the Fund, 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 shareholders 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 Distributor or any such
controlling persons, unless the Distributor or such controlling
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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, 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 shares.
(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, 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
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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, 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. 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 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, 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.
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Section 11. 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.
Section 12. Governing Law. The provisions of this Agreement shall be
governed by and 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 date first above written.
MERCURY SENIOR FLOATING RATE FUND, INC.
By
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Name:
Title:
PRINCETON FUNDS DISTRIBUTORS, INC.
By
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Name:
Title:
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