PRUDENTIAL SECTOR FUNDS, INC.
Prudential Financial Services Fund
Form of
DISTRIBUTION AGREEMENT
Agreement made as of , 19 , between Prudential
Sector Funds, Inc. (the Company), on behalf of its series, Prudential
Financial Services Fund (the Fund) and Prudential Investment Management
Services LLC, a Delaware limited liability company (the Distributor).
WITNESSETH
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the Investment Company Act), as an open-end, management
investment company and it is in the interest of the Company and the Fund to
offer its shares for sale continuously;
WHEREAS, the shares of the Fund may be divided into classes (all such
shares being referred to herein as Shares) and the Fund currently is authorized
to offer Class A, Class B, Class C and Class Z Shares;
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;
WHEREAS, the Company and the Distributor wish to enter into an
agreement with each other, with respect to the continuous offering of the Fund's
Shares from and after the date hereof in order to promote the growth of the Fund
and facilitate the distribution of its Shares; and
WHEREAS, the Fund has adopted a plan (or plans) of distribution
pursuant to Rule 12b-1 under the Investment Company Act with respect to certain
of its classes of Shares (the Plans) authorizing payments by the Fund to the
Distributor with respect to the distribution of such classes of Shares and the
maintenance of related shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
Section 1. APPOINTMENT OF THE DISTRIBUTOR
The Company hereby appoints the Distributor as the principal
underwriter and distributor of the Shares of the Fund to sell Shares to the
public on behalf of the Fund and the Distributor hereby accepts such appointment
and agrees to act
hereunder. The Company hereby agrees during the term of this Agreement to sell
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 Shares, except that:
2.1 The exclusive rights granted to the Distributor to sell Shares of
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 Company.
2.2 Such exclusive rights shall not apply to Shares issued by the
Fund pursuant to reinvestment of dividends or capital gains distributions or
through the exercise of any conversion feature or exchange privilege.
2.3 Such exclusive rights shall not apply to 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 Company'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 Company'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
Company with the Securities and Exchange Commission and effective under the
Securities Act of 1933, as amended (Securities Act), and the Investment Company
Act, as such Registration Statement is amended from time to time.
Section 3. PURCHASE OF SHARES FROM THE FUND
3.1 The Distributor shall have the right to buy from the Fund on
behalf of investors the Shares needed, but not more than the Shares needed
(except for clerical errors in transmission) to fill unconditional orders for
Shares placed with the Distributor by investors or registered and qualified
securities dealers and other financial institutions (selected dealers).
3.2 The Shares shall be sold by the Distributor on behalf of the Fund
and delivered by the Distributor or selected 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 any or all
classes of its 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. The Fund shall also have the right to suspend the sale of any or all
classes and/or series of its Shares if a banking moratorium shall have been
declared by federal or New Jersey 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 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
for such 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 SHARES BY THE FUND
4.1 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 the Company's 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 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 Shares shall be
paid by the Fund as follows: (i) in the case of Shares subject to a contingent
deferred sales charge, any applicable contingent deferred sales charge shall be
paid to the Distributor, and the balance shall be paid to or for the account of
the redeeming shareholder, in each case in accordance with applicable provisions
of the Prospectus; and (ii) in the case of all other Shares, proceeds shall be
paid to or for the account of the redeeming shareholder, in each case in
accordance with applicable provisions of the Prospectus.
4.3 Redemption of any class of 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
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Commission, by order, so permits.
Section 5. DUTIES OF THE FUND
5.1 Subject to the possible suspension of the sale of Shares as
provided herein, the Fund agrees to sell its Shares so long as it has Shares of
the respective class 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 Shares, and this shall
include one certified copy, upon request by the Distributor, 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 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 and the shareholders, all necessary action to
register Shares under the Securities Act for the Distributor 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.
5.4 The Fund shall use its best efforts to notify such states as the
Distributor and the Fund may approve of its intention to sell any appropriate
number of its Shares; provided that the Company 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 the
Fund's Shares in any state from the terms set forth in the 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 Shares. Any such notification may be withheld, terminated
or withdrawn by the Fund at any time in its discretion. As provided in Section
9 hereof, the expense of notification and maintenance of notification 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 notifications.
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Section 6. DUTIES OF THE DISTRIBUTOR
6.1 The Distributor shall devote reasonable time and effort to effect
sales of Shares, but shall not be obligated to sell any specific number of
Shares. Sales of the 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 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 Company.
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 rules of the National Association of Securities Dealers,
Inc. (NASD).
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 Shares, provided that the
Company shall approve the forms of such agreements. Within the United States,
the Distributor shall offer and sell Shares only to such selected dealers as are
members in good standing of the NASD or are institutions exempt from
registration under applicable federal securities laws. 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. PAYMENTS TO THE DISTRIBUTOR
7.1 With respect to classes of Shares which impose a front-end sales
charge, the Distributor shall receive and may retain any portion of any
front-end sales charge which is imposed on such sales and not reallocated to
selected dealers as set forth in the Prospectus, subject to the limitations of
Rule 2830 of the Conduct Rules of the NASD. Payment of these amounts to the
Distributor is not contingent upon the adoption or continuation of any
applicable Plans.
7.2 With respect to classes of Shares which impose a contingent
deferred sales charge, the Distributor shall receive and may retain any
contingent deferred sales charge which is imposed on such sales as set forth in
the Prospectus, subject to the limitations of Rule 2830 of the Conduct Rules of
the NASD. Payment of
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these amounts to the Distributor is not contingent upon the adoption or
continuation of any Plan.
Section 8. PAYMENT OF THE DISTRIBUTOR UNDER THE PLAN
8.1 The Fund shall pay to the Distributor as compensation for
services under any Plans adopted by the Fund and this Agreement a distribution
and service fee with respect to the Fund's classes of Shares as described in the
Fund's Plans and this Agreement.
8.2 So long as a Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of the commissions and account servicing fees
with respect to the relevant class and/or series of Shares to be paid by the
Distributor to account executives of the Distributor and to broker-dealers,
financial institutions and investment advisers which have dealer agreements with
the Distributor. So long as a Plan (or any amendment thereto) is in effect, at
the request of the Board or any agent or representative of the Fund, the
Distributor shall provide such additional information as may reasonably be
requested concerning the activities of the Distributor hereunder and the costs
incurred in performing such activities with respect to the relevant class of
Shares.
Section 9. ALLOCATION OF EXPENSES
The Fund shall bear all costs and expenses of the continuous offering
of its Shares (except for those costs and expenses borne by the Distributor
pursuant to a Plan and subject to the requirements of Rule 12b-1 under the
Investment Company Act), 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 all amendments and supplements thereto, 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 or expense of making notice
filings for the 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 notification therein until the Fund decides to
discontinue such notification pursuant to Section 5.4 hereof. As set forth in
Section 8 above, the Fund shall also bear the expenses it assumes pursuant to
any Plan, so long as such Plan is in effect.
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Section 10. INDEMNIFICATION
10.1 The Company agrees to indemnify, defend and hold the Distributor,
its officers and members 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
reasonable counsel fees incurred in connection therewith) which the Distributor,
its officers, members or any such controlling person 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 by the Distributor to the
Company for use in the Registration Statement or Prospectus; provided, however,
that this indemnity agreement shall not inure to the benefit of any such
officer, member 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 or Directors who
are neither "interested persons" of the Company 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 Company's agreement to
indemnify the Distributor, its officers and members and any such controlling
person as aforesaid is expressly conditioned upon the Company's being promptly
notified of any action brought against the Distributor, its officers or members,
or any such controlling person, such notification to be given by letter or
telegram addressed to the Company at its principal business office. The Company
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 Shares.
10.2 The Distributor agrees to indemnify, defend and hold the
Company, its officers and Directors and any person who controls the Company,
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 reasonable counsel fees incurred in
connection therewith) which the Company, 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 Company,
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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 by the
Distributor to the Company 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
Company, 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 Company, its officers and
Directors or any such controlling person, such notification being given to
the Distributor at its principal business office.
Section 11. DURATION AND TERMINATION OF THIS AGREEMENT
11.1 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 the Company, or by the vote of a majority of
the outstanding voting securities of the applicable class 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 or in the operation of any of the
Fund's Plans or in any agreement related thereto (independent Directors), cast
in person at a meeting called for the purpose of voting upon such approval.
11.2 This Agreement may be terminated at any time, without the
payment of any penalty, by a majority of the independent Directors or by vote of
a majority of the outstanding voting securities of the applicable class 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.
11.3 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.
Section 12. AMENDMENTS TO THIS AGREEMENT
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of the Company, or by the vote of a
majority of the outstanding voting securities of the applicable class of the
Fund, and (b) by the vote of a majority of the independent Directors cast in
person at a meeting called for the purpose of voting on such amendment.
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Section 13. SEPARATE AGREEMENT AS TO CLASSES
The amendment or termination of this Agreement with respect to any
class shall not result in the amendment or termination of this Agreement with
respect to any other class unless explicitly so provided.
Section 14. GOVERNING LAW
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New Jersey 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 Jersey, 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 Investment Management Services LLC
By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
Prudential Sector Funds, Inc.
By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
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