EXHIBIT h.4
ADDITIONAL COMPENSATION AGREEMENT
March [_], 2003
PIMCO Advisors Fund Management LLC
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Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated the date
hereof (the "Underwriting Agreement"), by and among ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇
Convertible & Income Fund, a closed-end management investment company (the
"Fund"), PIMCO Advisors Fund Management LLC (the "Investment Manager"), UBS
Warburg LLC ("UBS Warburg") and each of the respective Underwriters named
therein, with respect to the issue and sale of the Fund's common shares of
beneficial interest, par value $0.00001 per share (the "Common Shares"), as
described therein. Reference is also made to (i) the Investment Management
Agreement (the "Investment Management Agreement") dated as of March 12, 2003
between the Investment Manager and the Fund and (ii) the registration statement
on Form N-2 regarding the Common Shares (the "Registration Statement").
Capitalized terms used herein and not otherwise defined shall have the meanings
given to them in the Underwriting Agreement.
The Investment Manager hereby confirms its agreement with each
Qualifying Underwriter (as defined in Section 1 hereof) with respect to the
additional compensation referred to in the "Underwriting" section of the
Registration Statement, payable by the Investment Manager to each of the
Qualifying Underwriters. The Investment Manager agrees to pay to each Qualifying
Underwriter additional compensation (collectively, the "Additional
Compensation") as provided for in Section 3 hereof; provided, however, that such
Additional Compensation shall not exceed an amount equal to 0.10% per annum of
the aggregate average daily total managed assets of the Fund; and provided,
further, that such payments shall not, in the aggregate, exceed the "Maximum
Additional Compensation Amount" (as defined in Section 4 hereof). "Total managed
assets" means the total assets of the Fund (including assets attributable to any
preferred shares of beneficial interest or other forms of leverage of the Fund
that may be outstanding) minus accrued liabilities (other than liabilities
representing leverage). The Additional Compensation shall be payable as set
forth in Section 3 hereof.
SECTION 1. Qualifying Underwriters. For the purposes of this
Additional Compensation Agreement, each Underwriter which sells Common Shares of
the Fund with an aggregate purchase price to the public of at least $50,000,000
(the "Qualifying Amount") (which amount shall equal the aggregate purchase price
to the public of any Firm Shares and Additional Shares sold by such Underwriter,
as determined by UBS Warburg in good faith and set forth in Schedule A hereto)
shall be a "Qualifying Underwriter;" provided, however, that the Qualifying
Amount may be reduced with respect to any Underwriter in the sole discretion of
the Investment Manager, and provided further that UBS Warburg shall not be a
Qualifying Underwriter. Within 60 days following the Closing Date, UBS Warburg
shall prepare and provide to the Investment Manager a chart listing each of the
Qualifying Underwriters, which chart shall indicate the number of Common Shares
sold by each
Qualifying Underwriter and the Pro Rata Percentage (as defined in Section 2
hereof) of each Qualifying Underwriter and shall be appended as Schedule A to
this Additional Compensation Agreement.
SECTION 2. Pro Rata Percentage. Each Qualifying Underwriter shall
be assigned a "Pro Rata Percentage," the numerator of which shall equal the
aggregate purchase price to the public of the Common Shares sold by such
Underwriter as set forth on Schedule A hereto and the denominator of which shall
equal the aggregate purchase price to the public of all of the Common Shares
purchased by the Underwriters pursuant to the Underwriting Agreement.
SECTION 3. Payment of Additional Compensation.
(a) The Investment Manager shall pay the Additional Compensation,
quarterly in arrears, to each Qualifying Underwriter in an amount equal to the
product of such Qualifying Underwriter's Pro Rata Percentage multiplied by
0.025% of the aggregate average daily total managed assets of the Fund for such
quarter.
(b) All fees payable hereunder shall be paid to each Qualifying
Underwriter by wire transfer of immediately available funds within 15 days
following the end of each calendar quarter to a bank account designated by such
Qualifying Underwriter. At the time of each payment of Additional Compensation
hereunder, the Investment Manager shall deliver to each Qualifying Underwriter
receiving an installment of Additional Compensation a statement indicating the
amount of the of the aggregate average daily total managed assets of the Fund
for such quarter on which such payment was based.
(c) The initial payments of Additional Compensation hereunder shall be
paid with respect to the calendar quarter ending June 30, 2003. In the event
that this Additional Compensation Agreement terminates prior to the end of a
calendar quarter, the Additional Compensation required to be paid hereunder
shall be due and payable within 15 days following the termination hereof and
shall be pro-rated in respect of the period prior to such termination.
Notwithstanding the foregoing, if any payment hereunder would otherwise fall on
a day which is not a business day, it shall be due on the next day which is a
business day. All fees payable hereunder shall be in addition to any fees paid
by the Investment Manager pursuant to the Underwriting Agreement.
SECTION 4. Maximum Additional Compensation Amount. The "Maximum
Additional Compensation Amount" payable by the Investment Manager hereunder
shall be 4.5% of the aggregate initial offering price (at $15.00 per share) of
the Common Shares sold pursuant to the Underwriting Agreement (including the
Firm Shares and the Additional Shares, as defined in the Underwriting
Agreement); provided that, in determining when the Maximum Additional
Compensation Amount has been paid, the value of each of the quarterly payments
shall be discounted at the annual rate of 10% to the Closing Date.
SECTION 5. Term. This Additional Compensation Agreement shall
continue coterminously with and so long as the Investment Management Agreement,
dated March 12, 2003, remains in effect between the Fund and the Investment
Manager, or any similar investment management agreement with a successor in
interest or affiliate of the Investment Manager remains in effect, as, and to
the extent, that such investment advisory agreement is renewed periodically in
accordance with the Investment Company Act of 1940, as amended. This Additional
Compensation Agreement shall terminate on the earliest to occur of (a) with
respect to any Qualifying Underwriter, the payment by the Investment Manager to
such Qualifying Underwriter of the Maximum Additional Compensation Amount, (b)
with respect to the Fund, the dissolution and winding up of the Fund and (c)
with respect to the Fund, the date on which the Investment Management Agreement
or other investment management agreement between the Fund and the Investment
Manager or any successor in interest to the Investment Manager, including but
not limited to an affiliate of the Investment Manager, shall terminate.
SECTION 6. Not an Investment Manager. The Investment Manager
acknowledges that the Underwriters are not providing any advice hereunder as to
the value of securities or regarding the advisability of purchasing or selling
any securities for the Fund. No provision of this Additional Compensation
Agreement shall be considered as creating, nor shall any provision create, any
obligation on the part of any Underwriter, and the Underwriters are not hereby
agreeing, to: (i) furnish any advice or make any recommendations regarding the
purchase or sale of portfolio securities or (ii) render any opinions, valuations
or recommendations of any kind or to perform any such similar services.
SECTION 7. Not Exclusive. Nothing herein shall be construed as
prohibiting any Underwriter or its respective affiliates from acting as such for
any other clients (including other registered investment companies or other
investment advisers).
SECTION 8. No Liability. The Investment Manager agrees that no
Underwriter shall have liability to the Investment Manager or the Fund for any
act or omission to act by such Underwriter in the course of its performance
under this Additional Compensation Agreement, in the absence of gross negligence
or willful misconduct on the part of such Underwriter. The Investment Manager
agrees to indemnify and hold harmless each Underwriter and its respective
officers, directors, agents and employees against any loss or expense arising
out of or in connection with such Underwriter's performance under this
Additional Compensation Agreement. Notwithstanding the foregoing or anything to
the contrary in this Agreement, the Investment Manager's indemnification
obligations shall not apply to any losses, claims, damages, liabilities, fines
or expenses (including legal expenses) arising out of or relating to limitations
on or the reasonableness or characterization of the compensation payable by the
Investment Manager to any Underwriter or to the Underwriters in the aggregate
under this Agreement, including as a result of any violation of applicable rules
of the National Association of Securities Dealers, Inc. or other applicable law.
This provision shall survive the termination, expiration or supersession of this
Additional Compensation Agreement.
SECTION 9. Assignment. This Additional Compensation Agreement
may not be assigned by any party without the prior written consent of each other
party.
SECTION 10. Amendment; Waiver. No provision of this Additional
Compensation Agreement may be amended or waived except by an instrument in
writing signed by the parties hereto.
SECTION 11. Governing Law. This Additional Compensation Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York.
SECTION 12. Counterparts. This Additional Compensation Agreement
may be executed in any number of counterparts, each of which shall be an
original, and all of which, when taken together, shall constitute one agreement.
Delivery of an executed signature page of this Additional Compensation Agreement
by facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Investment Manager and UBS Warburg, on behalf of itself and each of the the
Qualifying Underwriters, in accordance with its terms.
Very truly yours,
[ ]
By: _____________________________
Name:
Title:
By: _____________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
PIMCO ADVISORS FUND MANAGEMENT LLC
By: _______________________________
Name:
Title:
SCHEDULE A
Aggregate
Purchase Price to Public Pro Rata
Name of Qualifying Underwriter of Common Shares Sold Percentage
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