PILGRIM AMERICA PRIME RATE TRUST
10,000,000 Shares of Beneficial Interest
without par value
SALES AGENCY AGREEMENT
May __, 1998
PAINEWEBBER INCORPORATED
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Gentlemen:
Pilgrim America Prime Rate Trust, a Massachusetts business trust (the
"Trust"), and Pilgrim America Investments, Inc., a Delaware corporation, (the
"Investment Manager"), each confirms its agreement (the "Agreement") with
PaineWebber Incorporated (the "Agent"), as follows:
SECTION 1. Description of Securities. The Trust proposes to issue and sell
through the Agent, as sales agent, up to 10,000,000 shares (the "Maximum
Amount") of beneficial interest, without par value (the "Common Shares"), on the
terms set forth in Section 3 hereof.
SECTION 2. Representations and Warranties of the Trust and the Investment
Manager. (a) The Trust and the Investment Manager each severally represents and
warrants to, and agrees with, the Agent as of the date hereof and as of each
Closing Date (as hereinafter defined) (each such date being hereinafter referred
to as the "Representation Date") that:
(i) The Trust has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form
N-2 (No. 333-29805) and a related preliminary prospectus for
the registration of the Common Shares under the Securities Act
of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"), and has
filed such amendments to such registration statement on Form
N-2, if any, and such amended preliminary prospectuses as may
have been required to each Representation Date. The Trust will
prepare and file such additional amendments thereto and such
amended prospectuses as may hereafter be required. The Trust
previously filed a notification on Form N-8A of registration
of the Trust as an investment company under the 1940 Act and
the rules and regulations of the Commission under the 1940 Act
(together with the rules and regulations under the 1933 Act,
the "Rules and Regulations"). The registration statement, and
the prospectus constituting a part thereof, each as from time
to time amended or supplemented pursuant to the 1933 Act, are
herein referred to as the "Registration Statement" and the
"Prospectus," respectively, except that if any revised
prospectus shall be provided to the Agent by the Trust for use
in connection with the offer of the Common Shares (the
"Offer") that differs from the Prospectus on file at the
Commission at the time the Registration Statement becomes
effective (whether such revised prospectus is required to be
filed by the Trust pursuant to Rule 497(c) or Rule 497(h) of
the Rules and Regulations), the term "Prospectus" shall refer
to each such revised prospectus from and after the time it is
first provided to the Agent for such use.
(ii) At the time the Registration Statement becomes effective
and at each Representation Date, the Registration Statement
will comply in all material respects with the requirements of
the 1933 Act, the 1940 Act and the Rules and Regulations and
will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. From
the time the Registration Statement becomes effective through
the termination of this Sales Agency Agreement (the
"Termination Date"), the Prospectus (unless the term
"Prospectus" refers to a prospectus that has been provided to
the Agent by the Trust for use in connection with the Offer
which differs from the Prospectus on file with the Commission
at the time the Registration Statement becomes effective, in
which case at the time such prospectus is first provided to
the Agent for such use) will not contain an untrue statement
of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in
this subsection shall not apply to statements in or omissions
from the Registration Statement or Prospectus made in reliance
upon and in conformity with information relating to the Agent
furnished to the Trust by the Agent in writing for use in the
Registration Statement or Prospectus or to information
describing the manner in which the Agent shall sell Common
Shares under this Agreement.
(iii) The accountants who certified the financial statements
included in the Registration Statement are independent public
accountants as required by the 1933 Act, the 1940 Act and the
Rules and Regulations.
(iv) The financial statements included in the Registration
Statement present fairly the financial position of the Trust
as of the date indicated and the results of its operations for
the period specified; such financial statements have been
prepared in conformity with generally accepted accounting
principles; and the information in the Prospectus under the
heading "Financial Highlights and Investment Performance --
Trust Characteristics and Composition" sets forth accurately
certain information with respect to the characteristics of the
Trust's investment portfolio as of February 28, 1998.
(v) Since the respective dates as of which information is
given in the Registration Statement and in the Prospectus,
except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or
otherwise, of the Trust, or in the earnings, business affairs
or business prospects of the Trust, whether or not arising in
the ordinary course of business, (B) there have been no
transactions entered into by the Trust which are material to
the Trust other than those in the ordinary course of business
and (C) there has been no dividend or distribution of any kind
declared, paid or made by the Trust on any class of its shares
of beneficial interest, other than dividends or distribution
made in the ordinary course of business or made for the
purpose of maintaining the Trust's qualification as a
regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended ("Subchapter M of
the Code").
(vi) The Trust has been duly created and is validly existing
as a business trust in good standing under the laws of the
Commonwealth of Massachusetts with power and authority to own
its own properties and conduct its business as described in
the Registration Statement; the Trust is duly qualified as a
foreign business trust to transact business and is in good
standing in each jurisdiction in which the failure to so
qualify, either individually or in the aggregate, would have a
material adverse effect upon the operations or financial
condition of the Trust; and the Trust has no subsidiaries.
(vii) The Trust is registered with the Commission under the
1940 Act as a closed-end diversified, management investment
company, and no order of suspension or revocation of such
registration has been issued or proceedings therefor initiated
or, to the knowledge of the Trust, threatened by the
Commission. No person is serving or acting as an officer of
the Trust who is ineligible to serve in such office under the
1940 Act and no person is acting or serving as trustee of the
Trust except in accordance with the provisions of the 1940
Act.
(viii) The Trust owns or possesses or has obtained all
material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease or own,
as the case may be, and to carry on its businesses as
contemplated in the Prospectus and the Trust has not received
any notice of proceedings relating to the revocation or
modification of any such licenses, permits, covenants, orders,
approvals or authorizations.
(ix) The authorized, issued and outstanding Common Shares as
of the date hereof is as set forth in the Prospectus under the
caption "Description of the Shares", except for any Common
Shares that may have been issued under the Trust's Dividend
Reinvestment and Cash Purchase Plan (the "Cash Purchase
Plan"), pursuant to this Agreement, in privately negotiated
transactions of which the Agent shall have received notice
pursuant to Section 4(k) hereof (the "Privately Negotiated
Transactions") or in other transactions which the Agent
receives notice of pursuant to Section 4(k) hereof; the
outstanding Common Shares have been duly authorized by all
requisite trustee action on the part of the Trust and are
validly issued and fully paid and non-assessable by the Trust;
the Common Shares to be sold pursuant to this Agreement have
been duly authorized by all requisite trustee action on the
part of the Trust for issuance pursuant to the terms of this
Agreement and, when issued and delivered by the Trust pursuant
to the terms of this Agreement against payment of
consideration therefor, will be validly issued and fully paid
and non-assessable by the Trust; the Common Shares conform in
all material respects to the description thereof set forth in
the Prospectus under the caption "Description of the Shares";
and the issuance of each of the Common Shares is not subject
to preemptive rights.
(x) (A) The Trust is not in violation of its Agreement and
Declaration of Trust, as amended (the "Declaration"), or as
supplemented by its by-laws (the "By-Laws") or in default in
the performance or observance of any material obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or its
properties may be bound; (B) (i) the execution and delivery of
each of this Agreement and the Investment Management Agreement
referred to in the Prospectus (the "Investment Management
Agreement") and the consummation of the transactions
contemplated herein and therein have been duly authorized by
all necessary trustee action of the Trust and will not
conflict with or constitute a breach of, or, with or without
giving notice or the lapse of time or both, a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Trust pursuant
to any contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Trust is a party or by
which it may be bound or to which any of the property or
assets of the Trust is subject, nor will such action result in
any violation of the provisions of the Declaration or By-Laws
or, to the best knowledge of the Trust and the Investment
Manager, any law, administrative regulation or administrative
or court decree applicable to the Trust, and no consent,
approval, authorization or order of any court or governmental
authority or agency is required for the consummation by the
Trust of the transactions contemplated by this Agreement
except such as has been obtained under the 1940 Act and the
1933 Act or as may be required under the state securities or
Blue Sky laws or foreign securities laws in connection with
the sale of Common Shares pursuant to this Agreement, (ii)
each of this Agreement and the Investment Management Agreement
complies with all applicable provisions of the 1940 Act,
except that with respect to this Agreement, no representation
is made as to compliance with Section 17(i) of the 1940 Act,
and (iii) each of this Agreement and the Investment Management
Agreement is in full force and effect and constitutes a valid
and binding obligation of the Trust, enforceable in accordance
with its terms, except that with respect to this Agreement, no
representation is made as to compliance with Section 17(i) of
the 1940 Act, and subject, as to enforcement, to bankruptcy,
insolvency, reorganization, or other similar laws relating to
or affecting creditors' rights generally and to general
principles of equity.
(xi) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Trust, threatened against
or affecting, the Trust, which might result in any material
adverse change in the condition, financial or otherwise,
business affairs or business prospects of the Trust, or might
materially and adversely affect the properties or assets of
the Trust; and there are no material contracts or documents of
the Trust which are required to be filed as exhibits to the
Registration Statement by the 1933 Act, the 1940 Act or the
Rules and Regulations which have not been so filed.
(xii) There are no contracts or documents which are required
to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not
been so described and filed as required.
(xiii) The Trust owns or possesses, or can acquire on
reasonable terms, adequate trademarks, service marks and trade
names necessary to conduct its business as described in the
Registration Statement, and the Trust has not received any
notice of infringement of or conflict with asserted rights of
others with respect to any trademarks, service marks or trade
names which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially
adversely affect the conduct of the business, operations,
financial condition or income of the Trust.
(xiv) Since the date of its organization, the Trust has
qualified as a regulated investment company under Subchapter M
of the Code (except that the Investment Manager only makes
such representation as of April 7, 1995, the date that it
first became the Investment Manager) and intends to continue
so to qualify. In addition, the Trust intends to direct the
investment of the proceeds of the Offer in such a manner as to
comply with the requirements of Subchapter M of the Code.
(xv) The Common Shares have been approved for listing, subject
to official notice of issuance, on the New York Stock Exchange
(the "NYSE").
(xvi) The Trust has not, directly or indirectly, (i) taken any
action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of
the Trust to facilitate the sale or resale of the Common
Shares or (ii) except for the Privately Negotiated
Transactions, sales pursuant to the Cash Purchase Plan and
other transactions which the Agent receives notice of pursuant
to Section 4(k), since the filing of the Registration
Statement, (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Common Shares or
(B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the
Trust (except for the sale of Common Shares under this
Agreement).
(xvii) The Common Shares have an ADTV (as defined in
Regulation M of the Exchange Act ("Regulation M")) value of at
least $1 million and have a public float of at least $150
million.
(b) The Investment Manager represents and warrants to the Agent as of the
date hereof and as of each Representation Date as follows:
(i) The Investment Manager has been duly organized as a
corporation under the laws of the State of Delaware with
corporate power and authority to conduct its business as
described in the Prospectus; the Investment Manager is duly
qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which the failure to
so qualify, either individually or in the aggregate, would
have a material adverse effect upon the operations or
financial condition of the Investment Manager.
(ii) The Investment Manager is duly registered as an
investment adviser under the Investment Advisers Act of 1940,
as amended (the "Advisers Act"), and is not prohibited by the
Advisers Act or the 1940 Act, or the rules and regulations
under such acts, from acting as Investment Manager to the
Trust under the terms of the Investment Management Agreement
as contemplated by the Prospectus.
(iii) The description of the Investment Manager in the
Prospectus is true and correct in all material respects and
does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not
misleading; and there are no pending legal proceedings that
would be required to be described under Item 12 of Form N-2.
(iv) Each of this Agreement and the Investment Management
Agreement has been duly authorized, executed and delivered by
the Investment Manager; each of this Agreement and the
Investment Management Agreement is in full force and effect
and constitutes a valid and binding obligation of the
Investment Manager, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization or other similar laws relating to or affecting
creditors' rights generally and to general principles of
equity; and neither the execution and delivery of this
Agreement nor the performance by the Investment Manager of its
obligation hereunder or under the Investment Management
Agreement will conflict with, or result in a breach of, any of
the terms and provisions of, or constitute, with or without
giving notice or lapse of time or both, a material default
under any agreement or instrument to which the Investment
Manager is a party or by which the Investment Manager is
bound, or any law, order, rule or regulation applicable to it
of any jurisdiction, court, federal or state regulatory body,
administrative agency or other governmental body, stock
exchange or securities association having jurisdiction over
the Investment Manager or its properties or operations.
(v) The Investment Manager has the financial resources
available to it necessary for the performance of its services
and obligations as contemplated in the Prospectus.
(vi) The Investment Manager has not, directly or indirectly,
(i) taken any action designed to cause or result in, or that
has constituted or might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security
of the Trust to facilitate the sale or resale of the Common
Shares or (ii) except for the Privately Negotiated
Transactions, sales pursuant to the Cash Purchase Plan and
other transactions which the Agent receives notice of pursuant
to Section 4(k), since the filing of the Registration
Statement, (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of the Common Shares or
(B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the
Trust.
(vii) Since the respective dates of the latest Form 10-K and
Form 10-Q filed by the Investment Manager's parent company,
Pilgrim America Capital Corporation, except as otherwise
stated therein, there has been no material adverse change, or
any development involving a prospective material adverse
change, in the condition (financial or otherwise) or
management of the Investment Manager, or in the earnings,
business affairs or business prospects of the Investment
Manager, whether or not arising in the ordinary course of
business.
(viii) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of the Investment Manager,
threatened against or affecting the Investment Manager, which
might result in any material adverse change in the condition,
financial or otherwise, business affairs or business prospects
of the Investment Manager or materially and adversely affect
the properties or assets of the Investment Manager; and there
are no material contracts or documents of the Investment
Manager that are required to be disclosed in the Registration
Statement by the 1933 Act, the 1940 Act or by the Rules and
Regulations that have not been so disclosed therein.
(c) Any certificate signed by any officer of the Trust or the Investment
Manager and delivered to the Agent or counsel for the Agent shall be deemed a
representation and warranty by the Trust or the Investment Manager, as the case
may be, to the Agent, as to the matters covered thereby.
SECTION 3. Sale and Delivery of Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Trust agrees to issue and sell
through the Agent, as exclusive sales agent for the sale of Common Shares
pursuant to this Agreement or an arrangement similar to that contemplated by
this Agreement, and the Agent agrees to sell, as sales agent for the Trust, on a
reasonable efforts basis, up to the Maximum Amount of Common Shares during the
term of this Agreement in accordance with the 1933 Act, the 1940 Act, the
Securities Exchange Act of 1934 (the "1934 Act"), the rules of the NYSE, the
Conduct Rules of the National Association of Securities Dealers, Inc. and the
terms set forth herein; provided, however, the Trust and the Agent shall suspend
the sale of Common Shares if the per share price for the Common Shares is less
than the Minimum Price (as defined below); provided, further, that the Agent and
the Trust agree that Pilgrim America Securities, Inc. ("PASI") may provide
administrative services to the Trust in connection with sales under this
Agreement but shall not act as a sales agent; provided, further, that the Agent
shall not be deemed to be in violation of this sentence if such violation is
caused by the activities of PASI or by the failure of the Trust to comply with
its agreements and representations contained herein. The Trust shall calculate
the Current Net Asset Value (as such term is used in Section 23(b) of the 1940
Act) per Common Share at the close of business on each day and shall notify the
Agent of the result of such calculation by 5:30 p.m. on each day. "Minimum
Price" means a price equal to (1) the Current Net Asset Value per Common Share
as determined by the Trust on the preceding business day plus (2) the per Common
Share amount of any commission to be paid to the Agent hereunder.
The Common Shares, up to the Maximum Amount, are to be sold on such days as
shall be agreed to by the Trust and the Agent. Subject to the terms and
conditions hereof, the Agent shall use its reasonable efforts to sell the entire
Maximum Amount. The Agent shall sell the Common Shares only by means of
transactions effected on the NYSE. The Agent shall not solicit or arrange for
the solicitation of customers' orders in anticipation of or in connection with
such transactions. The Agent shall calculate the ADTV (as defined in Regulation
M) of the Common Shares on a weekly basis. If either party has reason to believe
that the exemptive provisions set forth in rule 101(c)(1) of Regulation M, are
not satisfied, it shall promptly notify the other party and sales of Common
Shares under this Agreement shall be suspended until that or other exemptive
provisions have been satisfied in the judgment of each party. In addition, the
Trust or the Agent may, upon notice to the other party hereto by telephone
(confirmed promptly by telecopy), suspend the offering of Common Shares at any
time and each party agrees to promptly suspend the offering of Common Shares
upon such notice; provided, however, that such suspension or termination shall
not affect or impair the parties' respective obligations with respect to Common
Shares sold hereunder prior to the giving of such notice.
In connection with the sale of Common Shares under this Agreement, the
Agent is not authorized by the Trust to give any information or to make any
representations in connection with this Agreement other than those contained in
the Registration Statement and the Prospectus, and agrees not to give any
unauthorized information or to make any unauthorized representations. Except as
specifically provided in this Agreement, the Agent is not authorized to act as
an agent for the Trust, and agrees not to act or to purport to act as an agent
for the Trust.
The Trust and the Agent shall agree upon the number of Common Shares to be
sold on any business day. The compensation to the Agent for sales of Common
Shares shall be at a fixed commission rate of 3% of the gross sales price per
share of the first 4,000,000 Common Shares sold under this Agreement and 2.25%
of the gross sales price for the next 6,000,000 Common Shares sold.
The Agent shall provide written confirmation to the Trust following the
close of business on any day in which Common Shares are sold under this
Agreement setting forth the number of Common Shares sold, the gross proceeds
from the sale of such shares, the highest and lowest executed sales price at
which such shares were sold, the net proceeds to the Trust and the compensation
payable by the Trust to the Agent with respect to such sales.
Settlement for sales of Common Shares will occur on the third business day
following the date on which such sales are made (each a "Closing Date"). The
amount of proceeds for such sales to be delivered to the Trust against the
receipt of the Common Shares sold shall be equal to the aggregate sales prices
at which such Common Shares were sold, net of the Agent's compensation for such
sales and after deduction for any transaction fees imposed by any governmental
or self-regulatory organization in respect of such sales. Settlement for Common
Shares shall be effected by free delivery of shares to the Agent's account at
The Depository Trust Company in return for payments in same day funds delivered
to the account designated by the Trust.
On each Closing Date, the Trust shall be deemed to have affirmed each
representation, warranty, covenant and other agreement contained in this
Agreement. On the first day of each month, the Trust shall affirm in writing
each representation, warranty, covenant and other agreement contained in this
Agreement. The Trust covenants and agrees with the Agent that the Trust will
file a prospectus supplement under the applicable paragraph of Rule 497 of the
Rules and Regulations at such times as may be required by the 1933 Act and the
Rules and Regulations (but in any event not later than the second business day
after the end of the week during which sales of Common Shares occur), which
prospectus supplement will set forth the number of Common Shares sold through
the Agent, the highest and lowest executed sales price at which Common Shares
were sold, the net proceeds to the Trust and the compensation payable by the
Trust to the Agent. Any obligation of the Agent to use its reasonable efforts to
sell the Common Shares shall be subject to the continuing accuracy of the
representations and warranties of the Trust herein, to the performance by the
Trust of its obligations hereunder and to the continuing satisfaction of the
additional conditions specified in Section 5 of this Agreement.
SECTION 4. Covenants of the Trust. The Trust covenants and agrees with the
Agent that:
(a) The Trust will use its best efforts (i) to cause the Registration
Statement to become effective under the 1933 Act, and (ii) if required, to cause
the issuance of any orders exempting the Trust from any provisions of the 1940
Act, in which case it will advise the Agent promptly as to the time at which any
such orders are issued.
(b) The Trust will orally notify the Agent promptly, and confirm the notice
in writing, of the (i) effectiveness of the Registration Statement and any
amendment thereto (including any post-effective amendment), (ii) receipt of any
comments from the Commission, (iii) request by the Commission for any amendment
to the Registration Statement, any amendment or supplement to the Prospectus or
additional information, (iv) issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, (v) issuance by the Commission of an order of
suspension or revocation of the notification on Form N-8A of registration of the
Trust as an investment company under the 1940 Act or the initiation of any
proceeding for that purpose and (vi) suspension of the qualification of the
Common Shares for offering or sale in any jurisdiction. The Trust will make
every reasonable effort to prevent the issuance of any stop order described in
subsection (iv) hereunder or any order of suspension or revocation described in
subsection (v) or subsection (vi) hereunder and, if any such stop order or order
of suspension or revocation is issued, to obtain the lifting thereof at the
earliest possible moment.
(c) The Trust will give the Agent notice of its intention to file any
amendment to the Registration Statement (including any post-effective amendment)
or any amendment or supplement to the Prospectus (including any revised
prospectus that the Trust proposes for use by the Agent, which differs from the
prospectus on file at the Commission at the time the Registration Statement
becomes effective, whether such revised prospectus is required to be filed
pursuant to Rule 497(c) or Rule 497(h) of the Rules and Regulations), whether
pursuant to the 1940 Act, the 1933 Act, or otherwise, and will furnish the Agent
and counsel for the Agent with copies of any such amendment or supplement within
a reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file any such amendment or supplement to which the Agent or
counsel for the Agent reasonably shall object.
(d) During the period in which a prospectus relating to the Common Shares
is required to be delivered under the 1933 Act, the Trust will prepare and file
with the Commission, promptly upon the Agent's request, any amendments or
supplements to the Registration Statement or Prospectus that, in the Agent's or
counsel for the Agent's reasonable opinion, may be necessary or advisable in
connection with the distribution of the Common Shares by the Agent; and it will
furnish to the Agent and counsel for the Agent at the time of filing thereof a
copy of any document that upon filing is deemed to be incorporated by reference
in the Registration Statement or Prospectus; and the Trust will cause each
amendment or supplement to the Prospectus to be filed with the Commission as
required pursuant to the applicable paragraph of Rule 497 of the Rules and
Regulations within the time period prescribed.
(e) Within the time during which a prospectus relating to the Common Shares
is required to be delivered under the 1933 Act, the Trust will comply as far as
it is able with all requirements imposed upon it by the 1933 Act and by the
Rules and Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Common Shares as
contemplated by the provisions hereof and the Prospectus. If during such period
any event occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances then existing, not misleading, or if during such period it is
necessary to amend or supplement the Registration Statement or Prospectus to
comply with the 1933 Act, the Trust will promptly notify the Agent to suspend
the offering of Common Shares during such period and the Trust will amend or
supplement the Registration Statement or Prospectus so as to correct such
statement or omission or effect such compliance.
(f) The Trust will use its best efforts to qualify the Common Shares for
sale under the securities laws of such jurisdictions as the Agent designates and
to continue such qualifications in effect so long as required for the
distribution of the Common Shares, except that the Trust shall not be required
in connection therewith to qualify as a foreign business trust or to execute a
general consent to service of process in any jurisdiction.
(g) The Trust will furnish to the Agent and its counsel (at the expense of
the Trust) copies of the Registration Statement, the Prospectus and all
amendments and supplements to the Registration Statement or Prospectus that are
filed with the Commission during the period in which a prospectus relating to
the Common Shares is required to be delivered under the 1933 Act, in each case
as soon as available and in such quantities as the Agent may from time to time
reasonably request and will also furnish copies of the Prospectus to the NYSE in
accordance with Rule 153 of the Rules and Regulations and the Trust and the
Agent agree that the delivery of the Prospectus to any other person is not
required under this Agreement for so long as the Common Shares are listed on the
NYSE.
(h) The Trust will make generally available to its security holders as soon
as practicable, but in any event not later than 60 days after the close of the
period covered thereby, an earnings statement in form complying with the
provisions of Rule 158 of the Rules and Regulations covering a 12-month period
that satisfies the provisions of Section 11(a) of the Act and Rule 158 of the
Rules and Regulations.
(i) The Trust, whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, will pay all expenses incident to
the performance of its obligations hereunder, including, but not limited to,
expenses relating to (i) the printing and filing of the Registration Statement
as originally filed and of each amendment thereto, (ii) the preparation,
issuance and delivery of the Common Shares, (iii) the reasonable fees and
disbursements of the Trust's counsel and accountants, (iv) the qualification of
the Common Shares under securities laws in accordance with the provisions of
Section 4(f) of this Agreement, including filing fees and any reasonable fees or
disbursements of counsel for the Agent in connection therewith, (v) the printing
and delivery to the Agent of copies of the preliminary prospectus, of the
Prospectus and any amendments or supplements thereto, and of this Agreement,
(vi) the fees and expenses incurred in connection with the listing of the Common
Shares on the NYSE, and (vii) the filing fees of the Commission and the National
Association of Securities Dealers, Inc. The Agent will pay the fees and
disbursements of its legal counsel; provided, however, that if 2,000,000 Common
Shares are not sold by the Agent pursuant to the terms of this Agreement within
one year of the date of this Agreement, then the Trust will promptly, upon the
request of the Agent, reimburse the Agent for the fees and disbursements of the
Agent's legal counsel incurred in connection with the establishment of the
structured equity shelf program established by this Agreement up to an amount of
$50,000.
(j) The Trust will apply the net proceeds from the sale of the Common
Shares as set forth in the Prospectus.
(k) The Trust will not, directly or indirectly, offer or sell any Common
Shares (other than the Common Shares offered pursuant to the provisions of this
Agreement) or securities convertible into or exchangeable for, or any rights to
purchase or acquire, Common Shares during the period from the date of this
Agreement through the final Closing Date for the sale of Shares hereunder
without (a) giving the Agent at least one business day's prior written notice
specifying the nature of the proposed sale and the date of such proposed sale
and (b) suspending activity under this program for such period of time as may
reasonably be determined by agreement of the Trust and the Agent; provided,
however, that no such notice and suspension shall be required in connection with
the Trust's issuance or sale of Common Shares issuable upon conversion of
securities or the exercise of warrants, options or other rights in effect or
outstanding on the date hereof or in connection with the Trust's issuance or
sale of Common Shares under the terms of the Cash Purchase Plan (as in effect on
the date hereof).
(l) The Trust will, at any time during the term of this Agreement, as
supplemented from time to time, advise the Agent immediately after it shall have
received notice or obtain knowledge thereof, of any information or fact that
would alter or affect any opinion, certificate, letter and other document
provided to the Agent pursuant to Section 5 herein.
(m) Each time that the Registration Statement or the Prospectus shall be
amended or supplemented (other than a supplement filed pursuant to Rule 497(h)
under the 1933 Act that contains solely the information set forth in the final
paragraph of Section 3 of this Agreement), the Trust shall furnish or cause to
be furnished to the Agent forthwith a certificate dated the date of filing with
the Commission of such amendment or supplement, the date of effectiveness of
amendment, as the case may be, in form satisfactory to the Agent to the effect
that the statements contained in the certificate referred to in Section 5(f)
hereof which were last furnished to the Agent are true and correct at the time
of such amendment, supplement, filing, as the case may be, as though made at and
as of such time (except that such statements shall be deemed to relate to the
Registration Statement and the Prospectus as amended and supplemented to such
time) or, in lieu of such certificate, a certificate of the same tenor as the
certificate referred to in said Section 5(f), modified as necessary to relate to
the Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such certificate.
(n) Each time that the Registration Statement or the Prospectus is amended
or supplemented (other than a supplement filed pursuant to Rule 497(h) under the
1933 Act that contains solely the information set forth in the final paragraph
of Section 3 of this Agreement), the Trust shall furnish or cause to be
furnished forthwith to the Agent and to counsel to the Agent a written opinion
of Dechert Price & ▇▇▇▇▇▇, counsel to the Trust ("Trust Counsel"), or other
counsel satisfactory to the Agent, dated the date of filing with the Commission
of such amendment, supplement or other document and the date of effectiveness of
such amendment, as the case may be, in form and substance satisfactory to the
Agent, of the same tenor as the opinion and additional statement referred to in
Section 5(d) hereof, but modified as necessary to relate to the Registration
Statement and the Prospectus as amended and supplemented to the time of delivery
of such opinion.
(o) Each time that the Registration Statement or the Prospectus shall be
amended or supplemented to include additional amended financial information or
there is filed with the Commission any document incorporated by reference into
the Prospectus which contains additional amended financial information, the
Trust shall cause KPMG Peat Marwick LLP, or other independent accountants
satisfactory to the Agent, forthwith to furnish the Agent, with a copy to
counsel to the Agent, a letter, dated the date of effectiveness of such
amendment, or the date of filing of such supplement or other document with the
Commission, as the case may be, in form satisfactory to the Agent, of the same
tenor as the letter referred to in Section 5(e) hereof but modified to relate to
the Registration Statement and the Prospectus, as amended and supplemented to
the date of such letter; provided, however, that the Agent acknowledges that no
such letter shall be required for a supplement filed pursuant to Rule 497(h)
under the 1933 Act that contains solely the information set forth in the final
paragraph of Section 3 of this Agreement.
(p) The Trust hereby consents to the Agent trading in the Trust's Common
Shares for the Agent's own account and at the same time as the Trust's sales
agent pursuant to this Agreement.
(q) The Trust will use its best efforts to maintain its qualification as a
regulated investment company entitled to the benefits of Subchapter M of the
Code.
(r) The Trust and the Investment Manager will not, directly or indirectly,
(i) take any action designed to cause or result in, or that constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Trust to facilitate the sale or resale of the
Common Shares or (ii) except for the Privately Negotiated Transactions, sales
pursuant to the Cash Purchase Plan and other transactions which the Agent
receives notice of pursuant to Section 4(k), sell, bid for, purchase, or pay
anyone any compensation for soliciting purchases of the Common Shares or pay or
agree to pay any person any compensation for soliciting another to purchase any
other securities of the Trust (except for the sale of Common Shares under this
Agreement).
SECTION 5. Conditions of Agent's Obligations. The obligations of the Agent
to use reasonable efforts to sell the Common Shares as provided herein shall be
subject to the accuracy, as of the date hereof, and as of each Closing Date, of
the representations and warranties of the Trust and the Investment Manager
contained herein, to the performance by each of them of their respective
obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been instituted or, to the
knowledge of the Trust or the Agent, threatened by the Commission, and any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the Agent's satisfaction.
(b) The Agent shall not have advised the Trust that the Registration
Statement or Prospectus, or any amendment or supplement thereto, contains an
untrue statement of fact that in the Agent's opinion is material, or omits to
state a fact that in the Agent's opinion is material and is required to be
stated therein or is necessary to make the statements therein not misleading.
(c) Except as contemplated in the Prospectus, subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus, there shall not have been any material change in the capitalization
of the Trust, or any material adverse change, or any development that may
reasonably be expected to cause a material adverse change, in the condition
(financial or other), business, prospects, net worth or results of operations of
the Trust.
(d) The Agent shall have received by the first day on which sales are
permitted to be made by the Agent hereunder (the "Commencement Date") and at
every other date specified in Section 4(n) hereof, opinions of Trust Counsel,
which opinion may rely, in part as to matters of Delaware law, upon an opinion
from other counsel to the Trust or the Investment Manager satisfactory to the
Agent, dated as of the Commencement Date and dated as of such other date,
respectively, to the effect that:
(i) The Trust has been duly established and is validly
existing as a business trust in good standing under the laws
of the Commonwealth of Massachusetts, and the Investment
Manager has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of
Delaware.
(ii) Each of the Trust and the Investment Manager has the
trust and corporate power and authority, respectively, to own,
lease and operate its respective properties and conduct its
respective business as described in the Registration Statement
and the Prospectus.
(iii) Each of the Trust and the Investment Manager is duly
qualified as a trust and corporation, respectively, to
transact business and is in good standing in the jurisdiction
of its principal place of business and is duly qualified to do
business in each jurisdiction where such qualification is
required, except where the failure to so qualify would not
have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business
prospects of the Trust or the Investment Manager.
(iv) The Trust has an authorized, issued and outstanding
capitalization as set forth in the Prospectus as of the dates
specified therein. All of the outstanding Common Shares have
been duly authorized by requisite trustee action on the part
of the Trust and validly issued, are fully paid and
non-assessable by the Trust and conform to the description
thereof in the Prospectus.
(v) The Common Shares have been duly and validly authorized,
and, when issued and delivered to and paid for by the
purchasers thereof pursuant to this Agreement, will be fully
paid and nonassessable (except as set forth in the Prospectus)
and conform to the description thereof in the Prospectus; the
issuance of the Common Shares is not subject to any preemptive
or other rights to subscribe for any of the Common Shares
under any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which the Trust is a party or by
which the Trust or any of its properties are bound, or under
the Declaration or By-Laws of the Trust, or under
Massachusetts General Laws; the statements set forth in the
Prospectus under the headings "Description of the Trust",
insofar as such statements constitute legal matters, are
accurate; all action required to be taken for the
authorization, issue and sale of the Common Shares have been
validly and sufficiently taken; the form of certificate, if
any, used to evidence the Common Shares are in proper form and
comply with all applicable statutory requirements and the
Common Shares are the subject of an effective registration
statement permitting their sale in the manner contemplated by
this Agreement.
(vi) This Agreement has been duly authorized, executed and
delivered by the Trust and the Investment Manager, complies
with all applicable provisions of the 1940 Act, the Advisers
Act and the rules and regulations under such acts and
constitutes a valid and binding agreement of the Trust and the
Investment Manager, enforceable in accordance with its terms
(except that with respect to this Agreement, no representation
is made as to compliance with Section 17(i) of the 1940 Act),
subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general
equity principles.
(vii) The Investment Management Agreement has been duly
authorized, executed and delivered by the Trust and the
Investment Manager, complies as to form in all material
respects with all applicable provisions of the 1940 Act, the
Advisers Act and the rules and regulations under such acts and
constitutes the valid and binding obligation of each of the
Trust and the Investment Manager, enforceable in accordance
with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and
to general equity principles.
(viii) The Registration Statement has become effective under
the 1933 Act; to the knowledge of such counsel after due
inquiry, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for
that purpose has been instituted or threatened by the
Commission.
(ix) The Registration Statement, when it became effective, and
the Prospectus and any amendment or supplement thereto, on the
date of filing thereof with the Commission (and at each
Closing Date on or prior to the date of the opinion), complied
as to form in all material respects with the requirements of
the 1933 Act, the 1940 Act and the Rules and Regulations. (x)
The description in the Registration Statement and Prospectus
of statutes, legal and governmental proceedings, contracts and
other documents are accurate in all material respects and
fairly present the information required to be shown; and such
counsel do not know of any statutes or legal or governmental
proceedings required to be described in the Prospectus that
are not described as required.
(xi) To the best of such counsel's knowledge and information,
there are no contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments of the Trust or
the Investment Manager that are required to be described or
referred to in the Registration Statement or to be filed as
exhibits thereto other than those respectively described or
referred to therein or filed as exhibits thereto, the
descriptions thereof and references thereto are correct in all
material respects, and no default exists in the due
performance or observance of any material obligation,
agreement, covenant or condition contained in any contract,
indenture, loan agreement, note or lease so described,
referred to or filed.
(xii) No consent, approval, authorization or order of any
court or governmental authority or agency is required in
connection with the sale of the Common Shares pursuant to this
Agreement, except such as has been obtained under the 1933
Act, the 1940 Act or the Rules and Regulations or such as may
be required under state securities laws; and to the best of
such counsel's knowledge and information, the execution,
delivery and performance of, and the consummation of the
transactions contemplated by, this Agreement by the Trust and
the Investment Manager will not conflict with, or constitute
or result in a breach or violation by the Trust or the
Investment Manager of or a default under, any of the terms or
provisions of, (i) any contract, indenture, mortgage, loan
agreement, note, lease or other instrument known to such
counsel to which the Trust or the Investment Manager is a
party or by which any of them is bound or to which any of
their property or assets are subject, (ii) the provisions of
the Declaration or By-Laws of the Trust and the charter and
by-laws of the Investment Manager or (iii) any statute or any
order, rule or regulation known to such counsel of any court
or governmental agency or body applicable to the Trust or the
Investment Manager or any of their properties.
(xiii) The Trust is registered with the Commission under the
1940 Act as a closed-end diversified management investment
company, and all required action has been taken by the Trust
under the 1933 Act, the 1940 Act and the Rules and Regulations
to make and consummate the Offer; the provisions of the
Declaration and By-Laws of the Trust comply in all material
respects with the requirements of the 1940 Act and the rules
and regulations thereunder; and, to the best of such counsel's
knowledge and information, no order of suspension or
revocation of such registration under the 1940 Act, pursuant
to Section 8(e) of the 1940 Act, has been issued or
proceedings therefor initiated or threatened by the
Commission.
(xiv) The information in the Prospectus under the caption
"Description of the Trust" and in the Statement of Additional
Information under the caption "Tax Matters", to the extent
that it constitutes matters of law or legal conclusions
thereunder, has been reviewed by such counsel and is accurate
and correct in all material respects.
(xv) The Investment Manager is duly registered as an
investment adviser under the Advisers Act and is not
prohibited by the Advisers Act or the 1940 Act, or the rules
and regulations under such acts, from acting under the
Investment Management Agreement for the Trust as contemplated
by the Registration Statement and the Prospectus.
(xvi) The Investment Management Agreement and the Custody
Agreement have been authorized, executed and delivered in
compliance with the 1940 Act and the Advisers Act.
In addition, such counsel shall additionally state that nothing has come to
such counsel's attention that would lead them to believe that the Registration
Statement (other than the financial statements and other financial information
included therein, as to which no belief need be stated), at the time it
(including any post-effective amendment) became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus (other than the financial statements and other financial
information included therein, as to which no belief need be stated), and any
amendments or supplements thereto, on the date of filing thereof with the
Commission and at the Commencement Date and at each Closing Date on or prior to
the date of the opinion included an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(e) At the Commencement Date and at such other dates specified in Section
4(o) hereof, the Agent shall have received a letter from KPMG Peat Marwick LLP,
independent public accountants for the Trust, or other independent accountants
satisfactory to the Agent, dated the date of delivery thereof, substantially in
the form attached hereto as Annex I and otherwise in form and substance
satisfactory to the Agent.
(f) The Agent shall have received a certificate, or certificates, signed by
the President or a Vice President and by the principal financial or accounting
officer of each of the Trust and the Investment Manager, dated as of the
Commencement Date and dated as of the first day of each month (each a
"Certificate Date"), to the effect that, to the best of their knowledge based
upon reasonable investigation:
(i) the representations and warranties of the Trust in this
Agreement are true and correct, as if made at and as of such
Certificate Date, and the Trust has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Certificate Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for
that purpose has been instituted or, to the knowledge of such
officer after due inquiry, is threatened, by the Commission;
(iii) the Registration Statement and the Prospectus contain
all statements that are required to be stated therein in
accordance with the 1933 Act, the 1940 Act and the Rules and
Regulations and conform in all material respects to the
requirements of the 1933 Act, 1940 Act and the Rules and
Regulations and the Registration Statement and the Prospectus
do not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading, and no action suit or proceeding of
law or in equity is pending or, threatened against the Trust
or the Investment Manager, that would be required to be set
forth in the Registration Statement and the Prospectus other
than as set forth therein;
(iv) there has not been, since the respective dates as of
which information is given in the Registration Statement and
the Prospectus, any material adverse change in the condition,
financial or otherwise, of the Trust or in its earnings,
business affairs or business prospects, whether or not arising
in the ordinary course of business, from that set forth in the
Registration Statement and Prospectus;
(v) the Investment Manager has the financial resources
available to it necessary for the performance of its services
and obligations as contemplated in the Prospectus; and
(vi) no proceedings are pending or, to the knowledge of the
Trust or the Investment Manager, threatened against the Trust
or the Investment Manager, before or by any federal, state or
other commission, board or administrative agency wherein an
unfavorable decision, ruling or finding would materially and
adversely affect the business, property, financial condition
or income of either the Trust or the Investment Manager, other
than as set forth in the Registration Statement and the
Prospectus.
In addition, on each Certificate Date the certificate shall also state that
the Common Shares to be sold to that date have been duly and validly authorized
by the Trust and that all action required to be taken for the authorization,
issuance and sale of the Common Shares has been validly and sufficiently taken.
(g) At the Commencement Date and on each Closing Date, the Trust shall have
furnished to the Agent such appropriate further information, certificates and
documents as the Agent may reasonably request.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Agent. The Trust will furnish the Agent with such conformed
copies of such opinions, certificates, letters and other documents as the Agent
shall reasonably request.
SECTION 6. Indemnification and Contribution.
(a) Each of the Trust and the Investment Manager, jointly and severally,
agrees to indemnify and hold harmless the Agent, the directors, officers,
employees and agents of the Agent and each person, if any, who controls the
Agent within the meaning of Section 15 of the 1933 Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, liabilities, expenses
and damages (including, but not limited to, any and all investigative, legal and
other expenses reasonably incurred in connection with, and any and all amounts
paid in settlement of, any action, suit or proceeding between any of the
indemnified parties and any indemnifying parties or between any indemnified
party and any third party, or otherwise, or any claim asserted), as and when
incurred, to which the Agent, or any such person, may become subject under the
1933 Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on (i) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus, or in
any application or other document executed by or on behalf of the Trust or based
on written information furnished by or on behalf of the Trust filed in any
jurisdiction in order to qualify the Common Shares under the securities laws
thereof or filed with the Commission, (ii) the omission or alleged omission to
state in such document a material fact required to be stated in it or necessary
to make the statements in it not misleading or (iii) any breach by any of the
indemnifying parties of any of their respective representations, warranties and
agreements contained in this Agreement, or (iv) the engagement of the Agent
pursuant to, and the performance by the Agent of the services contemplated by,
this Agreement; provided that this indemnity agreement shall not apply to the
extent that such loss, claim, liability, expense or damage (1) arises from the
sale of the Common Shares pursuant to this Agreement and is based on an untrue
statement or omission or alleged untrue statement or omission made in reliance
on and in conformity with information relating to the Agent furnished in writing
to the Trust by the Agent expressly for inclusion in any document described in
clause (a)(i) above, or (2) is found in a final judgment by a court of competent
jurisdiction to have resulted from the bad faith, willful misconduct or gross
negligence of the Agent or the reckless disregard by the Agent of its duties and
obligations hereunder. This indemnity agreement will be in addition to any
liability that the Trust and the Investment Manager might otherwise have.
(b) The Agent agrees to indemnify and hold harmless the Trust and the
Investment Manager, each person, if any, who controls the Trust or the
Investment Manager within the meaning of Section 15 of the 1933 Act or Section
20 of the Exchange Act, each trustee/director of the Trust and the Investment
Manager and each officer of the Trust who signs the Registration Statement to
the same extent as the foregoing indemnity from the Trust and the Investment
Manager to the Agent, but only insofar as losses, claims, liabilities, expenses
or damages arise out of or are based on any untrue statement or omission or
alleged untrue statement or omission made in reliance on and in conformity with
information relating to the Agent furnished in writing to the Trust by the Agent
expressly for use in any document described in clause (a)(i) above. This
indemnity will be in addition to any liability that the Agent might otherwise
have; provided, however, that in no case shall the Agent be liable or
responsible for any amount in excess of the commissions received by the Agent
hereunder.
(c) Any party that proposes to assert the right to be indemnified under
this Section 6 will, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 6, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve it from (i) any liability that it might have to any indemnified party
otherwise than under this Section 6 and (ii) any liability that it may have to
any indemnified party under the foregoing provisions of this Section 6 unless,
and only to the extent that, such omission results in the forfeiture of
substantive rights or defenses by the indemnifying party. If any such action is
brought against any indemnified party and it notifies the indemnifying party of
such commencement, the indemnifying party will be entitled to participate in
and, to the extent that it elects by delivering written notice to the
indemnified party promptly after receiving notice of the commencement of the
action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party, for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own counsel
in any such action, but the fees, expenses and other charges of such counsel
will be at the expense of such indemnified party unless (1) the employment of
counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded (based on
advice of counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based on
advice of counsel to the indemnified party) between the indemnified party and
the indemnifying party (in which case the indemnifying party will not have the
right to direct the defense of such action on behalf of the indemnified party)
or (4) the indemnifying party has not in fact employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the
commencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All such
fees, disbursements and other charges will be reimbursed by the indemnifying
party promptly as they are incurred. An indemnifying party will not be liable
for any settlement of any action or claim effected without its written consent
(which consent will not be unreasonably withheld). No indemnifying party shall,
without the prior written consent of each indemnified party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated by this Section
6 (whether or not any indemnified party is a party thereto), unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising or that may arise out of such
claim, action or proceeding. Notwithstanding any other provision of this Section
6 (c), if at any time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement effected
without its written consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Trust and the Investment Manager
or the Agent, the Trust, the Investment Manager and the Agent will contribute to
the total losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted, but after deducting any contribution received by the Trust or
the Investment Manager from persons other than the Agent, such as persons who
control the Trust within the meaning of the 1933 Act, officers of the Trust who
signed the Registration Statement and directors of the Trust, who also may be
liable for contribution) to which the indemnified party may be subject in such
proportion as shall be appropriate to reflect the relative benefits received by
the Trust and the Investment Manager on the one hand and the Agent on the other.
The relative benefits received by the Trust and the Investment Manager on the
one hand and the Agent on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Trust bear to the total commissions received by the Agent from the sale
of the Common Shares on behalf of the Trust. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable law, the
allocation of contribution shall be made in such proportion as is appropriate to
reflect not only the relative benefits referred to in the foregoing sentence but
also the relative fault of the Trust and the Investment Manager, on the one
hand, and the Agent, on the other, with respect to the statements or omissions
which resulted in such loss, claim, liability, expense or damage, or action in
respect thereof, as well as any other relevant equitable considerations with
respect to such offering. Such relative fault shall be determined by reference
to whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, or other conduct giving rise to
liability, relates to information supplied by the Trust or the Agent, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission, and the conduct of
the parties. The Trust, the Investment Manager and the Agent agree that it would
not be just and equitable if contributions pursuant to this Section 6(d) were to
be determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss, claim,
liability, expense or damage, or action in respect thereof, referred to above in
this Section 6(d) shall be deemed to include, for purposes of this Section 6(d),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6(d), the Agent shall not be
required to contribute any amount in excess of the commissions received by it
under this Agreement and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6(d), any person who controls a
party to this Agreement within the meaning of the 1933 Act, and any officers,
directors, employees or agents of the Agent, will have the same rights to
contribution as that party, and each officer of the Trust who signed the
Registration Statement will have the same rights to contribution as the Trust,
subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 6(d), will notify any such party or parties from whom
contribution may be sought, but the omission to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 6(d). Except for a settlement entered
into pursuant to the last sentence of Section 6(c) hereof, no party will be
liable for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this Section 6
and the representations and warranties of the Trust and the Investment Manager
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any investigation made by or on behalf of the Agent, (ii)
acceptance of the Common Shares and payment therefore or (iii) any termination
of this Agreement.
SECTION 7. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements of the Trust herein or in
certificates delivered pursuant hereto, and the agreements of the Agent
contained in Section 6 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Agent or any
controlling persons, or the Trust (or any of their officers, directors or
controlling persons), and shall survive delivery of and payment for the Common
Shares.
SECTION 8. Termination.
(a) The Agent shall have the right by giving notice as hereinafter
specified at any time to terminate this Agreement if (i) any material adverse
change, or any development has occurred that is reasonably expected to cause
material adverse change, in the business, financial condition or results of
operations of the Trust or the Investment Manager has occurred which, in the
judgment of such Agent, materially impairs the investment quality of the Common
Shares, (ii) the Trust or the Investment Manager shall have failed, refused or
been unable to perform any agreement on its part to be performed hereunder,
(iii) any other condition of the Agent's obligations hereunder is not fulfilled,
(iv) any suspension or limitation of trading in the Common Shares on the NYSE,
or any setting of minimum prices for trading of the Common Shares on such
exchange, shall have occurred, (v) any banking moratorium shall have been
declared by Federal or New York authorities or (vi) an outbreak or material
escalation of major hostilities in which the United States is involved, a
declaration of war by Congress, any other substantial national or international
calamity or any other event or occurrence of a similar character shall have
occurred since the execution of this Agreement that, in the judgment of the
Agent, makes it impractical or inadvisable to proceed with the completion of the
sale of and payment for the Common Shares to be sold by the Agent on behalf of
the Trust. Any such termination shall be without liability of any party to any
other party except that the provisions of Section 4(i), Section 6 and Section 7
hereof shall remain in full force and effect notwithstanding such termination.
(b) The Trust shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion after the first
anniversary of the date of this Agreement. Any such termination shall be without
liability of any party to any other party except that the provisions of Section
4(i), Section 6 and Section 7 hereof shall remain in full force and effect
notwithstanding such termination.
(c) The Agent shall have the right, by giving notice as hereinafter
specified, to terminate this Agreement in its sole discretion at any time after
the first anniversary of the date of this Agreement. Any such termination shall
be without liability of any party to any other party except that the provisions
of Section 4(i), Section 6 and Section 7 hereof shall remain in full force and
effect notwithstanding such termination.
(d) This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 8(a), (b) or (c) above or otherwise by mutual agreement of
the parties; provided that any such termination by mutual agreement shall in all
cases be deemed to provide that Section 4(i), Section 6 and Section 7 shall
remain in full force and effect.
(e) Any termination of this Agreement shall be effective on the date
specified in such notice of termination; provided that such termination shall
not be effective until the close of business on the date of receipt of such
notice by the Agent or the Trust, as the case may be.
SECTION 9. Notices. All notices or communications hereunder shall be in
writing and if sent to the Agent shall be mailed, delivered, telexed or
telecopied and confirmed to the Agent at PaineWebber Incorporated, ▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopy no. (▇▇▇) ▇▇▇-▇▇▇▇,
attention: Corporate Finance Department, or if sent to the Trust or the
Investment Manager, shall be mailed, delivered, telexed or telecopied and
confirmed to the Trust or the Investment Manager at Two Renaissance Square, ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇. Each party to this Agreement may change such address for notices by
sending to the parties to this Agreement written notice of a new address for
such purpose.
SECTION 10. Parties. This Agreement shall inure to the benefit of and be
binding upon the Trust and the Agent and their respective successors and the
controlling persons, officers and directors referred to in Section 6 hereof, and
no other person will have any right or obligation hereunder.
SECTION 11. Adjustments for Stock Splits. The parties acknowledge and agree
that all share related numbers contained in this Agreement (including, without
limitation, the Maximum Amount and the Minimum Price) shall be adjusted to take
into account any stock split effected with respect to the Common Shares.
SECTION 12. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all other prior and contemporaneous agreements and
undertakings, both written and oral, among the parties hereto with regard to the
subject matter hereof.
SECTION 13. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
If the foregoing correctly sets forth the understanding between the Trust
and the Investment Manager and the Agent, please so indicate in the space
provided below for that purpose, whereupon this letter shall constitute a
binding agreement among the Trust, the Investment Manager and the Agent.
Alternatively, the execution of this Agreement by the Trust and the Investment
Manager and its acceptance by or on behalf of the Agent may be evidenced by an
exchange of telegraphic or other written communications.
Very truly yours,
PILGRIM AMERICA PRIME RATE TRUST
By:_________________________________
Name:
Title:
PILGRIM AMERICA INVESTMENTS, INC.
By:_________________________________
Name:
Title:
ACCEPTED as of the date
first above written
PAINEWEBBER INCORPORATED
By:
Name:
Title:
Annex I
Form of Comfort Letter
[To come]