As filed with the Securities and Exchange Commission on June 28, 2004
Securities Act File No. 333-61831
Investment Company Act File No. 811-05410
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
(CHECK APPROPRIATE BOX OR BOXES)
Registration Statement Under The Securities Act Of 1933 /X/ Pre-Effective Amendment No. / / Post-Effective Amendment No. 12 /X/ and/or Registration Statement Under The Investment Company Act Of 1940 /X/ Amendment No. 57 /X/ (Check appropriate box or boxes) ING PRIME RATE TRUST (Exact Name of Registrant Specified in Charter) 7337 E. Doubletree Ranch Road Scottsdale, AZ 85258 (Address of Principal Executive Offices) Registrant's Telephone Number, Including Area Code: (800) 992-0180 Huey P. Falgout, Jr. With copies to: ING Investments, LLC Jeffrey S. Puretz, Esq. 7337 E. Doubletree Ranch Road Dechert LLP Scottsdale, AZ 85258 1775 I Street, NW (Name and Address of Agent for Service) Washington, DC 20006 ---------- |
APPROXIMATE DATE OF PROPOSED OFFERING:
As soon as practical after the effective date of this Registration Statement
If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. /X/
It is proposed that this filing will become effective:
/X/ When declared effective pursuant to Section 8(c) of the Securities Act of 1933.
PROSPECTUS
PROSPECTUS
JULY 1, 2004
25,000,000
COMMON SHARES
ING PRIME RATE TRUST
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THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE ING PRIME RATE TRUST (THE TRUST) THAT A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. YOU SHOULD READ IT CAREFULLY BEFORE YOU INVEST, AND KEEP IT FOR FUTURE REFERENCE.
THE TRUST HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE SEC) A STATEMENT OF ADDITIONAL INFORMATION DATED JULY 1, 2004 (THE SAI) CONTAINING ADDITIONAL INFORMATION ABOUT THE TRUST. THE SAI IS INCORPORATED BY REFERENCE IN ITS ENTIRETY INTO THIS PROSPECTUS. YOU MAY OBTAIN A FREE COPY OF THE SAI BY CONTACTING THE TRUST AT (800) 992-0180 OR BY WRITING TO THE TRUST AT 7337 E. DOUBLETREE RANCH ROAD, SCOTTSDALE, ARIZONA 85258. THE PROSPECTUS, SAI AND OTHER INFORMATION ABOUT THE TRUST ARE AVAILABLE ON THE SEC'S WEBSITE (http://www.sec.gov). THE TABLE OF CONTENTS FOR THE SAI APPEARS ON PAGE 30 OF THIS PROSPECTUS.
COMMON SHARES OF THE TRUST TRADE ON THE NEW YORK STOCK EXCHANGE (THE NYSE) UNDER THE SYMBOL PPR.
MARKET FLUCTUATIONS AND GENERAL ECONOMIC CONDITIONS CAN ADVERSELY AFFECT THE TRUST. THERE IS NO GUARANTEE THAT THE TRUST WILL ACHIEVE ITS INVESTMENT OBJECTIVE. INVESTMENT IN THE TRUST INVOLVES CERTAIN RISKS AND SPECIAL CONSIDERATIONS, INCLUDING RISKS ASSOCIATED WITH THE TRUST'S USE OF LEVERAGE. SEE "RISK FACTORS AND SPECIAL CONSIDERATIONS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF ANY FACTORS THAT MAKE INVESTMENT IN THE TRUST SPECULATIVE OR HIGH RISK.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[ING FUNDS LOGO]
WHAT'S INSIDE
Introduction to the Trust 1 Prospectus Synopsis 2 What You Pay To Invest -- Trust Expenses 6 Financial Highlights 8 Trading and NAV Information 10 Investment Objective and Policies 11 The Trust's Investments 13 Risk Factors and Special Considerations 15 Transaction Policies 20 Plan of Distribution 21 Use of Proceeds 22 Dividends and Distributions 22 Investment Management and Other Service Providers 23 Description of the Trust 25 Description of Capital Structure 27 Tax Matters 28 More Information 29 Statement of Additional Information Table of Contents 30 |
[GRAPHIC] OBJECTIVE [GRAPHIC] INVESTMENT This Prospectus describes the Trust's STRATEGY objective, investment strategy and risks. [GRAPHIC] RISKS You'll also find: WHAT YOU PAY TO INVEST. [GRAPHIC] WHAT YOU A list of the fees and expenses you pay PAY TO -- both directly and indirectly -- INVEST when you invest in the Trust. |
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INTRODUCTION TO THE TRUST |
THIS PROSPECTUS IS DESIGNED TO HELP YOU MAKE AN INFORMED DECISION ABOUT MAKING AN INVESTMENT IN ING PRIME RATE TRUST. PLEASE READ IT CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
Who should invest in the Trust?
ING PRIME RATE TRUST MAY SUIT YOU IF YOU:
- are seeking a high level of current income; and
- are willing to accept the risks associated with an investment in a
leveraged portfolio consisting primarily of senior loans that are typically
below investment grade credit quality.
DESCRIPTION OF THE TRUST
The Trust is a diversified, closed-end management investment company that seeks to provide investors with as high a level of current income as is consistent with the preservation of capital. The Trust seeks to achieve this objective by investing in a professionally managed portfolio comprised primarily of senior loans, an investment typically not available directly to individual investors.
The Trust cannot guarantee that it will achieve its investment objective. In addition, since the senior loans in the Trust's portfolio typically are below investment grade credit quality and the portfolio is leveraged, the Trust has speculative characteristics.
Common Shares of the Trust trade on the NYSE under the symbol PPR.
The Trust's investment manager is ING Investments, LLC. The Trust's sub-adviser is ING Investment Management Co. (formerly known as Aeltus Investment Management, Inc.)
[SIDENOTE]
Risk is the potential that your investment will lose money or not earn as much as you hope. All funds have varying degrees of risk, depending upon the securities they invest in.
This Trust involves certain risks and special considerations, including risks associated with investing in below investment grade assets and risks associated with the Trust's use of borrowing and other leverage strategies. See "Risk Factors and Special Considerations" beginning on page 15.
Please read this Prospectus carefully to be sure you understand the principal risks and strategies associated with the Trust. You should consult the SAI for a complete list of the risks and strategies.
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If you have any questions about the Trust, please call your financial consultant or us at (800) 992-0180.
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If you have any questions, please call (800) 992-0180.
Introduction to the Trust 1
PROSPECTUS SYNOPSIS
The following synopsis is qualified in its entirety by reference to the more detailed information appearing elsewhere in this Prospectus.
DESCRIPTION OF THE TRUST
THE TRUST
The Trust is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). It was organized as a Massachusetts business trust on December 2, 1987. As of June 15, 2004, the Trust's net asset value (NAV) per Common Share was $7.35.
NYSE LISTED
As of June 15, 2004, the Trust had 137,821,394 Common Shares outstanding, which are traded on the NYSE under the symbol PPR. As of June 15, 2004, the last reported sales price of a Common Share of the Trust was $7.90.
INVESTMENT OBJECTIVE
To provide investors with as high a level of current income as is consistent with the preservation of capital. There is no assurance that the Trust will achieve its investment objective.
INVESTMENT MANAGER/SUB-ADVISER
The Trust's investment manager is ING Investments, LLC (ING Investments or the Investment Manager), an Arizona limited liability company. The Investment Manager had assets under management of over $35.4 billion as of March 31, 2004.
The Investment Manager is an indirect wholly-owned subsidiary of ING Groep N.V. (NYSE: ING) (ING Groep). ING Groep is a global financial institution active in the fields of insurance, banking and asset management in more than 65 countries with more than 100,000 employees.
The Investment Manager receives an annual fee, payable monthly, in an amount equal to 0.80% of the Trust's average daily gross asset value, minus the sum of the Trust's accrued and unpaid dividends on any outstanding preferred shares and accrued liabilities (other than liabilities for the principal amount of any borrowings incurred, commercial paper or notes issued by the Trust and the liquidation preference of any outstanding preferred shares) (Managed Assets). This definition includes the assets acquired through the Trust's use of leverage.
Effective August 1, 2003, ING Investment Management Co. (INGIM or Sub-Adviser) (formerly known as Aeltus Investment Management, Inc.) serves as Sub-Adviser to the Trust. See "Investment Management and Other Service Providers -- Sub-Adviser" on page 23. INGIM is an affiliate of the Investment Manager.
DISTRIBUTIONS
Income dividends on Common Shares accrue and are declared and paid monthly. Income dividends may be distributed in cash or reinvested in additional full and fractional shares of the Trust through the Trust's Shareholder Investment Program.
PRIMARY INVESTMENT STRATEGY
The Trust seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in higher yielding, U.S. dollar denominated, floating rate secured senior loans (Senior Loans). The Senior Loans are typically rated below investment grade credit quality. The Trust makes its investments in Senior Loans by purchasing a portion of the overall loan, I.E., the Trust becomes one of a number of lenders participating in the loan. The Trust will provide shareholders with at least 60 days' prior notice of any change in this investment policy.
The Trust only invests in Senior Loans made to corporations or other business entities organized under U.S. or Canadian law and which are domiciled in the U.S., Canada or in U.S. territories or possessions. Senior Loans either hold the most senior position in the capital structure of the borrower or hold an equal ranking with other senior debt or have characteristics that the Investment Manager believes justify treatment as senior debt.
2 Prospectus Synopsis
PROSPECTUS SYNOPSIS
OTHER INVESTMENT STRATEGIES AND POLICIES
Assets not invested in Senior Loans may be invested in unsecured loans, subordinated loans, short-term debt securities, and equities acquired in connection with investments in loans. See "Investment Objective and Policies" on page 11.
Loans in which the Trust invests typically have interest rates which reset at least quarterly and may reset as frequently as daily. The maximum duration of an interest rate reset on any loan in which the Trust may invest is one year. In order to achieve overall reset balance, the Trust will ordinarily maintain a dollar-weighted average time to next interest rate adjustment on its loans of 90 days or less.
Normally at least 80% of the Trust's portfolio will be invested in Senior Loans with maturities of one to ten years. The maximum maturity on any loan in which the Trust may invest is ten years.
To seek to increase the yield on the Common Shares, the Trust may engage in lending its portfolio securities. Such lending will be fully secured by investment grade collateral held by an independent agent.
The Trust may hold a portion of its assets in short-term interest bearing instruments. Moreover, in periods when, in the opinion of the Investment Manager or Sub-Adviser, a temporary defensive position is appropriate, up to 100% of the Trust's assets may be held in cash or short-term interest bearing instruments. The Trust may not achieve its investment objective when pursuing a temporary defensive position.
The Trust may not invest in Senior Loans made to foreign borrowers other than borrowers organized under Canadian law and which are domiciled in the U.S., Canada or in U.S. territories or possessions.
The Trust may engage in executing repurchase and reverse repurchase agreements.
LEVERAGE
To seek to increase the yield on the Common Shares, the Trust employs financial leverage by borrowing money and issuing preferred shares. See "Risk Factors and Special Considerations -- Leverage" on page 16.
BORROWINGS
Under the 1940 Act, the Trust may borrow up to an amount equal to 33 1/3% of its total assets (including the proceeds of the borrowings) less all liabilities other than borrowings. The Trust's obligations to holders of its debt are senior to its ability to pay dividends on, or redeem or repurchase, Common Shares and preferred shares, or to pay holders of Common Shares and preferred shares in the event of liquidation.
PREFERRED SHARES
Under the 1940 Act, the Trust may issue preferred shares so long as immediately after any issuance of preferred shares the value of the Trust's total assets (less all Trust liabilities and indebtedness that is not senior indebtedness) is at least twice the amount of the Trust's senior indebtedness plus the involuntary liquidation preference of all outstanding shares.
The Trust is authorized to issue an unlimited number of shares of a class of preferred stock in one or more series. In November 2000, the Trust issued 3,600 shares each of Series M, T, W, Th and F Auction Rate Cumulative Preferred Shares, $0.01 par value, $25,000 liquidation preference per share, for a total issuance of $450 million (the Preferred Shares). The Trust's obligations to holders of the Preferred Shares are senior to its ability to pay dividends on, or redeem or repurchase, Common Shares, or to pay holders of Common Shares in the event of liquidation.
The 1940 Act also requires that the holders of the Preferred Shares, voting as a separate class, have the right to:
- elect at least two trustees at all times; and
- elect a majority of the trustees at any time when dividends on any series of Preferred Shares are unpaid for two full years.
In each case, the holders of Common Shares voting separately as a class will elect the remaining trustees.
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If you have any questions, please call (800) 992-0180.
Prospectus Synopsis 3
PROSPECTUS SYNOPSIS
DIVERSIFICATION
The Trust maintains a diversified investment portfolio, a strategy which seeks to limit exposure to any one issuer or industry.
As a diversified investment company, the Trust may not make investments in any one issuer (other than the U.S. government) if, immediately after such purchase or acquisition, more than 5% of the value of the Trust's total assets would be invested in such issuer, or the Trust would own more than 25% of any outstanding issue. The Trust will consider a borrower on a loan, including a loan participation, to be the issuer of that loan. This strategy is a fundamental policy that may not be changed without shareholder approval. With respect to no more than 25% of its total assets, the Trust may make investments that are not subject to the foregoing restrictions.
In addition, a maximum of 25% of the Trust's total assets, measured at the time of investment, may be invested in any one industry. This strategy is also a fundamental policy that may not be changed without shareholder approval.
PLAN OF DISTRIBUTION
The Common Shares are offered by the Trust through the Trust's Shareholder Investment Program. The Shareholder Investment Program allows participating shareholders to reinvest all dividends in additional shares of the Trust, and also allows participants to purchase additional Common Shares through optional cash investments in amounts ranging from a minimum of $100 to a maximum of $100,000 per month. The Trust reserves the right to reject any purchase order. Please note that cash, travelers checks, third party checks, money orders and checks drawn on non-US banks (even if payment may be effected through a US bank) generally will not be accepted. Common Shares may be issued by the Trust under the Shareholder Investment Program only if the Trust's Common Shares are trading at a premium to net asset value (NAV). If the Trust's Common Shares are trading at a discount to NAV, Common Shares purchased under the Shareholder Investment Program will be purchased on the open market. See "Plan of Distribution" on page 21.
Shareholders may elect to participate in the Shareholder Investment Program by telephoning the Trust or submitting a completed Participation Form to DST Systems, Inc. (DST).
Common Shares also may be offered pursuant to privately negotiated transactions between the Trust or ING Funds Distributor, LLC and individual investors. Common Shares of the Trust issued in connection with privately negotiated transactions will be issued at the greater of (i) NAV per Common Share of the Trust's Common Shares or (ii) at a discount ranging from 0% to 5% of the average daily market price of the Trust's Common Shares at the close of business on the two business days preceding the date upon which Common Shares are sold pursuant to the privately negotiated transaction. See "Plan of Distribution" on page 21.
ADMINISTRATOR
The Trust's administrator is ING Funds Services, LLC (the Administrator). The Administrator is an affiliate of the Investment Manager. The Administrator receives an annual fee, payable monthly, in a maximum amount equal to 0.25% of the Trust's Managed Assets.
RISK FACTORS AND SPECIAL CONSIDERATIONS
CREDIT RISK ON LOANS
Loans in the Trust's portfolio will typically be below investment grade credit quality. Investment in the Trust involves the risk that borrowers may default on obligations to pay principal or interest when due, that lenders may have difficulty liquidating the collateral securing the loans or enforcing their rights under the terms of the loans, and that the Trust's investment objective may not be realized.
4 Prospectus Synopsis
PROSPECTUS SYNOPSIS
INTEREST RATE RISK
Changes in market interest rates will affect the yield on the Trust's Common Shares. If market interest rates fall, the yield on the Trust's Common Shares will also fall. In addition, changes in market interest rates may cause the Trust's NAV to experience moderate volatility because of the lag between changes in market rates and the resetting of the floating rates on assets in the Trust's portfolio. To the extent that market interest rate changes are reflected as a change in the market spreads for loans of the type and quality in which the Trust invests, the value of the Trust's portfolio may decrease in response to an increase in such spreads. Finally, substantial increases in interest rates may cause an increase in loan defaults as borrowers may lack the resources to meet higher debt service requirements.
DISCOUNT FROM NAV
As with any security, the market value of the Common Shares may increase or decrease from the amount that you paid for the Common Shares.
The Trust's Common Shares may trade at a discount to NAV. This is a risk separate and distinct from the risk that the Trust's NAV per Common Share may decrease.
LEVERAGE
The Trust's use of leverage through borrowings and the issuance of preferred shares can adversely affect the yield on the Trust's Common Shares. To the extent that the Trust is unable to invest the proceeds from the use of leverage in assets which pay interest at a rate which exceeds the rate paid on the leverage, the yield on the Trust's Common Shares will decrease. In addition, in the event of a general market decline in the value of assets such as those in which the Trust invests, the effect of that decline will be magnified in the Trust because of the additional assets purchased with the proceeds of the leverage. As of June 15, 2004, the Trust had $444 million of borrowings outstanding under two credit facilities totaling $525, and $450 million of Preferred Shares.
LIMITED SECONDARY MARKET FOR LOANS
Because of the limited secondary market for loans, the Trust may be limited in its ability to sell loans in its portfolio in a timely fashion and/or at a favorable price.
DEMAND FOR LOANS
An increase in demand for loans may adversely affect the rate of interest payable on new loans acquired by the Trust, and it may also increase the price of loans in the secondary market.
IMPACT OF SHAREHOLDER INVESTMENT PROGRAM AND PRIVATELY NEGOTIATED TRANSACTIONS
The issuance of Common Shares through the Shareholder Investment Program and/or through privately negotiated transactions may have an adverse effect on prices in the secondary market for the Trust's Common Shares by increasing the number of Common Shares available for sale. In addition, the Common Shares may be issued at a discount to the market price for such Common Shares, which may put downward pressure on the market price for Common Shares of the Trust.
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If you have any questions, please call (800) 992-0180.
Prospectus Synopsis 5
WHAT YOU PAY TO INVEST -- TRUST EXPENSES
The cost you pay to invest in the Trust includes the expenses incurred by the Trust. In accordance with SEC requirements, the table below shows the expenses of the Trust, including interest expense on borrowings, as a percentage of the average net assets of the Trust, and not as a percentage of gross assets or Managed Assets. By showing expenses as a percentage of net assets, expenses are not expressed as a percentage of all of the assets that are invested for the Trust. The Table below assumes that the Trust has issued $450 million of Preferred Shares and has borrowed an amount equal to 25% of its Managed Assets. For information about the Trust's expense ratios if the Trust had not borrowed or issued Preferred Shares, see "Risk Factors and Special Considerations -- Annual Expenses Without Borrowings or Preferred Shares."
SHAREHOLDER TRANSACTION EXPENSES
Shareholder Investment Program Fees NONE Privately Negotiated Transactions Commission (as a percentage of offering price) NONE ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON SHARES) Management and Administrative Fees(1) 2.05% Interest Expense on Borrowed Funds 0.89% Other Operating Expenses(2) 0.43% Total Annual Expenses(3) 3.37% |
(1) Pursuant to the Investment Management Agreement with the Trust, ING
Investments is paid a fee of 0.80% of the Trust's Managed Assets. Pursuant
to its Administration Agreement with the Trust, ING Funds Services, LLC,
the Trust's Administrator, is paid a fee of 0.25% of the Trust's Managed
Assets. See "Investment Management and Other Service Providers -- The
Administrator."
(2) "Other Operating Expenses" are based on estimated amounts for the current
fiscal year, which, in turn, are based on "other operating expenses" for
the fiscal year ended February 29, 2004, and does not include the expenses
of borrowing.
(3) If the Total Annual Expenses of the Trust were expressed as a percentage of Managed Assets (assuming the same 25% borrowing), the Total Annual Expense ratio would be 1.73%.
6 What You Pay to Invest -- Trust Expenses
WHAT YOU PAY TO INVEST -- TRUST EXPENSES
EXAMPLE
The following hypothetical example shows the amount of the expenses that an investor in the Trust would bear on a $1,000 investment that is held for the different time periods in the table. The example assumes that all dividends and other distributions are reinvested at NAV and that the percentage amounts listed under Total Annual Expenses above remain the same in the years shown. The tables and the assumption in the hypothetical example of a 5% annual return are required by regulation of the SEC applicable to all investment companies. The assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of the Trust's Common Shares. For more complete descriptions of certain of the Trust's costs and expenses, see "Investment Management and Other Service Providers."
The following example applies to shares issued in connection with the Trust's Shareholder Investment Program and shares issued in connection with privately negotiated transactions. This example does not take into account whether such shares are purchased at a discount or a premium to the Trust's net asset value.
1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------------------------------- You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and where the Trust has borrowed in an amount equal to 25% of its Managed Assets $ 34 $ 106 $ 183 $ 395 You would pay the following expenses on a $1,000 investment, assuming a 5% annual return and where the Trust has not borrowed $ 20 $ 62 $ 106 $ 230 |
The purpose of the above table is to assist you in understanding the various costs and expenses that an investor in the Trust will bear directly or indirectly.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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If you have any questions, please call (800) 992-0180.
What You Pay to Invest -- Trust Expenses 7
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS TABLE
The table below sets forth selected financial information which has been derived from the financial statements in the Trust's Annual Report dated as of February 29, 2004. The information in the table below has been audited by KPMG LLP, independent registered public accounting firm. The auditors' report is contained in the Trust's Annual Report dated as of February 29, 2004 which is incorporated by reference into the SAI. A free copy of the Annual Report may be obtained by calling (800) 992-0180.
YEARS ENDED FEBRUARY 28 OR FEBRUARY 29, -------------------------------------------------------------------- 2004 2003 2002 2001 2000(4) ----------- ----------- ----------- ----------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year $ 6.73 $ 7.20 $ 8.09 $ 8.95 $ 9.24 Net investment income 0.46 0.50 0.74 0.88 0.79 Net realized and unrealized gain (loss) on investments 0.61 (0.47) (0.89) (0.78) (0.30) ----------- ----------- ----------- ----------- ----------- Increase (decrease) in net asset value from investment operations 1.07 0.03 (0.15) 0.10 0.49 Distributions to Common Shareholders from net investment income (0.42) (0.45) (0.63) (0.86) (0.78) Distribution to Preferred Shareholders (0.04) (0.05) (0.11) (0.06) -- Reduction in net asset value from Preferred Shares offerings -- -- -- (0.04) -- ----------- ----------- ----------- ----------- ----------- Net asset value, end of year $ 7.34 $ 6.73 $ 7.20 $ 8.09 $ 8.95 =========== =========== =========== =========== =========== Closing market price at end of year $ 7.84 $ 6.46 $ 6.77 $ 8.12 $ 8.25 TOTAL INVESTMENT RETURN(1) Total investment return at closing market price(2) 28.77% 2.53% (9.20)% 9.10% (5.88)% Total investment return at net asset value(3) 15.72% 0.44% (3.02)% 0.19% 5.67% Ratios/Supplemental Data Net assets end of year (000's) $ 1,010,325 $ 922,383 $ 985,982 $ 1,107,432 $ 1,217,339 Preferred Shares Aggregate amount outstanding (000's) $ 450,000 $ 450,000 $ 450,000 $ 450,000 -- Borrowings at end of year (000's) $ 225,000 $ 167,000 $ 282,000 $ 510,000 $ 484,000 Liquidation and market value per share of Preferred Shares $ 25,000 $ 25,000 $ 25,000 $ 25,000 -- Asset coverage per $1,000 of debt(6) $ 2,500 $ 2,500 $ 2,350 $ 2,150 $ 3,520 Average borrowings (000's) $ 143,194 $ 190,671 $ 365,126 $ 450,197 $ 524,019 Ratios to average net assets including Preferred Shares(7) Expenses (before interest and other fees related to revolving credit facility) 1.45% 1.49% 1.57% 1.62% -- Expenses 1.65% 1.81% 2.54% 3.97% -- Net investment income 4.57% 4.97% 6.83% 9.28% -- Ratios to average net assets plus borrowing Expenses (before interest and other fees related to revolving credit facility) 1.84% 1.82% 1.66% 1.31% 1.00%(5) Expenses 2.09% 2.23% 2.70% 3.21% 2.79%(5) Net investment income 5.82% 6.10% 7.24% 7.50% 6.12% Ratios to average net assets Expenses (before interest and other fees related to revolving credit facility) 2.11% 2.19% 2.25% 1.81% 1.43%(5) Expenses 2.40% 2.68% 3.64% 4.45% 4.00%(5) Net investment income 6.68% 7.33% 9.79% 10.39% 8.77% Portfolio turnover rate 87% 48% 53% 46% 71% Common shares outstanding at end of year (000's) 137,638 136,973 136,973 136,847 136,036 |
8 Financial Highlights
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28 OR FEBRUARY 29, ---------------------------------------------------------------------- 1999(4) 1998(4) 1997(4) 1996(9) 1995 ----------- ----------- ----------- ----------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year $ 9.34 $ 9.45 $ 9.61 $ 9.66 $ 10.02 Net investment income 0.79 0.87 0.82 0.89 0.74 Net realized and unrealized gain (loss) on investments (0.10) (0.13) (0.02) (0.08) 0.07 ----------- ----------- ----------- ----------- ----------- Increase (decrease) in net asset value from investment operations 0.69 0.74 0.80 0.81 0.81 Distributions to Common Shareholders from net investment income (0.82) (0.85) (0.82) (0.86) (0.73) Distribution to Preferred Shareholders 0.03 -- -- -- -- Reduction in net asset value from Preferred Shares offerings -- -- (0.14) -- (0.44) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year $ 9.24 $ 9.34 $ 9.45 $ 9.61 $ 9.66 =========== =========== =========== =========== =========== Closing market price at end of year $ 9.56 $ 10.31 $ 10.00 $ 9.50 $ 8.75 TOTAL INVESTMENT RETURN(1) Total investment return at closing market price(2) 1.11% 12.70% 15.04%(8) 19.19% 3.27%(8) Total investment return at net asset value(3) 7.86% 8.01% 8.06%(8) 9.21% 5.24%(8) Ratios/Supplemental Data Net assets end of year (000's) $ 1,202,565 $ 1,034,403 $ 1,031,089 $ 862,938 $ 867,083 Preferred Shares Aggregate amount outstanding (000's) -- -- -- -- -- Borrowings at end of year (000's) $ 534,000 -- -- -- -- Liquidation and market value per share of Preferred Shares -- -- -- -- -- Asset coverage per $1,000 of debt(6) $ 3,250 -- -- -- -- Average borrowings (000's) $ 490,978 $ 346,110 $ 131,773 -- -- Ratios to average net assets including Preferred Shares(7) Expenses (before interest and other fees related to revolving credit facility) -- -- -- -- -- Expenses -- -- -- -- -- Net investment income -- -- -- -- -- Ratios to average net assets plus borrowing Expenses (before interest and other fees related to revolving credit facility) 1.05%(5) 1.04% 1.13% -- -- Expenses 2.86%(5) 2.65% 1.92% -- -- Net investment income 6.00% 6.91% 7.59% -- -- Ratios to average net assets Expenses (before interest and other fees related to revolving credit facility) 1.50%(5) 1.39% 1.29% -- -- Expenses 4.10%(5) 3.54% 2.20% 1.23% 1.30% Net investment income 8.60% 9.23% 8.67% 9.23% 7.59% Portfolio turnover rate 68% 90% 82% 88% 108% Common shares outstanding at end of year (000's) 130,206 110,764 109,140 89,794 89,794 |
(1) Total investment return calculations are attributable to common
shareholders.
(2) Total investment return measures the change in the market value of your
investment assuming reinvestment of dividends and capital gain
distributions, if any, in accordance with the provisions of the dividend
reinvestment plan.
(3) Total investment return at net asset value has been calculated assuming a
purchase at net asset value at the beginning of each period and a sale at
net asset value at the end of each period and assumes reinvestment of
dividends and capital gain distributions in accordance with the provisions
of the dividend reinvestment plan. This calculation differs from total
investment return because it excludes the effects of changes in the market
values of the Trust's shares.
(4) The Investment Manager agreed to reduce its fee for a period of three years
from the Expiration Date of the November 12, 1996 Rights Offering to 0.60%
of the average daily net assets, plus the proceeds of any outstanding
borrowings, over $1.15 billion.
(5) Calculated on total expenses before impact of earnings credits.
(6) Asset coverage represents the total assets available for settlement of
Preferred Stockholder's interest and notes payables in relation to the
Preferred Shareholder interest and notes payable balance outstanding. The
Preferred Shares were first offered November 2, 2000.
(7) Ratios do not reflect the effect of dividend payments to Preferred
Shareholders; income ratios reflect income earned on assets attributable to
preferred shares.
(8) Calculation of total return excludes the effects of the per share dilution
resulting from the rights offering as the total account value of a fully
subscribed shareholder was minimally impacted.
(9) Pilgrim Investments, Inc., the Trust's investment manager, acquired certain
assets of Pilgrim Management Corporation, the Trust's former investment
manager, in a transaction that closed on April 7, 1995.
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Financial Highlights 9
TRADING AND NAV INFORMATION
The following table shows for the Trust's Common Shares for the periods indicated: (1) the high and low closing prices as shown on the NYSE Composite Transaction Tape; (2) the NAV per Common Share represented by each of the high and low closing prices as shown on the NYSE Composite Transaction Tape; and (3) the discount from or premium to NAV per Share (expressed as a percentage) represented by these closing prices. The table also sets forth the aggregate number of shares traded as shown on the NYSE Composite Transaction Tape during the respective quarter.
PREMIUM/(DISCOUNT) PRICE NAV TO NAV ----------------- --------------- ------------------ REPORTED CALENDAR QUARTER ENDED HIGH LOW HIGH LOW HIGH LOW NYSE VOLUME -------- -------- ------- ------- ------ ------- ----------- March 31, 2002 $ 6.950 $ 6.640 $ 7.29 $ 7.25 (4.66)% (8.41)% 11,781,400 June 30, 2002 6.950 6.230 7.25 7.13 (4.14) (12.62) 13,759,808 September 30, 2002 6.290 5.610 7.07 6.96 (11.03) (19.40) 16,512,192 December 31, 2002 6.100 5.440 6.69 6.55 (8.82) (16.95) 16,672,498 March 31, 2003 6.690 6.130 6.74 6.69 (0.74) (8.37) 16,702,202 June 30, 2003 7.240 6.690 6.98 6.74 3.72 (0.74) 19,962,000 September 30, 2003 7.660 7.000 7.00 7.08 9.43 (1.13) 17,908,200 December 31, 2003 8.020 7.250 7.27 7.13 10.32 1.68 15,522,226 March 31, 2004 8.170 7.710 7.36 7.34 11.01 5.04 18,287,600 |
On June 15, 2004, the last reported sale price of a Common Share of the Trust's Common Shares on the NYSE was $7.90. The Trust's NAV on June 15, 2004 was $7.35. See "Transaction Policies -- Net Asset Value." On June 15, 2004 the last reported sale price of a share of the Trust's Common Shares on the NYSE ($7.90) represented a 7.4% premium above NAV ($7.35) as of that date.
The Trust's Common Shares have traded in the market above, at, and below NAV since March 9, 1992, when the Trust's Common Shares were listed on the NYSE. The Trust cannot predict whether its Common Shares will trade in the future at a premium or discount to NAV, and if so, the level of such premium or discount. Shares of closed-end investment companies frequently trade at a discount from NAV.
10 Trading and NAV Information
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Trust's investment objective is to provide investors with as high a level of current income as is consistent with the preservation of capital. The Trust seeks to achieve this investment objective by investing in the types of assets described below:
1. SENIOR LOANS. Under normal circumstances, at least 80% of the Trust's net assets, plus the amount of any borrowings for investment purposes, will be invested in higher yielding, U.S. dollar denominated, floating rate secured senior loans (Senior Loans). The Trust will provide shareholders with at least 60 days' prior notice of any change in this investment policy.
The Trust only invests in Senior Loans made to corporations or other business entities organized under U.S. or Canadian law and which are domiciled in the U.S., Canada or in U.S. territories or possessions. These Senior Loans are typically below investment grade in quality. The Trust makes its investments in Senior Loans by purchasing a portion of the overall loan, I.E., the Trust becomes one of a number of lenders participating in the loan.
Senior Loans either hold the most senior position in the capital structure of the borrower or hold an equal ranking with other senior debt or have characteristics that the Investment Manager or Sub-Adviser believes justify treatment as senior debt.
The Trust does not invest in Senior Loans whose interest rates are tied to non-domestic interest rates other than the London Inter-Bank Offered Rate (LIBOR).
2. OTHER INVESTMENTS. Under normal circumstances the Trust may also invest up to 20% of its total assets in the following types of investments (Other Investments):
- unsecured loans
- subordinated loans
- short-term debt securities
- equity securities incidental to investment in loans
3. CASH AND SHORT-TERM INSTRUMENTS. Under normal circumstances, the Trust may invest in cash and/or short-term instruments. During periods when, in the opinion of the Investment Manager or Sub-Adviser, a temporary defensive posture in the market is appropriate, the Trust may hold up to 100% of its assets in cash and/or short-term instruments.
FUNDAMENTAL DIVERSIFICATION POLICIES
1. INDUSTRY DIVERSIFICATION. The Trust may invest in any industry. The Trust may not invest more than 25% of its total assets in any single industry.
2. BORROWER DIVERSIFICATION. As a diversified investment company, the Trust may not make investments in any one issuer (other than the U.S. government) if, immediately after such purchase or acquisition, more than 5% of the value of the Trust's total assets would be invested in such issuer, or the Trust would own more than 25% of any outstanding issue. The Trust will consider the borrower on a loan, including a loan participation, to be the issuer of such loan. With respect to no more than 25% of its total assets, the Trust may make investments that are not subject to the foregoing restrictions.
These fundamental diversification policies may only be changed with approval by a majority of all shareholders, including the vote of a majority of the holders of Preferred Shares, and holders of any other preferred shares, voting separately as a class.
INVESTMENT POLICIES
The Investment Manager and Sub-Adviser follow certain investment policies set by the Trust's Board of Trustees. Some of those policies are set forth below. Please refer to the SAI for additional information on these and other investment policies.
1. PAYABLE IN U.S. DOLLARS. All investments purchased by the Trust must be denominated in U.S. dollars.
2. MATURITY. Normally at least 80% of the Trust's total assets will be invested in Senior Loans with maturities of one to ten years. The maximum maturity on any loan in which the Trust can invest is ten years.
3. INTEREST RATE RESETS. Normally, at least 80% of the Trust's total assets will be invested in assets with rates of interest which reset either daily, monthly, or quarterly. The maximum duration of an interest rate reset on any loan investment in which the Trust may invest is one year. In addition, the Trust will ordinarily maintain a dollar-weighted average time until the next interest rate adjustment on its loan investments of 90 days or less.
4. LIMITATIONS ON SUBORDINATED AND UNSECURED LOANS. The Trust may also invest up to 5% of its total assets, measured at the time of investment, in subordinated and unsecured loans. The Trust may acquire a subordinated loan only if, at the time of acquisition, it acquires or holds a Senior Loan from the same borrower. The Trust will acquire unsecured loans only where the Investment Manager or Sub-Adviser believes, at the time of acquisition, that the Trust would have the right to payment upon default that is not subordinate to any other creditor. The maximum of 5% of the Trust's assets invested in subordinated and unsecured loans will constitute part of the 20% of the Trust's assets that may be invested in "Other Investments" as described above, and will not count toward the 80% of the Trust's assets that are normally invested in Senior Loans.
5. INVESTMENT QUALITY; CREDIT ANALYSIS. Loans in which the Trust invests generally are rated below investment grade credit quality or are unrated. In acquiring a loan, the Investment
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Investment Objective and Policies 11
INVESTMENT OBJECTIVE AND POLICIES
Manager or Sub-Adviser will consider some or all of the following factors concerning the borrower: ability to service debt from internally generated funds; adequacy of liquidity and working capital; appropriateness of capital structure; leverage consistent with industry norms; historical experience of achieving business and financial projections; the quality and experience of management; and adequacy of collateral coverage. The Investment Manager or Sub-Adviser performs its own independent credit analysis of each borrower. In so doing, the Investment Manager or Sub-Adviser may utilize information and credit analyses from agents that originate or administer loans, other lenders investing in a loan, and other sources. The Investment Manager or Sub-Adviser also may communicate directly with management of the borrowers. These analyses continue on a periodic basis for any Senior Loan held by the Trust. See "Risk Factors and Special Considerations -- Credit Risk on Senior Loans."
6. USE OF LEVERAGE. The Trust may borrow money and issue preferred shares to the fullest extent permitted by the 1940 Act. See "Policy on Borrowing" and "Policy on Issuance of Preferred Shares" below.
7. SHORT-TERM INSTRUMENTS. Short-term instruments in which the Trust invests may include (i) commercial paper rated A-1 by Standard and Poor's or P-1 by Moody's Investors Service, Inc., or of comparable quality as determined by the Investment Manager, (ii) certificates of deposit, banker's acceptances, and other bank deposits and obligations, and (iii) securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
8. SECURITIES LENDING. The Trust also may lend portfolio securities on a short-term or long-term basis, an amount equal to up to 33 1/3% of its total assets.
POLICY ON BORROWING
Beginning in May of 1996, the Trust began a policy of borrowing for investment purposes. The Trust seeks to use proceeds from borrowing to acquire loans and other investments which pay interest at a rate higher than the rate the Trust pays on borrowings. Accordingly, borrowing has the potential to increase the Trust's total income available to holders of its Common Shares.
The Trust may issue notes, commercial paper, or other evidences of indebtedness and may be required to secure repayment by mortgaging, pledging, or otherwise granting a security interest in the Trust's assets. The terms of any such borrowings are subject to the provisions of the 1940 Act, and also subject to the more restrictive terms of the credit agreements relating to borrowings and additional guidelines imposed by rating agencies which are more restrictive than the provisions of the 1940 Act. The Trust is permitted to borrow an amount equal to up to 331/3%, or such other percentage permitted by law, of its total assets (including the amount borrowed) less all liabilities other than borrowings. See "Risk Factors and Special Considerations -- Leverage" and "Risk Factors and Special Considerations -- Restrictive Covenants and 1940 Act Restrictions."
POLICY ON ISSUANCE OF PREFERRED SHARES
The Trust has a policy of issuing preferred shares for investment purposes. The Trust seeks to use the proceeds from preferred shares to acquire loans and other investments which pay interest at a rate higher than the dividends payable on preferred shares. The terms of the issuance of preferred shares are subject to the 1940 Act and to additional guidelines imposed by rating agencies, which are more restrictive than the provisions of the 1940 Act. Under the 1940 Act, the Trust may issue preferred shares so long as immediately after any issuance of preferred shares the value of the Trust's total assets (less all Trust liabilities and indebtedness that is not senior indebtedness) is at least twice the amount of the Trust's senior indebtedness plus the involuntary liquidation preference of all outstanding shares. In November 2000, the Trust issued 18,000 Preferred Shares for a total of $450 million. See "Risk Factors and Special Considerations -- Leverage."
12 Investment Objective and Policies
THE TRUST'S INVESTMENTS
As stated above under Investment Objective and Policies, the Trust will invest primarily in Senior Loans. This section contains a discussion of the characteristics of Senior Loans, the manner in which those investments are made and the market for Senior Loans.
SENIOR LOAN CHARACTERISTICS
Senior Loans are loans that are typically made to business borrowers to finance leveraged buy-outs, recapitalizations, mergers, stock repurchases and internal growth. Senior Loans generally hold the most senior position in the capital structure of a borrower and are usually secured by liens on the assets of the borrowers, including tangible assets such as cash, accounts receivable, inventory, property, plant and equipment, common and/or preferred stock of subsidiaries, and intangible assets including trademarks, copyrights, patent rights and franchise value. The Trust may also receive guarantees as a form of collateral.
By virtue of their senior position and collateral, Senior Loans typically provide lenders with the first right to cash flows or proceeds from the sale of a borrower's collateral if the borrower becomes insolvent (subject to the limitations of bankruptcy law, which may provide higher priority to certain claims such as, for example, employee salaries, employee pensions and taxes). This means Senior Loans are generally repaid before unsecured bank loans, corporate bonds, subordinated debt, trade creditors, and preferred or common stockholders.
Senior Loans typically pay interest at least quarterly at rates which equal a fixed percentage spread over a base rate such as LIBOR. For example, if LIBOR were 2.00% and the borrower were paying a fixed spread of 3.00%, the total interest rate paid by the borrower would be 5.00%. Base rates and, therefore, the total rates paid on Senior Loans float, I.E., they change as market rates of interest change.
Although a base rate such as LIBOR can change every day, loan agreements for Senior Loans typically allow the borrower the ability to choose how often the base rate for its loan will change. Such periods can range from one day to one year, with most borrowers choosing monthly or quarterly reset periods. During periods of rising interest rates, borrowers will tend to choose longer reset periods, and during periods of declining interest rates, borrowers will tend to choose shorter reset periods. The fixed spread over the base rate on a Senior Loan typically does not change.
Senior Loans generally are arranged through private negotiations between a borrower and several financial institutions represented by an agent who is usually one of the originating lenders. In larger transactions, it is common to have several agents; however, generally only one such agent has primary responsibility for ongoing administration of a Senior Loan. Agents are typically paid fees by the borrower for their services. The agent is primarily responsible for negotiating the loan agreement which establishes the terms and conditions of the Senior Loan and the rights of the borrower and the lenders. The agent also is responsible for monitoring collateral and for exercising remedies available to the lenders such as foreclosure upon collateral.
Loan agreements may provide for the termination of the agent's agency status in the event that it fails to act as required under the relevant loan agreement, becomes insolvent, enters FDIC receivership or, if not FDIC insured, enters into bankruptcy. Should such an agent, lender or assignor with respect to an assignment interpositioned between the Trust and the borrower become insolvent or enter FDIC receivership or bankruptcy, any interest in the Senior Loan of such person and any loan payment held by such person for the benefit of the Trust should not be included in such person's or entity's bankruptcy estate. If, however, any such amount were included in such person's or entity's bankruptcy estate, the Trust would incur certain costs and delays in realizing payment or could suffer a loss of principal or interest. In this event, the Trust could experience a decrease in NAV.
The Trust acquires Senior Loans from lenders such as banks, insurance companies, finance companies, other investment companies and private investment funds. The Trust may also acquire Senior Loans from U.S. branches of foreign banks that are regulated by the Federal Reserve System or appropriate state regulatory authorities.
INVESTMENT BY THE TRUST
The Trust invests in Senior Loans primarily by purchasing an assignment of a portion of a Senior Loan from a third party, either in connection with the original loan transaction (I.E., in the primary market) or after the initial loan transaction (I.E., in the secondary market). When the Trust purchases an assignment in the primary market, it may share in a fee paid to the original lender. When the Trust acquires a Senior Loan in the secondary market, it may pay a fee to, or forego a portion of interest payments from, the lender making the assignment. The Trust will act as lender, or purchase an assignment with respect to a Senior Loan, only if the agent is determined by the Investment Manager or Sub-Adviser to be creditworthy.
Except for rating agency guidelines imposed on the Trust's portfolio while it has outstanding Preferred Shares, there is no minimum rating or other independent evaluation of a borrower limiting the Trust's investments and most Senior Loans that the Trust may acquire, if rated, will be rated below investment grade credit quality. See "Risk Factors and Special Considerations -- Credit Risk on Senior Loans."
ASSIGNMENTS. When the Trust is a purchaser of an assignment, it succeeds to all the rights and obligations under the loan agreement of the assigning lender and becomes a lender under the loan agreement with the same rights and obligations as the assigning lender. These rights include the ability to vote along with the other lenders on such matters as enforcing the terms of the loan agreement, E.G., declaring defaults, initiating collection action, etc. Taking such actions usually requires at least a vote of the lenders holding a majority of the investment in the loan, and may require a vote by lenders holding
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The Trust's Investments 13
THE TRUST'S INVESTMENTS
two-thirds or more of the investment in the loan. Because the Trust typically does not hold a majority of the investment in any loan, it will not be able by itself to control decisions that require a vote by the lenders.
ACQUISITION COSTS. When the Trust acquires an interest in a Senior Loan in the primary market, it typically acquires the loan at par less its portion of the fee paid to all originating lenders. When the Trust acquires an interest in a Senior Loan, in the secondary market, it may be at par, but typically the Trust will do so at premium or discount to par.
SENIOR LOAN MARKET
Total U.S. domestic Senior Loan volume has increased dramatically over the last 10 years. This increase has helped improve the liquidity of Senior Loans. However, this increase has also been accompanied by an increase in the number of participants in the Senior Loan market. Currently, the Senior Loan market is experiencing a narrowing of spreads over LIBOR and some relaxation in credit standards due to an insufficient number of loans to satisfy the requirements of all lenders. More loans may become available if the U.S. economy continues to show signs of improvement.
14 The Trust's Investments
RISK FACTORS AND SPECIAL CONSIDERATIONS
RISK IS INHERENT IN ALL INVESTING. THE FOLLOWING DISCUSSION SUMMARIZES SOME OF THE RISKS THAT YOU SHOULD CONSIDER BEFORE DECIDING WHETHER TO INVEST IN THE TRUST. FOR ADDITIONAL INFORMATION ABOUT THE RISKS ASSOCIATED WITH INVESTING IN THE TRUST, SEE "ADDITIONAL INFORMATION ABOUT INVESTMENTS AND INVESTMENT TECHNIQUES" IN THE SAI.
CREDIT RISK ON SENIOR LOANS
The Trust's ability to pay dividends and repurchase its Common Shares is dependent upon the performance of the assets in its portfolio. That performance, in turn, is subject to a number of risks, chief among which is credit risk on the underlying assets.
Credit risk is the risk of nonpayment of scheduled interest or principal payments. In the event a borrower fails to pay scheduled interest or principal payments on a Senior Loan held by the Trust, the Trust will experience a reduction in its income and a decline in the market value of the Senior Loan, which will likely reduce dividends and lead to a decline in the NAV of the Trust's Common Shares. See "The Trust's Investments -- Investment by the Trust."
Senior Loans generally involve less risk than unsecured or subordinated debt and equity instruments of the same issuer because the payment of principal and interest on Senior Loans is a contractual obligation of the issuer that, in most instances, takes precedence over the payment of dividends, or the return of capital, to the issuer's shareholders and payments to bond holders. The Trust generally invests in Senior Loans that are secured with specific collateral. However, the value of the collateral may not equal the Trust's investment when the loan is acquired or may decline below the principal amount of the Senior Loan subsequent to the Trust's investment. Also, to the extent that collateral consists of stock of the borrower or its subsidiaries or affiliates, the Trust bears the risk that the stock may decline in value, be relatively illiquid, or may lose all or substantially all of its value, causing the Senior Loan to be undercollateralized. Therefore, the liquidation of the collateral underlying a Senior Loan may not satisfy the issuer's obligation to the Trust in the event of non-payment of scheduled interest or principal, and the collateral may not be readily liquidated.
In the event of the bankruptcy of a borrower, the Trust could experience delays and limitations on its ability to realize the benefits of the collateral securing the Senior Loan. Among the credit risks involved in a bankruptcy are assertions that the pledge of collateral to secure a loan constitutes a fraudulent conveyance or preferential transfer that would have the effect of nullifying or subordinating the Trust's rights to the collateral.
The Senior Loans in which the Trust invests are generally rated lower than investment grade credit quality, I.E., rated lower than "Baa" by Moody's or "BBB" by S&P, or have been issued by issuers who have issued other debt securities which, if unrated, would be rated lower than investment grade credit quality. Investment decisions will be based largely on the credit analysis performed by the Investment Manager or Sub-Adviser, and not on rating agency evaluation. This analysis may be difficult to perform. Information about a Senior Loan and its issuer generally is not in the public domain. Moreover, Senior Loans are not often rated by any nationally recognized rating service. Many issuers have not issued securities to the public and are not subject to reporting requirements under federal securities laws. Generally, however, issuers are required to provide financial information to lenders and information may be available from other Senior Loan participants or agents that originate or administer Senior Loans.
INTEREST RATE RISK
During normal market conditions, changes in market interest rates will affect the Trust in certain ways. The principal effect will be that the yield on the Trust's Common Shares will tend to rise or fall as market interest rates rise and fall. This is because almost all of the assets in which the Trust invests pay interest at rates which float in response to changes in market rates. However, because the interest rates on the Trust's assets reset over time, there will be an imperfect correlation between changes in market rates and changes to rates on the portfolio as a whole. This means that changes to the rate of interest paid on the portfolio as a whole will tend to lag behind changes in market rates.
Market interest rate changes may also cause the Trust's NAV to experience moderate volatility. This is because the value of a loan asset in the Trust is partially a function of whether it is paying what the market perceives to be a market rate of interest for the particular loan, given its individual credit and other characteristics. If market interest rates change, a loan's value could be affected to the extent the interest rate paid on that loan does not reset at the same time. As discussed above, the rates of interest paid on the loans in which the Trust invests have a weighted average reset period that typically is less than 90 days. Therefore, the impact of the lag between a change in market interest rates and the change in the overall rate on the portfolio is expected to be minimal.
To the extent that changes in market rates of interest are reflected not in a change to a base rate such as LIBOR but in a change in the spread over the base rate which is payable on loans of the type and quality in which the Trust invests, the Trust's NAV could also be adversely affected. Again, this is because the value of a loan asset in the Trust is partially a function of whether it is paying what the market perceives to be a market rate of interest for the particular loan, given its individual credit and other characteristics. However, unlike changes in market rates of interest for which there is only a temporary lag before the portfolio reflects those changes, changes in a loan's value based on changes in the market spread on loans in the Trust's portfolio may be of longer duration.
Finally, substantial increases in interest rates may cause an increase in loan defaults as borrowers may lack the resources to meet higher debt service requirements.
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Risk Factors and Special Considerations 15
RISK FACTORS AND SPECIAL CONSIDERATIONS
CHANGES TO NAV
The NAV of the Trust is expected to change in response to a variety of factors, primarily in response to changes in the creditworthiness of the borrowers on the loans in which the Trust invests. See "Credit Risk on Senior Loans" above. Changes in market interest rates may also have a moderate impact on the Trust's NAV. See "Interest Rate Risk." Another factor which can affect the Trust's NAV is changes in the pricing obtained for the Trust's assets. See "Transaction Policies -- Valuation of the Trust's Assets."
DISCOUNT FROM NAV
The Trust's Common Shares have traded in the market above, at, and below NAV since March 9, 1992, when the Trust's shares were listed on the NYSE. The reasons for the Trust's Common Shares trading at a premium to or discount from NAV are not known to the Trust, and the Trust cannot predict whether its Common Shares will trade in the future at a premium to or discount from NAV, and if so, the level of such premium or discount. Shares of closed-end investment companies frequently trade at a discount from NAV. The possibility that Common Shares of the Trust will trade at a discount from NAV is a risk separate and distinct from the risk that the Trust's NAV may decrease.
LEVERAGE
The Trust may borrow an amount equal to up to 33 1/3% (or such other percentage permitted by law) of its total assets (including the amount borrowed) less all liabilities other than borrowings. Under the 1940 Act, the Trust may issue preferred shares so long as immediately after any issuance of preferred shares the value of the Trust's total assets (less all Trust liabilities and indebtedness that is not senior indebtedness) is at least twice the amount of the Trust's senior indebtedness plus the involuntary liquidation preference of all outstanding shares. In November 2000, the Trust issued 18,000 Preferred Shares for a total of $450 million. Borrowings and the issuance of preferred shares are referred to in this Prospectus collectively as "leverage." The Trust may use leverage for investment purposes, to finance the repurchase of its Common Shares, and to meet other cash requirements. The use of leverage for investment purposes increases both investment opportunity and investment risk.
Capital raised through leverage will be subject to interest and other costs, and these costs could exceed the income earned by the Trust on the proceeds of such leverage. There can be no assurance that the Trust's income from the proceeds of leverage will exceed these costs. However, the Investment Manager or Sub-Adviser seeks to use leverage for the purposes of making additional investments only if they believe, at the time of using leverage, that the total return on the assets purchased with such funds will exceed interest payments and other costs on the leverage. In addition, the Investment Manager or Sub-Adviser intends to reduce the risk that the costs of the use of leverage will exceed the total return on investments purchased with the proceeds of leveraging by utilizing leverage mechanisms whose interest rates float (or reset frequently). In the event of a default on one or more loans or other interest-bearing instruments held by the Trust, the use of leverage would increase the loss to the Trust and may increase the effect on the Trust's NAV. The Trust's lenders and Preferred shareholders have priority to the Trust's assets over the Trust's Common shareholders.
The Trust currently uses leverage by borrowing money on a floating rate basis and by the issuance of Preferred Shares. The current rate on the borrowings (as of June 15, 2004) is 1.56%. The current dividend rate on the Preferred Shares (as of June 15, 2004) is 1.54%. To cover the annual interest and dividends on the borrowings and the Preferred Shares for the current fiscal year (assuming that the current interest and dividend rates remain in effect for the entire fiscal year and assuming that the Trust borrows an amount equal to 25% of its Managed Assets and the current Preferred Shares remain outstanding), the Trust would need to earn 0.74% on its amount of Managed Assets as of June 15, 2004.
The Trust's leveraged capital structure creates special risks not associated with unleveraged funds having similar investment objectives and policies. The funds borrowed pursuant to the credit facilities or obtained through the issuance of Preferred Shares, or any other preferred shares, constitute a substantial lien and burden by reason of their prior claim against the income of the Trust and against the net assets of the Trust in liquidation.
16 Risk Factors and Special Considerations
RISK FACTORS AND SPECIAL CONSIDERATIONS
The Trust is not permitted to declare dividends or other distributions, including dividends and distributions with respect to Common Shares or Preferred Shares, or to purchase Common Shares or, Preferred Shares unless (i) at the time thereof the Trust meets certain asset coverage requirements and (ii) there is no event of default under any credit facility program that is continuing. See "Risk Factors and Special Considerations Restrictive Covenants and 1940 Act Restrictions" below. In the event of a default under a credit facility program, the lenders have the right to cause a liquidation of the collateral (I.E., sell Senior Loans and other assets of the Trust) and, if any such default is not cured, the lenders may be able to control the liquidation as well.
In addition, the Trust is not permitted to pay dividends on or redeem Common Shares unless all accrued dividends on the Preferred Shares and all accrued interest on borrowings have been paid or set aside for payment.
Because the fee paid to the Investment Manager will be calculated on the basis of Managed Assets, the fee will be higher when leverage is utilized, giving the Investment Manager an incentive to utilize leverage.
The Trust is subject to certain restrictions imposed by lenders to the Trust and by guidelines of one or more rating agencies which issue ratings for the Preferred Shares issued by the Trust. These restrictions impose asset coverage, fund composition requirements and limits on investment techniques, such as the use of financial derivative products, that are more stringent than those imposed on the Trust by the 1940 Act. These covenants or guidelines could impede the Investment Manager or Sub-Adviser from fully managing the Trust's portfolio in accordance with the Trust's investment objective and policies.
ANNUAL EXPENSES WITHOUT BORROWINGS OR PREFERRED SHARES
If the Trust were not to have borrowed or have Preferred Shares outstanding, the remaining expenses, as a percentage of the net assets of the Trust, would be as follows:
ANNUAL EXPENSES WITHOUT BORROWINGS OR PREFERRED SHARES
(AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON SHARES)
Management and Administrative Fees(1) 1.05% Other Operating Expenses(2) 0.43% Total Annual Expenses 1.48% |
(1) Pursuant to the Investment Management Agreement with the Trust, ING Investments is paid a fee of 0.80% of the Trust's Managed Assets. Pursuant to its Administration Agreement with the Trust, ING Funds Services, LLC, the Trust's Administrator, is paid a fee of 0.25% of the Trust's Managed Assets. See "Investment Management and Other Service Providers -- The Administrator."
(2) "Other Operating Expenses" are based on estimated amounts for the current fiscal year, which, in turn, are based on "other operating expenses" for the fiscal year ended February 29, 2004, and does not include the expenses of borrowing.
EFFECT OF LEVERAGE
The following table is designed to illustrate the effect on return to a holder of the Trust's Common Shares of the leverage created by the Trust's use of borrowing, using an assumed initial interest rate of 1.82%, assuming the Trust has used leverage by borrowing an amount equal to 25% of the Trust's Managed Assets and assuming hypothetical annual returns on the Trust's portfolio of minus 10% to plus 10%. As can be seen, leverage generally increases the return to shareholders when portfolio return is positive and decreases return when the portfolio return is negative. Actual returns may be greater or less than those appearing in the table.
Assumed Portfolio Return, net of expenses(1) (10%) (5%) 0% 5% 10% Corresponding Return to Common Shareholders(2) (13.94%) (7.27%) (0.61%) 6.06% 12.73% |
(1) The Assumed Portfolio Return is required by regulation of the SEC and is not a prediction of, and does not represent, the projected or actual performance of the Trust.
(2) In order to compute the "Corresponding Return to Common Shareholders," the "Assumed Portfolio Return" is multiplied by the total value of the Trust's assets at the beginning of the Trust's fiscal year to obtain an assumed return to the Trust. From this amount, all interest accrued during the year is subtracted to determine the return available to shareholders. The return available to shareholders is then divided by the total value of the Trust's net assets attributable to Common Shares as of the beginning of the fiscal year to determine the "Corresponding Return to Common Shareholders."
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Risk Factors and Special Considerations 17
RISK FACTORS AND SPECIAL CONSIDERATIONS
IMPACT OF SHAREHOLDER INVESTMENT PROGRAM AND PRIVATELY NEGOTIATED TRANSACTIONS
The issuance of Common Shares through the Trust's Shareholder Investment Program may have an adverse effect on the secondary market for the Trust's Common Shares. The increase in the number of the Trust's outstanding Common Shares resulting from issuances pursuant to the Trust's Shareholder Investment Program or pursuant to privately negotiated transactions, and the discount to the market price at which such Common Shares may be issued, may put downward pressure on the market price for Common Shares of the Trust. Common Shares will not be issued pursuant to the Trust's Shareholder Investment Program at any time when Common Shares are trading at a price lower than the Trust's NAV per Common Share.
LIMITED SECONDARY MARKET FOR LOANS
Although the resale, or secondary, market for loans is growing, it is currently limited. There is no organized exchange or board of trade on which loans are traded. Instead, the secondary market for loans is an unregulated inter-dealer or inter-bank re-sale market.
Loans usually trade in large denominations (typically in $1 million or larger) and trades can be infrequent. The market has limited transparency so that information about actual trades may be difficult to obtain. Accordingly, some or many of the loans in which the Trust invests will be relatively illiquid.
In addition, loans in which the Trust invests may require the consent of the borrower and/or the agent prior to sale or assignment. These consent requirements can delay or impede the Trust's ability to sell loans and can adversely affect the price that can be obtained. The Trust may have difficulty disposing of loans if it needs cash to repay debt, to pay dividends, to pay expenses or to take advantage of new investment opportunities. Although the Trust has not conducted a tender offer since 1992, if it determines to again conduct a tender offer, limitations of a secondary market may result in difficulty raising cash to purchase tendered Common Shares.
These considerations may cause the Trust to sell securities at lower prices than it would otherwise consider to meet cash needs or cause the Trust to maintain a greater portion of its assets in cash equivalents than it would otherwise, which could negatively impact performance. The Trust seeks to avoid the necessity of selling assets to meet such needs by the use of borrowings.
The Trust values its assets daily. However, because the secondary market for loans is limited, it may be difficult to value loans. Reliable market value quotations may not be readily available for some loans and valuation of such loans may require more research than for liquid securities. In addition, elements of judgment may play a greater role in valuation of loans, than for securities with a more developed secondary market, because there is less reliable, objective market value data available. In addition, if the Trust purchases a relatively large portion of a loan to generate extra income sometimes paid to large lenders, the limitations of the secondary market may inhibit the Trust from selling a portion of the loan and reducing its exposure to a borrower when the Investment Manager or Sub-Adviser deems it advisable to do so.
LENDING PORTFOLIO SECURITIES
To generate additional income, the Trust may lend portfolio securities in an amount equal to up to 331/3% of total Trust assets to broker-dealers, major banks, or other recognized domestic institutional borrowers of securities. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower default or fail financially. The Trust intends to engage in lending portfolio securities only when such lending is fully secured by investment grade collateral held by an independent agent.
DEMAND FOR LOANS
Although the volume of loans has increased in recent years, demand for loans has also grown. An increase in demand may benefit the Trust by providing increased liquidity for loans and higher sales prices, but it may also adversely affect the rate of interest payable on loans acquired by the Trust, the rights provided to the Trust under the terms of a loan agreement, and increase the price of loans that the Trust wishes to purchase in the secondary market.
UNSECURED LOANS AND SUBORDINATED LOANS
Subject to the 20% of the Trust's assets that may be invested in Other Investments, the Trust may invest up to 5% of its total assets, measured at the time of investment, in unsecured loans and in subordinated loans. Unsecured loans and subordinated loans share the same credit risks as those discussed above under "Credit Risk on Senior Loans" except that unsecured loans are not secured by any collateral of the borrower and subordinated loans are not the most senior debt in a borrower's capital structure. Unsecured loans do not enjoy the security associated with collateralization and may pose a greater risk of nonpayment of interest or loss of principal than do secured loans. The primary additional risk in a subordinated loan is the potential loss in the event of default by the issuer of the loan. Subordinated loans in an insolvency bear an increased share, relative to senior secured lenders, of the ultimate risk that the borrower's assets are insufficient to meet its obligations to its creditors.
SHORT-TERM DEBT SECURITIES
Subject to the 20% of the Trust's assets that may be invested in Other Investments, the Trust may invest in short-term debt securities. Short-term debt securities are subject to the risk of the issuer's inability to meet principal and interest payments on the obligation and also may be subject to price volatility due to such factors as interest rates, market perception of the creditworthiness of the issuer and general market liquidity.
Because short-term debt securities pay interest at a fixed-rate, when interest rates decline, the value of the Trust's short-term debt securities can be expected to rise, and when interest rates rise, the value of those securities can be expected to decline.
18 Risk Factors and Special Considerations
RISK FACTORS AND SPECIAL CONSIDERATIONS
INVESTMENTS IN EQUITY SECURITIES INCIDENTAL TO INVESTMENT IN LOANS
Subject to the 20% of the Trust's assets that may be invested in Other Investments, the Trust may acquire equity securities as an incident to the purchase or ownership of a loan or in connection with a reorganization of a borrower or its debt. Investments in equity securities incidental to investment in loans entail certain risks in addition to those associated with investment in loans. The value of these securities may be affected more rapidly, and to a greater extent, by company-specific developments and general market conditions. These risks may increase fluctuations in the Trust's NAV. The Trust may frequently possess material non-public information about a borrower as a result of its ownership of a loan of such borrower. Because of prohibitions on trading in securities of issuers while in possession of such information the Trust might be unable to enter into a transaction in a security of such a borrower when it would otherwise be advantageous to do so.
BORROWINGS UNDER THE CREDIT FACILITY PROGRAM
In May 1996, the Trust began a policy of borrowing to acquire income-producing investments which, by their terms, pay interest at a rate higher than the rate the Trust pays on borrowings. Accordingly, borrowing has the potential to increase the Trust's total income. The Trust currently is a party to two credit facilities with financial institutions that permit the Trust to borrow up to an aggregate of $525 million. Interest is payable on the credit facilities by the Trust at a variable rate that is tied to either LIBOR, the federal funds rate, or a commercial paper based rate and includes a facility fee on unused commitments. As of June 15, 2004, the Trust had outstanding borrowings under the credit facilities of approximately $444 million. Collectively, the lenders under the credit facilities have a security interest in all assets of the Trust. Under each of the credit facilities, the lenders have the right to liquidate Trust assets in the event of default by the Trust under such credit facility, and the Trust may be prohibited from paying dividends in the event of certain adverse events or conditions respecting the Trust or Investment Manager or Sub-Adviser until the credit facility is repaid in full or until the event or condition is cured.
RANKING OF SENIOR INDEBTEDNESS
The rights of lenders to receive payments of interest on and repayments of principal of any borrowings made by the Trust under the credit facility program are senior to the rights of holders of Common Shares and Preferred Shares with respect to the payment of dividends or upon liquidation.
RESTRICTIVE COVENANTS AND 1940 ACT RESTRICTIONS
The credit agreements governing the credit facility program (the Credit
Agreements) include usual and customary covenants for their respective type of
transaction, including limits on the Trust's ability to (i) issue preferred
shares, (ii) incur liens or pledge portfolio securities, (iii) change its
investment objective or fundamental investment restrictions without the approval
of lenders, (iv) make changes in any of its business objectives, purposes or
operations that could result in a material adverse effect, (v) make any changes
in its capital structure, (vi) amend the Trust documents in a manner which could
adversely affect the rights, interests or obligations of any of the lenders,
(vii) engage in any business other than the businesses currently engaged in,
(viii) create, incur, assume or permit to exist certain debt except for certain
specified types of debt, and (ix) permit any of its ERISA affiliates to cause or
permit to occur an event that could result in the imposition of a lien under the
Internal Revenue Code or ERISA. In addition, the Credit Agreements do not permit
the Trust's asset coverage ratio (as defined in the credit agreements) to fall
below 300% at any time (the Credit Agreement Asset Coverage Test).
Under the requirements of the 1940 Act, the Trust must have asset coverage of at
least 300% immediately after any borrowing, including borrowing under the credit
facility program. For this purpose, asset coverage means the ratio which the
value of the total assets of the Trust, less liabilities and indebtedness not
represented by senior securities, bears to the aggregate amount of borrowings
represented by senior securities issued by the Trust. The Credit Agreements
limit the Trust's ability to pay dividends or make other distributions on the
Trust's Common Shares, or purchase or redeem Common Shares, unless the Trust
complies with the Credit Agreement Asset Coverage Test. In addition, the Credit
Agreements do not permit the Trust to declare dividends or other distributions
or purchase or redeem Common Shares or any preferred shares (i) at any time that
an event of default under a Credit Agreement has occurred and is continuing; or
(ii) if, after giving effect to such declaration, the Trust would not meet the
Credit Agreement Asset Coverage Test set forth in the Credit Agreements.
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Risk Factors and Special Considerations 19
TRANSACTION POLICIES
NET ASSET VALUE
The NAV per Common Share of the Trust is determined each business day as of the close of regular trading on the New York Stock Exchange (NYSE) (normally 4:00 p.m. Eastern time). The Trust is open for business every day the NYSE is open. The NYSE is closed on all weekends and on all national holidays and Good Friday. Trust shares will not be priced on those days. The NAV per Common Share is determined by dividing the value of the Trust's loan assets plus all cash and other assets (including interest accrued but not collected) less all liabilities (including accrued expenses but excluding capital and less the liquidation preference of any outstanding preferred shares) by the number of Common Shares outstanding. The NAV per Common Share is made available for publication.
VALUATION OF THE TRUST'S ASSETS
The assets in the Trust's portfolio are valued daily in accordance with the Trust's Loan Valuation Procedures adopted by the Board of Trustees. A majority of the Trust's assets are valued using quotations supplied by a third party loan pricing service. However, the loans in which the Trust invests are not listed on any securities exchange or board of trade. Some loans are traded by institutional investors in an over-the-counter secondary market that has developed in the past several years. This secondary market generally has fewer trades and less liquidity than the secondary markets for other types of securities. Some loans have few or no trades. Accordingly, determinations of the value of loans may be based on infrequent and dated trades. Because there is less reliable, objective market value data available, elements of judgment may play a greater role in valuation of loans than for other types of securities. For further information, see "Risk Factors and Special Considerations -- Limited Secondary Market for Loans."
Loans are normally valued at the mean of the means of one or more bid and asked quotations obtained from a pricing service or other sources believed to be reliable. Loans for which reliable market value quotations are not readily available from a pricing service may be valued with reference to another loan or a group of loans for which reliable market value quotations are readily available and whose characteristics are comparable to the loan being valued. Under this approach, the comparable loan or loans serve as a proxy for changes in value of the loan being valued. The Trust has engaged an independent pricing service to provide quotations from dealers in loans and to calculate values under this proxy procedure.
It is expected that most of the loans held by the Trust will be valued with reference to quotations from the independent pricing service or with reference to the proxy procedure described above. The Investment Manager or Sub-Adviser may believe that the price for a loan derived from quotations or the proxy procedure described above is not reliable or accurate. Among other reasons, this may be the result of information about a particular loan or borrower known to the Investment Manager or Sub-Adviser that they believe may not be known to the pricing service or reflected in a price quote. In this event, the loan is valued at fair value under procedures established by the Trust's Board of Trustees, and in accordance with the provisions of the 1940 Act.
Under these procedures, fair value is determined by the Investment Manager or Sub-Adviser and monitored by the Trust's Board of Trustees through its Valuation and Proxy Voting Committee. In fair valuing a loan, consideration is given to several factors, which may include, among others, the following:
- the characteristics of and fundamental analytical data relating to the loan, including the cost, size, current interest rate, period until the next interest rate reset, maturity and base lending rate of the loan, the terms and conditions of the loan and any related agreements, and the position of the loan in the borrower's debt structure;
- the nature, adequacy and value of the collateral, including the Trust's rights, remedies and interests with respect to the collateral;
- the creditworthiness of the borrower and the cash flow coverage of outstanding principal and interest, based on an evaluation of its financial condition, financial statements and information about the borrower's business, cash flows, capital structure and future prospects;
- information relating to the market for the loan, including price quotations for, and trading in, the loan and interests in similar loans and the market environment and investor attitudes towards the loan and interests in similar loans;
- the reputation and financial condition of the agent of the loan and any intermediate participants in the loans;
- the borrower's management; and
- the general economic and market conditions affecting the fair value of the loan.
Securities for which the primary market is a national securities exchange are stated at the last reported sale price on the day of valuation. Securities reported by NASDAQ National Market System will be valued at the NASDAQ Official Closing Price on the valuation day. Debt and equity securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the mean between the last reported bid and asked price. Valuation of short term cash equivalent investments is at amortized cost. Securities maturing in 60 days or less are valued at amortized cost, which, when combined with accrued interest, approximates market value.
ACCOUNT ACCESS
Unless your Common Shares are held through a third-party fiduciary or in an omnibus registration at your bank or brokerage firm, you may be able to access your account information over the internet at www.ingfunds.com, or via a touch tone telephone by calling (800) 992-0180 and selecting Option 1. Should you wish to speak with a Shareholder Services Representative, you may call the toll-free number listed above and select Option 2.
20 Transaction Policies
TRANSACTION POLICIES
PRIVACY POLICY
The Trust has adopted a policy concerning investor privacy. To review the privacy policy, contact a Shareholder Services Representative at (800) 992-0180 and select Option 1, obtain a policy over the internet at www.ingfunds.com or see the privacy policy that accompanies this Prospectus.
HOUSEHOLDING
To reduce expenses, we may mail only one copy of the Trust's prospectus and each
annual and semi-annual report to those addresses shared by two or more accounts.
If you wish to receive individual copies of these documents, please call us at
(800) 992-0180 or your investment professional. We will begin sending you
individual copies 30 days after receiving your request.
PLAN OF DISTRIBUTION
SHAREHOLDER INVESTMENT PROGRAM
The following is a summary of the Shareholder Investment Program (Program). Shareholders are advised to review a fuller explanation of the Program contained in the Trust's SAI.
Common Shares are offered by the Trust through the Program. The Program allows participating shareholders to reinvest all dividends (Dividends) in additional Common Shares of the Trust, and also allows participants to purchase additional Common Shares through optional cash investments in amounts ranging from a minimum of $100 to a maximum of $100,000 per month.
The Trust reserves the right to reject any purchase order. Please note that cash, travelers checks, third party checks, money orders and checks drawn on non-US banks (even if payment may be effected through a US bank) generally will not be accepted.
Common Shares will be issued by the Trust under the Program when the Trust's Common Shares are trading at a premium to NAV. If the Trust's Common Shares are trading at a discount to NAV, Common Shares issued under the Program will be purchased on the open market. Common Shares issued under the Program directly from the Trust will be acquired at the greater of (i) NAV at the close of business on the day preceding the relevant investment date or (ii) the average of the daily market price of the Common Shares during the pricing period minus a discount of 5% for reinvested Dividends and 0% to 5% for optional cash investments. Common Shares issued under the Program when shares are trading at a discount to NAV will be purchased in the market by DSTSystems, Inc. (DST) at market price. Shares issued by the Trust under the Program will be issued without a fee or a commission.
Shareholders may elect to participate in the Program by telephoning the Trust or submitting a completed Participation Form to DST, the Program administrator. DST will credit to each participant's account funds it receives from: (a) Dividends paid on Trust shares registered in the participant's name, and (b) optional cash investments. DST will apply all Dividends and optional cash investments received to purchase Common Shares as soon as practicable beginning on the relevant investment date (as described below) and not later than six business days after the relevant investment date, except when necessary to comply with applicable provisions of the federal securities laws. For more information on the Trust's distribution policy, see "Dividends and Distributions."
In order for participants to purchase shares through the Program in any month, the Program administrator must receive from the participant any optional cash investment by the relevant investment date. The relevant investment date will be set in advance by the Trust, upon which optional cash investments are first applied by DST to the purchase of Common Shares. Participants may obtain a schedule of relevant dates, including investments dates, the dates by which optional cash investment payments must be received and the dates which shares will be paid by calling ING's Shareholder Services Department at (800) 992-0180.
Participants will pay a pro rata share of brokerage commissions with respect to DST's open market purchases in connection with the reinvestment of Dividends or purchases made with optional cash investments.
The Program is intended for the benefit of investors in the Trust. The Trust reserves the right to exclude from participation, at any time, (i) persons or entities who attempt to circumvent the Program's standard $100,000 maximum by accumulating accounts over which they have control or (ii) any other persons or entities, as determined in the sole discretion of the Trust.
Currently, persons who are not shareholders of the Trust may not participate in the Program. The Board of Trustees of the Trust may elect to change this policy at a future date, and permit non-shareholders to participate in the Program. Shareholders may request to receive their Dividends in cash at any time by giving DST written notice or by contacting ING's Shareholder Services Department at (800) 992-0180 and selecting Option 2. Shareholders may elect to close their account at any time by giving DST written notice. When a participant closes their account, the participant upon request will receive a certificate for full Common Shares in the account. Fractional Common Shares will be held and aggregated with other fractional Common Shares being liquidated by DST as agent of the Program and paid for by check when actually sold.
The automatic reinvestment of Dividends does not affect the tax characterization of the Dividends (I.E., capital gains and
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Transaction Policies 21
PLAN OF DISTRIBUTION
income are realized even though cash is not received). If shares are issued pursuant to the Program's dividend reinvestment provisions or cash purchase provisions at a discount from market price, participants may have income equal to the discount.
Additional information about the Program may be obtained by contacting ING's Shareholder Services Department at (800) 992-0180 and selecting Option 2.
PRIVATELY NEGOTIATED TRANSACTIONS
The Common Shares may also be offered pursuant to privately negotiated transactions between the Trust or ING Funds Distributor, LLC and specific investors. Generally, such investors will be sophisticated institutional investors. The terms of such privately negotiated transactions will be subject to the discretion of the management of the Trust. In determining whether to sell Common Shares pursuant to a privately negotiated transaction, the Trust will consider relevant factors including, but not limited to, the attractiveness of obtaining additional funds through the sale of Common Shares, the purchase price to apply to any such sale of Common Shares and the person seeking to purchase the Common Shares.
Common Shares issued by the Trust in connection with privately negotiated transactions will be issued at the greater of (i) NAV per Common Share of the Trust's Common Shares or (ii) at a discount ranging from 0% to 5% of the average of the daily market price of the Trust's Common Shares at the close of business on the two business days preceding the date upon which Common Shares are sold pursuant to the privately negotiated transaction. The discount to apply to such privately negotiated transactions will be determined by the Trust with regard to each specific transaction.
USE OF PROCEEDS
It is expected that 100% of the net proceeds of Common Shares issued pursuant to the Shareholder Investment Program and privately negotiated transactions will be invested in Senior Loans and other securities consistent with the Trust's investment objective and policies. Pending investment in Senior Loans, the proceeds will be used to pay down the Trust's outstanding borrowings under its credit facilities. See "Investment Objective and Policies -- Policy on Borrowing."
As of June 15, 2004, the Trust's outstanding borrowings under its credit facilities was $444 million. By paying down the Trust's borrowings, the Trust can avoid adverse impacts on yields pending investment of such proceeds in Senior Loans. As investment opportunities are subsequently identified, it is expected that the Trust will reborrow amounts previously repaid and invest such amounts in additional Senior Loans.
DIVIDENDS AND DISTRIBUTIONS
DISTRIBUTION POLICY. Income dividends are declared and paid monthly. Income dividends consist of interest accrued and amortization of fees earned less any amortization of premiums paid and the estimated expenses of the Trust, including fees payable to ING Investments. Income dividends are calculated monthly under guidelines approved by the Trustees. Each dividend is payable to shareholders of record on the 10th day of the following month (unless it is a holiday, in which case the next business day is the record date). Accrued amounts of fees received, including facility fees, will be taken in as income and passed on to shareholders as part of dividend distributions. Any fees or commissions paid to facilitate the sale of portfolio Senior Loans in connection with tender offers or other portfolio transactions may reduce the dividend yield.
Capital gains, if any, are declared and paid annually. Because the Trust currently has capital loss carry forwards, it is not anticipated that capital gains distributions will be made for the foreseeable future.
DIVIDEND REINVESTMENT. Unless you instruct the Trust to pay you dividends in cash, dividends and distributions paid by the Trust will be reinvested in additional Common Shares of the Trust. You may request to receive dividends in cash at any time by giving DST written notice or by contacting the ING's Shareholder Services Department at (800) 992-0180 and selecting Option 2.
22 Plan of Distribution
INVESTMENT MANAGEMENT AND OTHER
SERVICE PROVIDERS
INVESTMENT MANAGER
ING INVESTMENTS, LLC (the Investment Manager or ING Investments), an Arizona limited liability company, serves as Investment Manager to the Trust and has overall responsibility for the management of the Trust under the general supervision of the Board of Trustees. Its principal business address is 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258.
The Trust and the Investment Manager have entered into an Investment Management Agreement that requires ING Investments to provide all investment advisory and portfolio management services for the Trust. The agreement with ING Investments may be canceled by the Board of Trustees upon 60 days' written notice.
ING Investments is an indirect wholly-owned subsidiary of ING Groep N.V. (NYSE:
ING) (ING Groep). ING Groep is a global financial institution active in the
fields of insurance, banking and asset management in more than 65 countries with
more than 100,000 employees. The Investment Manager is registered as an
investment adviser with the SEC. ING Investments began investment management in
April, 1995, and serves as an investment adviser to registered investment
companies as well as structured finance vehicles. As of March 31, 2004, ING
Investments had assets under management of over $35.4 billion.
The Investment Manager bears its expenses of providing the services described above. The Investment Manager currently receives from the Trust an annual fee, paid monthly, of 0.80% of the Trust's Managed Assets.
SUB-ADVISER
ING Investments has engaged a Sub-Adviser to provide the day-to-day management of the Trust's portfolio. The Sub-Adviser has, at least in part, been selected primarily on the basis of its successful application of a consistent, well-defined, long-term investment approach over a period of several market cycles. ING Investments is responsible for monitoring the investment program and performance of the Sub-Adviser. Under the terms of the sub-advisory agreement, the agreement can be terminated by either ING Investments or the Board of Trustees of the Trust. In the event the sub-advisory agreement is terminated, the Sub-Adviser may be replaced subject to any regulatory requirements or ING Investments may assume day-to-day investment management of the Trust.
ING INVESTMENT MANAGEMENT CO.
ING Investment Management Co. (Sub-Adviser or INGIM), formerly known as Aeltus Investment Management, Inc., a Connecticut corporation serves as Sub-Adviser to the Trust. Founded in 1972, INGIM is registered with the SEC as an investment adviser. INGIM is an indirect wholly-owned subsidiary of ING Groep, N.V., and is an affiliate of ING Investments. INGIM has acted as adviser or sub-adviser to mutual funds since 1994 and has managed institutional accounts since 1972.
As of March 31, 2004, INGIM managed almost $53.48 billion in assets. Its principal office is located at 10 State House Square, Hartford, Connecticut 06103-3602. For its services, INGIM is entitled to receive a sub-advisory fee of 0.36%, expressed as an annual rate based on the average daily Managed Assets of the Trust. This sub-advisory fee is paid by ING Investments, not by the Trust.
PORTFOLIO MANAGEMENT. The Trust is managed by INGIM's Senior Debt Group. That team is comprised of the following individuals:
DANIEL A. NORMAN. Mr. Norman is Senior Vice President and Senior Portfolio Manager in the Senior Debt Group, and has served in that capacity since November 1999. Prior to that, Mr. Norman was Senior Vice President and Portfolio Manager in the Senior Debt Group (since April 1995). Mr. Norman also serves as Senior Vice President of the Trust, and he serves as Senior Vice President of ING Senior Income Fund, another closed-end fund sub-advised by INGIM that invests primarily in Senior Loans. Mr. Norman co-manages the Trust with Mr. Bakalar.
JEFFREY A. BAKALAR. Mr. Bakalar is Senior Vice President and Senior Portfolio Manager in the Senior Debt Group, and has served in that capacity since November 1999. Prior to that, Mr. Bakalar was Senior Vice President and Portfolio Manager in the Senior Debt Group (since January 1998). Before joining ING Groep N.V., Mr. Bakalar was Vice President of The First National Bank of Chicago (from 1994 to 1998). Mr. Bakalar also serves as Senior Vice President of the Trust and as Senior Vice President of ING Senior Income Fund, another closed-end fund sub-advised by INGIM that invests primarily in Senior Loans. Mr. Bakalar co-manages the Trust with Mr. Norman.
CURTIS F. LEE. Mr. Lee is Senior Vice President and Chief Credit Officer in the Senior Debt Group and has served in that capacity since August 1999. Prior to joining the Investment Manager, Mr. Lee held a series of positions with Standard Chartered Bank in the credit approval and problem loan management functions (1992 - 1999). Mr. Lee also serves as Senior Vice President and Chief Credit Officer of the Trust (since January 2001), and he serves as Senior Vice President and Chief Credit Officer of ING Senior Income Fund, another closed-end fund sub-advised by INGIM that invests primarily in Senior Loans.
ROBERT L. WILSON. Mr. Wilson is Senior Vice President in the Senior Debt Group (since March 2003) and before that was Vice President in the Senior Debt Group (since July 1998). Prior to joining ING Groep N.V., Mr. Wilson was Vice President of Bank of Hawaii (from 1997 to 1998) and Vice President of Union Bank of California (from 1994 to 1997).
MICHEL PRINCE. Mr. Prince is a Vice President in the Senior Debt Group (since May 1998). Prior to joining the Investment Manager, Mr. Prince was Vice President of Rabobank International, Chicago branch (from 1996 to 1998).
JASON T. GROOM. Mr. Groom is a Vice President in the Senior Debt Loan Group (since June 2000), and before that was an Assistant Vice President in the Senior Debt Group (1998 to 2000). Prior to joining ING Groep N.V., Mr. Groom was an Associate in the Corporate Finance Group of NationsBank (in 1998) and Assistant Vice President, Corporate Finance Group, of The Industrial Bank of Japan Limited (from 1995 to 1997).
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Investment Management and Other Service Providers 23
INVESTMENT MANAGEMENT AND OTHER
SERVICE PROVIDERS
CHARLES E. LEMIEUX. Mr. LeMieux is a Vice President in the Senior Debt Group (since June 2000), and before that was Assistant Vice President in the Senior Debt Group (from 1998 to 2000). Prior to joining ING Groep N.V., Mr. LeMieux was Assistant Treasurer, Cash Management, with Salt River Project (from 1993 to 1998).
MARK F. HAAK. Mr. Haak is a Vice President in the Senior Debt Group (since June 1999). Prior to joining ING Groep N.V., Mr. Haak was Assistant Vice President, Corporate Banking with Norwest Bank (from 1997 to 1998) and Lead Financial Analyst and Portfolio Manager for Bank One AZ, N.A. (from 1996 to 1997).
WILLIAM F. NUTTING, JR. Mr. Nutting is a Vice President in the Senior Debt Group (since November 1999), and joined ING Funds Services, LLC, an affiliate of the Investment Manager, in 1995 as an Operations Associate.
THEODORE M. HAAG. Mr. Haag is a Vice President in the Senior Debt Group (since March 2001). Mr. Haag joined ING Groep N.V. in June 2000 as Vice President and Senior Portfolio Manager, a position he continues to hold. From 1997 to 2000, Mr. Haag served as Vice President and Portfolio Manager for Gen Re-New England Asset Management. From 1995 to 1997, Mr. Haag was a Director of Fixed Income Securities and Securities Policy Committee member for Providian Capital Management. Prior to working at Providian, Mr. Haag was a high yield portfolio manager at ICH Corporation.
RALPH E. BUCHER. Mr. Bucher is a Vice President in the Senior Debt Group (since November 2001). Prior to joining ING Groep N.V., Mr. Bucher was the North American Head of Special Assets for Standard Chartered Bank (from 1999 to 2001). Mr. Bucher has also held other senior credit approval positions with Societe Generale (from 1997 to 1999).
BRIAN S. HORTON. Mr. Horton is a Vice President in the Senior Debt Group (since
September 2001). Prior to joining ING Groep N.V., Mr. Horton was a Vice
President in the Corporate and Investment Banking Group at Bank of America
Securities LLC, where he worked in the Consumer and Retail Industry Group (from
1999 to 2001). Mr. Horton also served in various other corporate finance and
relationship management positions during his seven years at Bank of America,
including corporate finance specialist for the Southeast U.S. region (from 1997
- 1999).
MOHAMED N. BASMA. Mr. Basma is a Vice President in the Senior Debt Group (since March 2003), and before that was a Research Analyst for the Senior Debt Group (since January 2000). Prior to joining ING Groep N.V., Mr. Basma was a senior auditor/consultant in the audit and business advisory group of Arthur Andersen, LLP (from 1995 to 1997). Mr. Basma attended school for the years between his employment at Arthur Andersen and the Investment Manager.
JAMES E. GRIMES. Mr. Grimes is a Vice President in the Senior Debt Group (since 2001), and before that was Manager of Structured Investments for the Investment Manager (since 1999). Prior to joining ING Groep N.V., Mr. Grimes was Manager of Finance and Strategic Planning for NationsBank Auto Leasing, Inc. (formerly Oxford Resources Corp.) (from 1994 to 1998).
JEFFREY S. SCHULTZ. Mr. Schultz is an Analyst in the Senior Debt Group (since March 2003), and before that was Treasury Operations Assistant (from 1998 to 2000) and Junior Research Analyst (from 2000 to 2003).
THE ADMINISTRATOR
The Administrator of the Trust is ING Funds Services, LLC (ING Funds Services). Its principal business address is 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258. The Administrator is a wholly-owned subsidiary of ING Groep and the immediate parent company of the Investment Manager.
Under an Administration Agreement between ING Funds Services and the Trust, ING Funds Services administers the Trust's corporate affairs subject to the supervision of the Board of Trustees of the Trust. In that connection, ING Funds Services monitors the provisions of the Senior Loan agreements and any agreements with respect to interests in Senior Loans and is responsible for recordkeeping with respect to the Senior Loans in the Trust's repurchase offers portfolio. ING Funds Services also furnishes the Trust with office facilities and furnishes executive personnel together with clerical and certain recordkeeping and administrative services. These services include preparation of annual and other reports to shareholders and to the SEC. ING Funds Services also handles the filing of federal, state and local income tax returns not being furnished by the Custodian or Transfer Agent (as defined below). The Administration Agreement also requires ING Funds Services to assist in managing and supervising all aspects of the general day-to-day business activities and operations of the Trust, including custodial, transfer agency, dividend disbursing, accounting, auditing, compliance and related services. ING Funds Services provides the Trust with office space, equipment and personnel necessary to administer the Trust. The Administrator has authorized all of its officers and employees who have been elected as officers of the Trust to serve in such capacities. All services furnished by the Administrator under the Administration Agreement may be furnished by such officers or employees of the Administrator.
The Trust pays ING Funds Services an administration fee, computed daily and payable monthly. The Administration Agreement states that ING Funds Services is entitled to receive a fee at an annual rate of 0.25% of the Trust's Managed Assets. The Administration Agreement may be canceled by the Board of Trustees upon 60 days' written notice.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR
The transfer agent, dividend disbursing agent and registrar for the Common Shares is DST Systems, Inc., whose principal business address is 816 Wyandotte, Kansas City, Missouri 64105.
CUSTODIAN
The Trust's securities and cash are held and maintained under a Custody Agreement with State Street Bank and Trust Company, whose principal place of business is 801 Pennsylvania Avenue, Kansas City, Missouri 64105.
24 Investment Management and Other Service Providers
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust established under the laws of the Commonwealth of Massachusetts by an Agreement and Declaration of Trust dated December 2, 1987, as amended (Declaration of Trust). The Board of Trustees is responsible for protecting the interests of shareholders. The Trustees are experienced executives who oversee the Trust's activities, review contractual arrangements with companies that provide services to the Trust and review the Trust's performance.
The Declaration of Trust provides that the Trustees of the Trust may authorize separate classes of shares of beneficial interest. The Trustees have authorized an unlimited number of shares of beneficial interest, par value $0.01 per share, all of which were initially classified as Common Shares. The Declaration of Trust also authorizes the creation of an unlimited number of shares of beneficial interest with preference rights, including preferred shares, having a par value of $0.01 per share, in one or more series, with rights as determined by the Board of Trustees, by action of the Board of Trustees without the approval of the shareholders. The following table shows the number of (i) shares authorized, (ii) shares held by the Trust for its own account and (iii) shares outstanding, for each class of authorized securities of the Trust as of June 15, 2004.
NUMBER HELD BY NUMBER TRUST FOR ITS NUMBER TITLE OF CLASS AUTHORIZED OWN ACCOUNT OUTSTANDING -------------- ---------- ----------- ----------- Common Shares unlimited 0 137,821,394 Preferred Shares, Series M 3,600 0 3,600 Preferred Shares, Series T 3,600 0 3,600 Preferred Shares, Series W 3,600 0 3,600 Preferred Shares, Series Th 3,600 0 3,600 Preferred Shares, Series F 3,600 0 3,600 |
The Common Shares outstanding are fully paid and nonassessable by the Trust. Holders of Common Shares are entitled to share equally in dividends declared by the Board of Trustees payable to holders of Common Shares and in the net assets of the Trust available for distribution to holders of Common Shares after payment of the preferential amounts payable to holders of any outstanding Preferred Shares. Neither holders of Common Shares nor holders of Preferred Shares have pre-emptive or conversion rights and Common Shares are not redeemable. Upon liquidation of the Trust, after paying or adequately providing for the payment of all liabilities of the Trust and the liquidation preference with respect to any outstanding preferred shares, and upon receipt of such releases, indemnities and refunding agreements as they deem necessary for their protection, the Trustees may distribute the remaining assets of the Trust among the holders of the Common Shares. Under the rules of the NYSE applicable to listed companies, the Trust is required to hold an annual meeting of shareholders in each year. If the Trust is converted to an open-end investment company or if for any other reason Common Shares are no longer listed on the NYSE (or any other national securities exchange the rules of which require annual meetings of shareholders), the Trust does not intend to hold annual meetings of shareholders.
The Trust is responsible for paying the following expenses, among others: the fees payable to the Investment Manager; the fees payable to the Administrator; the fees and certain expenses of the Trust's custodian and transfer agent, including the cost of providing records to the Administrator in connection with its obligation of maintaining required records of the Trust; the charges and expenses of the Trust's legal counsel, legal counsel to the Trustees who are not "interested persons" of the Trust, as defined in the 1940 Act and independent accountants; commissions and any issue or transfer taxes chargeable to the Trust in connection with its transactions; all taxes and corporate fees payable by the Trust to governmental agencies; the fees of any trade association of which the Trust is a member; the costs of share certificates representing Common Shares of the Trust; organizational and offering expenses of the Trust and the fees and expenses involved in registering and maintaining registration of the Trust and its Common Shares with the SEC, including the preparation and printing of the Trust's registration statement and prospectuses for such purposes; allocable communications expenses with respect to investor services, and all expenses of shareholders' and Trustees' meetings and of preparing, printing and mailing reports, proxy statements and prospectuses to shareholders; fees for independent loan pricing services; the cost of insurance; and litigation and indemnification expenses and extraordinary expenses not incurred in the ordinary course of the Trust's business.
Under Massachusetts law, shareholders, including holders of Preferred Shares, could under certain circumstances be held personally liable for the obligations of the Trust. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the Trust or the Trustees. The Declaration of Trust provides for indemnification out of Trust property for all loss and expense of any shareholder held personally liable for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Trust would be unable to meet its obligations.
Holders of Common Shares are entitled to one vote for each share held and will vote with the holders of any outstanding Preferred Shares or any other preferred shares on each matter submitted to a vote of holders of Common Shares, except as described under "Description of Capital Structure -- Preferred Shares."
Shareholders are entitled to one vote for each share held. The Common Shares, Preferred Shares and any other preferred shares do not have cumulative voting rights, which means that the holders of more than 50% of the shares of Common Shares, Preferred Shares and any other preferred shares voting for the election of Trustees can elect all of the Trustees standing for election by such holders, and, in such event, the holders of the remaining shares of Common Shares, Preferred Shares and any other preferred shares will not be able to elect any of such Trustees.
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Description of the Trust 25
DESCRIPTION OF THE TRUST
So long as any Preferred Shares or any other Preferred Shares are outstanding, holders of Common Shares will not be entitled to receive any dividends of or other distributions from the Trust, unless at the time of such declaration, (1) all accrued dividends on preferred shares or accrued interest on borrowings has been paid and (2) the value of the Trust's total assets (determined after deducting the amount of such dividend or other distribution), less all liabilities and indebtedness of the Trust not represented by senior securities, is at least 300% of the aggregate amount of such securities representing indebtedness and at least 200% of the aggregate amount of securities representing indebtedness plus the aggregate liquidation value of the outstanding preferred shares (expected to equal the aggregate original purchase price of the outstanding preferred shares plus redemption premium, if any, together with any accrued and unpaid dividends thereon, whether or not earned or declared and on a cumulative basis). In addition to the requirements of the 1940 Act, the Trust is required to comply with other asset coverage requirements as a condition of the Trust obtaining a rating of the Preferred Shares from a rating agency. These requirements include an asset coverage test more stringent than under the 1940 Act.
The Trust will send unaudited reports at least semi-annually and audited financial statements annually to all of its shareholders.
The Declaration of Trust further provides that obligations of the Trust are not binding upon Trustees individually but only upon the property of the Trust and that the Trustees will not be liable for errors of judgment or mistakes of fact or law, but nothing in the Declaration of Trust protects a Trustee against any liability to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office.
CONVERSION TO OPEN-END FUND
The Trustees may at any time propose conversion of the Trust to an open-end management investment company depending upon their judgment as to the advisability of such action in light of circumstances then prevailing. In considering whether to submit an open-ending proposal to shareholders, the Trustees might consider, among other factors, the differences in operating expenses between open-end and closed-end funds (due to the expenses of continuously selling shares and of standing ready to effect redemptions), the potentially adverse tax consequences to non-redeeming shareholders once a fund is open-ended, and the impact of open-ending on portfolio management policies. Such a conversion would require the approval of both a majority of the Trust's outstanding Common Shares and preferred shares voting together as a single class and a majority of the outstanding preferred shares voting as a separate class on such conversion. Conversion of the Trust to an open-end investment company would require the redemption of all outstanding preferred shares, including the Preferred Shares, which would eliminate the leveraged capital structure of the Trust with respect to the Common Shares. A delay in conversion could result following shareholder approval due to the Trust's inability to redeem the preferred shares. Shareholders of an open-end investment company may require the company to redeem their shares at any time (except in certain circumstances as authorized by or under the 1940 Act) at their next computed NAV less any redemption charge as might be in effect at the time of redemption. If the Trust is converted to an open-end management investment company, it could be required to liquidate portfolio securities to meet requests for redemption, and its shares would no longer be listed on the NYSE. If the Trust were to experience significant redemptions as an open-end fund, the decrease in total assets could result in a higher expense ratio and inefficiencies in portfolio management. In this regard, the Trust could reserve the right to effect redemptions in-kind with portfolio securities, which would subject redeeming shareholders to transaction costs in liquidating those securities.
REPURCHASE OF COMMON SHARES
In recognition of the possibility that the Trust's Common Shares may trade at a discount to their NAV, the Trust may from time to time take action to attempt to reduce or eliminate a market value discount from NAV by repurchasing its Common Shares in the open market or by tendering its Common Shares at NAV. So long as any Preferred Shares are outstanding, the Trust may not purchase, redeem or otherwise acquire any Common Shares unless (1) all accumulated dividends on the Preferred Shares have been paid or set aside for payment through the date of such purchase, redemption or other acquisition and (2) at the time of such purchase, redemption or acquisition asset coverage requirements set forth in the Declaration of Trust and the Trust's Certificate of Designation for Preferred Shares are met. Repurchases of Common Shares may result in the Trust being required to redeem preferred shares to satisfy asset coverage requirements.
FUNDAMENTAL AND NON-FUNDAMENTAL POLICIES OF THE TRUST
The investment objective of the Trust, certain policies of the Trust specified
herein as fundamental and the investment restrictions of the Trust described in
the SAI are fundamental policies of the Trust and may not be changed without a
Majority Vote of the shareholders of the Trust. The term Majority Vote means the
affirmative vote of (a) more than 50% of the outstanding shares of the Trust or
(b) 67% or more of the shares present at a meeting if more than 50% of the
outstanding shares of the Trust are represented at the meeting in person or by
proxy, whichever is less. All other policies of the Trust may be modified by
resolution of the Board of Trustees of the Trust.
26 Description of the Trust
DESCRIPTION OF CAPITAL STRUCTURE
COMMON SHARES
The Trust's Declaration of Trust authorizes the issuance of an unlimited number of Common Shares of beneficial interest, par value $.01 per share. All Common Shares have equal rights to the payment of dividends and the distribution of assets upon liquidation. Common Shares will, when issued, be fully paid and non-assessable, and will have no pre-emptive or conversion rights or rights to cumulative voting.
Whenever preferred shares are outstanding, holders of Common Shares will not be entitled to receive any distributions from the Trust, unless at the time of such declaration, (1) all accrued dividends on Preferred Shares or accrued interest on borrowings have been paid and (2) the value of the Trust's total assets (determined after deducting the amount of such dividend or other distribution), less all liabilities and indebtedness of the Trust not represented by senior securities, is at least 300% of the aggregate amount of such securities representing indebtedness and at least 200% of the aggregate amount of securities representing indebtedness plus the aggregate liquidation value of the outstanding preferred shares. In addition to the requirements of the 1940 Act, the Trust is required to comply with the other asset coverage requirements as a condition of the Trust obtaining a rating of the preferred shares from a rating agency. These requirements include asset coverage tests more stringent than under the 1940 Act. See "Preferred Shares" below.
BORROWINGS
The Trust's Declaration of Trust authorizes the Trust, without the prior approval of holders of Common Shares, to borrow money. In this connection, the Trust may issue notes or other evidence of indebtedness (including bank borrowings or commercial paper) and may secure any such borrowings by mortgaging, pledging or otherwise granting a security interest in the Trust's assets. See "Risk Factors and Special Consideration -- Leverage."
PREFERRED SHARES
Under the 1940 Act, the Trust is permitted to have outstanding more than one series of preferred shares as long as no single series has priority over another series nor holders of preferred shares have pre-emptive rights to purchase any other preferred shares that might be issued.
The Trust's Declaration of Trust authorizes the issuance of a class of preferred shares (which class may be divided into two or more series) as the Trustees may, without shareholder approval, authorize. The preferred shares have such preferences, voting powers, terms of redemption, if any, and special or relative rights or privileges (including conversion rights, if any) as the Trustee may determine and as are set forth in the Trust's Certificate of Designation establishing the terms of the preferred shares. The number of shares of the preferred class or series authorized is unlimited, and the shares authorized may be represented in part by fractional shares. Under the Trust's Certificate of Designation, the Trustees have authorized the creation of 18,000 Auction Rate Cumulative Preferred Shares, having a par value of $0.01 per share, with a liquidation preference of $25,000 per share, classified as Series M, T, W, Th and F Auction Rate Cumulative Preferred Shares.
Any decision to offer preferred shares is subject to market conditions and to the Board of Trustees' and the Investment Manager's continuing belief that leveraging the Trust's capital structure through the issuance of preferred shares is likely to achieve the benefits to the Common Shares described in this Prospectus for long-term investors. The terms of the preferred shares will be determined by the Board of Trustees in consultation with the Investment Manager (subject to applicable law and the Trust's Declaration of Trust) if and when it authorizes a preferred shares offering.
The Preferred Shares have complete priority over the Common Shares as to distribution of assets. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Trust, holders of preferred shares will be entitled to receive a preferential liquidating distribution (expected to equal the original purchase price per share plus accumulated and unpaid dividends thereon, whether or not earned or declared) before any distribution of assets is made to holders of Common Shares.
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Description of Capital Structure 27
TAX MATTERS
The following information is meant as a general summary for U.S. shareholders. Please see the SAI for additional information. Investors should rely on their own tax adviser for advice about the particular federal, state and local tax consequences to them of investing in the Trust.
The federal income tax treatment of the Trust's Preferred Shares is not entirely clear, but the Trust believes, based on the advice of its counsel, that the Preferred Shares will constitute stock of the Trust. It is possible, however, that the IRS might take a contrary position, asserting, for example, that the Preferred Shares constitute debt of the Trust. The discussion below assumes that the Preferred Shares are stock.
The Trust will distribute all or substantially all of its net investment income and net realized capital gains, if any, to its shareholders each year. Although the Trust will not be taxed on amounts it distributes, most shareholders will be taxed on amounts they receive. A particular distribution generally will be taxable as either ordinary income or long-term capital gain. The Trust will allocate a proportionate amount of each type of its income to the Common Shares and to the Preferred Shares. It generally does not matter how long a shareholder has held the Trust's Common Shares or Preferred Shares or whether the shareholder elects to receive distributions in cash or reinvest them in additional Trust's Common Shares or Preferred Shares. For example, if the Trust designates a particular distribution as a long-term capital gains distribution, it will be taxable to a shareholder at his or her long-term capital gains rate. Dividends from the Trust are generally not eligible for the reduced rate of tax that may apply to certain qualifying dividends on corporate stock.
Dividends declared by the Trust in October, November or December and paid during the following January may be treated as having been received by shareholders in the year the distributions were declared.
Each shareholder will receive an annual statement summarizing the shareholder's dividend and capital gains distributions.
If a shareholder invests through a tax-deferred account, such as a retirement plan, the shareholder generally will not have to pay tax on dividends until they are distributed from the account. These accounts are subject to complex tax rules, and shareholders should consult a tax adviser about investment through a tax-deferred account.
There may be tax consequences to a shareholder if the shareholder sells the Trust's Common Shares or Preferred Shares. A shareholder will generally have a capital gain or loss, which will be long-term or short-term, generally depending on how long the shareholder holds those Common Shares or Preferred Shares. If a shareholder exchanges shares, the shareholder may be treated as if he or she sold them. Shareholders are responsible for any tax liabilities generated by their own transactions.
As with all investment companies, the Trust may be required to withhold U.S. federal income tax at the rate of 28% of all taxable distributions payable to a shareholder if the shareholder fails to provide the Trust with his or her correct taxpayer identification number or to make required certifications, or if the shareholder has been notified by the IRS that he or she is subject to backup withholding. Backup withholding is not an additional tax; rather, it is a way in which the IRS ensures it will collect taxes otherwise due. Any amounts withheld may be credited against a shareholder's U.S. federal income tax liability.
28 Tax Matters
MORE INFORMATION
DISTRIBUTION ARRANGEMENTS
Pursuant to the terms of a Distribution Agreement, ING Funds Distributor, LLC will act as the Trust's distributor for the optional cash investments privately negotiated transactions under the Trust's Shareholder Investment Program and for The Distribution Agreement provides that ING Fund's Distributor LLC does not receive compensation or commissions from the Trust for such services. In addition, no fees or commissions will be paid by the Trust or its shareholders in connection with the reinvestment of dividends and capital gains distributions. ING Funds Distributor, LLC's principal business address is 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258. ING Funds Distributor, LLC and ING Investments, LLC, the Trust's Investment Manager, and INGIM, the Trust's Sub-Adviser, are indirect, wholly-owned subsidiaries of ING Groep. See "Plans of Distribution" in the SAI.
The Trust bears the expenses of issuing the Common Shares. These expenses include, but are not limited to, the expense of preparation and printing of the prospectus and SAI, the expense of counsel and auditors, and others.
LEGAL MATTERS
The validity of the Common Shares offered hereby will be passed on for the Trust by Dechert LLP, 1775 I Street, NW, Washington, DC, counsel to the Trust.
AUDITORS
KPMG LLP serves as the independent registered public accounting firm for the Trust. The auditors' address is 355 South Grand Avenue, Los Angeles, California 90071.
REGISTRATION STATEMENT
The Trust has filed with the SEC, Washington, DC, a Registration Statement under the Securities Act, relating to the Common Shares offered hereby. For further information with respect to the Trust and its Common Shares, reference is made to such Registration Statement and the exhibits filed with it.
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More Information 29
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE ---- Change of Name 2 Investment Objective 2 Investment Restrictions 2 Additional Information About Investments and Investment Techniques 4 Trustees and Officers 12 Compensation Table 20 Code of Ethics 22 Investment Management and Other Service Providers 23 Plans of Distribution 28 Portfolio Transactions 30 Net Asset Value 31 Federal Taxation 32 Advertising and Performance Data 36 General Information 37 Financial Statements 38 |
30 Statement of Additional Information
ING PRIME RATE TRUST
7337 E. DOUBLETREE RANCH ROAD
SCOTTSDALE, ARIZONA 85258
(800) 992-0180
25,000,000 COMMON SHARES OF BENEFICIAL INTEREST
TRUST ADVISORS AND AGENTS
INVESTMENT MANAGER
ING Investments, LLC
7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258
SUB-ADVISER
ING Investment Management Co.
10 State House Square
Hartford, Connecticut 06103-3602
ADMINISTRATOR
ING Funds Services, LLC
7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258
CUSTODIAN
State Street Bank and Trust
801 Pennsylvania Avenue
Kansas City, Missouri 64105
INDEPENDENT AUDITORS
KPMG LLP
355 South Grand Avenue
Los Angeles, California 90071
DISTRIBUTOR
ING Funds Distributor, LLC
7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258
TRANSFER AGENT
DST Systems, Inc.
816 Wyandotte
Kansas City, MO 64105
LEGAL COUNSEL
Dechert LLP
1775 I Street, NW
Washington, DC 20006
INSTITUTIONAL INVESTORS AND ANALYSTS
Call ING Prime Rate Trust
(800) 336-3436
THE TRUST HAS NOT AUTHORIZED ANY PERSON TO PROVIDE YOU WITH ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THIS OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION IN THIS PROSPECTUS OR OTHER INFORMATION TO WHICH WE HAVE REFERRED YOU. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON SHARES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE COMMON SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO THIS PROSPECTUS DOES NOT IMPLY THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME AFTER THE DATE OF THIS PROSPECTUS. HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED.
WHEN CONTACTING THE SEC, YOU WILL WANT TO REFER TO THE TRUST'S SEC FILE NUMBER.
THE FILE NUMBER IS AS FOLLOWS:
1940 Act File No. 811-5410
[ING FUNDS LOGO] PRPRO-PRT25M (07/04-07/01/04)
ING PRIME RATE TRUST
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258
STATEMENT OF ADDITIONAL INFORMATION
JULY 1, 2004
ING Prime Rate Trust ("Trust") is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended ("1940 Act"). The Trust's investment objective is to provide investors with as high a level of current income as is consistent with the preservation of capital. There is no assurance that the Trust will achieve its investment objective. The Trust is managed by ING Investments, LLC ("ING Investments" or "Investment Manager") and sub-advised by ING Investment Management Co. ("INGIM" or "Sub-Adviser"), formerly known as Aeltus Investment Management, Inc.
This Statement of Additional Information ("SAI") does not constitute a prospectus, but should be read in conjunction with the Prospectus relating thereto dated July 1, 2004. This SAI does not include all information that a prospective investor should consider before purchasing Common Shares in this offering, and investors should obtain and read the Prospectus prior to purchasing such shares. In addition, the financial statements from the Trust's Annual Report dated February 29, 2004, are incorporated herein by reference. A copy of the Prospectus may be obtained without charge by calling the Investment Manager at (800) 992-0180.
TABLE OF CONTENTS
PAGE CHANGE OF NAME 2 INVESTMENT OBJECTIVE 2 INVESTMENT RESTRICTIONS 2 ADDITIONAL INFORMATION ABOUT INVESTMENTS AND INVESTMENT TECHNIQUES 4 TRUSTEES AND OFFICERS 12 COMPENSATION TABLE 20 CODE OF ETHICS 22 INVESTMENT MANAGEMENT AND OTHER SERVICE PROVIDERS 23 PLANS OF DISTRIBUTION 28 PORTFOLIO TRANSACTIONS 30 NET ASSET VALUE 31 FEDERAL TAXATION 32 ADVERTISING AND PERFORMANCE DATA 36 GENERAL INFORMATION 37 FINANCIAL STATEMENTS 38 |
The Prospectus and SAI omit certain information contained in the registration statement filed with the Securities and Exchange Commission ("Commission" or "SEC"), Washington, DC. The registration statement may be obtained from the Commission upon payment of the fee prescribed, or inspected at the Commission's office for no charge. The registration statement is also available on the Commission's website (www.sec.gov).
CHANGE OF NAME
The Trust changed its name from Pilgrim Prime Rate Trust to Pilgrim America Prime Rate Trust in April 1996, and then changed its name back to Pilgrim Prime Rate Trust on November 16, 1998. Effective March 1, 2002, the Trust changed its name to ING Prime Rate Trust.
INVESTMENT OBJECTIVE
The Trust's investment objective is to obtain as high a level of current income as is consistent with the preservation of capital. The Trust seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in higher yielding, U.S. dollar denominated, floating rate secured senior loans ("Senior Loans"). These Senior Loans are typically below investment grade credit quality.
The Trust only invests in Senior Loans made to corporations or other business entities organized under U.S. or Canadian law and which are domiciled in the U.S., Canada or in U.S. territories or possessions. The Trust can also invest up to 20% of its total assets in other investments, including unsecured loans, subordinated loans, short-term debt instruments, equity securities acquired in connection with investments in loans and other instruments as described under "Additional Information About Investments and Investment Techniques." During periods when, in the opinion of the Trust's Investment Manager or Sub-Adviser, a temporary defensive posture in the market is appropriate, the Trust may hold up to 100% of its assets in cash and/or in short-term debt instruments.
INVESTMENT RESTRICTIONS
The Trust has adopted the following restrictions relating to its investments and activities, which may not be changed without a Majority Vote, as defined in the 1940 Act. The Trust may not:
1. Issue senior securities, except insofar as the Trust may be deemed
to have issued a senior security by reason of (i) entering into certain interest
rate hedging transactions, (ii) entering into reverse repurchase agreements, or
(iii) borrowing money in an amount not exceeding 33 1/3%, or such other
percentage permitted by law, of the Trust's total assets (including the borrowed
amount) less all liabilities other than borrowings, or (iv) issuing a class or
classes of preferred shares in an amount not exceeding 50%, or such other
percentage permitted by law, of the Trust's total assets less all liabilities
and indebtedness not represented by senior securities.
2. Invest more than 25% of its total assets in any industry.
3. Invest in marketable warrants other than those acquired in conjunction with Senior Loans and such warrants will not constitute more than 5% of its assets.
4. Make investments in any one issuer other than U.S. government securities if, immediately after such purchase or acquisition, more than 5% of the value of the Trust's total assets would be invested in such issuer, or the Trust would own more than 25% of any outstanding issue, except that up to 25% of the Trust's total assets may be invested without regard to the foregoing restrictions. For the purpose of the foregoing restriction, the Trust will consider the borrower of a Senior Loan to be the issuer of such Senior Loan. In addition, with respect to a Senior Loan under which the Trust does not have privity with the borrower or would not have a direct cause of action against the borrower in the event of the failure of the borrower to pay scheduled principal or interest, the Trust will also separately
meet the foregoing requirements and consider each interpositioned bank (a lender from which the Trust acquires a Senior Loan) to be an issuer of the Senior Loan.
5. Act as an underwriter of securities, except to the extent that it may be deemed to act as an underwriter in certain cases when disposing of its portfolio investments or acting as an agent or one of a group of co-agents in originating Senior Loans.
6. Purchase or sell equity securities (except that the Trust may, incidental to the purchase or ownership of an interest in a Senior Loan, or as part of a borrower reorganization, acquire, sell and exercise warrants and/or acquire or sell other equity securities), real estate, real estate mortgage loans, commodities, commodity futures contracts, or oil or gas exploration or development programs; or sell short, purchase or sell straddles, spreads, or combinations thereof, or write put or call options.
7. Make loans of money or property to any person, except that the Trust
(i) may make loans to corporations or other business entities, or enter into
leases or other arrangements that have the characteristics of a loan; (ii) may
lend portfolio instruments; and (iii) may acquire securities subject to
repurchase agreements.
8. Purchase shares of other investment companies, except in connection with a merger, consolidation, acquisition or reorganization.
9. Make investments on margin or hypothecate, mortgage or pledge any of its assets except for the purpose of securing borrowings as described above in connection with the issuance of senior securities and then only in an amount up to 33 1/3% (50% in the case of the issuance of a preferred class of shares), or such other percentage permitted by law, of the value of the Trust's total assets (including, with respect to borrowings, the amount borrowed) less all liabilities other than borrowings (or, in the case of the issuance of senior securities, less all liabilities and indebtedness not represented by senior securities).
If a percentage restriction is adhered to at the time of investment, a later increase or decrease in percentage resulting from a change in value of the Trust's investments or amount of total assets will not be considered a violation of any of the foregoing restrictions.
There is no limitation on the percentage of the Trust's total assets that may be invested in instruments which are not readily marketable or subject to restrictions on resale, and to the extent the Trust invests in such instruments, the Trust's portfolio should be considered illiquid. The extent to which the Trust invests in such instruments may affect its ability to realize the net asset value ("NAV") of the Trust in the event of the voluntary or involuntary liquidation of its assets.
The Trust has also adopted a non-fundamental policy as required by Rule 35d-1 under the 1940 Act to invest, under normal circumstances, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in higher yielding, U.S. dollar denominated, floating rate secured senior loans. The Trust has also adopted a policy to provide its shareholders with at least 60 days' prior notice of any change in such investment policy. If, subsequent to an investment, the 80% requirement is no longer met, the Trust's future investments will be made in a manner that will bring the Trust into compliance with this policy.
ADDITIONAL INFORMATION ABOUT INVESTMENTS AND INVESTMENT TECHNIQUES
Some of the different types of securities in which the Trust may invest, subject to its investment objective, policies and restrictions, are described in the prospectus under "Investment Objective and Policies." Additional information concerning certain of the Trust's investments and investment techniques is set forth below.
EQUITY SECURITIES
In connection with its purchase or holding of interests in Senior Loans, the Trust may acquire (and subsequently sell) equity securities or exercise warrants that it receives. The Trust will acquire such interests only as an incident to the intended purchase or ownership of loans or in connection with a reorganization of a borrower or its debt. The Trust normally will not hold more than 20% of its total assets in equity securities. Equity securities will not be treated as Senior Loans; therefore, an investment in such securities will not count toward the 80% of the Trust's net assets, plus the amount of any borrowings for investment purposes, that normally will be invested in Senior Loans. Equity securities are subject to financial and market risks and can be expected to fluctuate in value.
LEASE PARTICIPATIONS
Senior Loans that the Trust may acquire include particpation interests in lease fiancings (Lease Participations) where the collateral quality, credit quality of the borrower and the likelihood of payback are believed by the Investment Manager or Sub-Advisert to be the same as those applied to conventional Senior Loans. A Lease Participation is also required to have a floating interest rate that is indexed to a benchmark indicator of prevailing interest rates, such as LIBOR or the Prime Rate.
The credit quality standards and general requirements that the Trust applies to Lease Participations including collateral quality, the credit quality of the borrower and the likelihood of payback are substantially the same as those applied to conventional Senior Loans. A Lease Participation is also required to have a floating interest rate that is indexed to the federal funds rate, London Inter-Bank Offered Rate ("LIBOR"), or Prime Rate in order to be eligible for investment.
The Office of the Comptroller of the Currency has established regulations which set forth circumstances under which national banks may engage in lease financings. Among other things, the regulation requires that a lease be a net-full payout lease representing the noncancelable obligation of the lessee, and that the bank make certain determinations with respect to any estimated residual value of leased property relied upon by the bank to yield a full return on the lease. The Trust may invest in lease financings only if the Lease Participation meets these banking law requirements.
INTEREST RATES AND PORTFOLIO MATURITY
Interest rates on loans in which the Trust invests adjust periodically. The interest rates are adjusted based on a base rate plus a premium or spread over the base rate. The base rate usually is LIBOR, the Federal Reserve federal funds rate, the Prime Rate or other base lending rates used by commercial lenders. LIBOR usually is an average of the interest rates quoted by several designated banks as the rates at which they pay interest to major depositors in the London interbank market on U.S. dollar denominated deposits. The Investment Manager and Sub-Adviser believe that changes in short-term LIBOR rates are closely related to changes in the Federal Reserve federal funds rate, although the two are not technically linked. The Prime Rate quoted by a major U.S. bank is generally the interest rate at which that bank is willing to lend U.S. dollars to its most creditworthy borrowers, although it may not be the bank's lowest available rate.
Loans in which the Trust invests typically have interest rates which reset at least quarterly and may reset as frequently as daily. The maximum duration of an interest rate reset on any loan in which the Trust can invest is one year. The maximum maturity on any loan in which the Trust can invest is ten years. The Trust's portfolio of loans will ordinarily have a dollar-weighted average time until the next interest rate adjustment of 90 days or less, although the time may exceed 90 days. The Trust may find it possible and appropriate to use interest rate swaps and other investment practices to shorten the effective interest rate adjustment period of loans. If the Trust does so, it will consider the shortened period to be the adjustment period of the loan. As short-term interest rates rise, interest payable to the Trust should increase. As short-term interest rates decline, interest payable to the Trust should decrease. The amount of time that will pass before the Trust experiences the effects of changing short-term interest rates will depend on the dollar-weighted average time until the next interest rate adjustment on the Trust's portfolio of loans.
Loans usually have mandatory and optional prepayment provisions. Because of prepayments, the actual remaining maturity of a loan may be considerably less than its stated maturity. If a loan is prepaid, the Trust will have to reinvest the proceeds in other loans or securities which may have a lower fixed spread over its base rate. In such a case, the amount of interest paid to the Trust would likely decrease.
In the event of a change in the benchmark interest rate on a loan, the rate payable to lenders under the loan will, in turn, change at the next scheduled reset date. If the benchmark rate goes up, the Trust as lender would earn interest at a higher rate, but only on and after the reset date. If the benchmark rate goes down, the Trust as lender would earn interest at a lower rate, but only on and after the reset date.
During normal market conditions, changes in market interest rates will affect the Trust in certain ways. The principal effect will be that the yield on the Trust's Common Shares will tend to rise or fall as market interest rates rise and fall. This is because almost all of the assets in which the Trust invests pay interest at rates which float in response to changes in market rates. However, because the interest rates on the Trust's assets reset over time, there will be an imperfect correlation between changes in market rates and changes to rates on the portfolio as a whole. This means that changes to the rate of interest paid on the portfolio as a whole will tend to lag behind changes in market rates.
Market interest rate changes may also cause the Trust's NAV to experience moderate volatility. This is because the value of a loan asset in the Trust is partially a function of whether it is paying what the market perceives to be a market rate of interest for the particular loan, given its individual credit and other characteristics. If market interest rates change, a loan's value could be affected to the extent the interest rate paid on that loan does not reset at the same time. As discussed above, the rates of interest paid on the loans in which the Trust invests have a weighted average reset period that typically is less than 90 days. Therefore, the impact of the lag between a change in market interest rates and the change in the overall rate on the portfolio is expected to be minimal.
Finally, to the extent that changes in market rates of interest are reflected not in a change to a base rate such as LIBOR but in a change in the spread over the base rate which is payable on loans of the type and quality in which the Trust invests, the Trust's NAV could be adversely affected. Again, this is because the value of a loan asset in the Trust is partially a function of whether it is paying what the market perceives to be a market rate of interest for the particular loan, given its individual credit and other characteristics. However, unlike changes in market rates of interest for which there is only a temporary lag before the portfolio reflects those changes, changes in a loan's value based on changes in the market spread on loans in the Trust's portfolio may be of longer duration.
OTHER INVESTMENTS
Assets not invested in Senior Loans will generally consist of other
instruments, including unsecured loans and subordinated loans up to a maximum of
5% of the Trust's total assets, short-term debt instruments with remaining
maturities of 120 days or less (which may have yields tied to the Prime Rate,
commercial paper rates, the federal funds rate or LIBOR) and equity securities
acquired in connection with investments in loans. Short-term debt instruments
may include (i) commercial paper rated A-1 by Standard & Poor's Ratings Services
or P-1 by Moody's Investors Service, Inc., or of comparable quality as
determined by the Investment Manager or Sub-Adviser, (ii) certificates of
deposit, bankers' acceptances, and other bank deposits and obligations, and
(iii) securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. During periods when, in the judgment of the Investment
Manager or Sub-Adviser, a temporary defensive posture in the market is
appropriate, the Trust may hold up to 100% of its assets in cash and/or in
short-term debt instruments.
REPURCHASE AGREEMENTS
The Trust has the ability, pursuant to its investment objective and policies, to enter into repurchase agreements. A repurchase agreement is a contract under which the Trust may sell and simultaneously obtain the commitment of the purchaser to sell the security back to the Trust at an agreed upon price on an agreed upon date. Repurchase agreements will be considered borrowings by the Trust, and as such are subject to the restrictions on borrowing. Borrowings by the Trust create an opportunity for greater total return, but at the same time increase exposure to capital risk. The Trust will maintain in a segregated account with its custodian cash or liquid high grade portfolio securities in an amount sufficient to cover its obligations with respect to the repurchase agreements. The Trust will receive payment for such securities only upon physical delivery or evidence of book entry transfer by its custodian. Regulations of the Commission require either that securities sold by the Trust under a repurchase agreement be segregated pending repurchase or that the proceeds be segregated on the Trust's books and records pending repurchase. Repurchase agreements may involve certain risks in the event of default or insolvency of the other party, including possible loss from delays or restrictions upon the Trust's ability to dispose of the underlying securities.
REVERSE REPURCHASE AGREEMENTS
The Trust has the ability, pursuant to its investment objective and policies, to enter into repurchase agreements if the asset which is the subject of the repurchase is a loan. Such agreements may be considered to be loans by the Trust for purposes of the 1940 Act. Each reverse repurchase agreement must be collateralized fully, in accordance with the provisions of Rule 5b-3 under the 1940 Act, at all times. Pursuant to such reverse repurchase agreements, the Trust acquires securities from financial institutions such as brokers, dealers and banks, subject to the seller's agreement to repurchase and the Trust's agreement to resell such securities at a mutually agreed upon date and price. The term of such an agreement is generally quite short, possibly overnight or for a few days, although it may extend over a number of months (up to one year) from the date of delivery. The repurchase price generally equals the price paid by the Trust plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the underlying portfolio security). The securities underlying a reverse repurchase agreement will be marked to market every business day so that the value of the collateral is at least equal to the value of the loan, including the accrued interest thereon, and the Investment Manager or Sub-Adviser will monitor the value of the collateral. Securities subject to reverse repurchase agreements will be held by the Custodian or in the Federal Reserve/Treasury Book-Entry System. If the seller defaults
on its repurchase obligation, the Trust will suffer a loss to the extent that the proceeds from a sale of the underlying securities is less than the repurchase price under the agreement. Bankruptcy or insolvency of such a defaulting seller may cause the Trust's rights with respect to such securities to be delayed or limited. To mitigate this risk, the Trust only enters into reverse repurchase agreements with highly rated, large financial institutions. The Trust may only enter into reverse repurchase agreements that qualify for an exclusion from any automatic stay of creditors' rights against the counterparty under applicable insolvency law in the event of the counterparty's insolvency.
LENDING LOANS AND OTHER PORTFOLIO INSTRUMENTS
To generate additional income, the Trust may lend its portfolio securities, including interests in Senior Loans, in an amount equal to up to 33 1/3% of theTrust's total assets to broker-dealers, major banks, or other recognized domestic institutional borrowers of securities. No lending may be made to any companies affiliated with the Investment Manager or Sub-Adviser. During the time portfolio securities are on loan, the borrower pays the Trust any dividends or interest paid on such securities, and the Trust may invest the cash collateral and earn additional income, or it may receive an agreed-upon amount of interest income from the borrower who has delivered equivalent collateral or a letter of credit. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower fail financially.
The Trust may seek to increase its income by lending financial instruments in its portfolio in accordance with present regulatory policies, including those of the Board of Governors of the Federal Reserve System and the Commission. The lending of financial instruments is a common practice in the securities industry. The loans are required to be secured continuously by collateral, consistent with the requirements of the 1940 Act discussed below, maintained on a current basis at an amount at least equal to the market value of the portfolio instruments loaned. The Trust has the right to call a loan and obtain the portfolio instruments loaned at any time on such notice as specified in the transaction documents. For the duration of the loan, the Trust will continue to receive the equivalent of the interest paid by the issuer on the portfolio instruments loaned and may also receive compensation for the loan of the financial instrument. Any gain or loss in the market price of the instruments loaned that may occur during the term of the loan will be for the account of the Trust.
The Trust may lend its portfolio instruments so long as the terms and the
structure of such loans are not inconsistent with the requirements of the 1940
Act, which currently require that (a) the borrower pledge and maintain with the
Trust collateral consisting of cash, a letter of credit issued by a domestic
U.S. bank, or securities issued or guaranteed by the U.S. government having a
value at all times not less than 100% of the value of the instruments loaned,
(b) the borrowers add to such collateral whenever the price of the instruments
loaned rises (I.E., the value of the loan is marked to market on a daily basis),
(c) the loan be made subject to termination by the Trust at any time, and (d)
the Trust receives reasonable interest on the loan (which may include the
Trust's investing any cash collateral in interest bearing short-term
investments), any distributions on the loaned instruments and increase in their
market value. The Trust may lend its portfolio instruments to member banks of
the Federal Reserve System, members of the New York Stock Exchange ("NYSE") or
other entities determined by the Investment Manager or Sub-Adviser to be
creditworthy. All relevant facts and circumstances, including the
creditworthiness of the qualified institution, will be monitored by the
Investment Manager or Sub-Adviser, and will be considered in making decisions
with respect to the lending of portfolio instruments.
The Trust may pay reasonable negotiated fees in connection with loaned instruments. In addition, voting rights may pass with loaned securities, but if a material event were to occur affecting such a loan, the Trust will retain the right to call the loan and vote the securities. If a default occurs by the other party to such transaction, the Trust will have contractual remedies pursuant to the agreements related to the
transaction, but such remedies may be subject to bankruptcy and insolvency laws which could materially and adversely affect the Trust's rights as a creditor. However, the loans will be made only to firms deemed by the Investment Manager or Sub-Adviser to be of good financial standing and when, in the judgment of the Investment Manager or Sub-Adviser, the consideration which can be earned currently from loans of this type justifies the attendant risk.
INTEREST RATE HEDGING TRANSACTIONS
The Trust has the ability, pursuant to its investment objectives and policies, to engage in certain hedging transactions including interest rate swaps and the purchase or sale of interest rate caps and floors. The Trust may undertake these transactions primarily for the following reasons: to preserve a return on or value of a particular investment or portion of the Trust's portfolio, to protect against decreases in the anticipated rate of return on floating or variable rate financial instruments which the Trust owns or anticipates purchasing at a later date, or for other risk management strategies such as managing the effective dollar-weighted average duration of the Trust's portfolio. Market conditions will determine whether and in what circumstances the Trust would employ any of the hedging techniques described below.
Interest rate swaps involve the exchange by the Trust with another party of their respective commitments to pay or receive interest, E.G., an exchange of an obligation to make floating rate payments on a specified dollar amount, referred to as the "notional" principal amount, for an obligation to make fixed rate payments. For example, the Trust may seek to shorten the effective interest rate redetermination period of a Senior Loan in its portfolio that has an interest rate redetermination period of one year. The Trust could exchange its right to receive fixed income payments for one year from a borrower for the right to receive payments under an obligation that readjusts monthly. In such an event, the Trust would consider the interest rate redetermination period of such Senior Loan to be the shorter period.
The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling such interest rate floor. The Trust will not enter into swaps, caps or floors if, on a net basis, the aggregate notional principal amount with respect to such agreements exceeds the net assets of the Trust or to the extent the purchase of swaps, caps or floors would be inconsistent with the Trust's other investment restrictions.
The Trust will usually enter into interest rate swaps on a net basis, I.E., where the two parties make net payments with the Trust receiving or paying, as the case may be, only the net amount of the two payments. The net amount of the excess, if any, of the Trust's obligations over its entitlement with respect to each interest rate swap will be accrued and an amount of cash or liquid securities having an aggregate NAV at least equal to the accrued excess will be maintained in a segregated account. If the Trust enters into a swap on other than a net basis, the Trust will maintain in the segregated account the full amount of the Trust's obligations under each such swap. The Trust may enter into swaps, caps and floors with member banks of the Federal Reserve System, members of the NYSE or other entities determined by ING Investments. If a default occurs by the other party to such transaction, the Trust will have contractual remedies pursuant to the agreements related to the transaction but such remedies may be subject to bankruptcy and insolvency laws which could materially and adversely affect the Trust's rights as a creditor. The Trust will not treat swaps covered in accordance with applicable regulatory guidance as senior securities.
The swap, cap and floor market has grown substantially in recent years with a large number of banks and financial services firms acting both as principals and as agents utilizing standardized swap documentation. As a result, this market has become relatively liquid. There can be no assurance, however, that the Trust will be able to enter into interest rate swaps or to purchase interest rate caps or floors at prices or on terms the Investment Manager or Sub-Adviser believes are advantageous to the Trust. In addition, although the terms of interest rate swaps, caps and floors may provide for termination, there can be no assurance that the Trust will be able to terminate an interest rate swap or to sell or offset interest rate caps or floors that it has purchased.
The successful utilization of hedging and risk management transactions requires skills different from those needed in the selection of the Trust's portfolio securities and depends on the Investment Manager's or Sub-Adviser's ability to predict correctly the direction and degree of movements in interest rates. Although the Trust believes that use of the hedging and risk management techniques described above will benefit the Trust, if the Investment Manager's or Sub-Adviser's judgment about the direction or extent of the movement in interest rates is incorrect, the Trust's overall performance would be worse than if it had not entered into any such transactions. The Trust will incur brokerage and other costs in connection with its hedging transactions.
ORIGINATING SENIOR LOANS - RELIANCE ON AGENTS
The Trust has the ability to act as an agent in originating and administering a loan on behalf of all lenders or as one of a group of co-agents in originating Senior Loans. However, the Trust has not acted as agent or co-agent on any loans, and has no present intention of doing so in the future. An agent for a loan is required to administer and manage the Senior Loan and to service or monitor the collateral. The agent is also responsible for the collection of principal and interest and fee payments from the borrower and the apportionment of these payments to the credit of all lenders which are parties to the loan agreement. The agent is charged with the responsibility of monitoring compliance by the borrower with the restrictive covenants in the loan agreement and of notifying the lenders of any adverse change in the borrower's financial condition. In addition, the agent generally is responsible for determining that the lenders have obtained a perfected security interest in the collateral securing the Senior Loan.
Lenders generally rely on the agent to collect their portion of the payments on a Senior Loan and to use the appropriate creditor remedies against the borrower. Typically under loan agreements, the agent is given broad discretion in enforcing the loan agreement and is obligated to use the same care it would use in the management of its own property. The borrower compensates the agent for these services. Such compensation may include special fees paid on structuring and funding the Senior Loan and other fees on a continuing basis. The precise duties and rights of an agent are defined in the loan agreement.
The agent may enforce compliance by the borrower with the terms of the loan agreement. Agents also have voting and consent rights under the applicable loan agreement. Action subject to agent vote or consent generally requires the vote or consent of the holders of some specified percentage of the outstanding principal amount of the Senior Loan, which percentage varies depending on the relative loan agreement. Certain decisions, such as reducing the amount or increasing the time for payment of interest on or repayment of principal of a Senior Loan, or relating collateral therefor, frequently require the unanimous vote or consent of all lenders affected.
Pursuant to the terms of a loan agreement, the agent typically has sole responsibility for servicing and administering a loan on behalf of the other lenders. Each lender in a Senior Loan is generally
responsible for performing its own credit analysis and its own investigation of the financial condition of the borrower. Generally, loan agreements will hold the agent liable for any action taken or omitted that amounts to gross negligence or willful misconduct. In the event of a borrower's default on a loan, the loan agreements provide that the lenders do not have recourse against the agent for its activities as agent. Instead, lenders will be required to look to the borrower for recourse.
In a typical interest in a Senior Loan, the agent administers the loan and has the right to monitor the collateral. The agent is also required to segregate the principal and interest payments received from the borrower and to hold these payments for the benefit of the lenders. The Trust normally looks to the agent to collect and distribute principal of and interest on a Senior Loan. Furthermore, the Trust looks to the agent to use normal credit remedies, such as to foreclose on collateral, monitor credit loan covenants, and notify the lenders of any adverse changes in the borrower's financial condition or declarations of insolvency. At times the Trust may also negotiate with the agent regarding the agent's exercise of credit remedies under a Senior Loan. The agent is compensated for these services by the borrower as set forth in the loan agreement. Such compensation may take the form of a fee or other amount paid upon the making of the Senior Loan and/or an ongoing fee or other amount.
The loan agreements in connection with Senior Loans set forth the standard of care to be exercised by the agents on behalf of the lenders and usually provide for the termination of the agent's agency status in the event that it fails to act properly, becomes insolvent, enters FDIC receivership, or if not FDIC insured, enters into bankruptcy or if the agent resigns. In the event an agent is unable to perform its obligations as agent, another lender would generally serve in that capacity.
ADDITIONAL INFORMATION ON SENIOR LOANS
Senior Loans are direct obligations of corporations or other business entities and are arranged by banks or other commercial lending institutions and made generally to finance internal growth, mergers, acquisitions, stock repurchases, and leveraged buyouts. Senior Loans usually include restrictive covenants which must be maintained by the borrower. Such covenants, in addition to the timely payment of interest and principal, may include mandatory prepayment provisions arising from free cash flow and restrictions on dividend payments, and usually state that a borrower must maintain specific minimum financial ratios as well as establishing limits on total debt. A breach of covenant, which is not waived by the agent, is normally an event of acceleration, I.E., the agent has the right to call the outstanding Senior Loan. In addition, loan covenants may include mandatory prepayment provisions stemming from free cash flow. Free cash flow is cash that is in excess of capital expenditures plus debt service requirements of principal and interest. The free cash flow shall be applied to prepay the Senior Loan in an order of maturity described in the loan documents. Under certain interests in Senior Loans, the Trust may have an obligation to make additional loans upon demand by the borrower. The Trust intends to ensure its ability to satisfy such demands by segregating sufficient assets in high quality short-term liquid investments or by sufficiently maintaining unused borrowing capacity.
Senior Loans, unlike certain bonds, usually do not have call protection. This means that investments comprising the Trust's portfolio, while having a stated one to ten-year term, may be prepaid, often without penalty. The Trust generally holds Senior Loans to maturity unless it becomes necessary to sell them to adjust the Trust's portfolio in accordance with the Investment Manager's or Sub-Adviser's view of current or expected economic or specific industry or borrower conditions.
Senior Loans frequently require full or partial prepayment of a loan when there are asset sales or a securities issuance. Prepayments on Senior Loans may also be made by the borrower at its election. The rate of such prepayments may be affected by, among other things, general business and economic conditions, as well as the financial status of the borrower. Prepayment would cause the actual duration of a Senior Loan to be shorter than its stated maturity. Prepayment may be deferred by the Trust. This should, however, allow the Trust to reinvest in a new loan and recognize as income any unamortized loan fees. In many cases this will result in a new facility fee payable to the Trust.
Because interest rates paid on these Senior Loans fluctuate periodically with the market, it is expected that the prepayment and a subsequent purchase of a new Senior Loan by the Trust will not have a material adverse impact on the yield of the portfolio. See "Portfolio Transactions."
Under a Senior Loan, the borrower generally must pledge as collateral assets which may include one or more of the following: cash, accounts receivable, inventory, property, plant and equipment, both common and preferred stock in its subsidiaries, trademarks, copyrights, patent rights and franchise value. The Trust may also receive guarantees as a form of collateral. In some instances, a Senior Loan may be secured only by stock in a borrower or its affiliates. There is no assurance, however, that the liquidation of the existing collateral would satisfy the borrower's obligation in the event of nonpayment of scheduled interest or principal, or that such collateral could be readily liquidated.
The Trust may be required to pay and receive various fees and commissions
in the process of purchasing, selling and holding Senior Loans. The fee
component may include any, or a combination of, the following elements:
arrangement fees, assignment fees, non-use fees, facility fees, letter of credit
fees and ticking fees. Arrangement fees are paid at the commencement of a loan
as compensation for the initiation of the transaction. A non-use fee is paid
based upon the amount committed but not used under the loan. Facility fees are
on-going annual fees paid in connection with a loan. Letter of credit fees are
paid if a loan involves a letter of credit. Ticking fees are paid from the
initial commitment indication until loan closing if for an extended period. The
amount of fees is negotiated at the time of transaction.
MANAGEMENT OF THE TRUST
Set forth in the table below is information about each Trustee of the ING Funds.
NUMBER OF FUNDS IN PORTFOLIO TERM OF OFFICE COMPLEX POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) - OVERSEEN BY NAME, ADDRESS AND AGE WITH TRUST TIME SERVED(1) DURING THE PAST 5 YEARS TRUSTEE** ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES PAUL S. DOHERTY Trustee November 1999 - Mr. Doherty is President and Partner, Doherty, 117 7337 E. Doubletree Ranch Rd. Present Wallace, Pillsbury and Murphy, P.C., Attorneys Scottsdale, Arizona 85258 (1996 -Present). Date of Birth: 04/28/1934 J. MICHAEL EARLEY Trustee February 2002 - President and Chief Executive Officer, Bankers 117 7337 E. Doubletree Ranch Rd. Present Trust Company, N.A. (1992 - Present). Scottsdale, Arizona 85258 Date of Birth: 05/02/1945 R. BARBARA GITENSTEIN Trustee February 2002 - President, College of New Jersey (1999 - 117 7337 E. Doubletree Ranch Rd. Present Present). Scottsdale, Arizona 85258 Date of Birth: 02/18/1948 WALTER H. MAY Trustee November 1999- Retired. Formerly, Trustee of each of the funds 117 7337 E. Doubletree Ranch Rd. Present managed by Northstar Investment Management Scottsdale, Arizona 85258 Corporation (1996 - 1999). Date of Birth: 12/12/1936 JOCK PATTON Trustee August 1995 - Private Investor (June 1997 - Present). Formerly, 117 7337 E. Doubletree Ranch Rd. Present Director and Chief Executive Officer, Rainbow Scottsdale, Arizona 85258 Multimedia Group, Inc. (January 1999 - December Date of Birth: 12/11/1945 2001). DAVID W.C. PUTNAM Trustee November 1999- President and Director, F.L. Putnam Securities 117 7337 E. Doubletree Ranch Rd. Present Company, Inc. and its affiliates (1978 - present); Scottsdale, Arizona 85258 President, Secretary and Trustee, The Principled Date of Birth: 10/08/1939 Equity Market Fund (1996 - present). NAME, ADDRESS AND AGE OTHER DIRECTORSHIPS HELD BY TRUSTEE -------------------------------------------------------------------- INDEPENDENT TRUSTEES PAUL S. DOHERTY University of Massachusetts 7337 E. Doubletree Ranch Rd. Foundation Board (April 2004 - Scottsdale, Arizona 85258 present). Date of Birth: 04/28/1934 J. MICHAEL EARLEY 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Date of Birth: 05/02/1945 R. BARBARA GITENSTEIN New Jersey Resources (September 2003 7337 E. Doubletree Ranch Rd. - present). Scottsdale, Arizona 85258 Date of Birth: 02/18/1948 WALTER H. MAY Trustee, BestPrep Charity (1991 - 7337 E. Doubletree Ranch Rd. Present) - charitable organization. Scottsdale, Arizona 85258 Date of Birth: 12/12/1936 JOCK PATTON Director, Hypercom, Inc. (January 7337 E. Doubletree Ranch Rd. 1999 - Present); JDA Software Group, Scottsdale, Arizona 85258 Inc. (January 1999 - Present). Date of Birth: 12/11/1945 DAVID W.C. PUTNAM Anchor International Bond Trust 7337 E. Doubletree Ranch Rd. (December 2000 - Present); F.L. Scottsdale, Arizona 85258 Putnam Foundation (December 2000 - Date of Birth: 10/08/1939 Present); Progressive Capital Accumulation Trust (August 1998 - Present); Principled Equity Market Fund (November 1996 - Present), Mercy Endowment Foundation (1995 - Present); Asian American Bank and Trust Company (June 1992 - Present); Notre Dame Health Care Center (1991 - Present) F.L. Putnam Securities |
NUMBER OF FUNDS IN PORTFOLIO TERM OF OFFICE COMPLEX POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) - OVERSEEN BY NAME, ADDRESS AND AGE WITH TRUST TIME SERVED(1) DURING THE PAST 5 YEARS TRUSTEE** ------------------------------------------------------------------------------------------------------------------------------------ BLAINE E. RIEKE Trustee February 2001 - General Partner, Huntington Partners (January 117 7337 E. Doubletree Ranch Rd. Present 1997 - Present). Chairman of the Board and Scottsdale, Arizona 85258 Trustee of each of the funds managed by ING Date of Birth: 09/10/1933 Investment Management Co. LLC (November 1998 - February 2001). ROGER B. VINCENT Trustee February 2002 - President, Springwell Corporation (1989 - 117 7337 E. Doubletree Ranch Rd. Present Present). Formerly, Director, Tatham Offshore, Scottsdale, Arizona 85258 Inc. (1996 - 2000). Date of Birth: 08/26/1945 RICHARD A. WEDEMEYER Trustee February 2001 - Retired. Formerly, Vice President - Finance 117 7337 E. Doubletree Ranch Rd. Present and Administration, Channel Corporation (1996 Scottsdale, Arizona 85258 -2002). Formerly, Trustee, First Choice Funds Date of Birth: 03/23/1936 (1997 - 2001); and of each of the funds managed by ING Investment Management Co. LLC (1998 - 2001). TRUSTEES WHO ARE "INTERESTED PERSONS" THOMAS J. MCINERNEY(2) Trustee February 2001 - Chief Executive Officer, ING U.S. Financial 171 7337 E. Doubletree Ranch Rd. Present Services (September 2001 - Present); Member, Scottsdale, Arizona 85258 ING Americas Executive Committee (2001 - Date of Birth: 05/05/1956 Present); President, Chief Executive Officer and Director of Northern Life Insurance Company (March 2001 - October 2002), ING Aeltus Holding Company, Inc. (2000 - Present), ING Retail Holding Company (1998 - Present), ING Life Insurance and Annuity Company (September 1997 - November 2002) and ING Retirement Holdings, Inc. (1997 - Present). Formerly, General Manager and Chief Executive Officer, ING Worksite Division (December 2000 - October 2001), President, ING-SCI, Inc. (August 1997 - December 2000); President, Aetna Financial Services (August 1997 - December 2000). JOHN G. TURNER(3) Chairman and September 2000- Chairman, Hillcrest Capital Partners (May 117 7337 E. Doubletree Ranch Rd. Trustee Present 2002-Present); Vice Chairman of ING Americas Scottsdale, Arizona 85258 (2000 - 2002); Chairman and Chief Executive Officer of NAME, ADDRESS AND AGE OTHER DIRECTORSHIPS HELD BY TRUSTEE -------------------------------------------------------------------- Company, Inc. (June 1978 - Present); and an Honorary Trustee, Mercy Hospital (1973 - Present). BLAINE E. RIEKE Trustee, Morgan Chase Trust Co. 7337 E. Doubletree Ranch Rd. (January 1998 - Present); Director, Scottsdale, Arizona 85258 Members Trust Co. (November 2003 - Date of Birth: 09/10/1933 Present). ROGER B. VINCENT Director, AmeriGas Propane, Inc. 7337 E. Doubletree Ranch Rd. (1998 - Present). Scottsdale, Arizona 85258 Date of Birth: 08/26/1945 RICHARD A. WEDEMEYER Trustee, Touchstone Consulting Group 7337 E. Doubletree Ranch Rd. (1997 - Present); Jim Henson Legacy Scottsdale, Arizona 85258 (1994 - Present). Date of Birth: 03/23/1936 TRUSTEES WHO ARE "INTERESTED PERSONS" THOMAS J. MCINERNEY(2) Trustee, Equitable Life Insurance 7337 E. Doubletree Ranch Rd. Co., Golden American Life Insurance Scottsdale, Arizona 85258 Co., Life Insurance Company of Date of Birth: 05/05/1956 Georgia, Midwestern United Life Insurance Co., ReliaStar Life Insurance Co., Security Life of Denver, Security Connecticut Life Insurance Co., Southland Life Insurance Co., USG Annuity and Life Company, and United Life and Annuity Insurance Co. Inc (March 2001 - Present); Member of the Board, Bushnell Performing Arts Center; St. Francis Hospital; National Conference for Community Justice; and Metro Atlanta Chamber of Commerce. JOHN G. TURNER(3) Director, Hormel Foods Corporation 7337 E. Doubletree Ranch Rd. (March 2000 - Present); Shopko Scottsdale, Arizona 85258 Stores, Inc. (August 1999 - Present); and M.A. |
NUMBER OF FUNDS IN FUND TERM OF OFFICE COMPLEX POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) - OVERSEEN BY NAME, ADDRESS AND AGE WITH TRUST TIME SERVED(1) DURING THE PAST 5 YEARS TRUSTEE** ------------------------------------------------------------------------------------------------------------------------------------ Date of Birth: 10/03/1939 ReliaStar Financial Corp. and ReliaStar Life Insurance Company (1993 - 2001); Chairman of ReliaStar Life Insurance Company of New York (1995 - 2001); Chairman of Northern Life Insurance Company (1992 - 2001); Chairman and Trustee of the Northstar affiliated investment companies (1993 - 2001); and Director, Northstar Investment Management Corporation and its affiliates (1993 - 1999). NAME, ADDRESS AND AGE OTHER DIRECTORSHIPS HELD BY TRUSTEE -------------------------------------------------------------------- Date of Birth: 10/03/1939 Mortenson Company (March 2002 - Present); Conseco, Inc. (September 2003- Present). |
(1) Trustees serve until their successors are duly elected and qualified, subject to the Board's retirement policy which states that each duly elected or appointed Trustee who is not an "interested person" of the Trust, as defined in the 1940 Act ("Independent Trustees"), shall retire from service as a Trustee at the first regularly scheduled quarterly meeting of the Board that is held after the Trustee reaches the age of 70. A unanimous vote of the Board may extend the retirement date of a Trustee for up to one year. An extension may be permitted if the retirement would trigger a requirement to hold a meeting of shareholders of the Trust under applicable law, whether for purposes of appointing a successor to the Trustee or if otherwise necessary under applicable law, in which the extension would apply until such time as the shareholder meeting can be held or is no longer needed.
(2) Mr. McInerney is an "interested person," as defined by the 1940 Act, because of his affiliation with ING Groep N.V., the parent corporation of the investment adviser, ING Investments and the Distributor, ING Funds Distributor, LLC.
(3) Mr. Turner is an "interested person," as defined by the 1940 Act, because of his affiliation with ING Groep N.V., the parent corporation of the investment adviser, ING Investments and the Distributor, ING Funds Distributor, LLC.
** For the purposes of this table, "Fund Complex" means the following investment companies: ING Equity Trust; ING Funds Trust; ING Investment Funds, Inc.; ING Investors Trust; ING Mayflower Trust; ING Mutual Funds; ING Prime Rate Trust; ING Senior Income Fund; ING Variable Insurance Trust; ING Variable Products Trust; ING Emerging Markets Fund, Inc.; ING VP Natural Resources Trust; USLICO Series Fund, ING Partners, Inc.; ING VP Balanced Portfolio, Inc.; ING Strategic Allocation Portfolio, Inc.; ING Get Funds; ING VP Bond Portfolio; ING VP Money Market Portfolio; ING Variable Funds, Inc.; ING Variable Portfolios, Inc.; and ING Series Fund, Inc.
OFFICERS
Information about the ING Funds' officers are set forth in the table below:
NAME, ADDRESS AND AGE POSITIONS HELD WITH THE TRUST TERM OF OFFICE AND LENGTH OF TIME SERVED (1)(2) ---------------------------------------------------------------------------------------------------------------------- JAMES M. HENNESSY President and Chief Executive February 2001 - Present 7337 E. Doubletree Ranch Rd. Officer Scottsdale, Arizona 85258 Date of Birth: 04/09/1949 Chief Operating Officer July 2000 - Present STANLEY D. VYNER Executive Vice President August 2003 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Date of Birth: 05/14/1950 MICHAEL J. ROLAND Executive Vice President and February 2002 - Present 7337 E. Doubletree Ranch Rd. Assistant Secretary Scottsdale, Arizona 85258 Date of Birth: 05/30/1958 Principal Financial Officer August 1998 - Present ROBERT S. NAKA Senior Vice President November 1999 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Assistant Secretary July 1996 - Present Date of Birth: 06/17/1963 DANIEL A. NORMAN Senior Vice President April 1995 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Treasurer June 1997 - Present Date of Birth: 12/29/1957 JEFFREY A. BAKALAR Senior Vice President November 1999 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Date of Birth: 12/15/1959 NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION(S) DURING THE LAST FIVE YEARS (3) ------------------------------------------------------------------------------------------------------ JAMES M. HENNESSY President and Chief Executive Officer, ING Investments, LLC(2) 7337 E. Doubletree Ranch Rd. (December 2001 - Present). Formerly, Senior Executive Vice Scottsdale, Arizona 85258 President and Chief Operating Officer, ING Investments, LLC(2) Date of Birth: 04/09/1949 (April 1995 - December 2000); and Executive Vice President, ING Investments, LLC(2) (May 1998 - June 2000). STANLEY D. VYNER Executive Vice President, ING Investments, LLC(2) (July 2000 - 7337 E. Doubletree Ranch Rd. Present) and Chief Investment Risk Officer (June 2003 - Scottsdale, Arizona 85258 Present). Formerly, Chief Investment Officer of the Date of Birth: 05/14/1950 International Portfolios, ING Investments, LLC(2) (July 1996 - June 2003); and President and Chief Executive Officer, ING Investments, LLC(2) (August 1996 - August 2000). MICHAEL J. ROLAND Executive Vice President, Chief Financial Officer and 7337 E. Doubletree Ranch Rd. Treasurer, ING Investments, LLC(2) (December 2001 - Present). Scottsdale, Arizona 85258 Formerly, Senior Vice President, ING Investments, LLC(2) (June Date of Birth: 05/30/1958 1998 - December 2001). ROBERT S. NAKA Senior Vice President and Assistant Secretary, ING Funds 7337 E. Doubletree Ranch Rd. Services, LLC(3) (October 2001 - Present). Formerly, Senior Scottsdale, Arizona 85258 Vice President and Assistant Secretary, ING Funds Services, Date of Birth: 06/17/1963 LLC(3) (February 1997 - August 1999). DANIEL A. NORMAN Senior Vice President (April 1995 - Present) and Senior 7337 E. Doubletree Ranch Rd. Investment Manager in the Senior Floating Rate Loan Group Scottsdale, Arizona 85258 (November 1999 - Present), ING Investment Management Co. Date of Birth: 12/29/1957 Formerly, Portfolio Manager in the Senior Floating Rate Loan Group (April 1995 - November 1999). JEFFREY A. BAKALAR Senior Vice President (January 1998 - Present) and Senior 7337 E. Doubletree Ranch Rd. Investment Manager in the Senior Floating Rate Loan Group Scottsdale, Arizona 85258 (November 1999 - Present), ING Investment Management Co. Date of Birth: 12/15/1959 Formerly, Portfolio Manager in the Senior Floating Rate Loan Group (January 1998 - November 1999). |
NAME, ADDRESS AND AGE POSITIONS HELD WITH THE TRUST TERM OF OFFICE AND LENGTH OF TIME SERVED (1)(2) ---------------------------------------------------------------------------------------------------------------------- ELLIOT ROSEN Senior Vice President May 2002 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Date of Birth: 05/07/53 WILLIAM H. RIVOIR Senior Vice President and February 2001 - Present 7337 E. Doubletree Ranch Rd. Assistant Secretary Scottsdale, Arizona 85258 Date of Birth: 01/19/1951 CURTIS F. LEE Senior Vice President and February 2001 - Present 7337 E. Doubletree Ranch Rd. Chief Credit Officer Scottsdale, Arizona 85258 Date of Birth: 06/05/1954 KIMBERLY A. ANDERSON Senior Vice President November 2003 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Date of Birth: 07/25/1964 ROBYN L. ICHILOV Vice President November 1997 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Date of Birth: 09/25/1967 J. DAVID GREENWALD Vice President August 2003 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, AZ 85258 Date of Birth: 09/24/1957 LAUREN D. BENSINGER Vice President August 2003 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Date of Birth: 02/06/1954 TODD MODIC Vice President August 2003 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Date of Birth: 11/03/1967 NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION(S) DURING THE LAST FIVE YEARS (3) ------------------------------------------------------------------------------------------------------ ELLIOT ROSEN Senior Vice President in the Senior Floating Rate Loan Group of 7337 E. Doubletree Ranch Rd. ING Investment Management Co. (February 1999 - Present). Scottsdale, Arizona 85258 Date of Birth: 05/07/53 WILLIAM H. RIVOIR Vice President, ING Investment Management Co. (January 2004 - 7337 E. Doubletree Ranch Rd. Present). Formerly, Counsel, ING USFS Law Department (January Scottsdale, Arizona 85258 2003 - December 2003); and Senior Vice President, ING Date of Birth: 01/19/1951 Investments, LLC(2) (June 1998 - December 2002). CURTIS F. LEE Senior Vice President and Chief Credit Officer in the Senior 7337 E. Doubletree Ranch Rd. Floating Rate Loan Group of ING Investment Management Co. Scottsdale, Arizona 85258 (August 1999 - Present). Formerly, held a series of positions Date of Birth: 06/05/1954 with Standard Chartered Bank in the credit approval and problem loan management functions (1992 - 1999). KIMBERLY A. ANDERSON Senior Vice President, ING Investments, LLC(2) (October 2003 - 7337 E. Doubletree Ranch Rd. Present). Formerly, Vice President and Assistant Secretary, ING Scottsdale, Arizona 85258 Investments, LLC(2) (October 2001 - October 2003); Assistant Date of Birth: 07/25/1964 Vice President, ING Funds Services, LLC(3) (November 1999 - January 2001); and has held various other positions with ING Funds Services, LLC(3) for more than the last five years. ROBYN L. ICHILOV Vice President, ING Funds Services, LLC(3) (October 2001 - 7337 E. Doubletree Ranch Rd. Present) and ING Investments, LLC(2) (August 1997 - Present). Scottsdale, Arizona 85258 Date of Birth: 09/25/1967 J. DAVID GREENWALD Vice President of Mutual Fund Compliance, ING Funds Services, 7337 E. Doubletree Ranch Rd. LLC(3) (May 2003 - Present). Formerly, Assistant Treasurer and Scottsdale, AZ 85258 Director of Mutual Fund Compliance and Operations of American Date of Birth: 09/24/1957 Skandia, a Prudential Financial Company (October 1996 - May 2003). LAUREN D. BENSINGER Vice President and Chief Compliance Officer, ING Funds 7337 E. Doubletree Ranch Rd. Distributor, LLC(4) (July 1995 - Present); and Vice President Scottsdale, Arizona 85258 (February 1996 - Present) and Chief Compliance Officer (October Date of Birth: 02/06/1954 2001 - Present), ING Investments, LLC(2). TODD MODIC Vice President of Financial Reporting - Fund Accounting of ING 7337 E. Doubletree Ranch Rd. Fund Services, LLC(3) (September 2002 - Present). Formerly, Scottsdale, Arizona 85258 Director of Financial Reporting, ING Investments, LLC(2) (March Date of Birth: 11/03/1967 2001 - September 2002); Director of Financial Reporting, Axient Communications, Inc. (May 2000 - January 2001); and Director of Finance, Rural/Metro Corporation (March 1995 - May 2000). |
NAME, ADDRESS AND AGE POSITIONS HELD WITH THE TRUST TERM OF OFFICE AND LENGTH OF TIME SERVED (1)(2) ---------------------------------------------------------------------------------------------------------------------- SUSAN P. KINENS Assistant Vice President and February 2003 - Present 7337 E. Doubletree Ranch Rd. Assistant Secretary Scottsdale, Arizona 85258 Date of Birth: 12/31/1976 MARIA M. ANDERSON Assistant Vice President August 2001 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, Arizona 85258 Date of Birth: 05/29/1958 HUEY P. FALGOUT, JR. Secretary August 2003 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, AZ 85258 Date of Birth: 11/15/1963 THERESA K. KELETY Assistant Secretary August 2003 - Present 7337 E. Doubletree Ranch Rd. Scottsdale, AZ 85258 Date of Birth: 02/28/1963 NAME, ADDRESS AND AGE PRINCIPAL OCCUPATION(S) DURING THE LAST FIVE YEARS (3) ------------------------------------------------------------------------------------------------------ SUSAN P. KINENS Assistant Vice President and Assistant Secretary, ING Funds 7337 E. Doubletree Ranch Rd. Services, LLC(3) (December 2002 - Present); and has held Scottsdale, Arizona 85258 various other positions with ING Funds Services, LLC(3) for Date of Birth: 12/31/1976 more than the last five years. MARIA M. ANDERSON Assistant Vice President, ING Funds Services, LLC(3) (October 7337 E. Doubletree Ranch Rd. 2001 - Present). Formerly, Manager of Fund Accounting and Fund Scottsdale, Arizona 85258 Compliance, ING Investments, LLC(2) (September 1999 - November Date of Birth: 05/29/1958 2001); and Section Manager of Fund Accounting, Stein Roe Mutual Funds (July 1998 - August 1999). HUEY P. FALGOUT, JR. Chief Counsel, ING U.S. Financial Services (September 2003 - 7337 E. Doubletree Ranch Rd. Present). Formerly, Counsel, ING U.S. Financial Services Scottsdale, AZ 85258 (November 2002 - September 2003); and Associate General Counsel Date of Birth: 11/15/1963 of AIG American General (January 1999 - November 2002). THERESA K. KELETY Counsel, ING U.S. Financial Services (April 2003 - Present). 7337 E. Doubletree Ranch Rd. Formerly, Senior Associate with Shearman & Sterling (February Scottsdale, AZ 85258 2000 - April 2003); and Associate with Sutherland Asbill & Date of Birth: 02/28/1963 Brennan (1996 - February 2000). |
(1) The officers hold office until the next annual meeting of the Trustees and
until their successors shall have been elected and qualified.
(2) ING Investments, LLC was previously named ING Pilgrim Investments, LLC. ING
Pilgrim Investments, LLC is the sucessor in interest to ING Pilgirm Investments,
Inc., which was previously known as Pilgrim Investments, Inc. and before that
was known as Pilgrim America Investments, Inc.
(3) ING Funds Services, LLC was previously named ING Pilgrim Group, LLC. ING
Pilgrim Group, LLC is the sucessor in interest to ING Pilgirm Group, Inc., which
was previously known as Pilgrim Group, Inc. and before that was known as Pilgrim
America Group, Inc.
(4) ING Funds Distributor, LLC is the sucessor in interest to ING Funds
Distributor, Inc., which was previously known as ING Pilgrim Securities, Inc.,
and before that was known as Pilgrim Securities, Inc., and before that was known
as Pilgrim America Securities, Inc.
The Trust currently has an Executive Committee, Audit Committee, Valuation and Proxy Voting Committee (formerly Valuation Committee), Nominating Committee, an Investment Review Committee and Compliance and Coordination Committee. The Audit, Valuation and Proxy Voting, Nominating and Compliance and Coordination Committees consist entirely of Independent Trustees.
COMMITTEES
The Board of Trustees has an Executive Committee whose function is to act on behalf of the full Board of Trustees between regularly scheduled meetings when necessary. The Committee currently consists of two Independent Trustees and two Trustees who are interested persons as defined in the 1940 Act: Messrs. Turner, McInerney, May and Patton. Mr. Turner serves as Chairman of the Committee. The Executive Committee held two (2) meetings during the fiscal year ended February 29, 2004.
The Board of Trustees has an Audit Committee whose function is to meet with the independent auditors of the Trust to review the scope of the Trust's audit, its financial statements and interim accounting controls, and to meet with management concerning these matters, among other things. The Audit Committee currently consists of four Independent Trustees: Messrs. Earley, Rieke, Vincent and Putnam. Mr. Earley serves as Chairman of the Committee. The Audit Committee held four (4) meetings during the fiscal year ended February 29, 2004.
The Board of Trustees has formed a Valuation and Proxy Voting Committee (formerly the Valuation Committee) whose functions include, among others, reviewing the determination of the value of securities held by the Trust for which market value quotations are not readily available and, beginning in July 2003, overseeing management's administration of proxy voting. The Committee currently consists of five Independent Trustees: Dr. Gitenstein and Messrs. May, Patton, Doherty and Wedemeyer. Mr. Patton serves as Chairman of the Committee. The Valuation and Proxy Voting Committee held four (4) meetings during the fiscal year ended February 29, 2004.
The Board of Trustees has established a Nominating Committee for the purpose of considering and presenting to the Board of Trustees candidates it proposes for nomination to fill Independent Trustee vacancies on the Board of Trustees. The Nominating Committee currently consists of four Independent Trustees: Dr. Gitenstein and Messrs. Doherty, May, and Wedemeyer. Mr. May serves as Chairman of the Committee. The Committee does not currently have a charter nor does it have a policy regarding whether it will consider nominees recommended by shareholders. However, the Board of Trustees expects to have the Committee consider these matters fully during the upcoming year with a view towards adopting and publishing a charter and policies regarding shareholder recommendations for Trustee nominees. As part of its consideration, the Committee will also consider minimum qualifications for Trustee positions as well as a process for the Trust to identify and evaluate potential nominees. The Nominating Committee did not hold a meeting during the fiscal year ended February 29, 2004.
The Board of Trustees has established an Investment Review Committee that will monitor the investment performance of the Trust and make recommendations to the Board of Trustees with respect to the Trust. The Committee currently consists of five Independent Trustees and one Trustee who is an interested person as defined in the 1940 Act: Dr. Gitenstein and Messrs. Doherty, Patton, May, McInerney and Wedemeyer. Mr. Wedemeyer serves as Chairman of the Committee. The Investment Review Committee held four (4) meetings during the fiscal year ended February 29, 2004.
The Board of Trustees has established a Compliance and Coordination Committee for the purpose of facilitating information flow among Board members and with management between Board meetings, developing agendas for executive sessions of independent Board members, evaluating potential improvements in the allocation of work load among the Board members and Board committees, and evaluating other opportunities to enhance the efficient operations of the Board. The Compliance and Coordination Committee currently consists of five Independent Trustees: Messrs. Earley, May, Patton, Vincent and Wedemeyer. The Compliance and Coordination Committee held one (1) meeting during the fiscal year ended February 29, 2004.
TRUSTEE OWNERSHIP OF SECURITIES
SHARE OWNERSHIP POLICY
In order to further align the interests of the Independent Trustees with shareholders, the Board of Trustees has adopted a policy to own, beneficially, shares of one or more ING Funds at all times ("Policy"). For this purpose, beneficial ownership of Fund shares includes ownership of a variable annuity contract or a variable life insurance policy whose proceeds are invested in a Fund.
Under this Policy, the initial value of investments in the ING Funds that are beneficially owned by a Trustee must equal at least $50,000. Existing Trustees have a reasonable amount of time from the date of adoption of this Policy in order to satisfy the foregoing requirements. A new Trustee must satisfy the foregoing requirements within a reasonable amount of time of becoming a Trustee. A decline in the value of any Fund investments will not cause a Trustee to have to make any additional investments under this Policy.
Set forth below is the dollar range of equity securities owned by each Trustee.
AGGREGATE DOLLAR RANGE OF EQUITY DOLLAR RANGE OF EQUITY SECURITIES IN ALL REGISTERED INVESTMENT SECURITIES IN THE TRUST AS OF COMPANIES OVERSEEN BY TRUSTEE IN NAME OF TRUSTEE DECEMBER 31, 2003 FAMILY OF INVESTMENT COMPANIES -------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES Paul S. Doherty None Over $100,000 J. Michael Earley None $10,001 - $50,000 R. Barbara Gitenstein None $10,001 - $50,000 Walter H. May None Over $100,000 Jock Patton $10,001 - $50,000 Over $100,000 David W. C. Putnam Over $100,000 Over $100,000 Blaine E. Rieke None $50,001 - 100,000 Roger B. Vincent None Over $100,000 Richard A. Wedemeyer None $10,001 - $50,000 TRUSTEES WHO ARE INTERESTED PERSONS Thomas J. McInerney None $50,001 - 100,000 John G. Turner Over $100,000 Over $100,000 |
INDEPENDENT TRUSTEE OWNERSHIP OF SECURITIES
Set forth in the table below is information regarding each Independent Trustee's (and his or her immediate family members') share ownership in securities of the Trust's investment adviser or principal underwriter, and the ownership of securities in an entity controlling, controlled by or under common control with the investment adviser or principal underwriter of the Trust (not including registered investment companies) as of December 31, 2003.
NAME OF OWNERS AND RELATIONSHIP VALUE OF PERCENTAGE OF NAME OF TRUSTEE TO TRUSTEE COMPANY TITLE OF CLASS SECURITIES CLASS --------------------------------------------------------------------------------------------------------------------- Paul S. Doherty N/A N/A N/A $ 0 N/A J. Michael Earley N/A N/A N/A $ 0 N/A R. Barbara Gitenstein N/A N/A N/A $ 0 N/A Walter H. May N/A N/A N/A $ 0 N/A Jock Patton N/A N/A N/A $ 0 N/A David W. C. Putnam N/A N/A N/A $ 0 N/A Blaine E. Rieke N/A N/A N/A $ 0 N/A Roger B. Vincent N/A N/A N/A $ 0 N/A Richard A. Wedemeyer N/A N/A N/A $ 0 N/A |
COMPENSATION OF TRUSTEES
The Trust pays each Trustee who is not an interested person a pro rata share, as described below of: (i) an annual retainer of $40,000 (Messrs. Patton and May, as lead trustees, receive an annual retainer of $55,000); (ii) $7,000 for each in person meeting of the Board; (iii) $2,000 per attendance of any committee meeting; (iv) $1,000 for meeting attendance as a chairperson; (v) $2,000 per telephonic meeting; and (vi) out-of-pocket expenses. The pro rata share paid by the Trust is based on the average net assets as a percentage of the average net assets of all the funds managed by the Investment Manager or its affiliates for which the Trustees serve in common as Directors/Trustees.
The following table has been provided to the Trust by ING Investments and sets forth information regarding the compensation paid to the Trustees for the Trust's fiscal year ended February 29, 2004 for service on the Boards of the ING Funds complex. Officers of the Trust and Trustees who are interested persons of the Trust do not receive any compensation from the Trust or any funds managed by the Investment Manager or its affiliates.
COMPENSATION TABLE
PENSION OR TOTAL RETIREMENT COMPENSATION BENEFITS ESTIMATED FROM TRUST AND AGGREGATE ACCRUED AS ANNUAL FUND COMPLEX COMPENSATION PART OF TRUST BENEFITS UPON PAID TO NAME OF TRUSTEE FROM TRUST EXPENSES RETIREMENT(4) TRUSTEES(5) ----------------------------------------------------------------------------------------------------------- Paul S. Doherty $ 5,982 N/A N/A $ 104,000 J. Michael Earley $ 6,098 N/A N/A $ 106,000 R. Barbara Gitenstein $ 5,524 N/A N/A $ 97,000 R. Glenn Hilliard(1) $ 0 N/A N/A $ 0 Walter H. May $ 7,114 N/A N/A $ 123,000 |
PENSION OR TOTAL RETIREMENT COMPENSATION BENEFITS ESTIMATED FROM TRUST AND AGGREGATE ACCRUED AS ANNUAL FUND COMPLEX COMPENSATION PART OF TRUST BENEFITS UPON PAID TO NAME OF TRUSTEE FROM TRUST EXPENSES RETIREMENT(4) TRUSTEES(5) ----------------------------------------------------------------------------------------------------------- Thomas J. McInerney(2) $ 0 N/A N/A $ 0 Jock Patton $ 7,513 N/A N/A $ 129,000 David W.C. Putnam $ 5,216 N/A N/A $ 92,000 Blaine E. Rieke $ 5,751 N/A N/A $ 100,000 John G. Turner(3) $ 0 N/A N/A $ 0 Roger B. Vincent(6) $ 6,836 N/A N/A $ 118,000 Richard A. Wedemeyer(6) $ 6,836 N/A N/A $ 118,000 |
(1) An interested person, as defined in the 1940 Act, because of his
relationship with ING Groep N.V., the parent company of the Investment
Manager, ING Investments, LLC and the Distributor, ING Funds Distributor
LLC. Mr. Hilliard resigned as of April 30, 2003.
(2) An interested person, as defined in the 1940 Act, because of his
affiliation with ING Groep N.V. the parent company of the Investment
Manager, ING Investments, LLC and the Distributor, ING Funds Distributor
LLC.
(3) An interested person, as defined in the 1940 Act, because of his former affiliation with ING Americas, an affiliate of ING Investments, LLC.
(4) The ING Funds have adopted a retirement policy under which a director/trustee who has served as an Independent Director/Trustee for five years or more will be paid by the ING Funds at the time of his or her retirement an amount equal to twice the compensation normally paid to the Independent Director/Trustee for one year of service.
(5) Represents compensation from 117 funds.
(6) Mr. Wedemeyer and Mr. Vincent were paid $10,000 each in recognition of an extensive time commitment to format a methodolgy for presenting valuation information to the Board.
As of June 15, 2004, the Trustees and Officers of the Trust as a group owned beneficially less than 1% of the Trust's Common Shares.
As of June 15 , 2004, the Trustees and Officers of the Trust as a group owned beneficially less than 1% of the Trust's Preferred Shares.
As of June 15, 2004, no person to the knowledge of the Trust, owned beneficially or of record more than 5% of the outstanding Common Shares or Preferred Shares of the Trust except as set forth below:
CLASS AND TYPE OF PERCENTAGE PERCENTAGE NAME OF FUND NAME AND ADDRESS OWNERSHIP OF CLASS OF FUND ----------------------------------------------------------------------------------------------------------- ING Prime Rate Trust Pilgrim Prime Rate Trust Beneficial Owner 6.22% 6.22% Structured Equity Shelf Holding A/C Attn Dan Ryan 7337 E. Doubletree Ranch Road Scottsdale, AZ 85258-2160 ING Prime Rate Trust CEDE & CO Beneficial Owner 78.68% 78.68% PO Box 20 Bowling Green Station New York, NY 10274-0020 |
CODE OF ETHICS
The Trust's Distributor, ING Funds Distributor, LLC ("Distributor"), the Investment Manager and the Trust have adopted a Code of Ethics governing personal trading activities of all Trustees and the officers of the Trust and the Distributor and persons who, in connection with their regular functions, play a role in the recommendation of any purchase or sale of a security by the Trust or obtain information pertaining to such purchase or sale. The Code of Ethics is intended to prohibit fraud against the Trust that may arise from personal trading of securities that may be purchased or held by the Trust or of Trust shares. Personal trading is permitted by such persons subject to certain restrictions; however such persons are generally required to pre-clear all security transactions with the Trust's Compliance Officer or her designee and to report all transactions on a regular basis. The Sub-Adviser has adopted its own Codes of Ethics to govern the personal trading activities of its personnel.
The Code of Ethics can be reviewed and copied at the SEC's Public Reference
Room located at 450 Fifth Street, NW, Washington, DC 20549. Information on the
operation of the Public Reference Room may be obtained by calling the SEC at
(202) 942-8090. The Code of Ethics is available on the SEC's website
(http://www.sec.gov) and copies may also be obtained at prescribed rates by
electronic request at publicinfo@sec.gov, or by writing the SEC's Public
Reference Section at the address listed above.
PROXY VOTING PROCEDURES
The Board of Trustees for the Trust has adopted proxy voting procedures and guidelines to govern the voting of proxies relating to the Trust's portfolio securities. The procedures and guidelines delegate to the Investment Manager the authority to vote proxies relating to portfolio securities, and provide a method for responding to potential conflicts of interest. In delegating voting authority to the Investment Manager, the Board of Trustees has also approved the Investment Manager's proxy voting procedures which require the Investment Manager to vote proxies in accordance with the Trust's proxy voting procedures and guidelines. An independent proxy voting service has been retained to assist in the voting of Trust proxies through the provision of vote analysis, implementation and recordkeeping and disclosure services. A copy of the proxy voting procedures and guidelines of the Trust, including the procedures of the Investment Manager, is attached hereto as Appendix A. Beginning on or about August 31, 2004, and no later than August 31st annually thereafter, information regarding how the Trust votes proxies relating to portfolio securities for the one year period ending June 30th will be made available through the ING Funds' website (www.ingfunds.com) or by accessing the SEC's EDGAR database( www.sec.gov).
INVESTMENT MANAGEMENT AND OTHER SERVICE PROVIDERS
THE INVESTMENT MANAGER
The investment adviser for the ING Funds is ING Investments, LLC ("Investment Manager" or "ING Investments"), which is registered as an investment adviser with the SEC and serves as an investment adviser to registered investment companies (or series thereof), as well as structured finance vehicles. The Investment Manager, subject to the authority of the Board of Trustees, has the overall responsibility for the management of the Trust's portfolio subject to delegation of certain responsibilities to ING Investment Management Co. (the "Sub-Adviser" or "INGIM") (formerly known as Aeltus Investment Management, Inc.). The Investment Manager and the Sub-Adviser are direct, wholly owned subsidiaries of ING Groep N.V. (NYSE: ING) ("ING Groep N.V.") and are affiliates of each other. ING Groep N.V. is a global financial institution active in the fields of insurance, banking, and asset management in more than 65 countries, with more than 100,000 employees.
On February 26, 2001, the name of the Investment Manager changed from ING Pilgrim Investments, Inc. to ING Pilgrim Investments, LLC. On March 1, 2002, the name of the Investment Manager was changed from ING Pilgrim Investments, LLC to ING Investments, LLC.
The Investment Manager pays all of its expenses from the performance of its obligations under the Investment Management Agreement, including executive salaries and expenses of the officers of the Trust who are employees of the Investment Manager. Other expenses incurred in the operation of the Trust are borne by the Trust, including, without limitation, expenses incurred in connection with the sale, issuance, registration and transfer of its Common Shares; fees of its Custodian, Transfer and Shareholder Servicing; salaries of officers and fees and expenses of Trustees or members of any advisory board or committee of the Trust who are not members of, affiliated with or interested persons of the Investment Manager; the cost of preparing and printing reports, proxy statements and prospectuses of the Trust or other communications for distribution to its shareholders; legal, auditing and accounting fees; the fees of any trade association of which the Trust is a member; fees and expenses of registering and maintaining registration of its Common Shares for sale under federal and applicable state securities laws; fees for
independent loan pricing services; and all other charges and costs of its operation plus any extraordinary or non-recurring expenses.
After an initial term, the Investment Management Agreement continues from year to year if specifically approved at least annually by the Trustees or the Shareholders. In either event, the Investment Management Agreement must also be approved by vote of a majority of the Trustees who are not parties to the Investment Management Agreement or interested persons of any party, cast in person at a meeting called for that purpose.
In connection with their deliberations relating to the Trust's current
Investment Management Agreement, the Board of Trustees, including a majority of
the Independent Trustees, considered information that had been provided by the
Investment Manager throughout the year at regular Board meetings, as well as
information specifically furnished for a Board meeting held annually to
specifically consider such renewal, and considered several factors they
believed, in light of the legal advice furnished to them by their independent
legal counsel and their own business judgment, to be relevant. Foremost among
them was the performance of the Trust. In their approval of the arrangement, the
Board considered several factors, including but not limited to, the following:
(1) the continued belief that the Trust is well-managed by the Investment
Manager; (2) the fact that the Trust has consistently earned income in
furtherance of its investment objective; and (3) the positive performance of the
Investment Manager in the areas of leverage, administration, credit analysis and
fair valuation with respect to the Trust and its portfolio assets. In addition,
the Board considered: (1) the performance of the Trust compared to those of a
peer group of closed-end loan participation funds; (2) the nature and quality of
the services provided by the Investment Manager to the Trust including the
Investment Manager's experience in managing a similar fund and the nature and
depth of the services it provides to that fund and the Trust; (3) the fairness
of the compensation under the Investment Management Agreement in light of the
services provided to the Trust; (4) the profitability to the Investment Manager
from the Investment Management Agreement; (5) the personnel, including the
portfolio managers, operations, financial condition, and investment management
capabilities, methodologies and resources of the Investment Manager, as well as
its efforts in recent years to build its investment management capabilities and
administrative infrastructure; (6) the expenses borne by shareholders of the
Trust and a comparison of the Trust's fees and expenses to those of a peer group
of funds; (7) the Investment Manager's compliance capabilities and efforts on
behalf of the Trust; (8) the complexity of the instruments in which the Trust
invests and the investment research associated with those instruments performed
by the Investment Manager and the Investment Manager's proven expertise in
managing the types of investments in which the Trust invests; and (9) the
substantial time and resources devoted to the valuation process by the
Investment Manager. The Board of Trustees also considered the total services
provided by ING Funds Services, LLC, the Trust's administrator, as well as the
fees it receives for such services.
In considering the Investment Management Agreement, the Board of Trustees, including the Independent Trustees, did not identify any single factor as all-important or controlling. However, the Independent Trustees indicated that, generally, they initially scrutinized the performance of the Trust, including performance in relation to a peer group of funds, and the fees paid by the Trust. The Board of Trustees concluded that the fees to be paid to the Investment Manager are reasonable in relation to the services to be rendered, and that the anticipated expenses to be borne by the shareholders were reasonable. The Board of Trustees further determined that the contractual arrangements offer an appropriate means for the Trust to obtain high quality portfolio management services in furtherance of the Trust's objectives, and to obtain other appropriate services for the Trust.
In reviewing the terms of the Investment Management Agreement and in discussions with the Investment Manager concerning such Investment Management Agreement, the Independent Trustees were represented by independent legal counsel. Based upon its review, the Board of Trustees has determined that the Investment Management Agreement is in the best interests of the Trust and its shareholders, and that the Investment Management fees are fair and reasonable. Accordingly, after consideration of the factors described above, and such other factors and information it considered relevant, the Board of Trustees of the Trust, including the unanimous vote of the Independent Trustees, approved the Investment Management Agreement.
The Investment Management Agreement is terminable without penalty with not less than 60 days' notice by the Board of Trustees or by a vote of the holders of a majority of the Trust's outstanding shares voting as a single class, or upon not less than 60 days' notice by the Investment Manager. The Investment Management Agreement will terminate automatically in the event of its "assignment" (as defined in the 1940 Act).
For the fiscal years ended February 29, 2004, February 28, 2003, and February 28, 2002 the Investment Manager was paid $12,492,726, $12,698,403, and $14,838,307 respectively, for services rendered to the Trust.
The use of the name ING in the Trust's name is pursuant to the Investment Management Agreement between the Trust and the Investment Manager, and in the event that the Agreement is terminated, the Trust has agreed to amend its Agreement and Declaration of Trust to remove the reference to ING.
SUB-ADVISER
The Investment Management Agreement for the Trust provides that the Investment Manager, with the approval of the Board of Trustees, may select and employ an investment adviser to serve as a Sub-Adviser to the Trust, shall monitor the Sub-Adviser's investment programs and results, and coordinate the investment activities of the Sub-Adviser to ensure compliance with regulatory restrictions. The Investment Manager pays all of its expenses arising from the performance of its obligations under the Investment Management Agreement, including all fees payable to the Sub-Adviser, and executive salaries and expenses of the officers of the Trust who are employees of the Investment Manager. The Sub-Adviser pays all of its expenses arising from the performance of its obligations under the sub-advisory agreement.
On August 1, 2003, ING underwent an internal reorganization plan that among other things, integrated its portfolio management professionals across the U.S. under a common management structure known as ING Investment Management Americas, which includes ING Investment Management Co. ("INGIM" or "Sub-Adviser"). One of the primary purposes of the integration plan was to use the resources of several ING Groep N.V. companies to promote consistently high levels of performance in terms of investment standards, research, policies and procedures from the portfolio management functions related to the Trust. As a result of this integration plan the operational and supervisory functions were separated from the portfolio management functions related to the Trust, with the former continuing to be provided by the Investment Manager and the latter provided by INGIM. The portfolio management personnel currently employed by ING Investments became employees of INGIM, which assumed primary responsibility for all portfolio management issues, including the purchase, retention, or sale of portfolio securities.
INGIM serves as sub-adviser to the Trust pursuant to a sub-advisory agreement ("Sub-Advisory Agreement") between the Investment Manager and INGIM. The Sub-Advisory Agreement requires INGIM to provide, subject to the supervision of the Board of Trustees and the Investment Manager, a continuous investment program for the Trust and to determine the composition of the assets of the Trust, including determination of the purchase, retention or sale of the securities, cash and other investments for the Trust, in accordance with the Trust's investment objectives, policies and restrictions and applicable laws and regulations. The Sub-Advisory Agreement also requires INGIM to use reasonable compliance techniques as the Sub-Adviser or the Board of Trustees may reasonably adopt, including any written compliance procedures.
In determining whether or not it was appropriate to approve the Sub-Advisory Agreement through September 1, 2005 and to recommend approval to shareholders, the Board, including a majority of the Independent Trustees, considered several factors. Foremost among them was the fact that the new arrangement will not affect the fees charged to the Trust, nor the provision of portfolio management services to the Trust. In their approval of the arrangement, the Board of Trustees considered several factors, including, but not limited to, the following: (1) the centralization of asset managers will allow ING to access and leverage the capabilities of its portfolio management personnel among all subsidiaries; (2) the reorganization will facilitate more effective use of research and trading facilities and capabilities for greater efficiency; (3) the consolidation of portfolio management within one entity will permit certain future changes in portfolio managers without the potential expense of shareholder proxy solicitations; and (4) the reorganization can help INGIM to build a larger, more coherent management structure and to retain and attract highly qualified portfolio managers. The Board of Trustees noted that INGIM had taken steps to ameliorate any disadvantages, which might result from the reorganization. In addition, the Board of Trustees considered: (1) the current portfolio managers will remain and continue to provide services under the direction of the Sub-Adviser; (2) that the nature and quality of the services to be provided by the Sub-Adviser, including the Sub-Adviser's extensive investment management experience and the quality of services provided to the other mutual funds advised by the Sub-Adviser; (3) the fairness of the compensation under the Sub-Advisory Agreement in light of the services to be provided; (4) the personnel, operations, financial condition, and investment management capabilities and methodologies of INGIM after the reorganization; (5) the expectation of management that the reorganization will enable the Sub-Adviser to attract additional highly qualified personnel and to leverage its portfolio management resources and trading and research capabilities; and (6) compensation and the fact that the cost of the Sub-Adviser will be paid by the Investment Manager and not directly by the Trust. The Board of Trustees also reviewed information provided by the Sub-Adviser relating to their compliance systems, disaster recovery plans and personal trading policies and internal monitoring procedures. In the context of reviewing the Sub-Advisory Agreement with the Sub-Adviser, the Board of Trustees met with senior management and reviewed absolute and relative performance of the Trust. The Board of Trustees also considered the compensation structure within the Sub-Adviser and its ability to attract and retain high quality investment professionals. The Board of Trustees also considered the advisory fee to be retained by the Investment Manager for its oversight and monitoring services that will be provided to the Trust. After considering the Investment Manager's recommendation and these other factors, the Board of Trustees concluded that engaging INGIM as Sub-Adviser would be in the best interests of the Trust and its shareholders.
The Sub-Advisory Agreement may be terminated at any time by the Trust by a
vote of the majority of the Board of Trustees or by a vote of a majority of the
outstanding securities. The Sub-Advisory Agreement also may be terminated by:
(i) the Investment Manager at any time, upon sixty (60) days' written notice to
the Trust and the Sub-Adviser; (ii) at any time, without payment of any penalty
by the Trust, by the Trust's Board of Trustees or a majority of the outstanding
voting securities of the Trust upon sixty (60) days' written notice to the
Investment Manager and the Sub-Adviser; or (iii) by the Sub-Adviser upon three
(3) months' written notice unless the Trust or the Investment Manager requests
additional time to find a replacement for the Sub-Adviser, in which case, the
Sub-Adviser shall allow the
additional time, requested by the Trust or the Investment Manager, not to exceed three (3) additional months beyond the initial three (3) month notice period; provided, however, that the Sub-Adviser may terminate the Sub-Advisory Agreement at any time without penalty, effective upon written notice to the Investment Manager and the Trust, in the event either the Sub-Adviser (acting in good faith) or the Investment Manager ceases to be registered as an investment adviser under the Investment Advisers Act of 1940, as amended or otherwise becomes legally incapable of providing investment management services pursuant to its respective contract with the Trust, or in the event the Investment Manager becomes bankrupt or otherwise incapable of carrying out its obligations under the Sub-Advisory Agreement, or in the event that the Sub-Adviser does not receive compensation for its services from the Investment Manager or the Trust as required by the terms of the Sub-Advisory Agreement. Otherwise, the Sub-Advisory Agreement will remain in effect for two years and will, thereafter, continue in effect from year to year, subject to the annual appoval of the Board of Trustees, on behalf of the Trust, or the vote of a majority of the outstanding voting securities, and the vote, cast in person at a meetnig duly called and held, of a majority of the Trustees, on behalf of the Trust, who are not parties to the Sub-Advisory Agreement or interested persons (as defined in the 1940 Act) of any such party. The Sub-Advisory Agreement will terminate automatically in the event of an assignment (as defined in the 1940 Act).
In this capacity, the Sub-Adviser, subject to the supervision and control of ING Investments and the Trustees of the Trust, will manage the Trust's portfolio investments, consistently with its investment objective, and execute any of the Trust's investment policies that it deems appropriate to utilize from time to time.
For the 7 months ended February 29, 2004, ING Investments paid INGIM, in its capacity as Sub-Adviser, $3,093,114 in sub-advisory fees.
THE ADMINISTRATOR
The Administrator of the Trust is ING Funds Services, LLC ("Administrator" or "ING Funds Services") which is an affiliate of the Investment Manager. In connection with its administration of the corporate affairs of the Trust, the Administrator bears the following expenses: the salaries and expenses of all personnel of the Trust and the Administrator except for the fees and expenses of Trustees not affiliated with the Administrator or the Investment Manager; costs to prepare information; determination of daily NAV by the recordkeeping and accounting agent; expenses to maintain certain of the Trust's books and records that are not maintained by the Investment Manager, the custodian, or transfer agent; costs incurred to assist in the preparation of financial information for the Trust's income tax returns, proxy statements, quarterly, semi-annual, and annual shareholder reports; costs of providing shareholder services in connection with any tender offers or to shareholders proposing to transfer their shares to a third party; providing shareholder services in connection with the dividend reinvestment plan; and all expenses incurred by the Administrator or by the Trust in connection with administering the ordinary course of the Trust's business other than those assumed by the Trust, as described below.
Except as indicated immediately above and under "The Investment Manager," the Trust is responsible for the payment of its expenses including: the fees payable to the Investment Manager; the fees payable to the Administrator; the fees and certain expenses of the Trust's custodian and transfer agent, including the cost of providing records to the Administrator in connection with its obligation of maintaining required records of the Trust; the charges and expenses of the Trust's legal counsel, legal counsel to the Trustees who are not "interested persons" as defined in the 1940 Act and independent accountants; commissions and any issue or transfer taxes chargeable to the Trust in connection with its
transactions; all taxes and corporate fees payable by the Trust to governmental agencies; the fees of any trade association of which the Trust is a member; the costs of share certificates representing Common Shares of the Trust; organizational and offering expenses of the Trust and the fees and expenses involved in registering and maintaining registration of the Trust and its Common Shares with the Commission, including the preparation and printing of the Trust's registration statement and prospectuses for such purposes; allocable communications expenses with respect to investor services, and all expenses of shareholders' and Trustees' meetings and of preparing, printing and mailing reports, proxy statements and prospectuses to shareholders; the cost of insurance; and litigation and indemnification expenses and extraordinary expenses not incurred in the ordinary course of the Trust's business.
For its services, the Administrator is entitled to receive from the Trust a fee at an annual rate of 0.25% of the Fund's average daily net assets plus the proceeds of any outstanding borrowings.
Administrative fees paid by the Trust for the fiscal years ended February 29, 2004, February 28, 2003, and February 28, 2002 and the Administrator was paid $3,903,976, $3,968,231, and $4,637,682, respectively, for services rendered to the Trust.
PLANS OF DISTRIBUTION
THE DISTRIBUTOR
Pursuant to an Amended and Restated Distribution Agreement (the "Distribution Agreement"), ING Funds Distributor, LLC, an affiliate of the Investment Manager and the Administrator, is the principal underwriter and distributor for the shares of the Trust and acts as agent of the Trust in the continuous offering of its shares. The Distributor bears all of its expenses of providing services pursuant to the Distribution Agreement. The Trust pays the cost for the prospectus and shareholder reports to be set in type and printed for existing shareholders, and the Trust pays for the printing and distribution of copies thereof used in connection with the offering of shares to prospective investors. The Trust also pays for supplementary sales literature and advertising costs.
The Distribution Agreement continues in effect from year to year so long as such continuance is approved at least annually by a vote of the Board of the Trust, including the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the Distribution Agreement. The Distribution Agreement automatically terminates in the event of its assignment and may be terminated at any time without penalty by the Trust or by the Distributor upon 60 days' written notice. Termination by the Trust may be by vote of a majority of the Board, and a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the Distribution Agreement, or a majority of the outstanding voting securities of the Trust, as defined under the 1940 Act.
The Common Shares will only be sold on such days as shall be agreed to by the Trust and ING Funds Distributor. The Common Shares will be sold at market prices, which shall be determined with reference to trades on the NYSE, subject to a minimum price to be established each day by the Trust. The mininum price on any day will not be less than the current NAV per Common Share. The Trust and ING Funds Distributor will suspend the sale of Common Shares if the per share price of the Common Shares is less than the minimum price.
Settlements of sales of Common Shares will occur on the third business day following the date on which any such sales are made. Unless otherwise indicated in a further prospectus supplement, ING Funds Distributor as underwriter will act as underwriter on a reasonable efforts basis.
In connection with the sale of the Common Shares on behalf of the Trust, ING Funds Distributor may be deemed to be an underwriter within the meaning of the 1940 Act. As described below, ING Funds Distributor also serves as distributor for the Trust in connection with the sale of Common Shares of the Trust pursuant to privately negotiated transactions and pursuant to optional cash investments. In addition, ING Funds Distributor provides administrative services in connection with a separate at-the-market offering of Common Shares of the Trust. The offering of Common Shares pursuant to the Distribution Agreement will terminate upon the earlier of (i) the sale of all Common Shares subject thereto or (ii) termination of the Distribution Agreement.
SHAREHOLDER INVESTMENT PROGRAM
The Trust maintains a Shareholder Investment Program ("Program"), which allows participating shareholders to reinvest all dividends and capital gain distributions ("Dividends") in additional Common Shares of the Trust. The Program also allows participants to purchase additional Common Shares through optional cash investments in amounts ranging from a minimum of $100 to a maximum of $100,000 per month. Common Shares may be issued by the Trust under the Program only if the Trust's Common Shares are trading at a premium to NAV. If the Trust's Common Shares are trading at a discount to NAV, Common Shares purchased under the Program will be purchased on the open market.
If the Market Price (the volume-weighted average sales price, per share, as reported on the New York Stock Exchange Composite Transaction Tape as shown daily on Bloomberg's AQR screen) plus estimated commissions for Common Shares of the Trust is less than the NAV on the Valuation Date (defined below), DST will purchase Common Shares on the open market through a bank or securities broker as provided herein. Open market purchases may be effected on any securities exchange on which Common Shares of the Trust trade or in the over-the-counter market. If the Market Price, plus estimated commissions, exceeds the NAV before DST has completed its purchases, DST will use reasonable efforts to cease purchasing Common Shares, and the Trust shall issue the remaining Common Shares. If the Market Price, plus estimated commissions, is equal to or exceeds the NAV on the Valuation Date, the Trust will issue the Common Shares to be acquired by the Program. The Valuation Date is a date preceding the DRIP Investment Date and OCI Investment Date, on which it is determined, based on the Market Price and NAV of Common Shares of the Trust, whether DST will purchase Common Shares on the open market or the Trust will issue the Common Shares for the Program. The Trust may, without prior notice to participants, determine that it will not issue new Common Shares for purchase pursuant to the Program, even when the Market Price plus estimated commissions equals or exceeds NAV, in which case DST will purchase Common Shares on the open market.
Common Shares issued by the Trust under the Program will be issued without incurring a fee. Common Shares purchased for the Program directly from the Trust in connection with the reinvestment of Dividends will be acquired on the DRIP Investment Date at the greater of (i) NAV at the close of business on the Valuation Date or (ii) the average of the daily Market Price of the shares during the DRIP Pricing Period, minus a discount of 5%. The DRIP Pricing Period for a dividend reinvestment is the Valuation Date and the prior Trading Day. A Trading Day means any day on which trades of the Common Shares of the Trust are reported on the NYSE.
Common Shares purchased directly from the Trust pursuant to optional cash investments will be acquired on an OCI Investment Date at the greater of (i) NAV at the close of business on the Valuation Date or (ii) the average of the daily Market Price of the shares during the OCI Pricing Period minus a discount, determined at the sole discretion of the Trust and announced in advance, ranging from 0% to 5%. The OCI Pricing Period for an OCI Investment Date means the period beginning four Trading Days
prior to the Valuation Date through and including the Valuation Date. The discount for optional cash investments is set by the Trust and may be changed or eliminated by the Trust without prior notice to participants at any time. The discount for optional cash investments is determined on the last business day of each month. In all instances, however, the discount on Common Shares issued directly by the Trust shall not exceed 5% of the market price, and Common Shares may not be issued at a price less than NAV without prior specific approval of shareholders or of the Commission. Optional cash investments received by DST no later than 4:00 p.m. Eastern time on the OCI payment Due Date to be invested on the relevant OCI Investment Date.
Subject to the availability of Common Shares registered for issuance under the Program, there is no total maximum number of Common Shares that can be issued pursuant to the Program.
See "Federal Taxation - Distributions" for a discussion of the federal income tax ramifications of obtaining Common Shares under the Program.
PRIVATELY NEGOTIATED TRANSACTIONS
The Common Shares may also be offered pursuant to privately negotiated transactions between the Trust and specific investors. The terms of such privately negotiated transactions will be subject to the discretion of the management of the Trust. In determining whether to sell Common Shares pursuant to a privately negotiated transaction, the Trust will consider relevant factors including, but not limited to, the attractiveness of obtaining additional funds through the sale of Common Shares, the purchase price to apply to any such sale of Common Shares and the person seeking to purchase the Common Shares.
Common Shares issued by the Trust in connection with privately negotiated transactions will be issued at the greater of (1) NAV per Common Share of the Trust's Common Shares or (ii) at a discount ranging from 0% to 5% of the average of the daily market price of the Trust's Common Shares at the close of business on the two business days preceding the date upon which Common Shares are sold pursuant to the privately negotiated transaction. The discount to apply to such privately negotiated transactions will be determined by the Trust with regard to each specific transaction.
PORTFOLIO TRANSACTIONS
The Trust will generally have at least 80% of its net assets, plus the amount of any borrowings for investment purposes, invested in Senior Loans. The remaining assets of the Trust will generally consist of short-term debt instruments with remaining maturities of 120 days or less, longer-term debt securities, certain other instruments such as subordinated or unsecured loans up to a maximum of 5% of the Trust's net assets, interest rate swaps, caps and floors, repurchase agreements, reverse repurchase agreements and equity securities acquired in connection with investments in loans. The Trust will acquire Senior Loans from and sell Senior Loans to banks, insurance companies, finance companies, and other investment companies and private investment funds. The Trust may also purchase Senior Loans from and sell Senior Loans to U.S. branches of foreign banks which are regulated by the Federal Reserve System or appropriate state regulatory authorities. The Trust's interest in a particular Senior Loan will terminate when the Trust receives full payment on the loan or sells a Senior Loan in the secondary market. Costs associated with purchasing or selling investments in the secondary market include commissions paid to brokers and processing fees paid to agents. These costs are allocated between the purchaser and seller as agreed between the parties.
Purchases and sales of short-term debt and other financial instruments for the Trust's portfolio usually are principal transactions, and normally the Trust will deal directly with the underwriters or dealers who make a market in the securities involved unless better prices and execution are available
elsewhere. Such market makers usually act as principals for their own account. On occasion, securities may be purchased directly from the issuer. Short-term debt instruments are generally traded on a net basis and do not normally involve either brokerage commissions or transfer taxes. The cost of portfolio securities transactions of the Trust that are not transactions with principals will consist primarily of brokerage commissions or dealer or underwriter spreads between the bid and asked price, although purchases from underwriters may involve a commission or concession paid by the issuer.
In placing portfolio transactions, the Investment Manager or Sub-Adviser will use commercially reasonable efforts to choose a broker capable of providing the brokerage services necessary to obtain the most favorable price and execution available. The full range and quality of brokerage services available will be considered in making these determinations, such as the size of the order, the difficulty of execution, the operational facilities of the firm involved, the firm's risk in positioning a block of securities and other factors. While the Investment Manager or Sub-Adviser seeks to obtain the most favorable net results in effecting transactions in the Trust's portfolio securities, brokers or dealers who provide research services may receive orders for transactions by the Trust. Such research services ordinarily consist of assessments and analyses of the business or prospects of a company, industry, or economic sector. The Investment Manager is authorized to pay spreads or commissions to brokers or dealers furnishing such services which are in excess of spreads or commissions that other brokers or dealers not providing such research may charge for the same transaction, even if the specific services were not imputed to the Trust and were useful to the Investment Manager in advising other clients. Information so received will be in addition to, and not in lieu of, the services required to be performed by the Investment Manager under the Investment ManagementAgreement between the Investment Manager and the Trust. The expenses of the Investment Manager will not necessarily be reduced as a result of the receipt of such supplemental information. The Investment Manager or Sub-Adviser may use any research services obtained in providing investment advice to its other investment advisory accounts. Conversely, such information obtained by the placement of business for the Investment Manager or Sub-Adviser or other entities advised by the Investment Manager or Sub-Adviser will be considered by and may be useful to the Investment Manager or Sub-Adviser in carrying out its obligations to the Trust. As permitted by Section 28(e) of the Securities Exchange Act of 1934, as amended ("1934 Act") the Investment Manager may cause the Trust to pay a broker-dealer which provides brokerage and research services (as defined in the 1934 Act) to the Investment Manager or Sub-Adviser an amount of disclosed commissions for effecting a securities transaction for the Trust in excess of the commission which another broker-dealer would have charged for effecting the transaction.
The Trust does not intend to effect any brokerage transaction in its portfolio securities with any broker-dealer affiliated directly or indirectly with the Investment Manager or Sub-Adviser, except for any sales of portfolio securities pursuant to a tender offer, in which event the Investment Manager or Sub-Adviser will offset against the management fee a part of any tender fees which legally may be received by such affiliated broker-dealer. To the extent certain services which the Trust is obligated to pay for under the Investment Management Agreement are performed by the Investment Manager, the Trust will reimburse the Investment Manager for the costs of personnel involved in placing orders for the execution of portfolio transactions.
In connection with its purchase or holding interests in Senior Loans, the Trust may acquire (and subsequently sell) equity securities or warrants it recevies. Brokerage commissions paid by the Trust during the fiscal years ended February 29, 2004, February 28, 2003 and February 29, 2002, were $28,130, $0 and $0, respectively.
None of the total commissions paid during the fiscal years ended February 29, 2004, February 28, 2003 and February 29, 2002, were paid by the Trust to firms which provided research, statistical or other services to the Investment Manager.
PORTFOLIO TURNOVER RATE
The annual rate of the Trust's total portfolio turnover for the years ended February 29, 2004, February 28, 2003, and February 28, 2002 was 87%, 48%, and 53% respectively. The annual turnover rate of the Trust is generally expected to be between 50% and 100%, although as part of its investment policies, the Trust places no restrictions on portfolio turnover and the Trust may sell any portfolio security without regard to the period of time it has been held. The annual turnover rate of the Trust also includes Senior Loans on which the Trust has received full or partial payment. The Investment Manager believes that full and partial payments on loans generally comprise approximately 25% to 75% of the Trust's total portfolio turnover each year.
NET ASSET VALUE
The NAV per Common Share of the Trust is determined once daily at the close of regular trading on the NYSE (usually 4:00 p.m. Eastern time) on each day the NYSE is open. As of the date of this SAI, the NYSE is closed on the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The NAV per Common Share is determined by dividing the value of the Trust's loan assets plus all cash and other assets (including interest accrued but not collected) less all liabilities (including accrued expenses but excluding capital and surplus) by the number of Common Shares outstanding. The NAV per Common Share is made available for publication.
FEDERAL TAXATION
The following is only a summary of certain U.S. federal income tax considerations generally affecting the Trust and its shareholders. No attempt is made to present a detailed explanation of the tax treatment of the Trust or its shareholders, and the following discussion is not intended as a substitute for careful tax planning. Shareholders should consult with their own tax advisers regarding the specific federal, state, local, foreign and other tax consequences of investing in the Trust.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Trust will elect each year to be taxed as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code ("Code"). As a RIC, the Trust generally will not be subject to federal income tax on the portion of its investment company taxable income (I.E., taxable interest, dividends and other taxable ordinary income, net of expenses, and net short-term capital gains in excess of long-term capital losses) and net capital gain (I.E., the excess of net long-term capital gains over the sum of net short-term capital losses and capital loss carryovers from prior years) that it distributes to shareholders, provided that it distributes at least 90% of its investment company taxable income for the taxable year ("Distribution Requirement"), and satisfies certain other requirements of the Code that are described below.
In addition to satisfying the Distribution Requirement and an asset diversification requirement discussed below, a RIC must derive at least 90% of its gross income for each taxable year from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock or securities or foreign currencies and other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies.
In addition to satisfying the requirements described above, the Trust must satisfy an asset diversification test in order to qualify as a RIC. Under this test, at the close of each quarter of the Trust's taxable year, at least 50% of the value of the Trust's assets must consist of cash and cash items (including
receivables), U.S. government securities, securities of other regulated investment companies, and securities of other issuers (as to which the Trust has not invested more than 5% of the value of the Trust's total assets in securities of any such issuer and as to which the Trust does not hold more than 10% of the outstanding voting securities of any such issuer), and no more than 25% of the value of its total assets may be invested in the securities of any one issuer (other than U.S. government securities and securities of other regulated investment companies), or in two or more issuers which the Trust controls and which are engaged in the same or similar trades or businesses.
In general, gain or loss recognized by the Trust on the disposition of an asset will be a capital gain or loss. However, gain recognized on the disposition of a debt obligation purchased by the Trust at a market discount (generally at a price less than its principal amount) other than at the original issue will be treated as ordinary income to the extent of the portion of the market discount which accrued during the period of time the Trust held the debt obligation.
In general, investments by the Trust in zero coupon or other original issue discount securities will result in income to the Trust equal to a portion of the excess of the face value of the securities over their issue price ("original issue discount") each year that the Trust holds the securities, even though the Trust receives no cash interest payments. This income is included in determining the amount of income which the Trust must distribute to maintain its status as a RIC and to avoid federal income and excise taxes.
If for any taxable year the Trust does not qualify as a RIC, all of its taxable income (including its net capital gain) will be subject to tax at regular corporate rates without any deduction for distributions to shareholders, and such distributions will be taxable as ordinary dividends to the extent of the Trust's current and accumulated earnings and profits. Such distributions generally would be eligible for the dividends-received deduction in the case of corporate shareholders.
If the Fund fails to qualify as a RIC in any year, it must pay out its earnings and profits accumulated in that year in order to qualify again as a RIC. Moreover, if the Fund failed to qualify as a RIC for a period greater than one taxable year, the Fund may be required to recognize any net built-in gains with respect to certain of its assets (the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized if the Fund had been liquidated) in order to qualify as a RIC in a subsequent year.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a RIC that fails to distribute in each calendar year an amount equal to the sum of (1) 98% of its ordinary taxable income for the calendar year, (2) 98% of its capital gain net income (I.E., capital gains in excess of capital losses) for the one-year period ended on October 31 of such calendar year, and (3) any ordinary taxable income and capital gain net income for previous years that was not distributed or taxed to the RIC during those years. A distribution will be treated as paid on December 31 of the current calendar year if it is declared by the Trust in October, November or December with a record date in such a month and paid by the Trust during January of the following calendar year. Such distributions will be taxed to shareholders in the calendar year in which the distributions are declared, rather than the calendar year in which the distributions are received.
The Trust intends to make sufficient distributions or deemed distributions (discussed below) of its ordinary taxable income and capital gain net income to avoid liability for the excise tax.
HEDGING TRANSACTIONS
The Trust has the ability, pursuant to its investment objectives and policies, to hedge its investments in a variety of transactions, including interest rate swaps and the purchase or sale of interest rate caps and floors. The treatment of these transactions for federal income tax purposes may in some instances be unclear, and the RIC qualification requirements may limit the extent to which the Trust can engage in hedging transactions.
Under certain circumstances, the Trust may recognize gain from a constructive sale of an appreciated financial position. If the Trust enters into certain transactions in property while holding substantially identical property, the Trust would be treated as if it had sold and immediately repurchased the property and would be taxed on any gain (but not loss) from the constructive sale. The character of gain from a constructive sale would depend upon the Trust's holding period in the property. Loss from a constructive sale would be recognized when the property was subsequently disposed of, and its character would depend on the Trust's holding period and the application of various loss deferral provisions in the Code. Constructive sale treatment does not apply to transactions closed in the 90-day period ending with the 30th day after the close of the taxable year, if certain conditions are met.
DISTRIBUTIONS
The Trust anticipates distributing all or substantially all of its investment company taxable income for the taxable year. Such distributions will be taxable to shareholders as ordinary income. If a portion of the Trust's income consists of dividends paid by U.S. corporations, a portion of the dividends paid by the Trust may be eligible for the corporate dividends received deduction.
The Trust may either retain or distribute to shareholders its net capital gain for each taxable year. The Trust currently intends to distribute any such amounts. If net capital gain is distributed and designated as a capital gain dividend, it will generally be taxable to shareholders at a maximum federal tax rate of 15%. Distributions are subject to these capital gains rates regardless of the length of time the shareholder has held his shares. Conversely, if the Trust elects to retain its net capital gain, the Trust will be taxed thereon (except to the extent of any available capital loss carryovers) at the applicable corporate tax rate. In such event, it is expected that the Trust also will elect to treat such gain as having been distributed to shareholders. As a result, each shareholder will be required to report his pro rata share of such gain on his tax return as long-term capital gain, will be entitled to claim a tax credit for his pro rata share of tax paid by the Trust on the gain, and will increase the tax basis for his shares by an amount equal to the deemed distribution less the tax credit.
Recently enacted tax legislation generally provides for a maximum tax rate for individual taxpayers of 15% on long-term capital gains from sales on or after May 6, 2003 and on certain qualifying dividend income. The rate reductions do not apply to corporate taxpayers. The Trust will be able to separately designate distributions of any qualifying long-term capital gains or qualifying dividends earned by the Trust that would be eligible for the lower maximum rate, although it does not expect to distribute a material amount of qualifying dividends. A shareholder would also have to qualify a 60-day holding period with respect to any distributions of qualifying dividend in order to obtain the benefit of the lower rate. Distributions from funds, such as the Trust, investing in debt instruments will not generally qualify for the lower rate.
Distributions by the Trust in excess of the Trust's earnings and profits will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in his shares; any such return of capital distributions in excess of the shareholder's tax basis will be treated as gain from the sale of his shares, as discussed below.
Distributions by the Trust will be treated in the manner described above regardless of whether such distributions are paid in cash or reinvested in additional shares of the Trust. If the NAV at the time a shareholder purchases shares of the Trust reflects undistributed income or gain, distributions of such amounts will be taxable to the shareholder in the manner described above, even though such distributions economically constitute a return of capital to the shareholder.
The Trust will be required in certain cases to withhold and remit to the U.S. Treasury 28% of all dividends and redemption proceeds payable to any shareholder (1) who fails to provide the Trust with a certified, correct identification number or other required certifications, or (2) if the Internal Revenue Service notifies the Trust that the shareholder is subject to backup withholding. Corporate shareholders and other shareholders specified in the Code are exempt from such backup withholding. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's U.S. federal income tax liability if the appropriate information is provided to the IRS.
SALE OF COMMON SHARES
A shareholder will recognize gain or loss on the sale or exchange of shares of the Trust in an amount generally equal to the difference between the proceeds of the sale and the shareholder's adjusted tax basis in the shares. In general, any such gain or loss will be considered capital gain or loss if the shares are held as capital assets, and gain or loss will be long-term or short-term, depending upon the shareholder's holding period for the shares. However, any capital loss arising from the sale of shares held for six months or less will be treated as a long-term capital loss to the extent of any long-term capital gains distributed (or deemed distributed) with respect to such shares. Also, any loss realized on a sale or exchange of shares will be disallowed to the extent the shares disposed of are replaced (including shares acquired through the Shareholder Investment Program within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of. In such case, the tax basis of the acquired shares will be adjusted to reflect the disallowed loss.
FOREIGN SHAREHOLDERS
U.S. taxation of a shareholder who, as to the United States, is a nonresident alien individual, foreign trust or estate, foreign corporation, or foreign partnership ("foreign shareholder") depends, in part, on whether the shareholder's income from the Trust is effectively connected with a U.S. trade or business carried on by such shareholder.
If the income from the Trust is not effectively connected with a U.S. trade or business carried on by a foreign shareholder, distributions of investment company taxable income will be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate). Such a foreign shareholder would generally be exempt from U.S. federal income tax on gains realized on the sale or exchange of shares of the Trust, capital gain dividends, and amounts retained by the Trust that are designated as undistributed capital gains.
If the income from the Trust is effectively connected with a U.S. trade or business carried on by a foreign shareholder, then distributions of investment company taxable income, capital gain dividends, amounts retained by the Trust that are designated as undistributed capital gains and any gains realized upon the sale or exchange of shares of the Trust will be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations. Such shareholders that are classified as corporations for U.S. tax purposes also may be subject to a branch profits tax.
In the case of foreign noncorporate shareholders, the Trust may be required to withhold U.S. federal income tax at a rate of 30% on distributions that are otherwise exempt from withholding tax (or
taxable at a reduced treaty rate) unless such shareholders furnish the Trust with proper notification of their foreign status. See "Distributions."
The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Trust, including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; OTHER TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax consequences is based on the Code and the Treasury Regulations issued thereunder as in effect on the date of this SAI. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein.
Income received by the Trust from foreign sources may be subject to withholding and other taxes imposed by such foreign jurisdictions, absent treaty relief. Distributions to shareholders also may be subject to state, local and foreign taxes, depending upon each shareholder's particular situation. Shareholders are urged to consult their tax advisers as to the particular consequences to them of an investment in the Trust.
ADVERTISING AND PERFORMANCE DATA
ADVERTISING
From time to time, advertisements and other sales materials for the Trust may include information concerning the historical performance of the Trust. Any such information may include trading volume of the Trust's Common Shares, the number of Senior Loan investments, annual total return, aggregate total return, distribution rate, average compounded distribution rates and yields of the Trust for specified periods of time, and diversification statistics. Such information may also include rankings, ratings and other information from independent organizations such as Lipper Analytical Services, Inc. ("Lipper"), Morningstar, Value Line, Inc., CDA Technology, Inc., Standard & Poor's, Portfolio Management Data (a division of Standard & Poor's), Moody's, Bloomberg or other industry publications. These rankings will typically compare the Trust to all closed-end Funds, to other Senior Loan funds, and/or also to taxable closed-end fixed income funds. Any such use of rankings and ratings in advertisements and sales literature will conform with the guidelines of the NASD approved by the Commission. Ranking comparisons and ratings should not be considered representative of the Trust's relative performance for any future period.
Reports and promotional literature may also contain the following information: (i) number of shareholders; (ii) average account size; (iii) identification of street and registered account holdings; (iv) lists or statistics of certain of the Trust's holdings including, but not limited to, portfolio composition, sector weightings, portfolio turnover rates, number of holdings, average market capitalization and modern portfolio theory statistics alone or in comparison with itself (over time) and with its peers and industry group; (v) public information about the assets class; and (vi) discussions concerning coverage of the Trust by analysts.
In addition, reports and promotional literature may contain information concerning the Investment Manager, the Sub-Adviser, ING Groep, the Portfolio Managers, the Administrator or affiliates of the Trust including (i) performance rankings of other funds managed by the Investment Manager or
Sub-Adviser, or the individuals employed by the Investment Manager or Sub-Adviser who exercise responsibility for the day-to-day management of the Trust, including rankings and ratings of investment companies published by Lipper, Morningstar, Inc., Value Line, Inc., CDA Technologies, Inc., or other rating services, companies, publications or other persons who rank or rate investment companies or other investment products on overall performance or other criteria; (ii) lists of clients, the number of clients, or assets under management; (iii) information regarding the acquisition of the ING Funds by ING Capital; (iv) the past performance of ING Capital and ING Funds Services; (v) the past performance of other funds managed by the Investment Manager or Sub-Adviser; (vi) quotes from a portfolio manager of the Trust or industry specialists; and (vii) information regarding rights offerings conducted by closed-end funds managed by the Investment Manager or Sub-Adviser.
The Trust may compare the frequency of its reset period to the frequency which LIBOR changes. Further, the Trust may compare its yield to (i) LIBOR, (ii) the federal funds rate, (iii) the Prime Rate, quoted daily in the Wall Street Journal as the base rate on corporate loans at large U.S. money center commercial banks, (iv) the average yield reported by the Bank Rate Monitor National Index for money market deposit accounts offered by the 100 leading banks and thrift institutions in the ten largest standard metropolitan statistical areas, (v) yield data published by Lipper, Bloomberg or other industry sources, or (vi) the yield on an investment in 90-day Treasury bills on a rolling basis, assuming quarterly compounding. Further, the Trust may compare such other yield data described above to each other. The Trust may also compare its total return, NAV stability and yield to fixed income investments. As with yield and total return calculations, yield comparisons should not be considered representative of the Trust's yield or relative performance for any future period.
The Trust may provide information designed to help individuals understand their investment goals and explore various financial strategies. Such information may include information about current economic, market and political conditions; materials that describe general principles of investing, such as asset allocation, diversification, risk tolerance, and goal setting; worksheets used to project savings needs based on assumed rates of inflation and hypothetical rates of return; and action plans offering investment alternatives. Materials may also include discussion of other investment companies in the ING Funds, products and services, and descriptions of the benefits of working with investment professionals in selecting investments.
PERFORMANCE DATA
The Trust may quote annual total return and aggregate total return performance data. Total return quotations for the specified periods will be computed by finding the rate of return (based on net investment income and any capital gains or losses on portfolio investments over such periods) that would equate the initial amount invested to the value of such investment at the end of the period. On occasion, the Trust may quote total return calculations published by Lipper, a widely recognized independent publication that monitors the performance of both open-end and closed-end investment companies.
The Trust's distribution rate is calculated on a monthly basis by annualizing the dividend declared in the month and dividing the resulting annualized dividend amount by the Trust's corresponding month-end NAV (in the case of NAV) or the last reported market price (in the case of Market). The distribution rate is based solely on the actual dividends and distributions, which are made at the discretion of management. The distribution rate may or may not include all investment income, and ordinarily will not include capital gains or losses, if any.
Total return and distribution rate and compounded distribution rate figures utilized by the Trust are based on historical performance and are not intended to indicate future performance. Distribution rate, compounded distribution rate and NAV per share can be expected to fluctuate over time. Total
return will vary depending on market conditions, the Senior Loans, and other securities comprising the Trust's portfolio, the Trust's operating expenses and the amount of net realized and unrealized capital gains or losses during the period.
GENERAL INFORMATION
CUSTODIAN
State Street Bank and Trust Company, 801 Pennsylvania Avenue, Kansas City, Missouri 64105 has been retained to act as the custodian for the Trust. State Street Bank and Trust Company does not have any part in determining the investment policies of the Trust or in determining which portfolio securities are to be purchased or sold by the Trust or in the declaration of dividends and distributions.
LEGAL COUNSEL
Legal matters for the Trust are passed upon by Dechert LLP, 1775 I Street, NW, Washington, DC 20006.
INDEPENDENT AUDITORS
KPMG LLP, 355 South Grand Avenue, Los Angeles, California 90071, currently serves as the independent registered public accounting firm and has been selected as independent auditors for the Trust for the fiscal year ending February 28, 2005.
FINANCIAL STATEMENTS
The Financial Statements and the independent auditors' reports thereon, appearing in the Trust's Annual Report for the period ending February 29, 2004 are incorporated by reference in this SAI. The Trust's Annual and Semi-Annual Reports are available at 7337 East Doubletree Ranch Road, Scottsdale, Arizona 85258, upon request and without charge by calling (800) 992-0180.
APPENDIX A
ING FUNDS
PROXY VOTING PROCEDURES AND GUIDELINES
Effective as of July 10, 2003
As amended August 21, 2003 and November 11, 2003
I. INTRODUCTION
The following are the Proxy Voting Procedures and Guidelines (the "Procedures and Guidelines") of the ING Funds set forth on Exhibit 1 attached hereto and each portfolio or series thereof (each a "Fund" and collectively, the "Funds"). The purpose of these Procedures and Guidelines is to set forth the process by which each Fund will vote proxies related to the assets in its investment portfolio (the "portfolio securities"). The Procedures and Guidelines have been approved by each of the Funds' Board of Trustees/Directors(1) (each a "Board" and collectively, the "Boards"), including a majority of the independent Trustees/Directors(2) of the Board. These Procedures and Guidelines may be amended only by the Board. The Board shall review these Procedures and Guidelines at its discretion, and make any revisions thereto as deemed appropriate by the Board.
II. VALUATION AND PROXY VOTING COMMITTEE
The Boards hereby delegate to the Valuation and Proxy Voting Committee of each Board (each a "Committee" and collectively, the "Committees") the authority and responsibility to oversee the implementation of these Procedures and Guidelines, and where applicable, to make determinations on behalf of the Board with respect to the voting of proxies on behalf of each Fund. Furthermore, the Boards hereby delegate to each Committee the authority to review and approve material changes to proxy voting procedures of any Fund's investment adviser (the "Adviser"). The Proxy Voting Procedures of the Adviser are attached hereto as Exhibit 2. Any determination regarding the voting of proxies of each Fund that is made by a Committee, or any member thereof, as permitted herein, shall be deemed to be a good faith determination regarding the voting of proxies by the full Board. Each Committee may rely on the Adviser through the Agent, Proxy Coordinator and/or Proxy Group (as such terms are defined below and in the Adviser's proxy voting procedures) to deal in the first instance with the application of these Procedures and Guidelines. Each Committee shall conduct itself in accordance with its charter.
III. DELEGATION OF VOTING RESPONSIBILITY
(2) The independent Trustees/Directors are those Board members who are not "interested persons" within the meaning of Section 2(a)(19) the Investment Company Act of 1940.
The Board hereby delegates to the Adviser to each Fund the authority and responsibility to vote all proxies with respect to all portfolio securities of each Fund in accordance with then current proxy voting procedures and guidelines that have been approved by the Board. The Board may revoke such delegation with respect to any proxy or proposal, and assume the responsibility of voting any Fund proxy or proxies, as it deems appropriate. Non-material amendments to the Procedures and Guidelines may be approved for immediate implementation by the President or Chief Financial Officer of a Fund, subject to ratification at the next regularly scheduled meeting of the Valuation and Proxy Voting Committee.
When a Fund participates in the lending of its securities and the securities are on loan at record date, proxies related to such securities will not be forwarded to the Adviser by the Fund's custodian and therefore will not be voted.
When a Fund is a feeder in a master/feeder structure, proxies for the portfolio securities of the master fund will be voted pursuant to the master fund's proxy voting policies and procedures.
IV. APPROVAL AND REVIEW OF PROCEDURES
Each Fund's Adviser has adopted proxy voting procedures in connection with the voting of portfolio securities for the Funds as attached hereto in Exhibit 2. The Board hereby approves such procedures. All material changes to such procedures must be approved by the Board or the Valuation and Proxy Voting Committee prior to implementation; however, the President or Chief Financial Officer of a Fund may make such non-material changes as they deem appropriate, subject to ratification by the Board or the Valuation and Proxy Voting Committee at its next regularly scheduled meeting.
V. VOTING PROCEDURES AND GUIDELINES
THE GUIDELINES WHICH ARE SET FORTH IN EXHIBIT 3 HERETO SPECIFY THE MANNER IN WHICH THE FUNDS GENERALLY WILL VOTE WITH RESPECT TO THE PROPOSALS DISCUSSED THEREIN.
A. Routine Matters
The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear "For", "Against" or "Abstain" on a proposal. However, the Agent shall be directed to refer proxy proposals to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear, they appear to involve unusual or controversial issues, or an Investment Professional recommends a vote contrary to the Guidelines.
B. Matters Requiring Case-by-Case Consideration
The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted a "case-by-case" consideration.
Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.
The Proxy Coordinator will forward the Agent's analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.
1. Votes in Accordance with Agent Recommendation
In the event the Proxy Group recommends a vote in accordance with the Agent's recommendation, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in accordance with the Agent's recommendation.
2. Non-Votes
The Proxy Group may recommend that a Fund refrain from voting under the following circumstances: (1) if the economic effect on shareholders' interests or the value of the portfolio holding is indeterminable or insignificant or (2) if the cost of voting a proxy outweighs the benefits, E.G., certain international proxies. In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy.
3. Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, or where No Recommendation is provided by Agent.
If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, or if the Agent has made no recommendation and the Procedures and Guidelines are silent, the Proxy Coordinator will then request that each member of the Proxy Group and each Investment Professional participating in the voting process provide a Conflicts Report (as such term is defined for purposes of the Adviser's proxy voting procedures).
If Counsel determines that a conflict of interest appears to exist with respect to any member of the Proxy Group or the relevant Investment Professional(s), the Proxy Coordinator will then call a meeting of the Valuation and Proxy Voting Committee and forward to such committee all information relevant to their review, including the following materials or a summary thereof: the applicable Procedures and Guidelines, the recommendation of the Agent where applicable, the recommendation of the Investment Professional(s), where applicable, any resources used by the Proxy Group in arriving at its recommendation, the Conflicts Report and any other written materials establishing whether a conflict of interest exists, and findings of Counsel (as such term is defined for purposes of the Adviser's proxy voting procedures).
If Counsel determines that there does not appear to be a conflict of interest with respect to any member of the Proxy Group or the relevant Investment Professional(s), the Proxy Coordinator will instruct the Agent to vote the proxy as recommended by the Proxy Group.
4. Referrals to a Fund's Valuation and Proxy Voting Committee
A Fund's Valuation and Proxy Voting Committee may consider all recommendations, analysis, research and Conflicts Reports provided to it by the Agent, Proxy Group and/or Investment Professional(s), and any other written materials used to establish whether a conflict of interest exists, in determining how to vote the proxies referred to the Committee.
The Committee will instruct the Agent through the Proxy Coordinator how to vote such referred proposals.
The Proxy Coordinator will maintain a record of all proxy questions that have been referred to a Fund's Valuation and Proxy Voting Committee, all applicable recommendations, analysis, research and Conflicts Reports.
VI. CONFLICTS OF INTEREST
In all cases in which a vote has not been clearly determined in advance by the Procedures and Guidelines or for which the Proxy Group recommends a vote contrary to the Procedures and Guidelines, or contrary to the recommendation of the Agent, or where the Procedures and Guidelines are silent and the Agent has made no recommendation, and Counsel has determined that a conflict of interest appears to exist with respect to any member of the Proxy Group or any Investment Professional participating in the voting process, the proposal shall be referred to the Fund's Valuation and Proxy Voting Committee for determination so that the Adviser shall have no opportunity to vote a Fund's proxy in a situation in which it may be deemed to have a conflict of interest.
VII. REPORTING AND RECORD RETENTION
Beginning in August 2004, on an annual basis, each Fund will post its proxy voting record or a link thereto for the prior one-year period ending on June 30th on the ING Funds website. The proxy voting record posted for any Fund that is a feeder in a master/feeder structure will be that of the master fund. The proxy voting record for each Fund will also be available in the EDGAR database on the SEC's website.
EXHIBIT 1
TO THE
ING FUNDS
PROXY VOTING PROCEDURES
ING EQUITY TRUST
ING FUNDS TRUST
ING INVESTMENT FUNDS, INC.
ING INVESTORS TRUST
ING MAYFLOWER TRUST
ING MUTUAL FUNDS
ING PRIME RATE TRUST
ING SENIOR INCOME FUND
ING VARIABLE INSURANCE TRUST
ING VARIABLE PRODUCTS TRUST
ING VP EMERGING MARKETS FUND, INC.
ING VP NATURAL RESOURCES TRUST
USLICO SERIES FUND
Effective as of July 10, 2003
EXHIBIT 2
TO THE
ING FUNDS
PROXY VOTING PROCEDURES
ING INVESTMENTS, LLC,
DIRECTED SERVICES, INC.
AND
ING LIFE INSURANCE AND ANNUITY COMPANY
PROXY VOTING PROCEDURES
Effective as of July 10, 2003, as amended
I. INTRODUCTION
ING Investments, LLC, Directed Services, Inc. and ING Life Insurance and Annuity Company (each an "Adviser" and collectively, the "Advisers") are the investment advisers for the registered investment companies and each series or portfolio thereof (each a "Fund" and collectively, the "Funds") comprising the ING family of funds. As such, the Advisers have been delegated the authority to vote proxies with respect to securities for the Funds over which they have day-to-day portfolio management responsibility.
The Advisers will abide by the proxy voting guidelines adopted by a Fund's respective Board of Directors or Trustees (each a "Board" and collectively, the "Boards") with regard to the voting of proxies unless otherwise provided in the proxy voting procedures adopted by a Fund's Board.
In voting proxies, the Advisers are guided by general fiduciary principles. Each must act prudently, solely in the interest of the beneficial owners of the Funds it manages. The Advisers will not subordinate the interest of beneficial owners to unrelated objectives. Each Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.
The following are the Proxy Voting Procedures of ING Investments, LLC, Directed Services, Inc. and ING Life Insurance and Annuity Company with respect to the voting of proxies on behalf of their client Funds as approved by the respective Board of each Fund.
Unless otherwise noted, proxies will be voted in all instances.
II. ROLES AND RESPONSIBILITIES
A. Proxy Coordinator
The Proxy Coordinator identified in Appendix 1 will assist in the coordination of the voting of each Fund's proxies in accordance with the ING Funds Proxy Voting Procedures and Guidelines ("Procedures
and Guidelines"). The Proxy Coordinator is authorized to direct the Agent to vote a Fund's proxy in accordance with the Procedures and Guidelines unless the Proxy Coordinator receives a recommendation from an Investment Professional (as described below) to vote contrary to the Procedures and Guidelines. In such event, the Proxy Coordinator will call a meeting of the Proxy Group.
B. Agent
An independent proxy voting service (the "Agent"), as approved by the Board of each Fund, shall be engaged to assist in the voting of Fund proxies through the provision of vote analysis, implementation, recordkeeping and disclosure services. The Agent is responsible for coordinating with the Funds' custodians to ensure that all proxy materials received by the custodians relating to the portfolio securities are processed in a timely fashion. To the extent applicable, the Agent is required to vote and/or refer all proxies in accordance with these Procedures. The Agent will retain a record of all proxy votes handled by the Agent. Such record must reflect all the information required to be disclosed in a Fund's Form N-PX pursuant to Rule 30b1-4 under the Investment Company Act. In addition, the Agent is responsible for maintaining copies of all proxy statements received by issuers and to promptly provide such materials to the Adviser upon request.
The Agent shall be instructed to vote all proxies in accordance with the ING Funds' Guidelines, except as otherwise instructed through the Proxy Coordinator by the Adviser's Proxy Group, or a Fund's Valuation and Proxy Voting Committee.
The Agent shall be instructed to obtain all proxies from the Funds' custodians and to review each proxy proposal against the Guidelines. The Agent also shall be requested to call the Proxy Coordinator's attention to specific proxy proposals that although governed by the Guidelines appear to involve unusual or controversial issues.
C. Proxy Group
The Adviser shall establish a Proxy Group (the "Proxy Group") which shall assist in the review of the Agent's recommendations when a proxy voting issue is referred to the Group through the Proxy Coordinator. The members of the Proxy Group, which may include employees of the Advisers' affiliates, are identified in Appendix 1, as may be amended from time at the Advisers' discretion.
A minimum of four (4) members of the Proxy Group (or three (3) if one member of the quorum is either the Fund's Chief Investment Risk Officer or Chief Financial Officer) shall constitute a quorum for purposes of taking action at any meeting of the Group. The vote of a simple majority of the members present and voting shall determine any matter submitted to a vote. The Proxy Group may meet in person or by telephone. The Proxy Group also may take action via electronic mail in lieu of a meeting, provided that each Group member has received a copy of any relevant electronic mail transmissions circulated by each other participating Group member prior to voting and provided that the Proxy Coordinator follows the directions of a majority of a quorum (as defined above) responding via electronic mail. For all votes taken in person or by telephone or teleconference, the vote shall be taken outside the presence of any person other than the members of the Proxy Group.
A meeting of the Proxy Group will be held whenever the Proxy Coordinator receives a recommendation from an Investment Professional to vote a Fund's proxy contrary to the
Procedures and Guidelines, or the recommendation of the Agent, where applicable, or if the Agent has made no recommendation with respect to a vote on a proposal.
For each proposal referred to the Proxy Group, it will review (1) the Procedures and Guidelines, (2) the recommendation of the Agent, if any, (3) the recommendation of the Investment Professional(s) and (4) any other resources that the Proxy Group deems appropriate to aid in a determination of a recommendation.
If the Proxy Group recommends that a Fund vote in accordance with the Procedures and Guidelines, or the recommendation of the Agent, where applicable, it shall instruct the Proxy Coordinator to so advise the Agent.
If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, it shall follow the procedures for such voting as established by a Fund's Board.
D. Investment Professionals
The Funds' Advisers, sub-advisers and/or portfolio managers (referred to herein as "Investment Professionals") may be asked to submit a recommendation to the Proxy Group regarding the voting of proxies related to the portfolio securities over which they have day-to-day portfolio management responsibility. The Investment Professionals may accompany their recommendation with any other research materials that they deem appropriate.
III. VOTING PROCEDURES
A. In all cases, the Adviser shall follow the voting procedures as set forth in the Procedures and Guidelines of the Fund on whose behalf the Adviser is exercising delegated authority to vote.
B. Routine Matters
The Agent shall be instructed to submit a vote in accordance with the Guidelines where such Guidelines provide a clear "For", "Against" or "Abstain" on a proposal. However, the Agent shall be directed to refer proxy proposals to the Proxy Coordinator for instructions as if it were a matter requiring case-by-case consideration under circumstances where the application of the Guidelines is unclear.
C. Matters Requiring Case-by-Case Consideration
The Agent shall be directed to refer proxy proposals accompanied by its written analysis and voting recommendation to the Proxy Coordinator where the Guidelines have noted a "case-by-case" consideration.
Upon receipt of a referral from the Agent, the Proxy Coordinator may solicit additional research from the Agent, Investment Professional(s), as well as from any other source or service.
The Proxy Coordinator will forward the Agent's analysis and recommendation and/or any research obtained from the Investment Professional(s), the Agent or any other source to the Proxy Group. The Proxy Group may consult with the Agent and/or Investment Professional(s), as it deems necessary.
1. Votes in Accordance with Agent Recommendation
In the event the Proxy Group recommends a vote in accordance with the Agent's recommendation, the Proxy Group will instruct the Agent, through the Proxy Coordinator, to vote in accordance with the Agent's recommendation.
2. Non-Votes
The Proxy Group may recommend that a Fund refrain from voting under the following circumstances: (1) if the economic effect on shareholders' interests or the value of the portfolio holding is indeterminable or insignificant or (2) if the cost of voting a proxy outweighs the benefits, E.G., certain international proxies. In such instances, the Proxy Group may instruct the Agent, through the Proxy Coordinator, not to vote such proxy.
3. Votes Contrary to Procedures and Guidelines, or Agent Recommendation, where applicable, or Where No Recommendation is Provided by Agent.
If the Proxy Group recommends that a Fund vote contrary to the Procedures and Guidelines, or the recommendation of the Agent, where applicable, or if the Agent has made no recommendation and the Procedures and Guidelines are silent, the Proxy Coordinator will then implement the procedures for handling such votes as adopted by the Fund's Board.
4. The Proxy Coordinator will maintain a record of all proxy questions that have been referred to a Fund's Valuation and Proxy Voting Committee, all applicable recommendations, analysis, research and Conflicts Reports.
IV. CONFLICTS OF INTEREST
In connection with their participation in the voting process for portfolio securities, each member of the Proxy Group and each Investment Professional participating in the voting process must act solely in the best interests of the beneficial owners of the applicable Fund. The members of the Proxy Group may not subordinate the interests of the Fund's beneficial owners to unrelated objectives.
For all matters for which the Proxy Group recommends a vote contrary to Procedures and Guidelines, or the recommendation of the Agent, where applicable, or where the Agent has made no recommendation and the Procedures and Guidelines are silent, the Proxy Coordinator will implement the procedures for handling such votes as adopted by the Fund's Board, including completion of such Conflicts Reports as may be required under the Fund's procedures. Completed Conflicts Reports shall be provided to the Proxy Coordinator within two (2) business days. Such Conflicts Report should describe any known conflicts of either a business or personal nature, and set forth any contacts with respect to the referral item with non-investment personnel in its organization or with outside parties (except for routine communications from proxy solicitors). The Conflicts Report should also include written confirmation that any recommendation from an Investment Professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.
The Proxy Coordinator shall forward all Conflicts Reports to a member of the mutual funds practice group of ING US Legal Services ("Counsel") for review. Counsel shall review each report and provide the Proxy Coordinator with a brief statement regarding whether or not a material conflict of interest is
present. Matters as to which a conflict of interest is deemed to be present shall be handled as provided in the Fund's Procedures and Guidelines.
V. REPORTING AND RECORD RETENTION
The Adviser shall maintain the records required by Rule 204-2(c)(2), as may be amended from time to time, including the following: (1) A copy of each proxy statement received regarding a Fund's portfolio securities. Such proxy statements received from issuers are available either in the SEC's EDGAR database or are kept by the Agent and are available upon request. (2) A record of each vote cast on behalf of a Fund. (3) A copy of any document created by the Adviser that was material to making a decision how to vote a proxy, or that memorializes the basis for that decision. (4) A copy of written requests for Fund proxy voting information and any written response thereto or to any oral request for information on how the Adviser voted proxies on behalf of a Fund. All proxy voting materials and supporting documentation will be retained for a minimum of six (6) years.
APPENDIX 1
TO THE
ADVISERS' PROXY VOTING PROCEDURES
Proxy Group for registered investment company clients of ING Investments, LLC, Directed Services, Inc. and ING Life Insurance and Annuity Company:
NAME TITLE OR AFFILIATION Stanley D. Vyner Chief Investment Risk Officer and Executive Vice President of ING Investments, LLC Karla J. Bos Acting Proxy Coordinator Maria Anderson Assistant Vice President - Manager Fund Compliance of ING Funds Services, LLC Michael J. Roland Executive Vice President and Chief Financial Officer of ING Investments, LLC Todd Modic Vice President of Financial Reporting- Fund Accounting of ING Fund Services, LLC Theresa K. Kelety, Esq. Counsel, ING Americas US Legal Services |
Effective as of April 21, 2004
FORM OF EXHIBIT 3
TO THE
ING FUNDS PROXY VOTING PROCEDURES
PROXY VOTING GUIDELINES OF THE ING FUNDS
Effective as of July 10, 2003
As amended August 21, 2003 and November 11, 2003
I. INTRODUCTION
The following is a statement of the proxy voting Guidelines that have been adopted by the respective Boards of Directors or Trustees of each Fund.
Proxies must be voted in the best interest of the Fund. The Guidelines summarize the Funds' positions on various issues of concern to investors, and give a general indication of how Fund portfolio securities will be voted on proposals dealing with particular issues. The Guidelines are not exhaustive and do not include all potential voting issues.
The Advisers, in exercising their delegated authority, will abide by the Guidelines as outlined below with regard to the voting of proxies except as otherwise provided in the Procedures. In voting proxies, the Advisers are guided by general fiduciary principles. Each must act prudently, solely in the interest of the beneficial owners of the Funds it manages. The Advisers will not subordinate the interest of beneficial owners to unrelated objectives. Each Adviser will vote proxies in the manner that it believes will do the most to maximize shareholder value.
a. GUIDELINES
The following Guidelines are grouped according to the types of proposals generally presented to shareholders of U.S. issuers: Board of Directors, Proxy Contests, Auditors, Proxy Contest Defenses, Tender Offer Defenses, Miscellaneous Governance Provisions, Capital Structure, Executive and Director Compensation, State of Incorporation, Mergers and Corporate Restructurings, Mutual Fund Proxies and Social and Environmental Issues. An additional section addresses proposals most frequently found in Global Proxies.
In all cases where "case-by-case" consideration is noted, it shall be the policy of the Funds to vote in accordance with the recommendation provided by the Funds' Agent, Institutional Shareholder Services, Inc. Such policy may be overridden in any case pursuant to the procedures outlined herein.
THE BOARD OF DIRECTORS
Voting on Director Nominees in Uncontested Elections. Votes on director nominees
should be made on a CASE-BY-CASE basis.
SEPARATING CHAIRMAN AND CEO
Vote on a CASE-BY-CASE basis shareholder proposals requiring that the positions
of chairman and CEO be held separately.
PROPOSALS SEEKING A MAJORITY OF INDEPENDENT DIRECTORS
Evaluate on a CASE-BY-CASE basis shareholder proposals asking that a majority of directors be independent. Vote FOR shareholder proposals asking that board audit, compensation, and/or nominating committees be composed exclusively of independent directors.
STOCK OWNERSHIP REQUIREMENTS
Generally, vote AGAINST shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director or to remain on the board.
TERM OF OFFICE
Generally, vote AGAINST shareholder proposals to limit the tenure of outside directors.
AGE LIMITS
Generally, vote AGAINST shareholder proposals to impose a mandatory retirement age for outside directors.
DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY PROTECTION
Proposals on director and officer indemnification and liability protection should be evaluated on a CASE-BY-CASE basis, using Delaware law as the standard. Vote AGAINST proposals to limit or eliminate entirely directors' and officers' liability for monetary damages for violating the duty of care. Vote AGAINST indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness. Vote FOR only those proposals providing such expanded coverage in cases when a director's or officer's legal defense was unsuccessful if:
(1) The director was found to have acted in good faith and in a manner
that he reasonably believed was in the best interests of the company,
and
(2) Only if the director's legal expenses would be covered.
PROXY CONTESTS
Voting for Director Nominees in Contested Elections. Votes in a contested
election of directors must be evaluated on a CASE-BY-CASE basis.
REIMBURSE PROXY SOLICITATION EXPENSES
Voting to reimburse proxy solicitation expenses should be analyzed on a
CASE-BY-CASE basis.
AUDITORS
RATIFYING AUDITORS
Generally, vote FOR proposals to ratify auditors.
Non-Audit Services
Consider on a CASE-BY-CASE basis proposals to approve auditors when total non-audit fees exceed the total of audit fees, audit-related fees and permissible tax fees.
AUDITOR INDEPENDENCE
Generally, vote AGAINST shareholder proposals asking companies to prohibit their
auditors from engaging in non-audit services (or capping the level of non-audit
services).
AUDIT FIRM ROTATION (SHAREHOLDER PROPOSALS):
Generally, vote AGAINST shareholder proposals asking for mandatory audit firm
rotation.
PROXY CONTEST DEFENSES
Board Structure: Staggered vs. Annual Elections
Generally, vote AGAINST proposals to classify the board.
Generally, vote FOR proposals to repeal classified boards and to elect all
directors annually.
SHAREHOLDER ABILITY TO REMOVE DIRECTORS
Generally, vote AGAINST proposals that provide that directors may be removed
only for cause.
Generally, vote FOR proposals to restore shareholder ability to remove directors
with or without cause.
Generally, vote AGAINST proposals that provide that only continuing directors
may elect replacements to fill board vacancies.
Generally, vote FOR proposals that permit shareholders to elect directors to
fill board vacancies.
CUMULATIVE VOTING
Generally, vote AGAINST proposals to eliminate cumulative voting. Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis relative to the company's other governance provisions.
SHAREHOLDER ABILITY TO CALL SPECIAL MEETINGS
Generally, vote AGAINST proposals to restrict or prohibit shareholder ability to
call special meetings.
Generally, vote FOR proposals that remove restrictions on the right of
shareholders to act independently of management.
SHAREHOLDER ABILITY TO ACT BY WRITTEN CONSENT
Generally, vote AGAINST proposals to restrict or prohibit shareholder ability to
take action by written consent.
Generally, vote FOR proposals to allow or make easier shareholder action by
written consent.
SHAREHOLDER ABILITY TO ALTER THE SIZE OF THE BOARD
Review on a CASE-BY-CASE basis proposals that seek to fix the size of the board. Review on a CASE-BY-CASE basis proposals that give management the ability to alter the size of the board without shareholder approval.
TENDER OFFER DEFENSES
Poison Pills
Generally, vote FOR shareholder proposals that ask a company to submit its
poison pill for shareholder ratification.
Review on a CASE-BY-CASE basis shareholder proposals to redeem a company's
poison pill.
Review on a CASE-BY-CASE basis management proposals to ratify a poison pill.
FAIR PRICE PROVISIONS
Vote proposals to adopt fair price provisions on a CASE-BY-CASE basis.
Generally, vote AGAINST fair price provisions with shareholder vote requirements
greater than a majority of disinterested shares.
GREENMAIL
Generally, vote FOR proposals to adopt antigreenmail charter of bylaw amendments or otherwise restrict a company's ability to make greenmail payments. Review on a CASE-BY-CASE basis antigreenmail proposals when they are bundled with other charter or bylaw amendments.
PALE GREENMAIL
Review on a CASE-BY-CASE basis restructuring plans that involve the payment of pale greenmail.
UNEQUAL VOTING RIGHTS
Generally, vote AGAINST dual-class exchange offers. Generally, vote AGAINST dual-class recapitalizations.
SUPERMAJORITY SHAREHOLDER VOTE REQUIREMENT TO AMEND THE CHARTER OR BYLAWS
Generally, vote AGAINST management proposals to require a supermajority
shareholder vote to approve charter and bylaw amendments.
Generally, vote FOR shareholder proposals to lower supermajority shareholder
vote requirements for charter and bylaw amendments.
SUPERMAJORITY SHAREHOLDER VOTE REQUIREMENT TO APPROVE MERGERS Generally, vote AGAINST management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations. Generally, vote FOR shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations.
WHITE SQUIRE PLACEMENTS
Generally, vote FOR shareholder proposals to require approval of blank check preferred stock issues for other than general corporate purposes.
MISCELLANEOUS GOVERNANCE PROVISIONS
CONFIDENTIAL VOTING
Generally, vote FOR shareholder proposals that request companies to adopt
confidential voting, use independent tabulators, and use independent inspectors
of election as long as the proposals include clauses for proxy contests as
follows:
- In the case of a contested election, management should be permitted to
request that the dissident group honor its confidential voting policy.
- If the dissidents agree, the policy remains in place.
- If the dissidents do not agree, the confidential voting policy is
waived.
Generally, vote FOR management proposals to adopt confidential voting.
EQUAL ACCESS
Generally, vote FOR shareholder proposals that would allow significant company shareholders (defined as those holding more than $5 million in securities of the company in question) equal access to management's proxy material in order to evaluate and propose voting recommendations on proxy proposals and director nominees, and in order to nominate their own candidates to the board.
BUNDLED PROPOSALS
Review on a CASE-BY-CASE basis bundled or "conditioned" proxy proposals.
SHAREHOLDER ADVISORY COMMITTEES
Review on a CASE-BY-CASE basis proposals to establish a shareholder advisory committee.
CAPITAL STRUCTURE
Common Stock Authorization
Review proposals to increase the number of shares of common stock authorized for
issue on a CASE-BY-CASE basis.
Generally, vote AGAINST proposals to increase the number of authorized shares of
the class of stock that has superior voting rights in companies that have
dual-class capitalization structures.
STOCK DISTRIBUTIONS: SPLITS AND DIVIDENDS
Generally, vote FOR management proposals to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in an excessive number of shares available for issuance given a company's industry and performance in terms of shareholder returns.
REVERSE STOCK SPLITS
Consider on a CASE-BY-CASE basis management proposals to implement a reverse stock split.
PREFERRED STOCK
Generally, vote AGAINST proposals authorizing the creation of new classes of
preferred stock with unspecified voting, conversion, dividend distribution, and
other rights ("blank check" preferred stock). Generally, vote FOR proposals to
create blank check preferred stock in cases when the company expressly states
that the stock will not be used as a takeover defense.
Generally, vote FOR proposals to authorize preferred stock in cases where the
company specifies the voting, dividend, conversion, and other rights of such
stock and the terms of the preferred stock appear reasonable.
Vote CASE-BY-CASE on proposals to increase the number of blank check preferred
shares after analyzing the number of preferred shares available for issue given
a company's industry and performance in terms of shareholder returns.
SHAREHOLDER PROPOSALS REGARDING BLANK CHECK PREFERRED STOCK
Generally, vote FOR shareholder proposals to have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in the normal course of business, submitted for shareholder ratification.
ADJUSTMENTS TO PAR VALUE OF COMMON STOCK
Generally, vote FOR management proposals to reduce the par value of common stock.
PREEMPTIVE RIGHTS
Review on a CASE-BY-CASE basis shareholder proposals that seek preemptive rights. In evaluating proposals on preemptive rights, consider the size of a company and the characteristics of its shareholder base.
DEBT RESTRUCTURINGS
Review on a CASE-BY-CASE basis proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan.
SHARE REPURCHASE PROGRAMS
Generally, vote FOR management proposals to institute open-market share
repurchase plans in which all shareholders may participate on equal terms.
TRACKING STOCK
Votes on the creation of tracking stock are determined on a CASE-BY-CASE basis.
EXECUTIVE AND DIRECTOR COMPENSATION
Votes with respect to compensation plans should be determined on a CASE-BY-CASE
basis.
MANAGEMENT PROPOSALS SEEKING APPROVAL TO REPRICE OPTIONS
Generally, vote AGAINST management proposals seeking approval to reprice options.
DIRECTOR COMPENSATION
Votes on stock-based plans for directors are made on a CASE-BY-CASE basis.
EMPLOYEE STOCK PURCHASE PLANS
Votes on employee stock purchase plans should be made on a CASE-BY-CASE basis.
OBRA-RELATED COMPENSATION PROPOSALS:
AMENDMENTS THAT PLACE A CAP ON ANNUAL GRANTS OR AMEND ADMINISTRATIVE
FEATURES
Generally, vote FOR plans that simply amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m) of OBRA.
AMENDMENTS TO ADD PERFORMANCE-BASED GOALS
Generally, vote FOR amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of OBRA.
AMENDMENTS TO INCREASE SHARES AND RETAIN TAX DEDUCTIONS UNDER OBRA
Votes on amendments to existing plans to increase shares reserved and to
qualify the plan for favorable tax treatment under the provisions of
Section 162(m) should be evaluated on a CASE-BY-CASE basis.
APPROVAL OF CASH OR CASH-AND-STOCK BONUS PLANS
Generally, vote FOR cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of OBRA.
SHAREHOLDER PROPOSALS TO LIMIT EXECUTIVE AND DIRECTOR PAY
Generally, vote FOR shareholder proposals that seek additional disclosure of
executive and director pay information.
Review on a CASE-BY-CASE basis all other shareholder proposals that seek to
limit executive and director pay.
GOLDEN AND TIN PARACHUTES
Generally, vote FOR shareholder proposals to have golden and tin parachutes
submitted for shareholder ratification.
Review on a CASE-BY-CASE basis all proposals to ratify or cancel golden or tin
parachutes.
EMPLOYEE STOCK OWNERSHIP PLANS (ESOPs)
Generally, vote FOR proposals that request shareholder approval in order to
implement an ESOP or to increase authorized shares for existing ESOPs, except in
cases when the number of shares allocated to the ESOP is "excessive" (i.e.,
generally greater than five percent of outstanding shares).
401(k) EMPLOYEE BENEFIT PLANS Generally, vote FOR proposals to implement a 401(k) savings plan for employees.
EXPENSING OF STOCK OPTIONS
Consider shareholder proposals to expense stock options on a CASE-BY-CASE basis.
STATE OF INCORPORATION
VOTING ON STATE TAKEOVER STATUTES
Review on a CASE-BY-CASE basis proposals to opt in or out of state takeover
statutes (including control share acquisition statutes, control share cash-out
statutes, freezeout provisions, fair price provisions, stakeholder laws, poison
pill endorsements, severance pay and labor contract provisions, antigreenmail
provisions, and disgorgement provisions).
VOTING ON REINCORPORATION PROPOSALS
Proposals to change a company's state of incorporation should be examined on a
CASE-BY-CASE basis.
MERGERS AND CORPORATE RESTRUCTURINGS
MERGERS AND ACQUISITIONS
Votes on mergers and acquisitions should be considered on a CASE-BY-CASE basis.
CORPORATE RESTRUCTURING
Votes on corporate restructuring proposals, including minority squeezeouts,
leveraged buyouts, spinoffs, liquidations, and asset sales should be considered
on a CASE-BY-CASE basis.
SPINOFFS
Votes on spinoffs should be considered on a CASE-BY-CASE basis.
ASSET SALES
Votes on asset sales should be made on a CASE-BY-CASE basis.
LIQUIDATIONS
Votes on liquidations should be made on a CASE-BY-CASE basis.
ADJOURNMENT
Generally, vote FOR proposals to adjourn a meeting to provide additional time
for vote solicitation when the primary proposal is also voted FOR.
APPRAISAL RIGHTS
Generally, vote FOR proposals to restore, or provide shareholders with, rights
of appraisal.
CHANGING CORPORATE NAME
Generally, vote FOR changing the corporate name.
MUTUAL FUND PROXIES
ELECTION OF DIRECTORS
Vote the election of directors on a CASE-BY-CASE basis.
CONVERTING CLOSED-END FUND TO OPEN-END FUND
Vote conversion proposals on a CASE-BY-CASE basis.
PROXY CONTESTS
Vote proxy contests on a CASE-BY-CASE basis.
INVESTMENT ADVISORY AGREEMENTS
Vote the investment advisory agreements on a CASE-BY-CASE basis.
APPROVING NEW CLASSES OR SERIES OF SHARES
Generally, vote FOR the establishment of new classes or series of shares.
PREFERRED STOCK PROPOSALS
Vote the authorization for or increase in preferred shares on a CASE-BY-CASE
basis.
1940 ACT POLICIES
Vote these proposals on a CASE-BY-CASE basis.
CHANGING A FUNDAMENTAL RESTRICTION TO A NONFUNDAMENTAL RESTRICTION
Vote these proposals on a CASE-BY-CASE basis.
CHANGE FUNDAMENTAL INVESTMENT OBJECTIVE TO NONFUNDAMENTAL
Generally, vote AGAINST proposals to change a fund's fundamental investment
objective to nonfundamental.
NAME RULE PROPOSALS
Vote these proposals on a CASE-BY-CASE basis.
DISPOSITION OF ASSETS/TERMINATION/LIQUIDATION
Vote these proposals on a CASE-BY-CASE basis.
CHANGES TO THE CHARTER DOCUMENT
Vote changes to the charter document on a CASE-BY-CASE basis.
CHANGING THE DOMICILE OF A FUND
Vote reincorporations on a CASE-BY-CASE basis.
CHANGE IN FUND'S SUBCLASSIFICATION
Vote these proposals on a CASE-BY-CASE basis.
AUTHORIZING THE BOARD TO HIRE AND TERMINATE SUBADVISORS WITHOUT SHAREHOLDER
APPROVAL
Generally, vote FOR these proposals.
DISTRIBUTION AGREEMENTS
Vote these proposals on a CASE-BY-CASE basis.
MASTER-FEEDER STRUCTURE
Generally, vote FOR the establishment of a master-feeder structure.
CHANGES TO THE CHARTER DOCUMENT
Vote changes to the charter document on a CASE-BY-CASE basis.
MERGERS
Vote merger proposals on a CASE-BY-CASE basis.
ESTABLISH DIRECTOR OWNERSHIP REQUIREMENT
Generally, vote AGAINST shareholder proposals for the establishment of a
director ownership requirement.
REIMBURSE SHAREHOLDER FOR EXPENSES INCURRED
Voting to reimburse proxy solicitation expenses should be analyzed on a
CASE-BY-CASE basis.
TERMINATE THE INVESTMENT ADVISOR
Vote to terminate the investment advisor on a CASE-BY-CASE basis.
SOCIAL AND ENVIRONMENTAL ISSUES
These issues cover a wide range of topics, including consumer and public safety,
environment and energy, general corporate issues, labor standards and human
rights, military business, and workplace diversity.
In general, vote CASE-BY-CASE. While a wide variety of factors goes into each analysis, the overall principal guiding all vote recommendations focuses on how the proposal will enhance the economic value of the company.
GLOBAL PROXIES
While a number of the foregoing Guidelines may be applied to both U.S. and global proxies, the following provide for the differing regulatory and legal requirements, market practices and political and economic systems existing in various global markets.
ROUTINE MANAGEMENT PROPOSALS
Generally, vote FOR the following and other similar routine management
proposals:
- the opening of the shareholder meeting
- that the meeting has been convened under local regulatory requirements
- the presence of quorum
- the agenda for the shareholder meeting
- the election of the chair of the meeting
- the appointment of shareholders to co-sign the minutes of the meeting
- regulatory filings (E.G., to effect approved share issuances)
- the designation of inspector or shareholder representative(s) of
minutes of meeting
- the designation of two shareholders to approve and sign minutes of
meeting
- the allowance of questions
- the publication of minutes
- the closing of the shareholder meeting
DISCHARGE OF MANAGEMENT/SUPERVISORY BOARD MEMBERS
Generally, vote FOR management proposals seeking the discharge of management and supervisory board members, unless there is concern about the past actions of the company's auditors or directors or legal action is being taken against the board by other shareholders.
DIRECTOR REMUNERATION
Consider director compensation plans on a CASE-BY-CASE basis. Generally, vote FOR proposals to approve the remuneration of directors as long as the amount is not excessive and there is no evidence of abuse.
APPROVAL OF FINANCIAL STATEMENTS AND DIRECTOR AND AUDITOR REPORTS
Generally, vote FOR management proposals seeking approval of financial accounts and reports, unless there is concern about the company's financial accounts and reporting.
REMUNERATION OF AUDITORS
Generally, vote FOR proposals to authorize the board to determine the remuneration of auditors, unless there is evidence of excessive compensation relative to the size and nature of the company.
INDEMNIFICATION OF AUDITORS
Generally, vote AGAINST proposals to indemnify auditors.
ALLOCATION OF INCOME AND DIVIDENDS
Generally, vote FOR management proposals concerning allocation of income and the distribution of dividends, unless the amount of the distribution is consistently and unusually small or large.
STOCK (SCRIP) DIVIDEND ALTERNATIVES
Generally, vote FOR most stock (scrip) dividend proposals, but vote AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value.
DEBT ISSUANCE REQUESTS
When evaluating a debt issuance request, the issuing company's present financial situation is examined. The main factor for analysis is the company's current debt-to-equity ratio, or gearing level. A high gearing level may incline markets and financial analysts to downgrade the company's bond rating, increasing its investment risk factor in the process. A gearing level up to 100 percent is considered acceptable.
Generally, vote FOR debt issuances for companies when the gearing level is between zero and 100 percent. Review on a CASE-BY-CASE basis proposals where the issuance of debt will result in the gearing level being greater than 100 percent, comparing any such proposed debt issuance to industry and market standards.
FINANCING PLANS
Generally, vote FOR the adoption of financing plans if they are in the best economic interests of shareholders.
RELATED PARTY TRANSACTIONS
Consider related party transactions on a CASE-BY-CASE basis. Generally, vote FOR
approval of such transactions unless the agreement requests a strategic move
outside the company's charter or contains unfavorable terms.
CAPITALIZATION OF RESERVES
Generally, vote FOR proposals to capitalize the company's reserves for bonus issues of shares or to increase the par value of shares.
ARTICLE AMENDMENTS
Review on a CASE-BY-CASE basis all proposals seeking amendments to the articles of association.
Generally, vote FOR an article amendment if:
- it is editorial in nature;
- shareholder rights are protected;
- there is negligible or positive impact on shareholder value;
- management provides adequate reasons for the amendments; and
- the company is required to do so by law (if applicable).
PART C
OTHER INFORMATION
ING PRIME RATE TRUST
(25,000,000 COMMON SHARES)
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. Financial Statements
Contained in Part A:
Financial Highlights for the years ended February 29, 2004, February 28, 2003, 2002 and 2001; February 29, 2000.
Financial Statements are incorporated in Part B by reference to Registrant's February 29, 2004 Annual Report (audited).
2. Exhibits
(a) (i) Agreement and Declaration of Trust(1)
(ii) Amendment to the Agreement and Declaration of Trust dated March 26, 1996 and effective April 12, 1996(1)
(iii) Amendment to the Agreement and Declaration of Trust dated October 23, 1998 and effective November 16, 1998(7)
(iv) Amendment to the Agreement and Declaration of Trust dated October 20, 2000 and effective October 20, 2000(9)
(v) Amendment to the Agreement and Declaration of Trust dated February 20, 2002 and effective March 1, 2002(10)
(b) (i) By-Laws(2)
(ii) Amendment to By-Laws(2)
(iii) Amendment to By-Laws(8)
(iv) Amendment to By-Laws(9)
(c) Not Applicable
(d) (i) Certificate of Designation for Preferred Shares(9)
(ii) Form of Share Certificate
(e) Shareholder Investment Program is filed herewith.
(f) Not Applicable
(g) (i) Investment Management Agreement between ING Investment Management, LLC and ING Prime Rate Trust(9)
1. Amended Schedule of Approvals with respect to the Investment Management Agreement between ING Investments, LLC and ING Prime Rate Trust is filed herewith.
(ii) Sub-Advisory Agreement between ING Investments, LLC and Aeltus Investment Management, Inc.(11)
1. First Amendment to Sub-Advisory Agreement, effective as of September 1, 2003, between ING Investments, LLC and Aeltus Investment Management, Inc. with regards to ING Prime Rate Trust is filed herewith.
(h) (i) From of Amended and Restated Distribution Agreement, dated June 15, 2004, between ING Prime Rate Trust and ING Funds Distributor, LLC is filed herewith.
(ii) Underwriting Agreement for the Preferred Shares, dated November 13, 2000 is filed herewith.
1. Underwriting Agreement for the Preferred Shares, dated October 30, 2000 is filed herewith.
(i) Not Applicable
(j) (i) Custodian and Investment Accounting Agreement between Registrant and State Street Bank and Trust Company, effective November 1, 2001 is filed herewith.
1. First Amendment to the Custodian and Investment Accounting Agreement dated March 1, 2002 is filed herewith.
2. Amended and Restated Exhibit A with respect to the Custodian and Investment Accounting Agreement is filed herewith.
(ii) Fee Allocation Agreement, dated August 21, 2003 is filed herewith.
1. Amended Schedule A to the Fee Allocation Agreement is
filed herewith.
(iii) Proxy Agent Fee Allocation Agreement, dated August 21, 2003 is filed herewith.
1. Amended Schedule A to the Proxy Agent Fee Allocation Agreement is filed herewith.
(iv) Allocation Agreement Fidelity Bond, made May 24, 2002 is filed herewith.
1. Amended Schedule A to the Allocation Agreement is filed herewith.
(v) Allocation Agreement Directors & Officers, made May 24, 2002 is filed herewith.
1. Amended Schedule A to the Allocation Agreement Directors & Officers is filed herewith.
(vi) Agency Agreement, made November 30, 2000 by and between Registrant and DST Systems, Inc.
1. Amended and Restated Exhibit A with respect to the Agency Agreement between The Funds and DST Systems, Inc., dated February 25, 2004.
(k) (i) Amended and Restated Administration Agreement, amended and restated on April 27, 2000 is filed herewith.
(ii) Amendment to the Amended and Restated Administration Agreement(10)
(iii) Revolving Credit and Security Agreement between ING Prime Rate Trust and Citibank, dated as of July 16, 2003 is filed herewith.
1. Amendment No. 1 to the Revolving Credit and Security Agreement, dated February 3, 2004 is filed herewith.
(iv) Second Amended and Restated Credit Agreement with Bank of America is filed herewith.
(v) Auction Agency Agreement, dated as of November 16, 2000 is filed herewith.
1. Auction Agency Agreement, dated as of November 2, 2000 is filed herewith.
(vi) Broker-Dealer Agreement, dated as of November 16, 2000 (UBS) is filed herewith.
1. Broker-Dealer Agreement, dated as of November
16, 2000 (Salomon Smith Barney) is filed
herewith.
2. Broker-Dealer Agreement, dated as of November
16, 2000 (Lehman Brothers) is filed herewith.
3. Broker-Dealer Agreement, dated as of November
16, 2000 (Gruntal & Co.) is filed herewith.
4. Broker-Dealer Agreement, dated as of November
2, 2000 (PaineWebber) is filed herewith.
5. Broker-Dealer Agreement, dated as of November
2, 2000 (Gruntal & Co.) is filed herewith.
6. Broker-Dealer Agreement, dated as of November
2, 2000 (Salomon Smith Barney) is filed
herewith.
7. Broker-Dealer Agreement, dated as of October
31, 2000 (Lehman Brothers) is filed herewith.
(vii) DTC Letter of Representations as to Preferred Shares, dated November 15, 2000 is filed herewith.
1. DTC Letter of Representation as to Preferred Shares, dated November 1, 2000 is filed herewith.
(l) Opinion of Dechert Price & Rhoads(7)
(m) Not Applicable
(n) (i) Consent of Dechert LLP is filed herewith.
(ii) Consent of KPMG LLP is filed herewith.
(o) Not Applicable
(p) Certificate of Initial Capital(4)
(q) Not Applicable
(r) (i) ING Funds Code of Ethics, effective June 1, 2004 is filed herewith.
(ii) Aeltus Investment Management, Inc. Code of Ethics
(1) Incorporated herein by reference to Amendment No. 20 to Registrant's Registration Statement under the Investment Company Act of 1940 (the "1940 Act") on Form N-2 (File No. 811-5410), filed on September 16, 1996.
(2) Incorporated herein by reference to Amendment No. 24 to Registrant's Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on November 7, 1997.
(3) Incorporated herein by reference to Amendment No. 22 to Registrant's Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on June 23, 1997.
(4) Incorporated herein by reference to Pre-Effective Amendment No. 1 to Registrant's initial registration statement on form N-2 (File No. 33-18886), filed on January 22, 1988.
(5) Incorporated herein by reference to Amendment No. 27 to Registrant's Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on May 15, 1998.
(6) Incorporated herein by reference to Amendment No. 28 to Registrant's Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on August 19, 1998.
(7) Incorporated herein by reference to Amendment No. 29 to Registrant's Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on December 2, 1998.
(8) Incorporated herein by reference to Amendment No. 33 to Registrant's Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on May 9, 2000.
(9) Incorporated herein by reference to Amendment No. 38 to Registrant's Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on October 23, 2000.
(10) Incorporated herein by reference to Amendment No. 45 to Registrant's Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on April 30, 2002.
(11) Incorporated herein by reference to Amendment No. 53 to Registrant's Registration Statement under the 1940 Act on Form N-2 (File No. 811-5410), filed on June 26, 2003.
ITEM 25. MARKETING AGREEMENTS
Not Applicable.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth expenses incurred or estimated to be incurred in connection with the offering described in the Registration Statement.
Registration Fees $ 0 Trustee Fees $ 0 Rating Agency Fees $ 0 Printing Expenses $ 32,500 Legal Fees $ 30,000 Accounting Fees and Expenses $ 5,500 Miscellaneous Expenses $ 0 Total $ 68,000 |
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not Applicable.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
(1) TITLE OF CLASS (2) NUMBER OF RECORD HOLDERS -------------- ------------------------ Common Shares of beneficial interest, 7,424 as of June 18, 2004 par value $0.01 per share. Auction Rate Cumulative Preferred Shares of beneficial interest, par value $0.01 per share: Series M 3,600 as of June 18, 2004 Series T 3,600 as of June 18, 2004 Series W 3,600 as of June 18, 2004 Series Th 3,600 as of June 18, 2004 Series F 3,600 as of June 18, 2004 |
ITEM 29. INDEMNIFICATION
Registrant's Agreement and Declaration of Trust generally provides that the Trust shall indemnify each of its Trustees and officers (including persons who serve at the Trust's request as directors, officers or trustees of another organization in which the Trust has any interest as a shareholder, creditor or otherwise) ("Covered Persons") against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and
counsel fees reasonably incurred in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, by reason of being or having been such a Covered Person except with respect to any matter as to which such Covered Person shall have been finally adjudicated (a) not to have acted in good faith in the reasonable belief that such Covered Person's action was in the best interest of the Trust or (b) to be liable to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of duties involved in the conduct of such Covered Person's office.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of the Registrant of expenses incurred or paid by a Trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the securities being registered, the Registrant will submit, unless in the opinion of its counsel the matter has been settled by controlling precedent, to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information as to the Trustees and officers of the Adviser, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the Adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV (File No. 801-48282) filed under the Investment Advisers Act of 1940, as amended ("Advisers Act"), and is incorporated herein by reference thereto.
Information as to the directors and officers of the sub-adviser, together with information as to any other business, profession, vocation or employment of a substantial nature engaged in by the directors and officers of the sub-adviser in the last two years, is included in its application for registration as an investment adviser on Form ADV for ING Investment Management Co. (File No. 801-9046) filed under the Investment Advisers Act of 1940, as amended, and is incorporated by reference thereto.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The amounts and records of the Registrant will be maintained at its office at 7337 E. Doubletree Ranch Road, Scottsdale, Arizona 85258, at the office of its sub-adviser. ING Investment Management Co., 10 State House Square, Hartford, Connecticut 06103-3602 and at the office of its custodian, State Street Bank & Trust - Kansas City, 801 Pennsylvania, Kansas City, Missouri 64105.
ITEM 32. MANAGEMENT SERVICES
Not Applicable.
ITEM 33. UNDERTAKINGS
1. The Registrant undertakes to suspend the Offer until the prospectus is amended if (1) subsequent to the effective date of this registration statement, the net asset value declines more than ten percent from its net asset value as of the effective date of this registration statement or (2) the net asset value increases to an amount greater than the net proceeds as stated in the prospectus included in this registration statement.
2. Not Applicable.
3. Not Applicable.
4. Not Applicable.
5.
a. The Registrant undertakes that for the purpose of determining any liability under the 1933 Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 497(h) under the 1933 Act [17 CFR 230.497(h)] shall be deemed to be part of this Registration Statement as of the time it was declared effective; and
b. that for the purpose of determining any liability under the 1933 Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
6. The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement of Additional Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Scottsdale in the State of Arizona this 28th day of June, 2004.
ING PRIME RATE TRUST
By: /s/ Michael J. Roland --------------------- Michael J. Roland Executive Vice President, Chief Financial Officer and Assistant Secretary |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated:
SIGNATURE TITLE DATE --------- ----- ---- Trustee and Chairman June 28, 2004 -------------------------------- John G. Turner* President and Chief June 28, 2004 Executive Officer -------------------------------- James M. Hennessy* Executive Vice President, Chief Financial Officer and Assistant Secretary /s/ Michael J. Roland June 28, 2004 -------------------------------- Michael J. Roland Trustee June 28, 2004 -------------------------------- Paul S. Doherty* Trustee June 28, 2004 -------------------------------- J. Michael Earley* |
Trustee June 28, 2004 -------------------------------- R. Barbara Gitenstein* Trustee June 28, 2004 -------------------------------- Walter H. May, Jr.* Trustee June 28, 2004 -------------------------------- Thomas J. McInerney* Trustee June 28, 2004 -------------------------------- Jock Patton* Trustee June 28, 2004 -------------------------------- David W.C. Putnam* Trustee June 28, 2004 -------------------------------- Blaine E. Rieke* Trustee June 28, 2004 -------------------------------- Roger B. Vincent* Trustee June 28, 2004 -------------------------------- Richard A. Wedemeyer* |
*By: /s/ Michael J. Roland --------------------- Michael J. Roland Attorney-in-Fact** |
EXHIBIT INDEX
ING PRIME RATE TRUST
(25,000,000 COMMON SHARES)
EXHIBIT NUMBER EXHIBIT NAME -------------- ------------ (e) Shareholder Reinvestment Program. (g)(i)(1) Amended Schedule of Approvals with respect to the Investment Management Agreement between ING Investments, LLC and ING Prime Rate Trust. (g)(ii)(1) First Amendment, effective as of September 1, 2003, to Sub-Advisory Agreement between ING Investments, LLC and Aeltus Investment Management, Inc. with regards to ING Prime Rate Trust. (h)(i) Form of Amended and Restated Distribution Agreement between ING Prime Rate Trust (formerly Pilgrim Prime Rate Trust) and ING Funds Distributor, Inc. (formerly Pilgrim Securities, Inc.) dated June 15, 2004. (h)(ii) Underwriting Agreement for the Preferred Shares, dated November 13, 2000. (h)(ii)(1) Underwriting Agreement for the Preferred Shares, dated October 30, 2000. (j)(i) Custodian and Investment Accounting Agreement between Registrant and State Street Bank and Trust Company, effective November 1, 2001. (j)(i)(1) First Amendment to the Custodian and Investment Accounting Agreement dated March 1, 2002. (j)(i)(2) Amended and Restated Exhibit A with respect to the Custodian and Investment Accounting Agreement, effective November 22, 2002. (j)(ii) Fee Allocation Agreement, dated August 21, 2003. (j)(ii)(1) Amended Schedule A to the Fee Allocation Agreement. (j)(iii) Proxy Agent Fee Allocation Agreement, dated August 21, 2003. (j)(iii)(1) Amended Schedule A to the Proxy Agent Fee Allocation Agreement. (j)(iv) Allocation Agreement Fidelity Bond, made May 24, 2002. (j)(iv)(1) Amended Schedule A to the Allocation Agreement. (j)(v) Allocation Agreement Directors & Officers, made May 24, 2002. (j)(v)(1) Amended Schedule A to the Allocation Agreement Directors & Officers. (j)(vi) Agency Agreement, made November 30, 2000 by and between Registrant and DST Systems, Inc. (j)(vi)(1) Amended and Restated Exhibit A with respect to the Agency Agreement between The Funds and DST Systems, Inc., dated February 25, 2004. (k)(i) Amended and Restated Administration Agreement, amended and restated on April 27, 2000. (k)(iii) Revolving Credit and Security Agreement between ING Prime Rate Trust and Citibank, dated as of July 16, 2003. (k)(iii)(1) Amendment No. 1 to the Revolving Credit and Security Agreement, dated February 3, 2004. |
(k)(iv) Second Amended and Restated Credit Agreement with Bank of America, dated as of September 2, 1998. (k)(v) Auction Agency Agreement, dated as of November 16, 2000, by and between Registrant and Bankers Trust Co. (k)(v)(1) Auction Agency Agreement, dated as of November 2, 2000, by and between Registrant and Bankers Trust Co. (k)(vi) Broker-Dealer Agreement, dated as of November 16, 2000 (UBS). (k)(vi)(1) Broker-Dealer Agreement, dated as of November 16, 2000 (Salomon Smith Barney). (k)(vi)(2) Broker-Dealer Agreement, dated as of November 16, 2000 (Lehman Brothers). (k)(vi)(3) Broker-Dealer Agreement, dated as of November 16, 2000 (Gruntal & Co.). (k)(vi)(4) Broker-Dealer Agreement, dated as of November 2, 2000 (PaineWebber). (k)(vi)(5) Broker-Dealer Agreement, dated as of November 2, 2000 (Gruntal & Co.). (k)(vi)(6) Broker-Dealer Agreement, dated as of November 2, 2000 (Salomon Smith Barney). (k)(vi)(7) Broker-Dealer Agreement, dated as of October 31, 2000 (Lehman Brothers). (k)(vii) DTC Letter of Representations as to Preferred Shares, dated November 15, 2000. (k)(vii)(1) DTC Letter of Representation as to Preferred Shares, dated November 1, 2000. (n)(i) Consent of Dechert LLP. (n)(ii) Consent of KPMG LLP. (r)(i) ING Funds Code of Ethics, effective June 1, 2004. |
Exhibit 99.(E)
ING PRIME RATE TRUST
SHAREHOLDER REINVESTMENT PROGRAM
PURPOSE
The purpose of the ING Prime Rate Trust Shareholder Reinvestment Program
(the "Program") is to provide shareholders of ING Prime Rate Trust (the "Trust")
with a convenient and economical way to purchase common shares of the Trust
("Shares") and to reinvest their cash dividends from the Trust in additional
Shares.
ADMINISTRATION
The Program is administered by DST Systems, Inc. (the "Administrator"), which also serves as the Trust's transfer agent and dividend disbursing agent. As Administrator, DST Systems, Inc. acts as agent for Program participants, purchases and holds Shares acquired under the Program, keeps records, sends confirmations of account activity to participants, and performs other duties related to the Program as provided herein.
IMPORTANT CONTACTS ADMINISTRATOR: TRUST: DST Systems, Inc. Shareholder Services Department Post Office Box 219368 Telephone: (800) 992-0180 Kansas City, MO 64141 Telephone: (800) XXXXXXX |
DEFINITIONS
In addition to terms otherwise defined herein, the following terms, when written with capitalized initial letters, will have the following meanings when used in this Program.
"ADMINISTRATOR" means the entity that administers the Program, currently DST Systems, Inc.
"BENEFICIAL OWNER" means a shareholder that beneficially owns Shares that are registered in a name other than such shareholder's name (for example, where Shares are held in the name of a broker, bank or other nominee).
"BROKER AND NOMINEE FORM DUE DATE" means the date upon which a Broker and Nominee Form is due for a Beneficial Owner making an optional cash investment to participate in the next OCI Investment Date. The Broker and Nominee Form Due Date is two business days preceding the relevant OCI Pricing Period.
"DIVIDEND" means dividends and capital gain distributions, if any.
"DIVIDEND RECORD DATE" means a date established by the Trust upon which the Shareholders of Record on that day will be entitled to receive the next Dividend.
"DIVIDEND REINVESTMENT DATE" means the date upon which Dividends paid to participants in the Program are invested in additional Shares. Dividend Reinvestment Dates will be set by the Trust in advance. Participants can obtain a schedule of upcoming Dividend Reinvestment Dates by calling the Trust.
"DRIP" means Dividend Reinvestment.
"DRIP PRICING PERIOD" means the period encompassing the Valuation Date and the prior trading day.
"MARKET PRICE" means the volume-weighted average sales price, per Share, as reported on the New York Stock Exchange Composite Transaction Tape as shown for any day on Bloomberg screen AQR.
"OCI" means optional cash investment.
"OCI INVESTMENT DATE" means the date upon which optional cash investments received on or before the relevant OCI Payment Due Date are first applied by the Administrator to the purchase of Shares. OCI Investment Dates will be set by the Trust in advance. Please refer to ATTACHMENT A for a schedule of upcoming OCI Investment Dates.
"OCI PAYMENT DUE DATE" means the date upon which payment of any optional cash investment by a shareholder is due (by 4:00 pm Eastern time on such date) to be eligible for investment on the next OCI Investment Date. The OCI Payment Due Date is two business days preceding the relevant OCI Pricing Period.
"OCI PRICING PERIOD" means a period of five business days, beginning four Trading Days prior to the Valuation Date through and including the Valuation Date.
"OPEN MARKET" means transactions occurring on the New York Stock Exchange, any other exchange or over-the-counter.
"SHAREHOLDER OF RECORD" means a shareholder that owns Shares in his or her own name.
"TRADING DAY" means a day on which trades of the Shares are reported on the New York Stock Exchange.
"VALUATION DATE" means the date upon which it is determined, based upon the Market Price and the net asset value of Shares on such date, whether the Administrator will
purchase Shares on the Open Market or the Trust will issue the Shares for the Program. Please refer to ATTACHMENT A for a schedule of upcoming Valuation Dates.
PARTICIPATION
Participation in the Program is open to any shareholder of the Trust. By electing to participate in the Program, a participant appoints the Administrator as his/her agent and directs the Trust to pay to the Administrator all of the participant's cash Dividends, and directs the Administrator to purchase additional Shares of the Trust with such Dividends.
SHAREHOLDERS OF RECORD
A Shareholder of Record may participate directly in the Program by either telephoning the Trust at (800) 992-0180 or delivering a completed Shareholder Investment Program Participation Form to the Administrator. A Participation Form will be furnished at any time upon request to the Trust.
BENEFICIAL OWNERS
A Beneficial Owner may participate in the Program by either (i) becoming a Shareholder of Record by having ten or more shares registered into such shareholder's own name, or (ii) coordinating such Beneficial Owner's participation with a broker, bank or other nominee who is the record holder to participate on such shareholder's behalf.
A Beneficial Owner must contact their broker, bank or other nominee and complete any required documentation. The broker, bank or other nominee will coordinate participation with its securities depository, which will provide the Administrator with the information necessary to allow the Beneficial Owner to participate in the Program. See the section titled "Broker and Nominee Form" for a discussion of the requirements for optional cash investments of a Beneficial Owner.
Requests to participate in the Program will be processed as promptly as practicable.
The Program is intended for the benefit of investors in the Trust and not
for persons or entities who accumulate accounts under the Program over which
they have control for the purpose of exceeding the $100,000 per month optional
cash investment maximum or who engage in transactions that cause or are designed
to cause aberrations in the price or trading volume of the Shares.
Notwithstanding anything in the Program to the contrary, the Trust reserves the
right to exclude from participation in the Program, at any time, (i) persons or
entities who the Trust concludes are attempting to circumvent the Program's
$100,000 per month optional cash investment maximum by accumulating accounts
over which they have control, or (ii) any other persons or entities, as
determined in the sole discretion of the Trust.
REINVESTMENT OF DIVIDENDS
Dividends paid to participants in the Program will be reinvested in additional Shares on each relevant Dividend Reinvestment Date and will be credited to shareholder accounts as of that date. For a discussion of the source and price of shares purchased pursuant to the reinvestment of Dividends, see the section titled "Source and Price of Shares for DRIP and OCI."
TO BE EFFECTIVE WITH RESPECT TO A PARTICULAR DIVIDEND, THE ADMINISTRATOR MUST RECEIVE TELEPHONE INSTRUCTIONS OR A PARTICIPATION FORM AT LEAST THREE BUSINESS DAYS BEFORE THE DIVIDEND RECORD DATE. Dividends will continue to be reinvested until the participant provides new telephone or written instructions to the Administrator or the Program is terminated.
OPTIONAL CASH INVESTMENTS
Participants may make optional cash investments in amounts not exceeding $100,000 per month by personal check, wire investment, or an On-Demand Electronic Deduction from your bank account. Beneficial Owners wanting to participate in optional cash investments must instruct their broker, bank or other nominee to complete a Broker and Nominee Form and transmit the optional cash payment to the Administrator. See explanation of "Broker and Nominee Form" below. Optional cash investments must be at least $100 for any single investment and may not exceed $100,000 per month. (For the purposes of these limitations, all Program accounts under the common control or management of a participant may be aggregated, at the Trust's sole discretion.) There is no obligation to make an optional cash investment at any time, and the amount of such investments may vary from time to time. For a discussion of the source and price of shares purchased pursuant to optional cash investments, see the section titled "Source and Price of Shares for DRIP and OCI."
OPTIONAL CASH INVESTMENTS NOT EXCEEDING $100,000 MUST BE RECEIVED BY THE ADMINISTRATOR NO LATER THAN 4:00 P.M. EASTERN TIME ON THE OCI PAYMENT DUE DATE. The Trust may delay the mailing of stock certificates purchased by check until such check has cleared (or been paid by) the bank on which the check was written. This process may take up to 15 days or more. All optional cash investments are subject to collection by the Administrator for full face value in U.S. funds.
The Administrator will apply the optional cash investment from a participant to the purchase of Shares for the account of the participant on the related OCI Investment Date or Waiver Investment Date (see the sections titled "Source and Price of Shares for DRIP and OCI").
Upon a participant's written request received by the Administrator no later than two business days prior to the OCI Pricing Period, an optional cash investment not already invested under the Program will be canceled or refunded to the participant, as appropriate. However, in such event, no refund of a check will be made until the funds have cleared. Accordingly, such refunds may be delayed by up to three weeks.
NO INTEREST WILL BE PAID ON AMOUNTS HELD BY THE ADMINISTRATOR PENDING
INVESTMENT OR TO BE REFUNDED TO THE
PARTICIPANT.
BROKER AND NOMINEE FORM
The Broker and Nominee Form provides the only means by which a broker, bank or other nominee holding shares of a Beneficial Owner in the name of a major securities depository may invest optional cash investments within the minimum and maximum investment limitations established for the Program (see "Optional Cash Investments" below) on behalf of such Beneficial Owner or interested investor. A Broker and Nominee Form must be delivered to the Administrator each time such broker, bank or other nominee transmits optional cash investments. Broker and Nominee Forms will be furnished at any time upon request to the Trust.
The Broker and Nominee Form and appropriate instructions must be received by the Administrator not later than 4:00 pm Eastern time on the Broker and Nominee Form Due Date in order for any optional cash investment to be invested on the OCI Investment Date.
SOURCE AND PRICE OF SHARES FOR DRIP AND OCI
SOURCE OF SHARES
WHEN THE TRUST'S SHARES ARE TRADING AT A PREMIUM
If the Market Price, plus the estimated fees to purchase the Shares, is equal to or exceeds the net asset value per Share on the Valuation Date, the Trust may issue the Shares to be acquired under the Program.
WHEN THE TRUST'S SHARES ARE TRADING AT A DISCOUNT
If the Market Price, plus the estimated fees to purchase the Shares, is less than the net asset value per Share on the Valuation Date, the Administrator will purchase Shares on the Open Market through a bank or securities broker (including an affiliate of the Administrator) as provided herein. If the Market Price, plus estimated fees, exceeds the net asset value before the Administrator has completed its purchases, the Administrator will use reasonable efforts to cease purchasing Shares, and the Trust shall issue the remaining Shares.
The Trust may, without prior notice to participants, determine that it will not issue new Shares for purchase pursuant to the Program, even when shares are trading at a Premium, in which case the Administrator will purchase Shares pursuant to the Program on the Open Market.
PRICE OF SHARES
SHARES ISSUED BY THE TRUST
Dividend Reinvestment:
Shares issued by the Trust in connection with the reinvestment of Dividends will be acquired under the Program on the relevant Dividend Reinvestment Date at the greater of (i) net asset value at the close of business on the Valuation Date, or (ii) the average of the daily Market Price of the Shares during the DRIP Pricing Period, minus a discount of 5%.
Optional Cash Investments:
Shares issued by the Trust will be acquired under the Program on the relevant OCI Investment Date at the greater of (i) net asset value at the close of business on the Valuation Date, or (ii) the average of the daily Market Price of the Shares during the OCI Pricing Period minus a discount, determined at the sole discretion of the Trust, ranging from 0% to 5%.
On the last business day of each month, the Trust may establish a discount applicable to optional cash investments. The discount will be in effect for the following OCI Pricing Period. The discount for optional cash investments is set by the Trust and may be changed or eliminated by the Trust without prior notice to participants at any time. Participants may obtain the applicable discount by telephoning the Trust at (800) 992-0180.
SHARES PURCHASED ON THE OPEN MARKET
Dividend Reinvestment:
If some or all of the Shares are purchased on the Open Market, Shares purchased pursuant to the reinvestment of Dividends will be credited to the participant's account at the weighted average price per share of all such shares purchased with respect to the relevant Dividend Reinvestment Date.
Optional Cash Investments:
If some or all of the Shares are purchased on the Open Market, Shares purchased pursuant to optional cash investments will be credited to the participant's account at the weighted average price per share of all such Shares purchased as of the relevant OCI Investment Date.
When Shares are to be purchased on the Market, the Administrator will begin making purchases as soon as practicable on the day after the Valuation Date and in no event later than 6 business days after the Valuation Date, except where and to the extent necessary under any applicable federal securities laws or other government or stock exchange regulations. Shares will be applied to the Participant's account as of the relevant Investment Date. The Administrator may commingle each participant's funds with those of other participants for the purpose of executing purchases.
Dividend and voting rights on shares purchased in the Open Market will commence upon settlement, which is normally three business days after purchase. However, shares purchased in the Open Market within a period of three business days prior to and including a Dividend record date are considered purchased "ex-dividend" and therefore are not entitled to payment of that
Dividend or voting rights.
Shares purchased on the Open Market will not be eligible for the discount to Market Price and are subject to such terms and conditions, including price and delivery, as the Administrator may accept.
OPTIONAL CASH INVESTMENTS MAY BE MADE IN THE FOLLOWING WAYS:
BY WIRE Optional cash investments may be made by wire transfer to the Administrator. Call the Administrator at (800) 992-0180 to obtain a wire reference number. Give that number to your bank and instruct them to wire the funds to the Trust as follows: Investors Fiduciary Trust Co. (Kansas City, MO) ABA #101003621 Credit to: ING Prime Rate Trust A/C# 751-8315 For Further Credit to (Your Name and Account Number) Participants making wire investments may be charged fees by the commercial bank initiating the transfer. BY ELECTRONIC Optional cash investments may be made by an On-Demand Electronic FUNDS Funds Transfer. You must establish the privilege by completing an TRANSFER OCI Electronic Funds Transfer Form prior to initiating an Electronic Funds Transfer. The properly completed form must be received by the Administrator prior to the last business day of the month to be effective for the next OCI Investment Date. Call the Administrator at (800) 992-0180 to obtain the form. Once the Administrator receives and processes your properly completed form, you may initiate an Electronic Funds Transfer from your pre-designated U.S. bank account by instructing the Trust by telephone at (800) 992-0180, or in writing, to complete a purchase into your account for a specified amount (not less than $100 and not more than $100,000). Each On-Demand Electronic Funds Transfer must be separately initiated. Instructions must be received by the Trust on or before the OCI Payment Due Date Once the Electronic Funds Transfer is initiated by your telephone call or letter of instruction, the funds will be drawn from the pre-designated bank account providing the account contains funds sufficient to complete the transfer and will be invested in Shares on the relevant OCI Investment Date. An insufficient or uncollected account balance will void the transaction and you may be subject to fees by your bank. You may change the pre-designated bank by providing new written instructions to the Administrator. The new instructions must be received by the Administrator prior to the last business day of the month to be effective for the next month's OCI Investment Date. |
BY MAIL An optional cash investment may be made by personal check, drawn on a U.S. bank and payable in U.S. dollars, to "ING Prime Rate Trust." Checks should be mailed to: ING Prime Rate Trust c/o DST Systems, Inc. P.O. Box 219368 Kansas City, MO 64141 Checks drawn on non-U.S. banks and third-party checks (as defined by the Administrator) will not be accepted. To avoid investment delays write your account number on the check or you may include a completed Participation Form. BY CONTACTING Beneficial Owners may participate by either (i) becoming a YOUR DEALER Shareholder of Record or (ii) by contacting their broker, bank or other nominee. |
The Trust reserves the right to reject any purchase.
REPORTS TO PARTICIPANTS; TAX IMPLICATIONS
Participants will receive an account confirmation after each transaction. Participants should retain these account confirmations to be able to establish the cost basis of shares purchased under the Program for income tax and other purposes.
The automatic reinvestment of dividends will not relieve you of any income tax payable on the dividends. If shares are purchased at a discount from the market price, participants may have income equal to the discount. Please consult with your personal tax advisor.
All notices, account confirmations and reports from the Administrator to a participant will be addressed to the participant at his or her latest address of record with the Administrator. Therefore, participants must promptly notify the Administrator of any change of address. To be effective with respect to mailings of Dividend checks and account confirmations, address changes must be received by the Administrator or the Trust prior to the record date for that Dividend.
CERTIFICATES FOR SHARES
The Administrator will hold Shares purchased under the Program in book entry form. Participants may obtain a certificate for all or some of the whole Shares held in their account by writing or telephoning the Trust's Shareholder Services Department. Issuance of a certificate pursuant to such request in no way affects Dividend reinvestment (see "Reinvestment of Dividends" above).
Shares of stock held in book entry form for a participant cannot be pledged or assigned. A participant who wishes to pledge or assign any such Shares must request that a certificate for such Shares be issued in the participant's name.
PLAN OF DISTRIBUTION; EXPENSES
Subject to the availability of Shares registered for issuance under the Program, there is no total maximum number of Shares that can be issued pursuant to the Program.
From time to time, financial intermediaries, including brokers and dealers, and other persons may engage in positioning transactions in order to benefit from the discount from the market price of Shares acquired through the Program. Such Shares may be resold in market transactions (including coverage of short positions) on any national securities exchange on which Shares of the Trust trade or in privately negotiated transactions. Such transactions could cause fluctuations in the trading volume and price of the Shares. The difference between the price such owners pay to the Trust for Shares acquired under the Program, after deduction of the applicable discount from the market price, and the price at which such Shares are resold, may be deemed to constitute underwriting commissions received by such owners in connection with such transactions.
The Trust will pay the costs of administering the Program. There will be no brokerage charges on purchases of Shares by the Administrator directly from the Trust in connection with the reinvestment of dividends or Optional Cash Investments. For shares purchased on the Open Market, participants will pay a PRO RATA portion of brokerage commissions for such purchase. Brokerage charges for purchasing Shares for individual accounts through the Program may be expected, but are not guaranteed, to be less than the usual brokerage charge for such transactions, as the Administrator will usually be purchasing shares for all participants in blocks and prorating the lower commission thus attainable.
The Administrator may charge a participant for additional services not provided under the Program or where specified charges are indicated. Brokers or nominees who participate on behalf of Beneficial Owners for whom they are holding shares may charge such Beneficial Owners fees in connection with such participation, for which neither the Administrator nor the Trust will be responsible.
CLOSING OF A PARTICIPANT'S ACCOUNT
When a shareholder wants to close his/her account, a stock certificate for full Shares in the account must be requested from the Trust. The shareholder can then deliver the certificate to their broker or dealer for sale on the Open Market. Fractional Shares will be held and aggregated with other fractional Shares being liquidated by the Administrator, as agent of the Program and as Transfer Agent of the Trust, and paid by check when actually sold. Fractional Shares will be sold by the Administrator either on the Open Market or to the Program for use in Dividend reinvestment or cash investment transactions. The price for fractional Shares will be either the actual market price received, after deducting any commissions, for open market sales, or the average daily Market Price for the two Trading Days immediately preceding the relevant Investment Date for sales to the Program. If the certificate for full Shares or sale proceeds for fractional Shares are to be sent to
anyone other than the registered owner(s) at the address of record or broker/dealer of record, a signature guaranteed request will be required in order to process the request.
MISCELLANEOUS
REQUESTING CASH DIVIDENDS
Shareholders may request to receive their dividends in cash at any time by giving the Administrator written notice or by contacting the Trust's Shareholder Service Department at (800) 992-0180. Such request will be effective immediately if the Administrator receives notice at least three business days prior to the relative Dividend Record Date; otherwise such notice will be effective for the next Dividend Record Date and any subsequent Dividends.
VOTING OF SHARES HELD IN THE PROGRAM
Whole and fractional shares held in an account may be voted in person or by the proxy sent to the participant.
STOCK DIVIDEND OR RIGHTS OFFERING
Any Dividends in Shares distributed by the Trust on Shares held in book entry will be added to the participant's account.
In the event of a rights offering, the participant will receive rights based upon the total number of whole shares owned in book entry form and certificated shares outstanding in the participant's name.
LIMITATION OF LIABILITY
Neither the Trust nor the Administrator (nor any of their respective agents, representatives, employees, officers, trustees, directors, or subcontractors) will be liable in administering the Program for any act performed in good faith nor for any good faith omission to act, including, without limitation, any claim of liability arising with respect to the prices or times at which shares are purchased or sold for participants, or, with respect to fractional Shares any change in the market value of Shares, or from failure to terminate a participant's account upon such a participant's death. The foregoing does not represent a waiver of any rights a participant may have under applicable securities laws.
CHANGE OR TERMINATION OF THE PROGRAM
The Trust, in its sole discretion, may suspend, modify or terminate the Program at any time in whole, in part, or in respect of participants in one or more jurisdictions. Notice of such suspension, modification or termination will be sent to all affected participants. No such event will affect any Shares then credited to a participant's account. Upon any whole or partial termination of the Program by the Trust, the participant may request a certificate for any amount of
full Shares held in book entry form. Fractional Shares will be held and aggregated with other fractional Shares being liquidated by the Administrator, as agent of the Program and as Transfer Agent of the Trust, and paid for by check when actually sold. Any change in the Optional Cash Investment Discount made by the Trust shall not constitute a modification of the Program requiring notice to the participants.
TERMINATION OF THE ADMINISTRATOR
The Administrator may withdraw as Administrator to the Program upon 90 days written notice to the Trust, in which case the Trust will select a replacement to serve as Administrator. The Trust may also terminate the Administrator upon 90 days written notice, and select a replacement to serve as Administrator.
TERMINATION OF PARTICIPATION
If a participant owns fewer than ten whole Shares of the Trust, the participant's participation in the Program may be terminated. The Trust may also terminate any participant's participation in the Program for any reason (including, without limitation, the attempted circumvention by a participant of the $100,000 monthly maximum for cash purchases through the accumulation of Program accounts over which the participant has control) after written notice mailed in advance to such participant at the address appearing on the Administrator's records. Participants whose participation in the Program has been terminated will receive a certificate for full Shares in their account. Fractional Shares will be held and aggregated with other fractional Shares being liquidated by the Administrator as agent of the Program and as Transfer Agent of the Trust and paid for by check when actually sold.
PROFITS ON SALES OF SHARES
There is no assurance that participants will be able to sell Shares purchased pursuant to the Program at a profit.
FUTURE DIVIDENDS
The payment of Dividends is dependent upon the generation of income by the Trust. There is no assurance that income will continue to be generated by the Trust in the future from which Dividends may be paid, and, therefore, there is no assurance that there will continue to be Dividends in the future to be reinvested pursuant to the Program.
ATTACHMENTS
A. Schedule of Important Dates
ATTACHMENT A
SHAREHOLDER INVESTMENT PROGRAM
SCHEDULE OF IMPORTANT DATES - OPTIONAL CASH INVESTMENTS
OCI & OCI & VALUATION DATE, WAIVER DISCOUNT REQUEST FOR OCI & WAIVER WAIVER PRICING OCI & WAIVER OCI WAIVER ANNOUNCEMENT DATE WAIVER DEADLINE PAYMENT DUE DATE(1) PERIOD BEGINS PRICING PERIOD ENDS INVESTMENT DATE INVESTMENT DATE ----------------- --------------- ------------------- -------------- ------------------- ---------------- --------------- 1/30/2004 2/5/2004 2/6/2004 2/10/2004 2/17/2004 2/18/2004 2/19/2004 2/27/2004 3/4/2004 3/5/2004 3/9/2004 3/15/2004 3/16/2004 3/17/2004 3/31/2004 4/5/2004 4/6/2004 4/8/2004 4/15/2004 4/16/2004 4/19/2004 4/30/2004 5/6/2004 5/7/2004 5/11/2004 5/17/2004 5/18/2004 5/19/2004 5/28/2004 6/4/2004 6/7/2004 6/9/2004 6/15/2004 6/16/2004 6/17/2004 6/30/2004 7/6/2004 7/7/2004 7/9/2004 7/15/2004 7/16/2004 7/19/2004 7/30/2004 8/5/2004 8/6/2004 8/10/2004 8/16/2004 8/17/2004 8/18/2004 8/31/2004 9/3/2004 9/7/2004 9/9/2004 9/15/2004 9/16/2004 9/17/2004 9/30/2004 10/6/2004 10/7/2004 10/11/2004 10/15/2004 10/18/2004 10/19/2004 10/29/2004 11/4/2004 11/5/2004 11/9/2004 11/15/2004 11/16/2004 11/17/2004 11/30/2004 12/6/2004 12/7/2004 12/9/2004 12/15/2004 12/16/2004 12/17/2004 12/20/2004 12/27/2004 12/28/2004 12/30/2004 1/5/2005 1/6/2005 1/7/2005 |
Exhibit 99.(g)(i)(1)
AMENDED SCHEDULE OF APPROVALS
WITH RESPECT TO THE
INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
ING PRIME RATE TRUST
AND
ING INVESTMENTS, LLC
AN ARIZONA LIMITED LIABILITY COMPANY
ANNUAL INVESTMENT MANAGEMENT FEE TRUST (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS) ----- --------------------------------------------- ING Prime Rate Trust 0.80% |
Exhibit 99.(g)(ii)(1)
FIRST AMENDMENT TO SUB-ADVISORY AGREEMENT
ING PRIME RATE TRUST
This First Amendment, effective as of September 1, 2003, amends the Sub-Advisory Agreement (the "Agreement") dated the 19th day of August, 2003 between ING Investments, LLC, an Arizona limited liability company (the "Manager"), and Aeltus Investment Management, Inc., a Connecticut corporation (the "Sub-Adviser") with regards to ING Prime Rate Trust, a Series of ING Prime Rate Trust.
W I T N E S S E T H
WHEREAS, the parties desire to amend the Agreement and agree that the amendment will be effective as of September 1, 2003.
NOW, THEREFORE, the parties agree as follows:
1. The following Section 11 is hereby inserted between existing Section 10 and Section 11:
11. NON-EXCLUSIVITY. The services of the Sub-Adviser to the Series and the Fund are not to be deemed to be exclusive, and the Sub-Adviser shall be free to render investment advisory or other services to others (including other investment companies) and to engage in other activities, provided, however, that the Sub-Adviser may not consult with any other sub-adviser of the Fund concerning transactions in securities or other assets for any investment portfolio of the Fund, including the Series, except that such consultations are permitted between the current and successor sub-advisers of the Series in order to effect an orderly transition of sub-advisory duties so long as such consultations are not concerning transactions prohibited by Section 17(a) of the 1940 Act.
2. Each Section number and applicable references to each Section
following the inserted Section 11 above, will increase numerically by one (i.e.,
Section 13 will be Section 14, etc.).
3. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Agreement.
4. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as of the day and year first above written.
ING INVESTMENTS, LLC
By: /s/ Michael J. Roland --------------------- Michael J. Roland Executive Vice President |
AELTUS INVESTMENT MANAGEMENT, INC.
By: /s/ Michael Gioffre ------------------- Name: Michael Gioffre Title: Senior Vice President |
Ex 99.(h)(i)
FORM OF AMENDED AND RESTATED DISTRIBUTION AGREEMENT
(25 MILLION SHARES)
Parties: ING Prime Rate Trust (the "Trust")
ING Funds Distributor, LLC (the "Distributor") Date: June 15, 2004 WHEREAS, ING Prime Rate Trust is a Massachusetts business trust operating |
as a closed-end management investment company;
WHEREAS, the Trust has filed a registration statement (the "Registration Statement") on Form N-2 under the Investment Company Act of 1940, as amended (the "1940 Act") (File No. 333-61831) and under the Securities Act of 1933, as amended (the "1933 Act") (File No. 811-5410) to register shares of the Trust which may be issued and sold from time to time;
WHEREAS, the Distributor is registered as a broker-dealer under the provisions of the Securities Exchange Act of 1934 and is a member in good standing of the National Association of Securities Dealers, Inc.;
WHEREAS, the Trust and the Distributor have previously entered into a Distribution Agreement dated September 1, 2000, as amended, pursuant to which the Trust appointed the Distributor (and its predecessors) to distribute the Trust's shares under the Registration Statement;
WHEREAS, the parties wish to amend and restate the above referenced Distribution Agreement; and
WHEREAS, the Trust's Board of Trustees (the "Trustees") has adopted a resolution approving this Amended and Restated Distribution Agreement (the "Agreement"), and such resolution was adopted at a meeting of the Trustees, at which a majority of Trustees, including a majority of the Trust's Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust's investment manager or its affiliates, were present and voted in favor of the said resolution approving this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. APPOINTMENT OF DISTRIBUTOR; ACCEPTANCE. The Trust hereby appoints the Distributor as the principal underwriter and distributor for shares of the Trust to be issued pursuant to the Registration Statement (the "Shares") and the Distributor hereby accepts such appointment and agrees to serve as the principal underwriter and distributor for the Shares.
2. SALE OF SHARES. The Distributor will use reasonable efforts to promote the sale of the Shares, but the Distributor is not obligated to sell any specific number of Shares. The Shares will only be sold on such days as shall be agreed to between the Distributor and the Trust. The Trust will deliver to the Distributor such Shares as the Distributor may sell.
3. OFFERING PRICE. The public offering price per Share shall be determined in accordance with the then current prospectus of the Trust under the Registration Statement. In no event shall the public offering price be less than the current net asset value per Share (the "Minimum Price"). The Distributor shall suspend the sale of Shares if the per share price of the Shares is less than the Minimum Price.
4. SALES COMMISSIONS AND DISCOUNTS. The Distributor shall not be entitled to receive any sales commission or discount from the Trust for its services hereunder.
5. FURNISHING OF INFORMATION. The Trust will furnish the Distributor with such number of copies of the Registration Statement as the Distributor shall reasonably request, and the Trust warrants to the Distributor that the statements therein contained are true and correct as of the date of the Registration Statement, as it may be amended or supplemented from time to time. The Trust will also furnish the Distributor with such other information that the Distributor may reasonably request for use in connection with the distribution of the Shares, including, at least annually, audited financial statements of the Trust's books and accounts certified by independent public accountants.
6. CONDUCT OF BUSINESS. Other than the currently effective Prospectus and Statement of Additional Information, the Distributor will not use any sales materials or statements except literature or advertising which conforms to the requirements of federal and state securities laws and regulations and which have been filed, where necessary, with the appropriate regulatory authorities. The Distributor will furnish to the Trust copies of all material prior to its use and no such material shall be published if the Trust shall reasonably and promptly object.
7. COMPLIANCE WITH LAW. The Distributor shall comply with applicable federal and state laws and regulations where the Trust's Shares are offered for sale and conduct its affairs with the Trust and with dealers, brokers or investors in accordance with the Conduct Rules of the National Association of Securities Dealers, Inc.
8. OTHER ACTIVITIES. The Distributor's services pursuant to this Agreement shall not be deemed to be exclusive, and the Distributor may render similar services and act as an underwriter, distributor or dealer for other investment companies in the offering of their shares.
9. SUSPENSION OF SALES. The Trust reserves the right at all times to suspend or limit the public offering of the Shares upon written notice to the Distributor, and to reject any order in whole or in part.
10. PAYMENT OF EXPENSES. The Distributor shall bear all expenses incurred by it in connection with its duties and activities under this Agreement. The Trust shall bear all costs and expenses of the Trust, including expenses (including legal fees) pertaining to the preparation and filing of the Registration Statement and Prospectus and any amendments or supplements thereto, and expenses pertaining to the preparation, printing and distribution of any reports or communications to shareholders, including Prospectuses and Statements of Additional Information, annual or interim reports or proxy materials.
11. AGENT OF TRUST. Any person, even though also an officer, employee or agent of the Distributor, who may be or become an officer, Trustee, employee or agent of the Trust, shall be deemed, when rendering services to the Trust or acting in any business of the Trust, to be rendering
such services to or acting solely for the Trust and not as an officer, partner, employee or agent or one under the control or direction of the Distributor even though paid by the Distributor.
12. RECORDS. All records maintained by the Distributor in connection with this Agreement shall be the property of the Trust and shall be returned to the Trust upon termination of this Agreement, free from any claims or retention of rights by the Distributor. The Distributor shall keep confidential any information obtained pursuant to this Agreement and shall disclose such information only if the Trust has authorized such disclosure or if such disclosure is expressly required by applicable federal or state regulatory authorities.
13. DURATION AND TERMINATION. This Agreement shall take effect on the date of its execution and shall continue in effect, unless sooner terminated as provided herein, for two years from such date and shall continue from year to year thereafter so long as such continuance is specifically approved at least annually (a) by the vote of a majority of those Trustees who are not "interested persons," cast in person at a meeting called for the purpose of voting on such approval, and (b) either by a majority of the Trustees of the Trust or by a majority vote (as defined in the Prospectus) of the shareholders of the Trust; PROVIDED, HOWEVER, that this Agreement may be terminated by the Trust or by a majority vote of the shareholders of the Trust on 60 days' written notice to the Distributor, or by the Distributor at any time on 60 days' written notice to the Trust, in all cases without the payment of any penalty. This Agreement will automatically and immediately terminate in the event of its assignment (as described in the 1940 Act).
14. LIABILITY OF DISTRIBUTOR. The Distributor shall not be liable to the Trust for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the matters to which this Agreement relates, except a loss resulting from the Distributor's willful misfeasance, bad faith or negligence in the performance of its duties, or by reason of its reckless disregard of its obligations and duties under this Agreement.
15. AGREEMENT AND DECLARATION OF TRUST AND LIMITATION OF LIABILITY. A copy
of the Agreement and Declaration of Trust of the Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that this Agreement is executed by an officer of the Trust on behalf of
the Trustees of the Trust, as Trustees and not individually, and that the
obligations of this Agreement with respect to the Trust shall be binding upon
the assets and properties of the Trust only and shall not be binding upon the
assets or properties of the Trustees, officers, employees, agents or
shareholders of the Trust individually.
16. NOTICES. Notices of any kind to be given to the Distributor by the Trust shall be in writing and shall be duly given if mailed, first class postage prepaid, or delivered to the Distributor at its principal place of business or at such other address or to such individual as shall be specified by the Distributor to the Trust. Notices of any kind to be given to the Trust shall be in writing and shall be duly given if mailed, first class postage prepaid, or delivered to the Trust at its principal place of business or at such other address or to such individual as shall be specified by the Trust.
17. REPORTS. The Distributor shall prepare reports to the Trustees of the Trust showing such information as from time to time shall be reasonably requested by the Trustees or as are required of the Distributor by applicable laws and regulations.
18. INDEPENDENT CONTRACTOR STATUS. The Distributor shall for all purposes herein
provided be deemed to be an independent contractor and, unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Trust in any way or otherwise be deemed an agent of the Trust. It is understood and agreed that the Distributor, by separate agreement with the Trust, may also serve the Trust in other capacities.
19. MISCELLANEOUS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original. This Agreement shall be governed by the laws of the State of New York, provided that nothing herein shall be construed in a manner inconsistent with the 1940 Act, the Securities Exchange Act of 1934, as amended, or any rule or order of the Securities and Exchange Commission. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby and, to this extent, the provisions of this Agreement shall be deemed to be severable.
ING PRIME RATE TRUST ING FUNDS DISTRIBUTOR, LLC By: By: ----------------------------- ----------------------------- Robert S. Naka Michael J. Roland Senior Vice President Executive Vice President |
Exhibit 99 (h)(ii)
Auction Rate Cumulative Preferred Shares
PILGRIM PRIME RATE TRUST
3,600 Shares, Series T
3,600 Shares, Series Th
Liquidation Preference $25,000 Per Share
UNDERWRITING AGREEMENT
November 13, 2000
SALOMON SMITH BARNEY INC.
UBS WARBURG LLC
LEHMAN BROTHERS INC.
GRUNTAL & CO., L.L.C.
c/o SALOMON SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Pilgrim Prime Rate Trust, a Massachusetts business trust (the "Trust"), proposes, upon the terms and conditions set forth herein, to issue and sell an aggregate of 3,600 shares of its Auction Rate Cumulative Preferred Shares, Series T, and 3,600 shares of its Auction Rate Cumulative Preferred Shares, Series Th, each with a liquidation preference of $25,000 per share (the shares of Auction Rate Cumulative Preferred Shares to be sold hereby are referred to herein, collectively, as the "Shares"). The Shares will be authorized by, and subject to the terms and conditions of, the Certificate of Designation for Preferred Shares of the Trust (the "Certificate") in the form filed as an exhibit to the Registration Statement referred to in Section 1 of this agreement. The Trust and its investment adviser, ING Pilgrim Investments, Inc. (the "Adviser"), wish to confirm as follows their agreement with Salomon Smith Barney Inc., UBS Warburg LLC, Lehman Brothers Inc. and Gruntal & Co., L.L.C. (the "Underwriters"), in connection with the purchase of the Shares by the Underwriters.
Collectively, the Investment Management Agreement dated as of September 1, 2000 between the Trust and the Adviser ("the "Investment Management Agreement"), the
Custodian Agreement dated as of July 1, 1996 between the Trust and State Street Bank and Trust - Kansas City, the Agency Agreement dated as of October 1, 1996 between the Trust and DST Systems, Inc. and the Auction Agency Agreement between the Trust and Bankers Trust Company are hereinafter referred to as the "Trust Agreements." This Underwriting Agreement is hereinafter referred to as the "Agreement."
1. REGISTRATION STATEMENT AND PROSPECTUS. The Trust has prepared in conformity with the provisions of the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations of the Securities and Exchange Commission (the "Commission") promulgated under the 1933 Act (the "1933 Act Rules and Regulations") and the 1940 Act (the "1940 Act Rules and Regulations" and, together with the 1933 Act Rules and Regulations, the "Rules and Regulations") a registration statement on Form N-2, as amended by Pre-Effective Amendment No. 1 (File Nos. 333-48782 and 811-05410), under the 1933 Act and the 1940 Act (the "registration statement"), including a prospectus relating to the Shares, and has filed the registration statement and prospectus in accordance with the 1933 Act and the 1940 Act. The Trust also has filed a notification of registration of the Trust as an investment company under the 1940 Act on Form N-8A (the "1940 Act Notification"). The term "Registration Statement" as used in this Agreement means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective under the 1933 Act or, if the registration statement became effective under the 1933 Act prior to the execution of this Agreement, as amended or supplemented at the time it became effective, prior to the execution of this Agreement. If it is contemplated, at the time this Agreement is executed, that a post-effective amendment to the registration statement will be filed under the 1933 Act and must be declared effective before the offering of the Shares may commence, the term "Registration Statement" as used in this Agreement means the registration statement as amended by said post-effective amendment. If the Trust has filed an abbreviated registration statement to register an additional amount of Shares pursuant to Rule 462(b) under the 1933 Act (the "Rule 462 Registration Statement"), then any reference herein to the term "Registration Statement" shall include such Rule 462 Registration Statement. The term "Prospectus" as used in this Agreement means the prospectus and statement of additional information in the forms included in the Registration Statement or, if the prospectus and statement of additional information included in the Registration Statement omit information in reliance on Rule 430A under the 1933 Act Rules and Regulations and such information is included in a prospectus and statement of additional information filed with the Commission pursuant to Rule 497(h) under the 1933 Act, the term "Prospectus" as used in this Agreement means the prospectus and statement of additional information in the forms included in the Registration Statement as supplemented by the addition of the information contained in the prospectus filed with the Commission pursuant to Rule 497(h). The term "Prepricing Prospectus" as used in this Agreement means the prospectus and statement of additional information subject to completion in the forms included in the registration statement at the time of filing of amendment no. 1 to the registration statement with the Commission on November 6, 2000, and as such prospectus and statement of additional information shall have been amended from time to time prior to the date of the Prospectus, together with any other prospectus and statement of additional information relating to the Trust other than the Prospectus approved in writing by or directly or indirectly prepared by the Trust or the Adviser; it being understood that the definition of Prepricing Prospectus above shall not include any Prepricing Prospectus
prepared by the Underwriters unless approved in writing by the Trust or Adviser. The terms "Registration Statement," "Prospectus" and "Prepricing Prospectus" shall also include any financial statements incorporated by reference therein.
The Trust has furnished Salomon Smith Barney Inc. with copies of such registration statement, each amendment to such registration statement filed with the Commission and each Prepricing Prospectus, and Salomon Smith Barney Inc. has provided the same to the other Underwriters.
2. AGREEMENTS TO SELL AND PURCHASE. The Trust hereby agrees, subject to all the terms and conditions set forth herein, to issue and sell to the Underwriters and, upon the basis of the representations, warranties and agreements of the Trust and the Adviser herein contained and subject to all the terms and conditions set forth herein, the Underwriters agree to purchase from the Trust, at a purchase price of $24,750 per Share, the number of shares of each series of Auction Rate Cumulative Preferred Shares set forth opposite the name of each Underwriter in Schedule I hereto.
3. TERMS OF PUBLIC OFFERING. The Trust and the Adviser have been advised by the Underwriters that they propose to make a public offering of the Shares as soon after the Registration Statement and this Agreement have become effective as in the Underwriters' judgment is advisable and initially to offer the Shares upon the terms set forth in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the Underwriters of and payment for the Shares shall be made at the office of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, NY 10017, or through the facilities of The Depository Trust Company or another mutually agreeable facility, at 9:30 A.M., New York City time, on November 16, 2000 (the "Closing Date"). The place of closing for the Shares and the Closing Date may be varied by agreement between you and the Trust.
Certificates for the Shares shall be registered in such names and in such denominations as the Underwriters shall request prior to 9:30 A.M., New York City time, on the second business day preceding the Closing Date. Such certificates shall be made available to the Underwriters in New York City for inspection not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date. The certificates evidencing the Shares shall be delivered to the Underwriters on the Closing Date, through the facilities of The Depository Trust Company or another mutually agreeable facility, against payment of the purchase price therefor in immediately available funds.
5. AGREEMENTS OF THE TRUST AND THE ADVISER. The Trust and the Adviser, jointly and severally, agree with the Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective under the 1933 Act before the offering of the Shares may commence, the Trust will endeavor to cause the Registration Statement or such post-effective amendment to become effective under the 1933 Act as soon as possible and will advise the Underwriters promptly and, if requested by the
Underwriters, will confirm such advice in writing when the Registration Statement or such post-effective amendment has become effective.
(b) The Trust will advise the Underwriters promptly and, if requested by the Underwriters, will confirm such advice in writing: (i) of any request made by the Commission for amendment of or a supplement to the Registration Statement, any Prepricing Prospectus or the Prospectus (or any amendment or supplement to any of the foregoing) or for additional information, (ii) of the issuance by the Commission, the National Association of Securities Dealers, Inc. (the "NASD"), any state securities commission, any national securities exchange, any arbitrator, any court or any other governmental, regulatory, self-regulatory or administrative agency or any official of any order suspending the effectiveness of the Registration Statement, prohibiting or suspending the use of the Prospectus or any Prepricing Prospectus, or any sales material (as hereinafter defined), of any notice pursuant to Section 8(e) of the 1940 Act, of the suspension of qualification of the Shares for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purposes, (iii) of receipt by the Trust, the Adviser, any affiliate of the Trust or the Adviser or any representative or attorney of the Trust or the Adviser of any other material communication from the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or any other governmental, regulatory, self-regulatory or administrative agency or any official relating to the Trust (if such communication relating to the Trust is received by such person within three years after the date of this Agreement), the Registration Statement, the 1940 Act Notification, the Prospectus, any Prepricing Prospectus, any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) or this Agreement or any of the Trust Agreements and (iv) within the period of time referred to in paragraph (f) below, of any material adverse change in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Trust or the Adviser or of the happening of any other event which makes any statement of a material fact made in the Registration Statement or the Prospectus, or any Prepricing Prospectus or any sales materials (as herein defined) (or any amendment or supplement to any of the foregoing) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus, or any Prepricing Prospectus or any sales materials (as herein defined) (or any amendment or supplement to any of the foregoing) in order to state a material fact required by the 1933 Act, the 1940 Act or the Rules and Regulations to be stated therein or necessary in order to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made), not misleading or of the necessity to amend or supplement the Registration Statement, the Prospectus, or any Prepricing Prospectus or any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) to comply with the 1933 Act, the 1940 Act, the Rules and Regulations or any other law or order of any court or regulatory body. If at any time the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or any other governmental, regulatory, self-regulatory or administrative agency or any official shall issue any order suspending the effectiveness of the Registration Statement, prohibiting or suspending the use of the Prospectus or any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) or suspending the qualification of the Shares for offering or sale in any jurisdiction, the Trust will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time.
(c) The Trust will furnish to you, without charge, three signed copies of the Registration Statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits thereto, and will also furnish to you, without charge, such number of conformed copies of the Registration Statement as originally filed and of each amendment thereto, but without exhibits, as you may reasonably request.
(d) The Trust will not (i) file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus, or any sales material (as herein defined), of which you shall not previously have been advised or to which you shall reasonably object after being so advised or (ii) so long as, in the opinion of counsel for the Underwriters, a Prospectus is required by the 1933 Act to be delivered in connection with sales by the Underwriters or any dealer, file any information, documents or reports pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), without delivering a copy of such information, documents or reports to you prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the Trust has delivered to you, without charge, in such quantities as you have requested, copies of each form of the Prepricing Prospectus. The Trust consents to the use, in accordance with the provisions of the 1933 Act and with the state securities or blue sky laws of the jurisdictions in which the Shares are offered by the Underwriters and by dealers, prior to the date of the Prospectus, of each Prepricing Prospectus so furnished by the Trust.
(f) As soon after the execution and delivery of this Agreement as possible and thereafter from time to time for such period as in the opinion of counsel for the Underwriters a prospectus is required by the 1933 Act to be delivered in connection with sales by the Underwriters or any dealer, the Trust will expeditiously deliver to the Underwriters and each dealer, without charge, as many copies of the Prospectus (and of any amendment or supplement thereto) as the Underwriters may reasonably request. The Trust consents to the use of the Prospectus (and of any amendment or supplement thereto) in accordance with the provisions of the 1933 Act and with the state securities or blue sky laws of the jurisdictions in which the Shares are offered by the Underwriters and by all dealers to whom Shares may be sold, both in connection with the offering and sale of the Shares and for such period of time thereafter as the Prospectus is required by the 1933 Act to be delivered in connection with sales by the Underwriters or any dealer. If during such period of time any event shall occur that in the judgment of the Trust or in the opinion of counsel for the Underwriters is required to be set forth in the Registration Statement or the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading, or if it is necessary to supplement or amend the Registration Statement or the Prospectus to comply with the 1933 Act, the 1940 Act, the Rules and Regulations or any other federal law, rule or regulation, or any state securities or blue sky disclosure laws, rules or regulations, the Trust will forthwith prepare and, subject to the provisions of paragraph (d) above, promptly file with the Commission an appropriate supplement or amendment thereto, and will expeditiously furnish to the Underwriters and dealers, without charge, a reasonable number of copies thereof. In the event that the Trust and the Underwriters agree that the Registration Statement or the Prospectus should be amended
or supplemented, the Trust, if requested by the Underwriters, will promptly issue a press release announcing or disclosing the matters to be covered by the proposed amendment or supplement.
(g) The Trust will make generally available to its security holders an earnings statement, which need not be audited, covering a twelve-month period ending not later than 15 months after the effective date of the Registration Statement as soon as practicable after the end of such period, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 of the 1933 Act Rules and Regulations.
(h) During the period of five years after the date of this Agreement,
the Trust will furnish to you (i) as soon as available, a copy of each report of
the Trust mailed to stockholders or filed with the Commission or furnished to
the New York Stock Exchange (the "NYSE") other than reports on Form N-SAR, and
(ii) from time to time such other information concerning the Trust as the
Underwriters may reasonably request.
(i) If this Agreement shall terminate or shall be terminated after execution pursuant to any provisions hereof (otherwise than by notice given by the Underwriters terminating this Agreement pursuant to Section 12 hereof) or if this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Trust or the Adviser to comply with the terms or fulfill any of the conditions of this Agreement, the Trust and the Adviser, jointly and severally, agree to reimburse the Underwriters for all out-of-pocket expenses (including reasonable fees and expenses of counsel for the Underwriters) incurred by the Underwriters in connection herewith.
(j) The Trust will apply the net proceeds from the sale of the Shares substantially in accordance with the description set forth in the Prospectus and in such a manner as to comply with the investment objectives, policies and restrictions of the Trust as described in the Prospectus.
(k) The Trust will timely file the Prospectus with the Commission pursuant to Rule 497(c) or Rule 497(h) of the 1933 Act Rules and Regulations, whichever is applicable or, if applicable, will timely file the certification permitted by Rule 497(j) of the 1933 Act Rules and Regulations and will advise the Underwriters of the time and manner of such filing.
(l) Except as provided in this Agreement, the Trust will not sell, contract to sell, or otherwise dispose of any senior securities (as defined in the 1940 Act) (other than senior securities sold in an underwriting lead-managed by Salomon Smith Barney Inc.) of the Trust, or grant any options or warrants to purchase senior securities of the Trust, for a period of 180 days after the date of the Prospectus, without the prior written consent of the Underwriters.
(m) Except as stated in this Agreement and in the Prepricing Prospectus and the Prospectus, neither the Trust nor the Adviser has taken, nor will it take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of any securities issued by the Trust to facilitate the sale or resale of the Shares.
(n) The Trust will use commercially reasonable efforts to cause the Shares, prior to the Closing Date, to be assigned a rating of 'aaa' by Moody's Investors Service, Inc. ("Moody's") and 'AAA' by Standard & Poor's, a division of McGraw-Hill Companies, Inc. ("S&P" and, together with Moody's, the "Rating Agencies").
(o) The Trust and the Adviser will use commercially reasonable efforts to perform all of the agreements required of them and discharge all conditions to closing as set forth in this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE TRUST AND THE ADVISER. The Trust and the Adviser, jointly and severally, represent and warrant to the Underwriters that:
(a) Each Prepricing Prospectus included as part of the registration statement as originally filed or as part of any amendment or supplement thereto, or filed pursuant to Rule 497 of the 1933 Act Rules and Regulations, complied when so filed in all material respects with the provisions of the 1933 Act, the 1940 Act and the Rules and Regulations. The Commission has not issued any order preventing or suspending the use of any Prepricing Prospectus.
(b) The registration statement in the form in which it became or becomes effective and also in such form as it may be when any post-effective amendment thereto shall become effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 497 of the 1933 Act Rules and Regulations and the 1940 Act Notification when originally filed with the Commission and any amendment or supplement thereto when filed with the Commission, complied or will comply in all material respects with the provisions of the 1933 Act, the 1940 Act and the Rules and Regulations and did not or will not at any such times 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 (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, except that this representation and warranty does not apply to statements in or omissions from the registration statement or the Prospectus made in reliance upon and in conformity with information relating to the Underwriters furnished to the Trust in writing by or on behalf of the Underwriters expressly for use therein.
(c) All the outstanding shares of beneficial interest of the Trust have been duly authorized and validly issued by the Trust, are fully paid and nonassessable and are free of any preemptive or similar rights; the Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued by the Trust, fully paid and nonassessable and free of any preemptive or similar rights and will conform to the description thereof in the Registration Statement and the Prospectus (and any amendment or supplement to either of them); and the capitalization of the Trust conforms to the description thereof in the Registration Statement and the Prospectus (and any amendment or supplement to either of them).
(d) The Trust is a business trust duly organized and validly existing under the laws of the State of Massachusetts with full business trust power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and
the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have a material adverse effect on the condition (financial or other), business, prospects, properties, net assets or results of operations of the Trust; and the Trust has no subsidiaries.
(e) There are no legal or governmental proceedings pending or, to the knowledge of the Trust, threatened, against the Trust, or to which the Trust or any of its properties is subject, that are required to be described in the Registration Statement or the Prospectus (and any amendment or supplement to either of them) but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus (and any amendment or supplement to either of them) or to be filed as an exhibit to the Registration Statement that are not described or filed as required by the 1933 Act, the 1940 Act or the Rules and Regulations.
(f) The Trust is not in violation of its Agreement and Declaration of Trust (the "Declaration"), or bylaws (the "Bylaws"), or other organizational documents or of any law, ordinance, administrative or governmental rule or regulation applicable to the Trust or of any decree of the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or governmental agency, body or official having jurisdiction over the Trust, or in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any material agreement, indenture, lease or other instrument to which the Trust is a party or by which it or any of its properties may be bound.
(g) Neither the issuance and sale of the Shares, the execution, delivery or performance of this Agreement or any of the Trust Agreements by the Trust, nor the consummation by the Trust of the transactions contemplated hereby or thereby (A) requires the Trust to obtain any consent, approval, authorization or other order of or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may have been obtained prior to the date hereof and such as may be required for compliance with the state securities or blue sky laws of various jurisdictions which have been or will be effected in accordance with this Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the Declaration, the Bylaws or other organizational documents of the Trust or (B) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, any agreement, indenture, lease or other instrument to which the Trust is a party or by which it or any of its properties may be bound, or violates or will violate any statute, law, regulation or judgment, injunction, order or decree applicable to the Trust or any of its properties, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Trust pursuant to the terms of any agreement or instrument to which it is a party or by which it may be bound or to which any of its property or assets is subject. The Trust is not subject to any order of any court or of any arbitrator, governmental authority or administrative agency.
(h) The accountants, KPMG LLP, who have certified or shall certify the financial statements included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement to either of them) have represented to the Trust that they are independent public accountants as required by the 1933 Act, the 1940 Act and the Rules and Regulations.
(i) The financial statements, together with related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), present fairly the financial position, results of operations and changes in financial position of the Trust on the basis stated or incorporated by reference in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data included in the Registration Statement and the Prospectus (and any amendment or supplement to either of them) are accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Trust.
(j) The execution and delivery of, and the performance by the Trust of its obligations under, this Agreement and the Trust Agreements have been duly and validly authorized by the Trust, and this Agreement and the Trust Agreements have been duly executed and delivered by the Trust and constitute the valid and legally binding agreements of the Trust, enforceable against the Trust in accordance with their terms, except as rights to indemnity and contribution hereunder and thereunder may be limited by federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Trust's obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles.
(k) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), the Trust has not incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Trust, and there has not been any change in the capital stock, or material increase in the short-term debt or long-term debt, of the Trust, or any material adverse change, or any development involving or which may reasonably be expected to involve, a prospective material adverse change, in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Trust, whether or not arising in the ordinary course of business.
(1) The Trust has not distributed and, prior to the later to occur of
(i) the Closing Date and (ii) completion of the distribution of the Shares, will
not distribute any offering material in connection with the offering and sale of
the Shares other than the Registration Statement, the Prepricing Prospectus, the
Prospectus or other materials, if any, permitted by the 1933 Act, the 1940 Act
or the Rules and Regulations.
(m) The Trust has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits") as are necessary to own its properties and to conduct its business in the manner described in the Prospectus (and any amendment or supplement thereto), subject to such qualifications as may be set forth in the Prospectus; the Trust has fulfilled and performed all its material obligations with respect to such permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the Trust under any such permit, subject in each case to such qualification as may be set forth in the Prospectus (and any amendment or supplement thereto); and, except as described in the Prospectus (and any amendment or supplement thereto), none of such permits contains any restriction that is materially burdensome to the Trust.
(n) The Trust maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions in portfolio securities are executed in accordance with management's general or specific authorization and with the applicable requirements of the 1940 Act, the 1940 Act Rules and Regulations and the Internal Revenue Code of 1986, as amended (the "Code"); (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets and to maintain compliance with the books and records requirements under the 1940 Act and the 1940 Act Rules and Regulations; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(o) To the Trust's knowledge, neither the Trust nor any employee or agent of the Trust has made any payment of funds of the Trust or received or retained any funds, which payment, receipt or retention of funds is of a character required to be disclosed in the Prospectus and that is not so disclosed.
(p) The Trust has filed all tax returns required to be filed, which returns are complete and correct in all material respects, and the Trust is not in material default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto.
(q) No holder of any security of the Trust has any right to require registration of common shares of beneficial interest or any other security of the Trust because of the filing of the registration statement or consummation of the transactions contemplated by this Agreement.
(r) The Trust, subject to the registration statement having been declared effective and the filing of the Prospectus under Rule 497 under the 1933 Act Rules and Regulations, has taken all required action under the 1933 Act, the 1940 Act and the Rules and Regulations to make the public offering and consummate the sale of the Shares as contemplated by this Agreement.
(s) The conduct by the Trust of its business (as described in the Prospectus) does not, to the knowledge of the Trust or the Adviser after reasonable inquiry, require the Trust to be
the owner, possessor or licensee of any patents, patent licenses, trademarks, service marks or trade names which it does not own, possess or license.
(t) The Trust is registered under the 1940 Act as a closed-end, diversified management investment company and the 1940 Act Notification has been duly filed with the Commission and, at the time of filing thereof and any amendment or supplement thereto, conformed in all material respects with all applicable provisions of the 1940 Act and the Rules and Regulations. The Trust is, and at all times through the completion of the transactions contemplated hereby, will be, in compliance in all material respects with the terms and conditions of the 1933 Act and the 1940 Act. No person is serving or acting as an officer, trustee or investment adviser of the Trust except in accordance with the provisions of the 1940 Act and the 1940 Act Rules and Regulations and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and regulations of the Commission promulgated under the Advisers Act (the "Advisers Act Rules and Regulations").
(u) Except as stated in this Agreement and in the Prospectus (and any amendment or supplement thereto), the Trust has not taken, nor will it take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any securities issued by the Trust to facilitate the sale or resale of the Shares, and the Trust is not aware of any such action taken or to be taken by any affiliates of the Trust.
(v) The Trust has filed in a timely manner each document or report required to be filed by it pursuant to the 1934 Act and the rules and regulations of the Commission promulgated thereunder (the "1934 Act Rules and Regulations"); each such document or report at the time it was filed conformed to the requirements of the 1934 Act and the 1934 Act Rules and Regulations; and none of such documents or reports contained an untrue statement of any material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading.
(w) All advertising, sales literature or other promotional material (including "prospectus wrappers," "broker kits," "road show slides" and "road show scripts") authorized in writing by or prepared by the Trust or the Adviser for use in connection with the offering and sale of the Shares (collectively, "sales material") complied and comply in all material respects with the applicable requirements of the 1933 Act, the 1940 Act, the Rules and Regulations and the rules and interpretations of the NASD and no such sales material contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(x) Each of the Trust Agreements complies in all material respects with all applicable provisions of the 1940 Act, the 1940 Act Rules and Regulations, the Advisers Act and the Advisers Act Rules and Regulations, except as to rights of indemnity and contribution.
(y) The Shares have been, or prior to the Closing Date will be, assigned a rating of 'aaa' by Moody's and 'AAA' by S&P.
(z) As required by Subchapter M of the Code, the Trust is currently in compliance with the requirements to qualify as a regulated investment company under the Code.
(aa) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), no trustee of the Trust is an "interested person" (as defined in the 1940 Act) of the Trust or an "affiliated person" (as defined in the 1940 Act) of any Underwriter listed in Schedule I hereto.
7. REPRESENTATIONS AND WARRANTIES OF THE ADVISER. The Adviser represents and warrants to the Underwriters as follows:
(a) The Adviser is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or to qualify does not have a material adverse effect on the condition (financial or other), business, prospects, properties, net assets or results of operations of the Adviser or on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement.
(b) The Adviser is duly registered with the Commission as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules and Regulations from acting under the Investment Management Agreement for the Trust as contemplated by the Prospectus (or any amendment or supplement thereto). There does not exist any proceeding or any facts or circumstances the existence of which could lead to any proceeding which might adversely affect the registration of the Adviser with the Commission.
(c) There are no legal or governmental proceedings pending or, to the knowledge of the Adviser, threatened against the Adviser, or to which the Adviser or any of its properties is subject, that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement to either of them) but are not described as required or that may reasonably be expected to involve a prospective material adverse change in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Adviser or on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement.
(d) Neither the execution, delivery or performance of this Agreement or the Investment Management Agreement by the Adviser, nor the consummation by the Adviser of the transactions contemplated hereby or thereby (A) requires the Adviser to obtain any consent, approval, authorization or other order of or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency or official or
conflicts or will conflict with or constitutes or will constitute a breach of or a default under, the certificate of incorporation or by-laws, or other organizational documents, of the Adviser or (B) conflicts or will conflict with or constitutes or will constitute a breach of or a default under, any agreement, indenture, lease or other instrument to which the Adviser is a party or by which it or any of its properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Adviser or any of its properties or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Adviser pursuant to the terms of any agreement or instrument to which it is a party or by which it may be bound or to which any of the property or assets of the Adviser is subject. The Adviser is not subject to any order of any court or of any arbitrator, governmental authority or administrative agency.
(e) The execution and delivery of, and the performance by the Adviser of its obligations under, this Agreement and the Investment Management Agreement have been duly and validly authorized by the Adviser, and this Agreement and the Investment Management Agreement have been duly executed and delivered by the Adviser and each constitutes the valid and legally binding agreement of the Adviser, enforceable against the Adviser in accordance with its terms except as rights to indemnity and contribution hereunder may be limited by federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Trust's obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles.
(f) The Adviser has the financial resources available to it necessary for the performance of its services and obligations as contemplated in the Prospectus (or any amendment or supplement thereto) and under this Agreement and the Investment Management Agreement.
(g) The description of the Adviser in the Registration Statement and the Prospectus (and any amendment or supplement thereto) complied and comply in all material respects with the provisions of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and Regulations and the Advisers Act Rules and Regulations and did not 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 (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading.
(h) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), the Adviser has not incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Adviser or the Trust and that is required to be disclosed in the Registration Statement or the Prospectus and there has not been any material adverse change, or any development involving or which may reasonably be expected to involve, a prospective material adverse change, in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Adviser, whether or not arising in the ordinary course of business, or which,
in each case, could have a material adverse effect on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement.
(i) The Adviser has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits") as are necessary to own its properties and to conduct its business in the manner described in the Prospectus (and any amendment or supplement thereto); the Adviser has fulfilled and performed all its material obligations with respect to such permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the Adviser under any such permit; and, except as described in the Prospectus (and any amendment or supplement thereto), none of such permits contains any restriction that is materially burdensome to the Adviser.
(j) Except as stated in this Agreement and in the Prospectus (and in any amendment or supplement thereto), the Adviser has not taken, nor will it take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in, stabilization or manipulation of the price of any securities issued by the Trust to facilitate the sale or resale of the Shares, and the Adviser is not aware of any such action taken or to be taken by any affiliates of the Adviser.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Trust and the Adviser, jointly and severally, agree to
indemnify and hold harmless each of the Underwriters and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation), joint or
several, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prepricing Prospectus or in the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or omission or alleged untrue statement or omission which
has been made therein or omitted therefrom in reliance upon and in conformity
with the information relating to any Underwriter furnished in writing to the
Trust by or on behalf of any Underwriter through you expressly for use in
connection therewith; provided, however, that the indemnification contained in
this paragraph (a) with respect to any Prepricing Prospectus shall not inure to
the benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Shares by such Underwriter to any person if a copy
of the Prospectus shall not have been delivered or sent to such person within
the time required by the 1933 Act and the 1933 Act Rules and Regulations, and
the untrue statement or alleged untrue statement or omission or alleged omission
of a material fact contained in such Prepricing Prospectus was corrected in the
Prospectus, provided that the Trust has delivered the Prospectus to the several
Underwriters in requisite quantity on a
timely basis to permit such delivery or sending. The foregoing indemnity agreement shall be in addition to any liability which the Trust or the Adviser may otherwise have.
(b) If any action, suit or proceeding shall be brought against any Underwriter or any person controlling any Underwriter in respect of which indemnity may be sought against the Trust or the Adviser, such Underwriter or such controlling person shall promptly notify the Trust or the Adviser, and the Trust or the Adviser shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. Such Underwriter or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the Trust or the Adviser has agreed in writing to pay such fees and expenses, (ii) the Trust and the Adviser have failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both such Underwriter or such controlling person and the Trust or the Adviser and such Underwriter or such controlling person shall have been advised by its counsel that representation of such indemnified party and the Trust or the Adviser by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Trust and the Adviser shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Underwriter or such controlling person). It is understood, however, that the Trust and the Adviser shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such Underwriters and controlling persons not having actual or potential differing interests with you or among themselves, which firm shall be designated in writing by the Underwriters, and that all such fees and expenses shall be reimbursed as they are incurred. The Trust and the Adviser shall not be liable for any settlement of any such action, suit or proceeding effected without their written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Trust and the Adviser agree to indemnify and hold harmless any Underwriter, to the extent provided in the preceding paragraph, and any such controlling person from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees to indemnify and hold harmless the Trust and the Adviser, their trustees, directors, any officers who sign the Registration Statement, and any person who controls the Trust or the Adviser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, to the same extent as the foregoing indemnity from the Trust and the Adviser to each Underwriter, but only with respect to information relating to such Underwriter furnished in writing by or on behalf of such Underwriter expressly for use in the Registration Statement, the Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Trust or the Adviser, any of their trustees or directors, any such officer, or any such controlling person based on the Registration Statement, the Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto, and in respect of which indemnity may be sought against any Underwriter
pursuant to this paragraph (c), such Underwriter shall have the rights and duties given to the Trust and the Adviser by paragraph (b) above (except that if the Trust or the Adviser shall have assumed the defense thereof such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at such Underwriter's expense), and the Trust and the Adviser, their trustees or directors, any such officer, and any such controlling person shall have the rights and duties given to the Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters on the other hand from the offering of the Shares, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters 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 underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) or by the Underwriters on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(e) The Trust, the Adviser and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 8 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in paragraph
(d) above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 8 are several in proportion to the respective numbers of Shares set forth opposite their names in Schedule I hereto (or such numbers of Shares increased as set forth in Section 11 hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Trust and the Adviser set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Trust, the Adviser, their trustees, directors
or officers, or any person controlling the Trust or the Adviser, (ii) acceptance
of any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Trust, the Adviser, their trustees, directors or
officers, or any person controlling the Trust or the Adviser, shall be entitled
to the benefits of the indemnity, contribution, and reimbursement agreements
contained in this Section 8.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the Underwriters to purchase the Shares hereunder are subject to the following conditions:
(a) If, at the time this Agreement is executed and delivered, it is necessary for the registration statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, the registration statement or such post-effective amendment shall have become effective not later than 5:30 P.M., New York City time, on the date hereof, or at such later date and time as shall be consented to in writing by the Underwriters, and all filings, if any, required by Rules 497 and 430A under the 1933 Act and the 1933 Act Rules and Regulations shall have been timely made; no stop order suspending the effectiveness of the Registration Statement or order pursuant to Section 8(e) of the 1940 Act shall have been issued and no proceeding for those purposes shall have been instituted or, to the knowledge of the Trust, the Adviser or any Underwriter, 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 Underwriters' satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall not have occurred (i) any change or any development involving a prospective change in or affecting the
condition (financial or other), business, prospects, properties, net assets, or results of operations of the Trust or the Adviser not contemplated by the Prospectus, which in the Underwriters' opinion would materially, adversely affect the market for the Shares, or (ii) any event or development relating to or involving the Trust or the Adviser or any officer, trustee or director of the Trust or the Adviser which makes any statement made in the Prospectus untrue or which, in the opinion of the Trust and its counsel or the Underwriters and their counsel, requires the making of any addition to or change in the Prospectus in order to state a material fact required by the 1933 Act, the 1940 Act or the Rules and Regulations or any other law to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, if amending or supplementing the Prospectus to reflect such event or development would, in the Underwriters' opinion, materially adversely affect the market for the Shares.
(c) The Trust shall have furnished to you a report showing compliance with the asset coverage requirements of the 1940 Act and a Preferred Shares Basic Maintenance Certificate (as defined in the Certificate), each dated the Closing Date and in form and substance satisfactory to you. Each such report may use portfolio holdings and valuations as of the close of business of any day not more than six business days preceding the Closing Date, provided, however, that the Trust represents in such report that its total net assets as of the Closing Date have not declined by 5% or more from such valuation date.
(d) The Underwriters shall have received on the Closing Date an opinion of Dechert, counsel for the Trust, dated the Closing Date and addressed to you, in form and substance satisfactory to you and to the effect that:
(i) The Trust (A) is a business trust duly formed by virtue of the execution and delivery of the Agreement and Declaration of Trust on December 2, 1987 and is validly existing under the laws of the State of Massachusetts with full business trust power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and (B) is duly registered and qualified to conduct its business and is in good standing in the State of Arizona;
(ii) The Trust has no subsidiaries;
(iii) The authorized and outstanding capital stock of the Trust is as set forth under the caption "Capitalization" in the Prospectus; and the authorized capital stock of the Trust conforms in all material respects as to legal matters to the description thereof contained in the Prospectus under the caption "Description of Capital Structure";
(iv) All the shares of beneficial interest of the Trust outstanding prior to the issuance of the Shares have been duly authorized and validly issued by the Trust, and are fully paid and nonassessable;
(v) The Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued by the Trust, fully paid and nonassessable and free of any preemptive, or to the best knowledge of such counsel after reasonable inquiry, similar rights that entitle or will entitle any person to acquire any Shares upon the issuance thereof by the Trust, and will conform to the description thereof contained in the Prospectus under the caption "Description of Preferred Shares";
(vi) The form of certificates for the Shares conforms to the requirements of Massachusetts law;
(vii) The Registration Statement and all post-effective
amendments, if any, have become effective under the 1933 Act and the
1933 Act Rules and Regulations and, to the best knowledge of such
counsel after reasonable inquiry, no stop order suspending the
effectiveness of the Registration Statement or order pursuant to
Section 8(e) of the 1940 Act has been issued and no proceedings for
that purpose are pending before or contemplated by the Commission; and
any required filing of the Prospectus pursuant to Rule 497 of the 1933
Act Rules and Regulations has been made in accordance with Rule 497;
(viii) The Trust has business trust power and authority to enter into this Agreement and each of the Trust Agreements and to issue, sell and deliver the Shares to the Underwriters as provided herein, and this Agreement and each of the Trust Agreements have been duly authorized, executed and delivered by the Trust and each is a valid, legal and binding agreement of the Trust, enforceable against the Trust in accordance with its terms, except as enforcement of rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Trust's obligations hereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles;
(ix) (A) The Trust is not in violation of the Declaration, including the Certificate, or Bylaws, or other organizational documents, and (B) based upon a certificate executed by officers of the Trust delivered to us, is not in default in the performance of any material obligation, agreement or condition contained in any bond, debenture, note or other evidence of indebtedness, except as may be disclosed in the Prospectus;
(x) Neither the offer, sale or delivery of the Shares, the execution, delivery or performance of this Agreement and in the Trust Agreements by the Trust, compliance by the Trust with the provisions hereof or thereof nor consummation by the Trust of the transactions contemplated hereby and the Trust Agreements constitutes or will constitute a breach of, or a default under, the Declaration, including the Certificate, or Bylaws, or other organizational
documents, of the Trust or any agreement, indenture, lease or other instrument to which the Trust is a party or by which it or any of its properties is bound that is an exhibit to the Registration Statement, nor will any such action result in any violation of any existing law, regulation, ruling (assuming compliance with all applicable state securities or blue sky laws), judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Trust or any of its properties;
(xi) No consent, approval, authorization or other order of, or registration or filing with, the Commission, the NASD, any national securities exchange, or, to counsel's knowledge, any state securities commission, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Trust (except such as may have been obtained prior to the date hereof and such as may be required for compliance with the state securities or blue sky laws of various jurisdictions) for the valid issuance and sale of the Shares to the Underwriters as contemplated by this Agreement, the execution, delivery and performance by the Trust of this Agreement and the Trust Agreements or the consummation of the transactions contemplated hereby and thereby;
(xii) The 1940 Act Notification, the Registration Statement, the Prospectus and any supplements or amendments thereto (except for the financial statements and the notes thereto and the schedules and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the 1933 Act, the 1940 Act and the Rules and Regulations;
(xiii) Based upon a certificate executed by officers of the Trust delivered to us, (A) other than as described or contemplated in the Registration Statement or Prospectus (or any amendment or supplement thereto), there are no legal or governmental proceedings pending or threatened against the Trust, or to which the Trust or any of its properties is subject, which are required to be described in the Registration Statement or Prospectus (or any amendment or supplement to either of them) and (B) there are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement thereto) or to be filed as an exhibit to the Registration Statement that are not described or filed as required, as the case may be;
(xiv) The statements in the Registration Statement and Prospectus, insofar as they (A) are descriptions of contracts, agreements or other legal documents, or (B) refer to statements of law or legal conclusions, are accurate and present fairly the information required to be shown;
(xv) Each of the Trust Agreements complies in all material respects with all applicable provisions of the 1933 Act, the 1940 Act, the Advisers Act, the
Rules and Regulations and the Advisers Act Rules and Regulations, except as to rights of indemnity and contribution;
(xvi) The Trust is duly registered with the Commission under the 1940 Act and the 1940 Act Rules and Regulations as a closed-end, diversified management investment company and, to such counsel's best knowledge after reasonable inquiry, no order of suspension or revocation of such registration under the 1940 Act and the 1940 Act Rules and Regulations has been issued or proceedings therefor initiated or threatened by the Commission; the provisions of the Declaration, including the Certificate, and Bylaws comply as to form in all material respects with the applicable provisions of the 1940 Act and the 1940 Act Rules and Regulations, the provisions of the Declaration, including the Certificate, and Bylaws and the investment policies and restrictions described in the Registration Statement and the Prospectus under the captions "Investment Objective and Policies", "Risk Factors", "Additional Information About Investments and Investment Techniques" and "Investment Restrictions" (in the Prospectus and the statement of additional information) comply in all material respects with the requirements of the 1940 Act, and all action has been taken by the Trust as is required of the Trust by the 1933 Act and the 1940 Act and the Rules and Regulations in connection with the issuance and sale of the Shares to make the public offering and consummate the sale of the Shares as contemplated by this Agreement;
(xvii) Except as described in the Prospectus, there are no outstanding options, warrants or other rights calling for the issuance of, and such counsel does not know of any commitment, plan or arrangement to issue, any shares of beneficial interest of the Trust or any security convertible into or exchangeable or exercisable for shares of beneficial interest of the Trust;
(xviii) Except as described in the Prospectus, such counsel does not know of any holder of any security of the Trust or any other person who has the right, contractual or otherwise, to cause the Trust to sell or otherwise issue to them, or to permit them to underwrite the sale of, the Shares or the right to have any securities of the Trust included in the registration statement or the right, as a result of the filing of the registration statement, to require registration under the 1933 Act of any securities of the Trust;
(xix) If the Trust operates as described in the Prospectus, the Trust will qualify as a regulated investment company under the Code; and
(xx) Such counsel shall also state that, while they have not themselves checked the accuracy and completeness of or otherwise verified, and are not passing upon and assume no responsibility for the accuracy or completeness of, the statements contained in the Registration Statement or the Prospectus, except to the limited extent stated in paragraphs (iii), (xiv) and (xvi) above, in the course of their review and discussion of the contents of the Registration Statement and
Prospectus with certain officers and employees of the Trust and its independent accountants, no facts have come to their attention which cause them to believe that the Registration Statement or any amendment or supplement thereto (except as to any financial statements or other financial data included in the Registration Statement or any such amendment or supplement, as to which they express no belief), as of its effective date, 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 contained therein not misleading or that the Prospectus or any amendment or supplement thereto (except as to any financial statements or other financial data included in the Prospectus or any such amendment or supplement, as to which they express no belief), as of its issue date and as of the Closing Date, 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 contained therein, in the light of the circumstances under which they were made, not misleading.
Such counsel may state in its opinion letter that "[O]ur
opinion is limited solely to those laws, rulings and regulations that
are normally applicable to transactions of the type contemplated by
the Underwriting Agreement by closed-end management investment
companies registered under the 1940 Act, and to Massachusetts law with
respect to the matters covered by paragraphs (i)(A), (iii), (iv), (v),
(vi) and (viii). Moreover, the opinions given under paragraphs (ix)(B)
and (xiii) are based solely upon the receipt of a certificate signed
by officers of the Trust attesting to the statements made therein."
(e) The Underwriters shall have received on the Closing Date an opinion of Bryan Cave LLP, counsel for the Adviser, dated the Closing Date and addressed to you, in form and substance satisfactory to you and to the effect that:
(i) The Adviser is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each of the following jurisdictions: Arizona and California;
(ii) The Adviser is duly registered with the Commission as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules and Regulations from acting under the Investment Management Agreement for the Trust as contemplated by the Prospectus (or any amendment or supplement thereto); and, to such counsel's knowledge, no order of suspension or revocation of such registration under the Advisers Act and the Advisers Act Rules and Regulations has been issued or proceedings therefor initiated or threatened by the Commission;
(iii) The Adviser has corporate power and authority to enter into this Agreement and the Investment Management Agreement, and this Agreement and the Investment Management Agreement have been duly authorized, executed and delivered by the Adviser and each is a valid, legal and binding agreement of the Adviser, enforceable against the Adviser in accordance with its terms except as enforcement of rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Adviser's obligations hereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles;
(iv) Neither the execution, delivery or performance of this Agreement or the Investment Management Agreement by the Adviser, compliance by the Adviser with the provisions hereof or thereof nor consummation by the Adviser of the transactions contemplated hereby and by the Investment Management Agreement conflicts or will conflict with, or constitutes or will constitute a breach of or default under, the certificate of incorporation or bylaws, or other organizational documents, of the Adviser or any agreement, indenture, lease or other instrument to which the Adviser is a party or by which it or any of its properties is bound that is known to such counsel, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Adviser, nor will any such action result in any violation of any existing law, regulation, ruling, judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Adviser or any of its properties;
(v) No consent, approval, authorization or other order of, or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Adviser for the execution, delivery and performance by it of this Agreement and the Investment Management Agreement or the consummation by it of the transactions contemplated hereby and thereby;
(vi) To the best knowledge of such counsel after reasonable inquiry, there are no legal or governmental proceedings pending or threatened against the Adviser or to which the Adviser or any of its properties is subject, which are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement to either of them) but are not described as required or which may reasonably be expected to involve a prospective material adverse change on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement;
(vii) The obligations of the Adviser under this Agreement and the Investment Management Agreement comply in all material respects with all
applicable provisions of the 1940 Act, the 1940 Act Rules and Regulations, the Advisers Act and the Advisers Act Rules and Regulations, except as to rights of indemnity and contribution; and
(viii) Such counsel shall also state that, while they have not checked or verified the accuracy and completeness of, and are not passing upon and assume no responsibility for the accuracy and completeness of, any statements in the Registration Statement or the Prospectus, no facts have come to their attention in the course of their representation of the Adviser which cause them to believe that the description of the Adviser contained in the Registration Statement (and any amendment or supplement thereto), as of its effective date, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading or that the description of the Adviser contained in the Prospectus or any amendment or supplement thereto, as of its issue date and as of the Closing Date, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading.
(f) The Underwriters shall have received on the Closing Date an opinion of Simpson Thacher & Bartlett, counsel for the Underwriters, dated the Closing Date and addressed to you, with respect to such matters as you may reasonably request. It is agreed that Simpson Thacher & Bartlett may rely on the opinions of Dechert contained in Sections 9(d)(i)(A), 9(d)(v), 9(d)(viii) and 9(d)(xiv)(B) of this Agreement to the extent those opinions relate to or are dependent upon matters governed by the laws of the State of Massachusetts.
(g) The Underwriters shall have received letters addressed to you, dated the date hereof and the Closing Date, from KPMG LLP, independent certified public accountants, substantially in the forms heretofore approved by you.
(h) (i) No order suspending the effectiveness of the registration statement or the Registration Statement or prohibiting or suspending the use of the Prospectus (or any amendment or supplement thereto) or any Prepricing Prospectus or any sales material shall have been issued and no proceedings for such purpose or for the purpose of commencing an enforcement action against the Trust, the Adviser or, with respect to the transactions contemplated by the Prospectus (or any amendment or supplement thereto) and this Agreement, the Underwriters, may be pending before or, to the knowledge of the Trust, the Adviser or the Underwriters or in the reasonable view of counsel to the Underwriters, shall be threatened or contemplated by the Commission at or prior to the Closing Date and that any request for additional information on the part of the Commission (to be included in the Registration Statement, the Prospectus or otherwise) be complied with to the satisfaction of the Underwriters; (ii) there shall not have been any change in the capital stock of the Trust nor any material increase in the short-term or long-term debt of the Trust (other than in the ordinary course of business) from that set forth or contemplated in the Registration Statement or the Prospectus (or any amendment or supplement thereto); (iii) there shall not have been, subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or
supplement thereto), except as may otherwise be stated in the Registration
Statement and Prospectus (or any amendment or supplement thereto), any material
adverse change in the condition (financial or other), business, prospects,
properties, net assets or results of operations of the Trust or the Adviser;
(iv) the Trust shall not have any liabilities or obligations, direct or
contingent (whether or not in the ordinary course of business), that are
material to the Trust, other than those reflected in the Registration Statement
or the Prospectus (or any amendment or supplement to either of them); and (v)
all the representations and warranties of the Trust and the Adviser contained in
this Agreement shall be true and correct on and as of the date hereof and on and
as of the Closing Date as if made on and as of the Closing Date, and the
Underwriters shall have received a certificate of the Trust and the Adviser,
dated the Closing Date and signed by the chief executive officer and the chief
financial officer of each of the Trust and the Adviser (or such other officers
as are acceptable to the Underwriters), to the effect set forth in this Section
9(h) and in Section 9(i) hereof.
(i) That neither the Trust nor the Adviser shall have failed at or prior to the Closing Date to have performed or complied in all material respects with any of its agreements herein contained and required to be performed or complied with by it hereunder at or prior to the Closing Date.
(j) The Trust shall have delivered and the Underwriters shall have received evidence satisfactory to the Underwriters that each series of Shares are rated 'aaa' by Moody's and 'AAA' by S&P as of the Closing Date, and there shall not have been given any notice of any intended or potential downgrading, or of any review for a potential downgrading, in the rating accorded to the shares of each series of the Shares by either Rating Agency.
(k) The Trust and the Adviser shall have furnished or caused to be furnished to you such further certificates and documents as you shall have reasonably requested.
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 Underwriters and the Underwriters' counsel.
Any certificate or document signed by any officer of the Trust or the Adviser and delivered to the Underwriters, or to counsel for the Underwriters, shall be deemed a representation and warranty by the Trust or the Adviser to the Underwriters as to the statements made therein.
10. EXPENSES. The Trust agrees to pay the following costs and expenses and all other costs and expenses incident to the performance by it of its obligations hereunder: (i) the preparation, printing or reproduction, and filing with the Commission of the registration statement (including financial statements and exhibits thereto), each Prepricing Prospectus, the Prospectus and each amendment or supplement to any of them (including, without limitation, the filing fees prescribed by the 1933 Act, the 1940 Act and the Rules and Regulations); (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each Prepricing Prospectus, the Prospectus, any sales material and all amendments or supplements to any of them as may be reasonably requested for use in connection with the offering and sale of the Shares; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Shares, including any stamp taxes in connection with the original issuance and sale of the Shares; (iv) the reproduction and delivery of this Agreement, any dealer agreements, the preliminary blue sky memorandum and all other agreements or documents reproduced and delivered in connection with the offering of the Shares; (v) the reasonable fees, expenses and disbursements of counsel for the Underwriters relating to the preparation, reproduction, and delivery of the preliminary blue sky memorandum; (vi) fees paid to the Rating Agencies; (vii) the transportation and other expenses incurred by or on behalf of Trust representatives in connection with presentations to prospective purchasers of the Shares; and (viii) the fees and expenses of the Trust's accountants and the fees and expenses of counsel (including local and special counsel) for the Trust and of the transfer agent.
11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the Trust,
by notifying the Underwriters, or by the Underwriters, by notifying the Trust.
If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase hereunder on the Closing Date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters are obligated but fail or refuse to purchase is not more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date, each non-defaulting Underwriter shall be obligated, severally, in the proportion which the number of Shares set forth opposite its name in Schedule I hereto bears to the aggregate number of Shares set forth opposite the names of all non-defaulting Underwriters or in such other proportion as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters are obligated, but fail or refuse, to purchase. If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase on the Closing Date and the aggregate number of Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date and arrangements satisfactory to you and the Trust for the purchase of such Shares by one or more non-defaulting Underwriters or other party or parties approved by you and the Trust are not made within 36
hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter, the Trust or the Adviser. In any such case which does not result in termination of this Agreement, either you or the Trust shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any such default of any such Underwriter under this Agreement. The term "Underwriter" as used in this Agreement includes, for all purposes of this Agreement, any party not listed in Schedule I hereto who, with your approval and the approval of the Trust, purchases Shares which a defaulting Underwriter is obligated, but fails or refuses, to purchase.
Any notice under this Section 11 may be given by telegram, telecopy or telephone but shall be subsequently confirmed by letter.
12. TERMINATION OF AGREEMENT. This Agreement shall be subject to termination in the Underwriters' absolute discretion, without liability on the part of any Underwriter to the Trust or the Adviser, by notice to the Trust or the Adviser, if prior to the Closing Date (i) trading in the Shares or the Trust's common shares of beneficial interest or securities generally on the NYSE shall have been suspended or materially limited or minimum prices shall have been established on the NYSE, (ii) a general moratorium on commercial banking activities in New York shall have been declared by either federal or state authorities, or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other international or domestic calamity, crisis or change in political, financial or economic conditions, the effect of which on the financial markets of the United States is to make it, in your judgment, impracticable or inadvisable to commence or continue the offering of the Shares at the offering price to the public set forth on the cover page of the Prospectus or to enforce contracts for the resale of the Shares by the Underwriters. Notice of such termination may be given to the Trust by telegram, telecopy or telephone and shall be subsequently confirmed by letter.
13. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth in the last paragraph on the cover page and the statements in the third and fifth paragraphs under the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute the only information furnished by or on behalf of the Underwriters through you as such information is referred to in Sections 6(b) and 8 hereof.
14. MISCELLANEOUS. Except as otherwise provided in Sections 5, 11 and 12 hereof, notice given pursuant to any provision of this Agreement shall be in writing and shall be delivered (i) if to the Trust or the Adviser, at the office of the Trust at 7337 E. Doubletree Ranch Rd., Scottsdale, Arizona 85258-2034, Attention: Daniel A. Norman, Senior Vice President; or (ii) if to the Underwriters, to Salomon Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the Underwriters, the Trust, the Adviser, their trustees, directors and officers, and the other controlling persons
referred to in Section 8 hereof and their respective successors and assigns, to the extent provided herein, and no other person shall acquire or have any right under or by virtue of this Agreement. Neither the term "successor" nor the term "successors and assigns" as used in this Agreement shall include a purchaser from the Underwriters of any of the Shares in his status as such purchaser.
Consistent with the Trust's Declaration, notice is hereby given and the parties hereto acknowledge and agree that this Agreement is executed on behalf of the trustees of the Trust as trustees and not individually and that obligations of this Agreement are not binding upon any of the trustees or shareholders of the Trust individually but are binding only against the assets and property of the Trust.
15. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
This Agreement may be signed in various counterparts, which together constitute one and the same instrument. If signed in counterparts, this Agreement shall not become effective unless at least one counterpart hereof shall have been executed and delivered on behalf of each party hereto.
Please confirm that the foregoing correctly sets forth the agreement among the Trust, the Adviser and the several Underwriters.
Very truly yours,
PILGRIM PRIME RATE TRUST
Title:
ING PILGRIM INVESTMENTS, INC.
Title:
Confirmed as of the date first above
mentioned on behalf of themselves
and the other several Underwriters
named in Schedule I hereto.
SALOMON SMITH BARNEY INC.
UBS WARBURG LLC
LEHMAN BROTHERS INC.
GRUNTAL & CO., L.L.C.
By: SALOMON SMITH BARNEY INC.
By: /s/ Robert F. Bush Jr. ------------------------------- Name: Robert F. Bush Jr. Title: Director |
Please confirm that the foregoing correctly sets forth the agreement among the Trust, the Adviser and the several Underwriters.
Very truly yours,
PILGRIM PRIME RATE TRUST
By: /s/ Daniel A. Norman ------------------------------- Name: Daniel A. Norman Title: Senior Vice President and Treasurer |
ING PILGRIM INVESTMENTS, INC.
By: /s/ Daniel A. Norman ------------------------------- Name: Daniel A. Norman Title: Senior Vice President and Treasurer |
Confirmed as of the date first above
mentioned on behalf of themselves
and the other several Underwriters
named in Schedule I hereto.
SALOMON SMITH BARNEY INC.
UBS WARBURG LLC
LEHMAN BROTHERS INC.
GRUNTAL & CO., L.L.C.
By: SALOMON SMITH BARNEY INC.
SCHEDULE I
PILGRIM PRIME RATE TRUST
NUMBER OF UNDERWRITER SHARES ----------- --------- Salomon Smith Barney Inc. 2,160 Series T 2,160 Series Th UBS Warburg LLC 1,080 Series T 1,080 Series Th Lehman Brothers Inc. 180 Series T 180 Series Th Gruntal & Co., L.L.C. 180 Series T 180 Series Th --------------- Total 3,600 Series T 3,600 Series Th |
Exhibit 99.(h)(ii)(1)
Auction Rate Cumulative Preferred Shares
PILGRIM PRIME RATE TRUST
3,600 Shares, Series M
3,600 Shares, Series W
3,600 Shares, Series F
Liquidation Preference $25,000 Per Share
UNDERWRITING AGREEMENT
October 30, 2000
SALOMON SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
LEHMAN BROTHERS INC.
GRUNTAL & CO., L.L.C.
c/o SALOMON SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Pilgrim Prime Rate Trust, a Massachusetts business trust (the "Trust"), proposes, upon the terms and conditions set forth herein, to issue and sell an aggregate of 3,600 shares of its Auction Rate Cumulative Preferred Shares, Series M, 3,600 shares of its Auction Rate Cumulative Preferred Shares, Series W and 3,600 shares of its Auction Rate Cumulative Preferred Shares, Series F, each with a liquidation preference of $25,000 per share (the shares of Auction Rate Cumulative Preferred Shares to be sold hereby are referred to herein, collectively, as the "Shares"). The Shares will be authorized by, and subject to the terms and conditions of, the Certificate of Designation for Preferred Shares of the Trust (the "Certificate") in the form filed as an exhibit to the Registration Statement referred to in Section 1 of this agreement. The Trust and its investment adviser, ING Pilgrim Investments, Inc. (the "Adviser"), wish to confirm as follows their agreement with Salomon Smith Barney Inc., PaineWebber Incorporated, Lehman Brothers Inc. and Gruntal & Co., L.L.C. (the "Underwriters"), in connection with the purchase of the Shares by the Underwriters.
Collectively, the Investment Management Agreement dated as of September 1, 2000 between the Trust and the Adviser ("the "Investment Management Agreement"), the Custodian Agreement dated as of July 1, 1996 between the Trust and State Street Bank and Trust - Kansas City, the Agency Agreement dated as of October 1, 1996 between the Trust and DST Systems, Inc. and the Auction Agency Agreement between the Trust and Bankers Trust Company are hereinafter referred to as the "Trust Agreements." This Underwriting Agreement is hereinafter referred to as the "Agreement."
1. REGISTRATION STATEMENT AND PROSPECTUS. The Trust has prepared in conformity with the provisions of the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations of the Securities and Exchange Commission (the "Commission") promulgated under the 1933 Act (the "1933 Act Rules and Regulations") and the 1940 Act (the "1940 Act Rules and Regulations" and, together with the 1933 Act Rules and Regulations, the "Rules and Regulations") a registration statement on Form N-2, as amended by Pre-Effective Amendment No. 1 (File Nos. 333-44918 and 811-05410), under the 1933 Act and the 1940 Act (the "registration statement"), including a prospectus relating to the Shares, and has filed the registration statement and prospectus in accordance with the 1933 Act and the 1940 Act. The Trust also has filed a notification of registration of the Trust as an investment company under the 1940 Act on Form N-8A (the "1940 Act Notification"). The term "Registration Statement" as used in this Agreement means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective under the 1933 Act or, if the registration statement became effective under the 1933 Act prior to the execution of this Agreement, as amended or supplemented at the time it became effective, prior to the execution of this Agreement. If it is contemplated, at the time this Agreement is executed, that a post-effective amendment to the registration statement will be filed under the 1933 Act and must be declared effective before the offering of the Shares may commence, the term "Registration Statement" as used in this Agreement means the registration statement as amended by said post-effective amendment. If the Trust has filed an abbreviated registration statement to register an additional amount of Shares pursuant to Rule 462(b) under the 1933 Act (the "Rule 462 Registration Statement"), then any reference herein to the term "Registration Statement" shall include such Rule 462 Registration Statement. The term "Prospectus" as used in this Agreement means the prospectus and statement of additional information in the forms included in the Registration Statement or, if the prospectus and statement of additional information included in the Registration Statement omit information in reliance on Rule 430A under the 1933 Act Rules and Regulations and such information is included in a prospectus and statement of additional information filed with the Commission pursuant to Rule 497(h) under the 1933 Act, the term "Prospectus" as used in this Agreement means the prospectus and statement of additional information in the forms included in the Registration Statement as supplemented by the addition of the information contained in the prospectus filed with the Commission pursuant to Rule 497(h). The term "Prepricing Prospectus" as used in this Agreement means the prospectus and statement of additional information subject to completion in the forms included in the registration statement at the time of filing of amendment no. 1 to the registration statement with the Commission on October 23, 2000, and as such prospectus and statement of additional information shall have been amended from time to time prior to the date of the Prospectus, together with any other prospectus and
statement of additional information relating to the Trust other than the Prospectus approved in writing by or directly or indirectly prepared by the Trust or the Adviser; it being understood that the definition of Prepricing Prospectus above shall not include any Prepricing Prospectus prepared by the Underwriters unless approved in writing by the Trust or Adviser. The terms "Registration Statement," "Prospectus" and "Prepricing Prospectus" shall also include any financial statements incorporated by reference therein.
The Trust has furnished Salomon Smith Barney Inc. with copies of such registration statement, each amendment to such registration statement filed with the Commission and each Prepricing Prospectus, and Salomon Smith Barney Inc. has provided the same to the other Underwriters.
2. AGREEMENTS TO SELL AND PURCHASE. The Trust hereby agrees, subject to all the terms and conditions set forth herein, to issue and sell to the Underwriters and, upon the basis of the representations, warranties and agreements of the Trust and the Adviser herein contained and subject to all the terms and conditions set forth herein, the Underwriters agree to purchase from the Trust, at a purchase price of $24,750 per Share, the number of shares of each series of Auction Rate Cumulative Preferred Shares set forth opposite the name of each Underwriter in Schedule I hereto.
3. TERMS OF PUBLIC OFFERING. The Trust and the Adviser have been advised by the Underwriters that they propose to make a public offering of the Shares as soon after the Registration Statement and this Agreement have become effective as in the Underwriters' judgment is advisable and initially to offer the Shares upon the terms set forth in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the Underwriters of and payment for the Shares shall be made at the office of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, NY 10017, or through the facilities of The Depository Trust Company or another mutually agreeable facility, at 9:30 A.M., New York City time, on November 2, 2000 (the "Closing Date"). The place of closing for the Shares and the Closing Date may be varied by agreement between you and the Trust.
Certificates for the Shares shall be registered in such names and in such denominations as the Underwriters shall request prior to 9:30 A.M., New York City time, on the second business day preceding the Closing Date. Such certificates shall be made available to the Underwriters in New York City for inspection not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date. The certificates evidencing the Shares shall be delivered to the Underwriters on the Closing Date, through the facilities of The Depository Trust Company or another mutually agreeable facility, against payment of the purchase price therefor in immediately available funds.
5. AGREEMENTS OF THE TRUST AND THE ADVISER. The Trust and the Adviser, jointly and severally, agree with the Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective under the
1933 Act before the offering of the Shares may commence, the Trust will endeavor to cause the Registration Statement or such post-effective amendment to become effective under the 1933 Act as soon as possible and will advise the Underwriters promptly and, if requested by the Underwriters, will confirm such advice in writing when the Registration Statement or such post-effective amendment has become effective.
(b) The Trust will advise the Underwriters promptly and, if requested by the Underwriters, will confirm such advice in writing: (i) of any request made by the Commission for amendment of or a supplement to the Registration Statement, any Prepricing Prospectus or the Prospectus (or any amendment or supplement to any of the foregoing) or for additional information, (ii) of the issuance by the Commission, the National Association of Securities Dealers, Inc. (the "NASD"), any state securities commission, any national securities exchange, any arbitrator, any court or any other governmental, regulatory, self-regulatory or administrative agency or any official of any order suspending the effectiveness of the Registration Statement, prohibiting or suspending the use of the Prospectus or any Prepricing Prospectus, or any sales material (as hereinafter defined), of any notice pursuant to Section 8(e) of the 1940 Act, of the suspension of qualification of the Shares for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purposes, (iii) of receipt by the Trust, the Adviser, any affiliate of the Trust or the Adviser or any representative or attorney of the Trust or the Adviser of any other material communication from the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or any other governmental, regulatory, self-regulatory or administrative agency or any official relating to the Trust (if such communication relating to the Trust is received by such person within three years after the date of this Agreement), the Registration Statement, the 1940 Act Notification, the Prospectus, any Prepricing Prospectus, any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) or this Agreement or any of the Trust Agreements and (iv) within the period of time referred to in paragraph (f) below, of any material adverse change in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Trust or the Adviser or of the happening of any other event which makes any statement of a material fact made in the Registration Statement or the Prospectus, or any Prepricing Prospectus or any sales materials (as herein defined) (or any amendment or supplement to any of the foregoing) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus, or any Prepricing Prospectus or any sales materials (as herein defined) (or any amendment or supplement to any of the foregoing) in order to state a material fact required by the 1933 Act, the 1940 Act or the Rules and Regulations to be stated therein or necessary in order to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made), not misleading or of the necessity to amend or supplement the Registration Statement, the Prospectus, or any Prepricing Prospectus or any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) to comply with the 1933 Act, the 1940 Act, the Rules and Regulations or any other law or order of any court or regulatory body. If at any time the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or any other governmental, regulatory, self-regulatory or administrative agency or any official shall issue any order suspending the effectiveness of the Registration Statement, prohibiting or suspending the use of the Prospectus or any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) or suspending the qualification of the Shares for offering or sale in any jurisdiction,
the Trust will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time.
(c) The Trust will furnish to you, without charge, three signed copies of the Registration Statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits thereto, and will also furnish to you, without charge, such number of conformed copies of the Registration Statement as originally filed and of each amendment thereto, but without exhibits, as you may reasonably request.
(d) The Trust will not (i) file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus, or any sales material (as herein defined), of which you shall not previously have been advised or to which you shall reasonably object after being so advised or (ii) so long as, in the opinion of counsel for the Underwriters, a Prospectus is required by the 1933 Act to be delivered in connection with sales by the Underwriters or any dealer, file any information, documents or reports pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), without delivering a copy of such information, documents or reports to you prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the Trust has delivered to you, without charge, in such quantities as you have requested, copies of each form of the Prepricing Prospectus. The Trust consents to the use, in accordance with the provisions of the 1933 Act and with the state securities or blue sky laws of the jurisdictions in which the Shares are offered by the Underwriters and by dealers, prior to the date of the Prospectus, of each Prepricing Prospectus so furnished by the Trust.
(f) As soon after the execution and delivery of this Agreement as possible and thereafter from time to time for such period as in the opinion of counsel for the Underwriters a prospectus is required by the 1933 Act to be delivered in connection with sales by the Underwriters or any dealer, the Trust will expeditiously deliver to the Underwriters and each dealer, without charge, as many copies of the Prospectus (and of any amendment or supplement thereto) as the Underwriters may reasonably request. The Trust consents to the use of the Prospectus (and of any amendment or supplement thereto) in accordance with the provisions of the 1933 Act and with the state securities or blue sky laws of the jurisdictions in which the Shares are offered by the Underwriters and by all dealers to whom Shares may be sold, both in connection with the offering and sale of the Shares and for such period of time thereafter as the Prospectus is required by the 1933 Act to be delivered in connection with sales by the Underwriters or any dealer. If during such period of time any event shall occur that in the judgment of the Trust or in the opinion of counsel for the Underwriters is required to be set forth in the Registration Statement or the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading, or if it is necessary to supplement or amend the Registration Statement or the Prospectus to comply with the 1933 Act, the 1940 Act, the Rules and Regulations or any other federal law, rule or regulation, or any state securities or blue sky disclosure laws, rules or regulations, the Trust will forthwith prepare and, subject to the provisions of paragraph (d) above, promptly file with the Commission an appropriate supplement or amendment thereto, and will expeditiously furnish to the Underwriters
and dealers, without charge, a reasonable number of copies thereof. In the event that the Trust and the Underwriters agree that the Registration Statement or the Prospectus should be amended or supplemented, the Trust, if requested by the Underwriters, will promptly issue a press release announcing or disclosing the matters to be covered by the proposed amendment or supplement.
(g) The Trust will make generally available to its security holders an earnings statement, which need not be audited, covering a twelve-month period ending not later than 15 months after the effective date of the Registration Statement as soon as practicable after the end of such period, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 of the 1933 Act Rules and Regulations.
(h) During the period of five years after the date of this Agreement,
the Trust will furnish to you (i) as soon as available, a copy of each report of
the Trust mailed to stockholders or filed with the Commission or furnished to
the New York Stock Exchange (the "NYSE") other than reports on Form N-SAR, and
(ii) from time to time such other information concerning the Trust as the
Underwriters may reasonably request.
(i) If this Agreement shall terminate or shall be terminated after execution pursuant to any provisions hereof (otherwise than by notice given by the Underwriters terminating this Agreement pursuant to Section 12 hereof) or if this Agreement shall be terminated by the Underwriters because of any failure or refusal on the part of the Trust or the Adviser to comply with the terms or fulfill any of the conditions of this Agreement, the Trust and the Adviser, jointly and severally, agree to reimburse the Underwriters for all out-of-pocket expenses (including reasonable fees and expenses of counsel for the Underwriters) incurred by the Underwriters in connection herewith.
(j) The Trust will apply the net proceeds from the sale of the Shares substantially in accordance with the description set forth in the Prospectus and in such a manner as to comply with the investment objectives, policies and restrictions of the Trust as described in the Prospectus.
(k) The Trust will timely file the Prospectus with the Commission pursuant to Rule 497(c) or Rule 497(h) of the 1933 Act Rules and Regulations, whichever is applicable or, if applicable, will timely file the certification permitted by Rule 497(j) of the 1933 Act Rules and Regulations and will advise the Underwriters of the time and manner of such filing.
(l) Except as provided in this Agreement, the Trust will not sell, contract to sell, or otherwise dispose of any senior securities (as defined in the 1940 Act) (other than senior securities sold in an underwriting lead-managed by Salomon Smith Barney Inc.) of the Trust, or grant any options or warrants to purchase senior securities of the Trust, for a period of 180 days after the date of the Prospectus, without the prior written consent of the Underwriters.
(m) Except as stated in this Agreement and in the Prepricing Prospectus and the Prospectus, neither the Trust nor the Adviser has taken, nor will it take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or
manipulation of the price of any securities issued by the Trust to facilitate the sale or resale of the Shares.
(n) The Trust will use commercially reasonable efforts to cause the Shares, prior to the Closing Date, to be assigned a rating of 'aaa' by Moody's Investors Service, Inc. ("Moody's") and 'AAA' by Standard & Poor's, a division of McGraw-Hill Companies, Inc. ("S&P" and, together with Moody's, the "Rating Agencies").
(o) The Trust and the Adviser will use commercially reasonable efforts to perform all of the agreements required of them and discharge all conditions to closing as set forth in this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE TRUST AND THE ADVISER. The Trust and the Adviser, jointly and severally, represent and warrant to the Underwriters that:
(a) Each Prepricing Prospectus included as part of the registration statement as originally filed or as part of any amendment or supplement thereto, or filed pursuant to Rule 497 of the 1933 Act Rules and Regulations, complied when so filed in all material respects with the provisions of the 1933 Act, the 1940 Act and the Rules and Regulations. The Commission has not issued any order preventing or suspending the use of any Prepricing Prospectus.
(b) The registration statement in the form in which it became or becomes effective and also in such form as it may be when any post-effective amendment thereto shall become effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 497 of the 1933 Act Rules and Regulations and the 1940 Act Notification when originally filed with the Commission and any amendment or supplement thereto when filed with the Commission, complied or will comply in all material respects with the provisions of the 1933 Act, the 1940 Act and the Rules and Regulations and did not or will not at any such times 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 (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading, except that this representation and warranty does not apply to statements in or omissions from the registration statement or the Prospectus made in reliance upon and in conformity with information relating to the Underwriters furnished to the Trust in writing by or on behalf of the Underwriters expressly for use therein.
(c) All the outstanding common shares of beneficial interest of the Trust have been duly authorized and validly issued by the Trust, are fully paid and nonassessable and are free of any preemptive or similar rights; the Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued by the Trust, fully paid and nonassessable and free of any preemptive or similar rights and will conform to the description thereof in the Registration Statement and the Prospectus (and any amendment or supplement to either of them); and the capitalization of the Trust conforms to the description thereof in the Registration Statement and the Prospectus (and any amendment or supplement to either of them).
(d) The Trust is a business trust duly organized and validly existing under the laws of the State of Massachusetts with full business trust power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify does not have a material adverse effect on the condition (financial or other), business, prospects, properties, net assets or results of operations of the Trust; and the Trust has no subsidiaries.
(e) There are no legal or governmental proceedings pending or, to the knowledge of the Trust, threatened, against the Trust, or to which the Trust or any of its properties is subject, that are required to be described in the Registration Statement or the Prospectus (and any amendment or supplement to either of them) but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus (and any amendment or supplement to either of them) or to be filed as an exhibit to the Registration Statement that are not described or filed as required by the 1933 Act, the 1940 Act or the Rules and Regulations.
(f) The Trust is not in violation of its Agreement and Declaration of Trust (the "Declaration"), or bylaws (the "Bylaws"), or other organizational documents or of any law, ordinance, administrative or governmental rule or regulation applicable to the Trust or of any decree of the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or governmental agency, body or official having jurisdiction over the Trust, or in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any material agreement, indenture, lease or other instrument to which the Trust is a party or by which it or any of its properties may be bound.
(g) Neither the issuance and sale of the Shares, the execution, delivery or performance of this Agreement or any of the Trust Agreements by the Trust, nor the consummation by the Trust of the transactions contemplated hereby or thereby (A) requires the Trust to obtain any consent, approval, authorization or other order of or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may have been obtained prior to the date hereof and such as may be required for compliance with the state securities or blue sky laws of various jurisdictions which have been or will be effected in accordance with this Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the Declaration, the Bylaws or other organizational documents of the Trust or (B) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, any agreement, indenture, lease or other instrument to which the Trust is a party or by which it or any of its properties may be bound, or violates or will violate any statute, law, regulation or judgment, injunction, order or decree applicable to the Trust or any of its properties, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Trust pursuant to the terms of any agreement or instrument to which it is a party or by which it
may be bound or to which any of its property or assets is subject. The Trust is not subject to any order of any court or of any arbitrator, governmental authority or administrative agency.
(h) The accountants, KPMG LLP, who have certified or shall certify the financial statements included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement to either of them) have represented to the Trust that they are independent public accountants as required by the 1933 Act, the 1940 Act and the Rules and Regulations.
(i) The financial statements, together with related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), present fairly the financial position, results of operations and changes in financial position of the Trust on the basis stated or incorporated by reference in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data included in the Registration Statement and the Prospectus (and any amendment or supplement to either of them) are accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Trust.
(j) The execution and delivery of, and the performance by the Trust of its obligations under, this Agreement and the Trust Agreements have been duly and validly authorized by the Trust, and this Agreement and the Trust Agreements have been duly executed and delivered by the Trust and constitute the valid and legally binding agreements of the Trust, enforceable against the Trust in accordance with their terms, except as rights to indemnity and contribution hereunder and thereunder may be limited by federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Trust's obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles.
(k) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), the Trust has not incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Trust, and there has not been any change in the capital stock, or material increase in the short-term debt or long-term debt, of the Trust, or any material adverse change, or any development involving or which may reasonably be expected to involve, a prospective material adverse change, in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Trust, whether or not arising in the ordinary course of business.
(1) The Trust has not distributed and, prior to the later to occur of
(i) the Closing Date and (ii) completion of the distribution of the Shares, will
not distribute any offering material in connection with the offering and sale of
the Shares other than the Registration Statement, the
Prepricing Prospectus, the Prospectus or other materials, if any, permitted by the 1933 Act, the 1940 Act or the Rules and Regulations.
(m) The Trust has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits") as are necessary to own its properties and to conduct its business in the manner described in the Prospectus (and any amendment or supplement thereto), subject to such qualifications as may be set forth in the Prospectus; the Trust has fulfilled and performed all its material obligations with respect to such permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the Trust under any such permit, subject in each case to such qualification as may be set forth in the Prospectus (and any amendment or supplement thereto); and, except as described in the Prospectus (and any amendment or supplement thereto), none of such permits contains any restriction that is materially burdensome to the Trust.
(n) The Trust maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions in portfolio securities are executed in accordance with management's general or specific authorization and with the applicable requirements of the 1940 Act, the 1940 Act Rules and Regulations and the Internal Revenue Code of 1986, as amended (the "Code"); (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets and to maintain compliance with the books and records requirements under the 1940 Act and the 1940 Act Rules and Regulations; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(o) To the Trust's knowledge, neither the Trust nor any employee or agent of the Trust has made any payment of funds of the Trust or received or retained any funds, which payment, receipt or retention of funds is of a character required to be disclosed in the Prospectus and that is not so disclosed.
(p) The Trust has filed all tax returns required to be filed, which returns are complete and correct in all material respects, and the Trust is not in material default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto.
(q) No holder of any security of the Trust has any right to require registration of common shares of beneficial interest or any other security of the Trust because of the filing of the registration statement or consummation of the transactions contemplated by this Agreement.
(r) The Trust, subject to the registration statement having been declared effective and the filing of the Prospectus under Rule 497 under the 1933 Act Rules and Regulations, has taken all required action under the 1933 Act, the 1940 Act and the Rules and Regulations to make the public offering and consummate the sale of the Shares as contemplated by this Agreement.
(s) The conduct by the Trust of its business (as described in the Prospectus) does not, to the knowledge of the Trust or the Adviser after reasonable inquiry, require the Trust to be the owner, possessor or licensee of any patents, patent licenses, trademarks, service marks or trade names which it does not own, possess or license.
(t) The Trust is registered under the 1940 Act as a closed-end, diversified management investment company and the 1940 Act Notification has been duly filed with the Commission and, at the time of filing thereof and any amendment or supplement thereto, conformed in all material respects with all applicable provisions of the 1940 Act and the Rules and Regulations. The Trust is, and at all times through the completion of the transactions contemplated hereby, will be, in compliance in all material respects with the terms and conditions of the 1933 Act and the 1940 Act. No person is serving or acting as an officer, trustee or investment adviser of the Trust except in accordance with the provisions of the 1940 Act and the 1940 Act Rules and Regulations and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and regulations of the Commission promulgated under the Advisers Act (the "Advisers Act Rules and Regulations").
(u) Except as stated in this Agreement and in the Prospectus (and any amendment or supplement thereto), the Trust has not taken, nor will it take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any securities issued by the Trust to facilitate the sale or resale of the Shares, and the Trust is not aware of any such action taken or to be taken by any affiliates of the Trust.
(v) The Trust has filed in a timely manner each document or report required to be filed by it pursuant to the 1934 Act and the rules and regulations of the Commission promulgated thereunder (the "1934 Act Rules and Regulations"); each such document or report at the time it was filed conformed to the requirements of the 1934 Act and the 1934 Act Rules and Regulations; and none of such documents or reports contained an untrue statement of any material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading.
(w) All advertising, sales literature or other promotional material (including "prospectus wrappers," "broker kits," "road show slides" and "road show scripts") authorized in writing by or prepared by the Trust or the Adviser for use in connection with the offering and sale of the Shares (collectively, "sales material") complied and comply in all material respects with the applicable requirements of the 1933 Act, the 1940 Act, the Rules and Regulations and the rules and interpretations of the NASD and no such sales material contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(x) Each of the Trust Agreements complies in all material respects with all applicable provisions of the 1940 Act, the 1940 Act Rules and Regulations, the Advisers Act and the Advisers Act Rules and Regulations, except as to rights of indemnity and contribution.
(y) The Shares have been, or prior to the Closing Date will be, assigned a rating of 'aaa' by Moody's and 'AAA' by S&P.
(z) As required by Subchapter M of the Code, the Trust is currently in compliance with the requirements to qualify as a regulated investment company under the Code.
(aa) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), no trustee of the Trust is an "interested person" (as defined in the 1940 Act) of the Trust or an "affiliated person" (as defined in the 1940 Act) of any Underwriter listed in Schedule I hereto.
7. REPRESENTATIONS AND WARRANTIES OF THE ADVISER. The Adviser represents and warrants to the Underwriters as follows:
(a) The Adviser is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or to qualify does not have a material adverse effect on the condition (financial or other), business, prospects, properties, net assets or results of operations of the Adviser or on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement.
(b) The Adviser is duly registered with the Commission as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules and Regulations from acting under the Investment Management Agreement for the Trust as contemplated by the Prospectus (or any amendment or supplement thereto). There does not exist any proceeding or any facts or circumstances the existence of which could lead to any proceeding which might adversely affect the registration of the Adviser with the Commission.
(c) There are no legal or governmental proceedings pending or, to the knowledge of the Adviser, threatened against the Adviser, or to which the Adviser or any of its properties is subject, that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement to either of them) but are not described as required or that may reasonably be expected to involve a prospective material adverse change in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Adviser or on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement.
(d) Neither the execution, delivery or performance of this Agreement or the Investment Management Agreement by the Adviser, nor the consummation by the Adviser of the transactions contemplated hereby or thereby (A) requires the Adviser to obtain any consent,
approval, authorization or other order of or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency or official or conflicts or will conflict with or constitutes or will constitute a breach of or a default under, the certificate of incorporation or by-laws, or other organizational documents, of the Adviser or (B) conflicts or will conflict with or constitutes or will constitute a breach of or a default under, any agreement, indenture, lease or other instrument to which the Adviser is a party or by which it or any of its properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Adviser or any of its properties or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Adviser pursuant to the terms of any agreement or instrument to which it is a party or by which it may be bound or to which any of the property or assets of the Adviser is subject. The Adviser is not subject to any order of any court or of any arbitrator, governmental authority or administrative agency.
(e) The execution and delivery of, and the performance by the Adviser of its obligations under, this Agreement and the Investment Management Agreement have been duly and validly authorized by the Adviser, and this Agreement and the Investment Management Agreement have been duly executed and delivered by the Adviser and each constitutes the valid and legally binding agreement of the Adviser, enforceable against the Adviser in accordance with its terms except as rights to indemnity and contribution hereunder may be limited by federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Trust's obligations thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles.
(f) The Adviser has the financial resources available to it necessary for the performance of its services and obligations as contemplated in the Prospectus (or any amendment or supplement thereto) and under this Agreement and the Investment Management Agreement.
(g) The description of the Adviser in the Registration Statement and the Prospectus (and any amendment or supplement thereto) complied and comply in all material respects with the provisions of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and Regulations and the Advisers Act Rules and Regulations and did not 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 (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading.
(h) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), the Adviser has not incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Adviser or the Trust and that is required to be disclosed in the Registration Statement or the Prospectus and there has not been any material adverse change, or any development
involving or which may reasonably be expected to involve, a prospective material adverse change, in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Adviser, whether or not arising in the ordinary course of business, or which, in each case, could have a material adverse effect on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement.
(i) The Adviser has such permits, licenses, franchises and authorizations of governmental or regulatory authorities ("permits") as are necessary to own its properties and to conduct its business in the manner described in the Prospectus (and any amendment or supplement thereto); the Adviser has fulfilled and performed all its material obligations with respect to such permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the Adviser under any such permit; and, except as described in the Prospectus (and any amendment or supplement thereto), none of such permits contains any restriction that is materially burdensome to the Adviser.
(j) Except as stated in this Agreement and in the Prospectus (and in any amendment or supplement thereto), the Adviser has not taken, nor will it take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in, stabilization or manipulation of the price of any securities issued by the Trust to facilitate the sale or resale of the Shares, and the Adviser is not aware of any such action taken or to be taken by any affiliates of the Adviser.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Trust and the Adviser, jointly and severally, agree to
indemnify and hold harmless each of the Underwriters and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation), joint or
several, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Prepricing Prospectus or in the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or omission or alleged untrue statement or omission which
has been made therein or omitted therefrom in reliance upon and in conformity
with the information relating to any Underwriter furnished in writing to the
Trust by or on behalf of any Underwriter through you expressly for use in
connection therewith; provided, however, that the indemnification contained in
this paragraph (a) with respect to any Prepricing Prospectus shall not inure to
the benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Shares by such Underwriter to any person if a copy
of the Prospectus shall not have been delivered or sent to such person within
the time required by the 1933 Act and the 1933 Act Rules and Regulations, and
the untrue statement or alleged untrue statement or omission or alleged omission
of a
material fact contained in such Prepricing Prospectus was corrected in the Prospectus, provided that the Trust has delivered the Prospectus to the several Underwriters in requisite quantity on a timely basis to permit such delivery or sending. The foregoing indemnity agreement shall be in addition to any liability which the Trust or the Adviser may otherwise have.
(b) If any action, suit or proceeding shall be brought against any Underwriter or any person controlling any Underwriter in respect of which indemnity may be sought against the Trust or the Adviser, such Underwriter or such controlling person shall promptly notify the Trust or the Adviser, and the Trust or the Adviser shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. Such Underwriter or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless (i) the Trust or the Adviser has agreed in writing to pay such fees and expenses, (ii) the Trust and the Adviser have failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both such Underwriter or such controlling person and the Trust or the Adviser and such Underwriter or such controlling person shall have been advised by its counsel that representation of such indemnified party and the Trust or the Adviser by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Trust and the Adviser shall not have the right to assume the defense of such action, suit or proceeding on behalf of such Underwriter or such controlling person). It is understood, however, that the Trust and the Adviser shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such Underwriters and controlling persons not having actual or potential differing interests with you or among themselves, which firm shall be designated in writing by the Underwriters, and that all such fees and expenses shall be reimbursed as they are incurred. The Trust and the Adviser shall not be liable for any settlement of any such action, suit or proceeding effected without their written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Trust and the Adviser agree to indemnify and hold harmless any Underwriter, to the extent provided in the preceding paragraph, and any such controlling person from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees to indemnify and hold harmless the Trust and the Adviser, their trustees, directors, any officers who sign the Registration Statement, and any person who controls the Trust or the Adviser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, to the same extent as the foregoing indemnity from the Trust and the Adviser to each Underwriter, but only with respect to information relating to such Underwriter furnished in writing by or on behalf of such Underwriter expressly for use in the Registration Statement, the Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Trust or the Adviser, any of their trustees or directors, any such officer, or any such controlling person based
on the Registration Statement, the Prospectus or any Prepricing Prospectus, or
any amendment or supplement thereto, and in respect of which indemnity may be
sought against any Underwriter pursuant to this paragraph (c), such Underwriter
shall have the rights and duties given to the Trust and the Adviser by paragraph
(b) above (except that if the Trust or the Adviser shall have assumed the
defense thereof such Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof, but the fees
and expenses of such counsel shall be at such Underwriter's expense), and the
Trust and the Adviser, their trustees or directors, any such officer, and any
such controlling person shall have the rights and duties given to the
Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be
in addition to any liability which the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters on the other hand from the offering of the Shares, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters 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 underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Trust and the Adviser on the one hand (treated jointly for this purpose as one person) or by the Underwriters on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
(e) The Trust, the Adviser and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 8 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in paragraph
(d) above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 8 are several
in proportion to the respective numbers of Shares set forth opposite their names
in Schedule I hereto (or such numbers of Shares increased as set forth in
Section 11 hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Trust and the Adviser set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Trust, the Adviser, their trustees, directors
or officers, or any person controlling the Trust or the Adviser, (ii) acceptance
of any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Trust, the Adviser, their trustees, directors or
officers, or any person controlling the Trust or the Adviser, shall be entitled
to the benefits of the indemnity, contribution, and reimbursement agreements
contained in this Section 8.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the Underwriters to purchase the Shares hereunder are subject to the following conditions:
(a) If, at the time this Agreement is executed and delivered, it is necessary for the registration statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, the registration statement or such post-effective amendment shall have become effective not later than 5:30 P.M., New York City time, on the date hereof, or at such later date and time as shall be consented to in writing by the Underwriters, and all filings, if any, required by Rules 497 and 430A under the 1933 Act and the 1933 Act Rules and Regulations shall have been timely made; no stop order suspending the effectiveness of the Registration Statement or order pursuant to Section 8(e) of the 1940 Act shall have been issued and no proceeding for those purposes shall have been instituted or, to the knowledge of the Trust, the Adviser or any Underwriter, 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 Underwriters' satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall not have occurred (i) any change or any development involving a prospective change in or affecting the condition (financial or other), business, prospects, properties, net assets, or results of operations of the Trust or the Adviser not contemplated by the Prospectus, which in the Underwriters' opinion would materially, adversely affect the market for the Shares, or (ii) any event or development relating to or involving the Trust or the Adviser or any officer, trustee or director of the Trust or the Adviser which makes any statement made in the Prospectus untrue or which, in the opinion of the Trust and its counsel or the Underwriters and their counsel, requires the making of any addition to or change in the Prospectus in order to state a material fact required by the 1933 Act, the 1940 Act or the Rules and Regulations or any other law to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, if amending or supplementing the Prospectus to reflect such event or development would, in the Underwriters' opinion, materially adversely affect the market for the Shares.
(c) The Trust shall have furnished to you a report showing compliance with the asset coverage requirements of the 1940 Act and a Preferred Shares Basic Maintenance Certificate (as defined in the Certificate), each dated the Closing Date and in form and substance satisfactory to you. Each such report may use portfolio holdings and valuations as of the close of business of any day not more than six business days preceding the Closing Date, provided, however, that the Trust represents in such report that its total net assets as of the Closing Date have not declined by 5% or more from such valuation date.
(d) The Underwriters shall have received on the Closing Date an opinion of Dechert, counsel for the Trust, dated the Closing Date and addressed to you, in form and substance satisfactory to you and to the effect that:
(i) The Trust (A) is a business trust duly formed by virtue of the execution and delivery of the Agreement and Declaration of Trust on December 2, 1987 and is validly existing under the laws of the State of Massachusetts with full business trust power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and (B) is duly registered and qualified to conduct its business and is in good standing in the State of Arizona;
(ii) The Trust has no subsidiaries;
(iii) The authorized and outstanding capital stock of the Trust is as set forth under the caption "Capitalization" in the Prospectus; and the authorized capital stock of the Trust conforms in all material respects as to legal matters to the description thereof contained in the Prospectus under the caption "Description of Capital Structure";
(iv) All the shares of beneficial interest of the Trust outstanding prior to the issuance of the Shares have been duly authorized and validly issued by the Trust, and are fully paid and nonassessable;
(v) The Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued by the Trust, fully paid and nonassessable and free of any preemptive, or to the best knowledge of such counsel after reasonable inquiry, similar rights that entitle or will entitle any person to acquire any Shares upon the issuance thereof by the Trust, and will conform to the description thereof contained in the Prospectus under the caption "Description of Preferred Shares";
(vi) The form of certificates for the Shares conforms to the requirements of Massachusetts law;
(vii) The Registration Statement and all post-effective
amendments, if any, have become effective under the 1933 Act and the
1933 Act Rules and Regulations and, to the best knowledge of such
counsel after reasonable inquiry, no stop order suspending the
effectiveness of the Registration Statement or order pursuant to
Section 8(e) of the 1940 Act has been issued and no proceedings for
that purpose are pending before or contemplated by the Commission; and
any required filing of the Prospectus pursuant to Rule 497 of the 1933
Act Rules and Regulations has been made in accordance with Rule 497;
(viii) The Trust has business trust power and authority to enter into this Agreement and each of the Trust Agreements and to issue, sell and deliver the Shares to the Underwriters as provided herein, and this Agreement and each of the Trust Agreements have been duly authorized, executed and delivered by the Trust and each is a valid, legal and binding agreement of the Trust, enforceable against the Trust in accordance with its terms, except as enforcement of rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Trust's obligations hereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles;
(ix) (A) The Trust is not in violation of the Declaration, including the Certificate, or Bylaws, or other organizational documents, and (B) based upon a certificate executed by officers of the Trust delivered to us, is not in default in the performance of any material obligation, agreement or condition contained in any bond, debenture, note or other evidence of indebtedness, except as may be disclosed in the Prospectus;
(x) Neither the offer, sale or delivery of the Shares, the execution, delivery or performance of this Agreement and in the Trust Agreements by the Trust, compliance by the Trust with the provisions hereof or thereof nor consummation by the Trust of the transactions contemplated hereby and the Trust Agreements constitutes or will constitute a breach of, or a default under, the
Declaration, including the Certificate, or Bylaws, or other organizational documents, of the Trust or any agreement, indenture, lease or other instrument to which the Trust is a party or by which it or any of its properties is bound that is an exhibit to the Registration Statement, nor will any such action result in any violation of any existing law, regulation, ruling (assuming compliance with all applicable state securities or blue sky laws), judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Trust or any of its properties;
(xi) No consent, approval, authorization or other order of, or registration or filing with, the Commission, the NASD, any national securities exchange, or, to counsel's knowledge, any state securities commission, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Trust (except such as may have been obtained prior to the date hereof and such as may be required for compliance with the state securities or blue sky laws of various jurisdictions) for the valid issuance and sale of the Shares to the Underwriters as contemplated by this Agreement, the execution, delivery and performance by the Trust of this Agreement and the Trust Agreements or the consummation of the transactions contemplated hereby and thereby;
(xii) The 1940 Act Notification, the Registration Statement, the Prospectus and any supplements or amendments thereto (except for the financial statements and the notes thereto and the schedules and other financial and statistical data included therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the 1933 Act, the 1940 Act and the Rules and Regulations;
(xiii) Based upon a certificate executed by officers of the Trust delivered to us, (A) other than as described or contemplated in the Registration Statement or Prospectus (or any amendment or supplement thereto), there are no legal or governmental proceedings pending or threatened against the Trust, or to which the Trust or any of its properties is subject, which are required to be described in the Registration Statement or Prospectus (or any amendment or supplement to either of them) and (B) there are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement thereto) or to be filed as an exhibit to the Registration Statement that are not described or filed as required, as the case may be;
(xiv) The statements in the Registration Statement and Prospectus, insofar as they (A) are descriptions of contracts, agreements or other legal documents, or (B) refer to statements of law or legal conclusions, are accurate and present fairly the information required to be shown;
(xv) Each of the Trust Agreements complies in all material respects with all applicable provisions of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and Regulations and the Advisers Act Rules and Regulations, except as to rights of indemnity and contribution;
(xvi) The Trust is duly registered with the Commission under the 1940 Act and the 1940 Act Rules and Regulations as a closed-end, diversified management investment company and, to such counsel's best knowledge after reasonable inquiry, no order of suspension or revocation of such registration under the 1940 Act and the 1940 Act Rules and Regulations has been issued or proceedings therefor initiated or threatened by the Commission; the provisions of the Declaration, including the Certificate, and Bylaws comply as to form in all material respects with the applicable provisions of the 1940 Act and the 1940 Act Rules and Regulations, the provisions of the Declaration, including the Certificate, and Bylaws and the investment policies and restrictions described in the Registration Statement and the Prospectus under the captions "Investment Objective and Policies", "Risk Factors", "Additional Information About Investments and Investment Techniques" and "Investment Restrictions" (in the Prospectus and the statement of additional information) comply in all material respects with the requirements of the 1940 Act, and all action has been taken by the Trust as is required of the Trust by the 1933 Act and the 1940 Act and the Rules and Regulations in connection with the issuance and sale of the Shares to make the public offering and consummate the sale of the Shares as contemplated by this Agreement;
(xvii) Except as described in the Prospectus, there are no outstanding options, warrants or other rights calling for the issuance of, and such counsel does not know of any commitment, plan or arrangement to issue, any shares of beneficial interest of the Trust or any security convertible into or exchangeable or exercisable for shares of beneficial interest of the Trust;
(xviii) Except as described in the Prospectus, such counsel does not know of any holder of any security of the Trust or any other person who has the right, contractual or otherwise, to cause the Trust to sell or otherwise issue to them, or to permit them to underwrite the sale of, the Shares or the right to have any securities of the Trust included in the registration statement or the right, as a result of the filing of the registration statement, to require registration under the 1933 Act of any securities of the Trust;
(xix) If the Trust operates as described in the Prospectus, the Trust will qualify as a regulated investment company under the Code; and
(xx) Such counsel shall also state that, while they have not themselves checked the accuracy and completeness of or otherwise verified, and are not passing upon and assume no responsibility for the accuracy or completeness of, the statements contained in the Registration Statement or the Prospectus, except to
the limited extent stated in paragraphs (iii), (xiv) and (xvi) above, in the course of their review and discussion of the contents of the Registration Statement and Prospectus with certain officers and employees of the Trust and its independent accountants, no facts have come to their attention which cause them to believe that the Registration Statement or any amendment or supplement thereto (except as to any financial statements or other financial data included in the Registration Statement or any such amendment or supplement, as to which they express no belief), as of its effective date, 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 contained therein not misleading or that the Prospectus or any amendment or supplement thereto (except as to any financial statements or other financial data included in the Prospectus or any such amendment or supplement, as to which they express no belief), as of its issue date and as of the Closing Date, 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 contained therein, in the light of the circumstances under which they were made, not misleading.
Such counsel may state in its opinion letter that "[O]ur opinion
is limited solely to those laws, rulings and regulations that are
normally applicable to transactions of the type contemplated by the
Underwriting Agreement by closed-end management investment companies
registered under the 1940 Act, and to Massachusetts law with respect
to the matters covered by paragraphs (i)(A), (iii), (iv), (v), (vi)
and (viii). Moreover, the opinions given under paragraphs (ix)(B) and
(xiii) are based solely upon the receipt of a certificate signed by
officers of the Trust attesting to the statements made therein."
(e) The Underwriters shall have received on the Closing Date an opinion of Bryan Cave LLP, counsel for the Adviser, dated the Closing Date and addressed to you, in form and substance satisfactory to you and to the effect that:
(i) The Adviser is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each of the following jurisdictions: Arizona and California;
(ii) The Adviser is duly registered with the Commission as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules and Regulations from acting under the Investment Management Agreement for the Trust as contemplated by the Prospectus (or any amendment or supplement thereto); and, to such counsel's knowledge, no order of suspension or revocation of such registration under the Advisers Act and the Advisers Act Rules and
Regulations has been issued or proceedings therefor initiated or threatened by the Commission;
(iii) The Adviser has corporate power and authority to enter into this Agreement and the Investment Management Agreement, and this Agreement and the Investment Management Agreement have been duly authorized, executed and delivered by the Adviser and each is a valid, legal and binding agreement of the Adviser, enforceable against the Adviser in accordance with its terms except as enforcement of rights to indemnity and contribution hereunder may be limited by Federal or state securities laws or principles of public policy and subject to the qualification that the enforceability of the Adviser's obligations hereunder may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors' rights generally and by general equitable principles;
(iv) Neither the execution, delivery or performance of this Agreement or the Investment Management Agreement by the Adviser, compliance by the Adviser with the provisions hereof or thereof nor consummation by the Adviser of the transactions contemplated hereby and by the Investment Management Agreement conflicts or will conflict with, or constitutes or will constitute a breach of or default under, the certificate of incorporation or bylaws, or other organizational documents, of the Adviser or any agreement, indenture, lease or other instrument to which the Adviser is a party or by which it or any of its properties is bound that is known to such counsel, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Adviser, nor will any such action result in any violation of any existing law, regulation, ruling, judgment, injunction, order or decree known to such counsel after reasonable inquiry, applicable to the Adviser or any of its properties;
(v) No consent, approval, authorization or other order of, or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency, or official is required on the part of the Adviser for the execution, delivery and performance by it of this Agreement and the Investment Management Agreement or the consummation by it of the transactions contemplated hereby and thereby;
(vi) To the best knowledge of such counsel after reasonable inquiry, there are no legal or governmental proceedings pending or threatened against the Adviser or to which the Adviser or any of its properties is subject, which are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement to either of them) but are not described as required or which may reasonably be expected to involve a prospective material adverse change on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement;
(vii) The obligations of the Adviser under this Agreement and the Investment Management Agreement comply in all material respects with all applicable provisions of the 1940 Act, the 1940 Act Rules and Regulations, the Advisers Act and the Advisers Act Rules and Regulations, except as to rights of indemnity and contribution; and
(viii) Such counsel shall also state that, while they have not checked or verified the accuracy and completeness of, and are not passing upon and assume no responsibility for the accuracy and completeness of, any statements in the Registration Statement or the Prospectus, no facts have come to their attention in the course of their representation of the Adviser which cause them to believe that the description of the Adviser contained in the Registration Statement (and any amendment or supplement thereto), as of its effective date, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading or that the description of the Adviser contained in the Prospectus or any amendment or supplement thereto, as of its issue date and as of the Closing Date, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading.
(f) The Underwriters shall have received on the Closing Date an opinion of Simpson Thacher & Bartlett, counsel for the Underwriters, dated the Closing Date and addressed to you, with respect to such matters as you may reasonably request. It is agreed that Simpson Thacher & Bartlett may rely on the opinions of Dechert contained in Sections 9(d)(i)(A), 9(d)(v), 9(d)(viii) and 9(d)(xiv)(B) of this Agreement to the extent those opinions relate to or are dependent upon matters governed by the laws of the State of Massachusetts.
(g) The Underwriters shall have received letters addressed to you, dated the date hereof and the Closing Date, from KPMG LLP, independent certified public accountants, substantially in the forms heretofore approved by you.
(h) (i) No order suspending the effectiveness of the registration statement or the Registration Statement or prohibiting or suspending the use of the Prospectus (or any amendment or supplement thereto) or any Prepricing Prospectus or any sales material shall have been issued and no proceedings for such purpose or for the purpose of commencing an enforcement action against the Trust, the Adviser or, with respect to the transactions contemplated by the Prospectus (or any amendment or supplement thereto) and this Agreement, the Underwriters, may be pending before or, to the knowledge of the Trust, the Adviser or the Underwriters or in the reasonable view of counsel to the Underwriters, shall be threatened or contemplated by the Commission at or prior to the Closing Date and that any request for additional information on the part of the Commission (to be included in the Registration Statement, the Prospectus or otherwise) be complied with to the satisfaction of the Underwriters; (ii) there shall not have been any change in the capital stock of the Trust nor any material increase in the short-term or long-term debt of the Trust (other than in the ordinary course of business) from that set forth or contemplated in the Registration Statement or the Prospectus (or any amendment or supplement
thereto); (iii) there shall not have been, subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), except as may otherwise be stated in the Registration Statement and Prospectus (or any amendment or supplement thereto), any material adverse change in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Trust or the Adviser; (iv) the Trust shall not have any liabilities or obligations, direct or contingent (whether or not in the ordinary course of business), that are material to the Trust, other than those reflected in the Registration Statement or the Prospectus (or any amendment or supplement to either of them); and (v) all the representations and warranties of the Trust and the Adviser contained in this Agreement shall be true and correct on and as of the date hereof and on and as of the Closing Date as if made on and as of the Closing Date, and the Underwriters shall have received a certificate of the Trust and the Adviser, dated the Closing Date and signed by the chief executive officer and the chief financial officer of each of the Trust and the Adviser (or such other officers as are acceptable to the Underwriters), to the effect set forth in this Section 9(h) and in Section 9(i) hereof.
(i) That neither the Trust nor the Adviser shall have failed at or prior to the Closing Date to have performed or complied in all material respects with any of its agreements herein contained and required to be performed or complied with by it hereunder at or prior to the Closing Date.
(j) The Trust shall have delivered and the Underwriters shall have received evidence satisfactory to the Underwriters that each series of Shares are rated 'aaa' by Moody's and 'AAA' by S&P as of the Closing Date, and there shall not have been given any notice of any intended or potential downgrading, or of any review for a potential downgrading, in the rating accorded to the shares of each series of the Shares by either Rating Agency.
(k) The Trust and the Adviser shall have furnished or caused to be furnished to you such further certificates and documents as you shall have reasonably requested.
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 Underwriters and the Underwriters' counsel.
Any certificate or document signed by any officer of the Trust or the Adviser and delivered to the Underwriters, or to counsel for the Underwriters, shall be deemed a representation and warranty by the Trust or the Adviser to the Underwriters as to the statements made therein.
10. EXPENSES. The Trust agrees to pay the following costs and expenses and all other costs and expenses incident to the performance by it of its obligations hereunder: (i) the preparation, printing or reproduction, and filing with the Commission of the registration statement (including financial statements and exhibits thereto), each Prepricing Prospectus, the Prospectus and each amendment or supplement to any of them (including, without limitation, the filing fees prescribed by the 1933 Act, the 1940 Act and the Rules and Regulations); (ii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, each Prepricing Prospectus, the Prospectus, any sales material and all amendments or supplements to any of them as may be reasonably requested for use in connection with the offering and sale of the Shares; (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Shares, including any stamp taxes in connection with the original issuance and sale of the Shares; (iv) the reproduction and delivery of this Agreement, any dealer agreements, the preliminary blue sky memorandum and all other agreements or documents reproduced and delivered in connection with the offering of the Shares; (v) the reasonable fees, expenses and disbursements of counsel for the Underwriters relating to the preparation, reproduction, and delivery of the preliminary blue sky memorandum; (vi) fees paid to the Rating Agencies; (vii) the transportation and other expenses incurred by or on behalf of Trust representatives in connection with presentations to prospective purchasers of the Shares; and (viii) the fees and expenses of the Trust's accountants and the fees and expenses of counsel (including local and special counsel) for the Trust and of the transfer agent.
11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the Trust,
by notifying the Underwriters, or by the Underwriters, by notifying the Trust.
If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase hereunder on the Closing Date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters are obligated but fail or refuse to purchase is not more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date, each non-defaulting Underwriter shall be obligated, severally, in the proportion which the number of Shares set forth opposite its name in Schedule I hereto bears to the aggregate number of Shares set forth opposite the names of all non-defaulting Underwriters or in such other proportion as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters are obligated, but fail or refuse, to purchase. If any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they are obligated to purchase on the Closing Date and the aggregate number of Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date and arrangements satisfactory to you and the Trust for the purchase of such Shares by one or more non-defaulting Underwriters or other party or parties approved by you and the Trust are not made within 36
hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter, the Trust or the Adviser. In any such case which does not result in termination of this Agreement, either you or the Trust shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any such default of any such Underwriter under this Agreement. The term "Underwriter" as used in this Agreement includes, for all purposes of this Agreement, any party not listed in Schedule I hereto who, with your approval and the approval of the Trust, purchases Shares which a defaulting Underwriter is obligated, but fails or refuses, to purchase.
Any notice under this Section 11 may be given by telegram, telecopy or telephone but shall be subsequently confirmed by letter.
12. TERMINATION OF AGREEMENT. This Agreement shall be subject to termination in the Underwriters' absolute discretion, without liability on the part of any Underwriter to the Trust or the Adviser, by notice to the Trust or the Adviser, if prior to the Closing Date (i) trading in the Shares or the Trust's common shares of beneficial interest or securities generally on the NYSE shall have been suspended or materially limited or minimum prices shall have been established on the NYSE, (ii) a general moratorium on commercial banking activities in New York shall have been declared by either federal or state authorities, or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other international or domestic calamity, crisis or change in political, financial or economic conditions, the effect of which on the financial markets of the United States is to make it, in your judgment, impracticable or inadvisable to commence or continue the offering of the Shares at the offering price to the public set forth on the cover page of the Prospectus or to enforce contracts for the resale of the Shares by the Underwriters. Notice of such termination may be given to the Trust by telegram, telecopy or telephone and shall be subsequently confirmed by letter.
13. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth in the last paragraph on the cover page and the statements in the third and fifth paragraphs under the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute the only information furnished by or on behalf of the Underwriters through you as such information is referred to in Sections 6(b) and 8 hereof.
14. MISCELLANEOUS. Except as otherwise provided in Sections 5, 11 and 12 hereof, notice given pursuant to any provision of this Agreement shall be in writing and shall be delivered (i) if to the Trust or the Adviser, at the office of the Trust at 7337 E. Doubletree Ranch Rd., Scottsdale, Arizona 85258-2034, Attention: Daniel A. Norman, Senior Vice President; or (ii) if to the Underwriters, to Salomon Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the Underwriters, the Trust, the Adviser, their trustees, directors and officers, and the other controlling persons
referred to in Section 8 hereof and their respective successors and assigns, to the extent provided herein, and no other person shall acquire or have any right under or by virtue of this Agreement. Neither the term "successor" nor the term "successors and assigns" as used in this Agreement shall include a purchaser from the Underwriters of any of the Shares in his status as such purchaser.
Consistent with the Trust's Declaration, notice is hereby given and the parties hereto acknowledge and agree that this Agreement is executed on behalf of the trustees of the Trust as trustees and not individually and that obligations of this Agreement are not binding upon any of the trustees or shareholders of the Trust individually but are binding only against the assets and property of the Trust.
15. APPLICABLE LAW: COUNTERPARTS. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
This Agreement may be signed in various counterparts, which together constitute one and the same instrument. If signed in counterparts, this Agreement shall not become effective unless at least one counterpart hereof shall have been executed and delivered on behalf of each party hereto.
Please confirm that the foregoing correctly sets forth the agreement among the Trust, the Adviser and the several Underwriters.
Very truly yours,
PILGRIM PRIME RATE TRUST
Title:
ING PILGRIM INVESTMENTS, INC.
Title:
Confirmed as of the date first above
mentioned on behalf of themselves
and the other several Underwriters
named in Schedule I hereto.
SALOMON SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
LEHMAN BROTHERS INC.
GRUNTAL & CO., L.L.C.
By: SALOMON SMITH BARNEY INC.
By: /s/ Robert F. Bush, Jr ----------------------------- Name: Robert F. Bush, Jr Title: Director |
Please confirm that the foregoing correctly sets forth the agreement among the Trust, the Adviser and the several Underwriters.
Very truly yours,
PILGRIM PRIME RATE TRUST
By: /s/ Daniel A. Norman ---------------------------------- Name: DANIEL A. NORMAN Title: SENIOR VICE PRESIDENT |
ING PILGRIM INVESTMENTS, INC.
By: /s/ Daniel A. Norman ---------------------------------- Name: DANIEL A. NORMAN Title: SENIOR VICE PRESIDENT |
Confirmed as of the date first above
mentioned on behalf of themselves
and the other several Underwriters
named in Schedule I hereto.
SALOMON SMITH BARNEY INC.
PAINEWEBBER INCORPORATED
LEHMAN BROTHERS INC.
GRUNTAL & CO., L.L.C.
By: SALOMON SMITH BARNEY INC.
SCHEDULE I
PILGRIM PRIME RATE TRUST
NUMBER OF UNDERWRITER SHARES ----------- --------- Salomon Smith Barney Inc. 2,160 Series M, 2,160 Series W 2,160 Series F PaineWebber Incorporated 1,080 Series M 1,080 Series W 1,080 Series F Lehman Brothers Inc. 180 Series M 180 Series W 180 Series F 180 Series M Gruntal & Co., L.L.C. 180 Series W 180 Series F -------------- Total 3,600 Series M 3,600 Series W 3,600 Series F |
Exhibit 99.(j)(i)
CUSTODIAN AND INVESTMENT ACCOUNTING AGREEMENT
This Agreement is made effective the 1st day of November, 2001, by and between EACH OF THE FUNDS SET FORTH ON EXHIBIT A HERETO, each a business trust or corporation organized and existing under the laws of the jurisdiction listed on Exhibit A (each a "FUND"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company ("STATE STREET"),
WITNESSETH:
WHEREAS, Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets; and
WHEREAS, Fund intends that this Agreement be applicable to each of its series existing on the date hereof (such series together with all other series subsequently established by Fund and made subject to this Agreement in accordance with Section 16.2, be referred to herein as the "PORTFOLIO(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter contained, the parties hereto agree as follows:
SECTION 1 APPOINTMENT OF STATE STREET AS CUSTODIAN AND RECORDKEEPING AGENT. Fund hereby appoints State Street as the custodian of the assets of the Portfolios, including securities that Fund, on behalf of the applicable Portfolio, desires to be held in places within the United States ("DOMESTIC SECURITIES") and securities it desires to be held outside the United States ("FOREIGN SECURITIES"). Fund, on behalf of the Portfolio(s), agrees to deliver to State Street all securities and cash of the Portfolios, and all payments of income, payments of principal or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such new or treasury shares of beneficial interest of Fund representing interests in the Portfolios ("SHARES") as may be issued or sold from time to time. State Street shall not be responsible for any property of a Portfolio held or received by the Portfolio and not delivered to State Street.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in Section 6 hereof), State Street shall on behalf of the applicable Portfolio(s) from time to time appoint one or more sub-custodians located in the United States, but only in accordance with an applicable vote by the Board of Trustees or Directors of Fund (the "BOARD") on behalf of the applicable Portfolio(s). State Street may appoint as sub-custodian for Fund's foreign securities on behalf of the applicable Portfolio(s) the foreign banking institutions and foreign securities depositories designated in Schedules A and B hereto, but only in accordance with the applicable provisions of Sections 3 and 4. State Street shall have the same responsibility or liability to Fund on account of any actions or omissions of any sub-custodian so appointed that State Street would have if State Street had not retained such sub-custodian.
Fund hereby appoints State Street as agent to perform certain investment accounting and recordkeeping functions relating to portfolio transactions required of a duly registered investment company under Rule 31a of the Investment Company Act of 1940, as amended and the rules promulgated thereunder, including without limitation Rules 31a-1, 31a-2 and 31a-3 (the
"1940 ACT") and to calculate the net asset value of the Portfolio(s) in accordance with the provisions of Section 9 hereof.
SECTION 2 DUTIES OF STATE STREET WITH RESPECT TO PROPERTY OF FUND HELD BY STATE STREET IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. State Street shall hold and physically segregate for the account of each Portfolio all non-cash property to be held by it in the United States, including all domestic securities other than securities which are maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a "U.S. SECURITIES SYSTEM").
SECTION 2.2 DELIVERY OF SECURITIES. State Street shall release and deliver domestic securities held by State Street or in a U.S. Securities System account of State Street only upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof;
4) To the depository agent in connection with tender or other similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to State Street;
6) To the issuer thereof, or its agent, for transfer into the name of
the Portfolio or into the name of any nominee(s) of State Street or
into the name or nominee name of any agent appointed pursuant to
Section 2.7 or into the name or nominee name of any sub-custodian
appointed pursuant to Section 1; or for exchange for a different
number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; PROVIDED that, in any
such case, the new securities are to be delivered to State Street;
7) Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with "street delivery" custom; provided that in any such case, State Street shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from State Street's own negligence or willful misconduct;
8) For exchange or conversion pursuant to any corporate action, including without limitation, any calls for redemption, tender or exchange offers, declarations, record and payment dates and amounts of any dividends or income, plan of merger, consolidation, recapitalization, reorganization, readjustment, split-up of shares, changes of par value, or conversion ("CORPORATE ACTION") of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to State Street;
9) In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to State Street;
10) For delivery in connection with any loans of securities made by the Portfolio, BUT ONLY against receipt of adequate collateral as agreed upon from time to time by State Street and Fund on behalf of the Portfolio, which may be in the form of cash or obligations issued by the United States government, its agencies or instrumentalities, except that in connection with any loans for which collateral is to be credited to State Street's account in the book-entry system authorized by the U.S. Department of the Treasury, State Street will not be held liable or responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral;
11) For delivery as security in connection with any borrowing by Fund on behalf of the Portfolio requiring a pledge of assets by Fund, BUT ONLY against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among Fund on behalf of the Portfolio, State Street and a broker-dealer registered under the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio;
13) For delivery in accordance with the provisions of any agreement among Fund on behalf of the Portfolio, State Street, and a futures commission merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission ("CFTC") and/or any contract market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Portfolio;
14) Upon receipt of instructions from the transfer agent for Fund (the "TRANSFER AGENT") for delivery to such Transfer Agent or to the holders of Shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information related to the Portfolio (the "PROSPECTUS"), in satisfaction of requests by holders of Shares for repurchase or redemption; and
15) For any other purpose, BUT ONLY upon receipt of Proper Instructions on behalf of the applicable Portfolio specifying the securities to be delivered and naming the person or persons to whom delivery of such securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities (other than
bearer securities) shall be registered in the name of the Portfolio or in the
name of any nominee of Fund on behalf of the Portfolio or of State Street which
nominee shall be assigned exclusively to the Portfolio, UNLESS Fund has
authorized in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment advisor as the
Portfolio, or in the name or nominee name of any agent appointed pursuant to
Section 2.7 or in the name or nominee name of any sub-custodian appointed
pursuant to Section 1. All securities accepted by State Street under the terms
hereof shall be in "street name" or other good delivery form. If, however, Fund
directs State Street to maintain securities in "street name", State Street shall
continuously utilize its best efforts to timely collect income due Fund on such
securities and to notify Fund on a best efforts basis only of relevant
information regarding securities such as maturities and pendency of calls and
Corporate Actions.
SECTION 2.4 BANK ACCOUNTS. State Street shall open and maintain a separate bank account or accounts in the United States in the name of each Portfolio, subject only to draft or order by State Street acting pursuant hereto, and shall hold in such account or accounts, subject to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in an account established and used in accordance with Rule 17f-3 under the 1940 Act. Funds held by State Street for a Portfolio may be deposited by it to its credit as custodian in the banking department of State Street or in such other banks or trust companies as it may in its discretion deem necessary or desirable; PROVIDED, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be approved by vote of a majority of the Board. Such funds shall be deposited by State Street in its capacity as custodian and shall be withdrawable by State Street only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, State Street shall collect on a timely basis all income and other payments with respect to registered domestic securities to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by State Street or its agent thereof and shall credit such income, as collected, to such Portfolio's custodian account. Without limiting the generality of the foregoing, State Street shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of Fund. State Street will have no duty or responsibility in connection therewith, other than to provide Fund with such information or data as may be necessary to assist Fund in arranging for the timely delivery to State Street of the income to which the Portfolio is properly entitled.
SECTION 2.6 PAYMENT OF PORTFOLIO MONIES. Except to the extent that Section 4.4.2 applies, upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be
continuing instructions when deemed appropriate by the parties, State Street shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to State Street (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and has been
designated by State Street as its agent for this purpose) registered
in the name of the Portfolio or in the name of a nominee of State
Street referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a U.S.
Securities System, in accordance with the conditions set forth in
Section 2.8 hereof; (c) in the case of repurchase agreements entered
into between Fund on behalf of the Portfolio and State Street, or
another bank, or a broker-dealer which is a member of NASD, (i)
against delivery of the securities either in certificate form or
through an entry crediting State Street's account at the Federal
Reserve Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities owned by
State Street along with written evidence of the agreement by State
Street to repurchase such securities from the Portfolio; or (d) for
transfer to a time deposit account of Fund in any bank, whether
domestic or foreign; such transfer may be effected prior to receipt
of a confirmation from a broker and/or the applicable bank pursuant
to Proper Instructions ;
2) In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued as set forth in
Section 5 hereof;
4) For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest, taxes, management, accounting, transfer agent and legal fees, and operating expenses of Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant to the Declaration of Trust, Articles of Incorporation, Bylaws or other governing documents of Fund (collectively, the "GOVERNING DOCUMENTS");
6) For payment of the amount of dividends received in respect of securities sold short; and
7) For any other purpose, BUT ONLY upon receipt of Proper Instructions on behalf of the Portfolio specifying the amount of such payment and naming the person or persons to whom such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. State Street may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under the 1940 Act to act as a custodian, as its agent to carry out such of the provisions
of this Section 2 as State Street may from time to time direct; PROVIDED, however, that the appointment of any agent shall not relieve State Street of its responsibilities or liabilities hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. State Street may deposit and/or maintain securities owned by a Portfolio in a U.S. Securities System subject to the following provisions:
1) State Street may keep securities of the Portfolio in a U.S. Securities System provided that such securities are represented in an account of State Street in the U.S. Securities System (the "U.S. SECURITIES SYSTEM ACCOUNT") which account shall not include any assets of State Street other than assets held as a fiduciary, custodian or otherwise for customers;
2) The records of State Street with respect to securities of the Portfolio which are maintained in a U.S. Securities System shall identify by book-entry those securities belonging to the Portfolio;
3) State Street shall pay for securities purchased for the account of the Portfolio upon (i) receipt of advice from the U.S. Securities System that such securities have been transferred to the U.S. Securities System Account, and (ii) the making of an entry on the records of State Street to reflect such payment and transfer for the account of the Portfolio. State Street shall transfer securities sold for the account of the Portfolio upon (i) receipt of advice from the U.S. Securities System that payment for such securities has been transferred to the U.S. Securities System Account, and (ii) the making of an entry on the records of State Street to reflect such transfer and payment for the account of the Portfolio. Copies of all advices from the U.S. Securities System of transfers of securities for the account of the Portfolio shall identify the Portfolio, be maintained for the Portfolio by State Street and be provided to Fund at its request. Upon request, State Street shall furnish Fund on behalf of the Portfolio confirmation of each transfer to or from the account of the Portfolio in the form of a written advice or notice and shall furnish to Fund on behalf of the Portfolio copies of daily transaction sheets reflecting each day's transactions in the U.S. Securities System for the account of the Portfolio;
4) State Street shall provide Fund with any report obtained by State Street on the U.S. Securities System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the U.S. Securities System;
5) Anything to the contrary herein notwithstanding, State Street shall be liable to Fund for the benefit of the Portfolio for any loss or damage to the Portfolio resulting from use of the U.S. Securities System by reason of any negligence, misfeasance or misconduct of State Street or any of its agents or of any of its their employees or from failure of State Street or any such agent to enforce effectively such rights as it may have against the U.S. Securities System; at the election of Fund, it shall be entitled to be subrogated to the rights of State Street with respect to any claim against the U.S. Securities System or any other person which State
Street may have as a consequence of any such loss or damage if and to the extent that the Portfolio has not been made whole for any such loss or damage.
SECTION 2.9 SEGREGATED ACCOUNT. State Street shall upon receipt of Proper Instructions on behalf of each applicable Portfolio establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by State Street pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any agreement among Fund on behalf of the Portfolio, State Street and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the CFTC or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Portfolio, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Portfolio or commodity futures contracts or options thereon purchased or sold by the Portfolio, (iii) for the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the "SEC"), or interpretative opinion of the staff of the SEC, relating to the maintenance of segregated accounts by registered investment companies, and (iv) for any other purpose upon receipt of Proper Instructions on behalf of the applicable Portfolio.
SECTION 2.10 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. State Street shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to domestic securities of each Portfolio and in connection with transfers of securities.
SECTION 2.11 PROXIES. State Street shall, with respect to domestic securities, cause to be promptly executed by the registered holder of such securities, if the securities are registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Portfolio such proxies, all proxy soliciting materials and all notices relating to such securities.
SECTION 2.12 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject to the provisions of Section 2.3, State Street shall transmit promptly to Fund for each Portfolio all written information received by State Street from issuers of the securities being held for the Portfolio with respect to Corporate Actions, notices of exercise of call and put options written by Fund on behalf of the Portfolio, and the maturity of futures contracts purchased or sold by the Portfolio. With respect to tender or exchange offers, State Street shall transmit promptly to the Portfolio all written information received by State Street from issuers of the securities whose tender or exchange is sought and from the party (or its agents) making the tender or exchange offer. If the Portfolio desires to take action with respect to any Corporate Action, the Portfolio shall provide Proper Instruction to State Street at least three business days prior to the date on which State Street is to take such action.
SECTION 3 PROVISIONS RELATING TO RULES 17F-5 AND 17F-7
SECTION 3.1 DEFINITIONS. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
"Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country. "Country Risk" does not include the risk that State Street or any sub-custodian or agent will be negligent or will engage in willful misconduct.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC, or a foreign branch of a Bank (as defined in section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository.
"Eligible Securities Depository" has the meaning set forth in section (b)(1) of Rule 17f-7.
"Foreign Assets" means any of the Portfolios' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios' transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(3) of Rule 17f-5.
"Rule 17f-5" means Rule 17f-5 promulgated under the 1940 Act.
"Rule 17f-7" means Rule 17f-7 promulgated under the 1940 Act.
SECTION 3.2 STATE STREET AS FOREIGN CUSTODY MANAGER.
3.2.1 DELEGATION TO STATE STREET AS FOREIGN CUSTODY MANAGER. Fund, by
resolution adopted by its Board, hereby delegates to State Street, subject
to section (b) of Rule 17f-5, the responsibilities set forth in this
Section 3.2 with respect to Foreign Assets held outside the United States,
and State Street hereby accepts such delegation as Foreign Custody Manager
with respect to the Portfolios.
3.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A, which list of countries may be amended from time to time by Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Portfolios, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the
fulfillment by Fund, on behalf of the Portfolios, of the applicable account
opening requirements for such country, the Foreign Custody Manager shall be
deemed to have been delegated by the Board on behalf of the Portfolios
responsibility as Foreign Custody Manager with respect to that country and
to have accepted such delegation. Execution hereof by Fund shall be deemed
(i) to be a Proper Instruction to open an account, or to place or maintain
Foreign Assets, in each country listed on Schedule A in which State Street
has previously placed or currently maintains Foreign Assets pursuant to the
terms of the contract governing the custody arrangement (the parties
agreeing that the countries in which the Custodian has previously
maintained or currently maintains Foreign Assets are listed on Schedule B)
and (ii) to be a delegation by the Board on behalf of the Portfolios to the
Custodian of responsibility as Foreign Custody Manager with respect to the
countries listed on Schedule B and the acceptance by the Custodian of such
delegation. Following the receipt of Proper Instructions directing the
Foreign Custody Manager to close the account of a Portfolio with the
Eligible Foreign Custodian selected by the Foreign Custody Manager in a
designated country, the delegation by the Board on behalf of the Portfolios
to State Street as Foreign Custody Manager for that country shall be deemed
to have been withdrawn and State Street shall use commercially reasonable
efforts to effect the closing of such account and to cease to be the
Foreign Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to Fund. Thirty days (or such longer period to which the parties agree in writing) after receipt of any such notice by Fund, State Street shall have no further responsibility in its capacity as Foreign Custody Manager to Fund with respect to the country as to which State Street's acceptance of delegation is withdrawn.
3.2.3 SCOPE OF DELEGATED RESPONSIBILITIES:
(a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1).
(b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
(c) MONITORING. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall in accordance with Rule 17f-
5(c)(3)(1), establish a system to monitor (i) the appropriateness of
maintaining the Foreign Assets with such Eligible Foreign Custodian and
(ii) the contract governing the custody arrangements established by the
Foreign Custody Manager with the Eligible Foreign Custodian. In the event
the Foreign Custody Manager determines that the custody arrangements with
an Eligible Foreign Custodian it has selected are no longer appropriate,
the Foreign Custody Manager shall notify the Board in accordance with
Section 3.2.5 hereunder.
3.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which State Street is serving as Foreign Custody Manager of the Portfolios.
3.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian not previously reported to the Board by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the occurrence of the material change.
3.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.
3.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign Custody
Manager represents to Fund that (i) it is a U.S. Bank as defined in section
(a)(7) of Rule 17f-5 (ii) that each institution listed on Schedule A is an
Eligible Foreign Custodian and (iii) each institution listed in Schedule B
is an Eligible Securities Depository. Fund represents to State Street that
the Board has determined that it is reasonable for the Board to rely on
State Street to perform the responsibilities delegated pursuant hereto to
State Street as the Foreign Custody Manager of the Portfolios.
3.2.8 EFFECTIVE DATE AND TERMINATION OF STATE STREET AS FOREIGN CUSTODY MANAGER. The Board's delegation to State Street as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of State Street as Foreign Custody Manager of the Portfolios with respect to designated countries.
SECTION 3.3 ELIGIBLE SECURITIES DEPOSITORIES.
3.3.1 ANALYSIS AND MONITORING. State Street shall (a) provide Fund (or its duly-authorized investment manager, investment advisor or sub-adviser, where applicable)
with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify Fund (or its duly-authorized investment manager, investment advisor or sub-adviser, where applicable) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2 STANDARD OF CARE. State Street agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1.
SECTION 4 DUTIES OF STATE STREET WITH RESPECT TO PROPERTY HELD OUTSIDE THE UNITED STATES
SECTION 4.1 DEFINITIONS. As used throughout this Agreement, the capitalized terms set forth below shall have the indicated meanings:
"Foreign Securities System" means an Eligible Securities Depository listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian.
SECTION 4.2 HOLDING SECURITIES. State Street shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. State Street may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to State Street for the benefit of its customers, provided however, that (i) the records of State Street with respect to foreign securities which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, State Street shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3 FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by State Street or a Foreign Sub-Custodian, as applicable, in such country. (Foreign Securities Systems and U.S. Securities Systems are collectively referred to herein as "SECURITIES SYSTEMS").
SECTION 4.4 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS. State Street or a Foreign Sub-Custodian shall release and deliver foreign securities held by State Street or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions on behalf of the Applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign
securities are held or traded, including, without limitation: (A) delivery against reasonable expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign securities;
(iii) to the depository agent in connection with tender or other similar offers for foreign securities;
(iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of State Street (or the name of the respective Foreign Sub-Custodian or of any nominee of State Street or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any Corporate Actions or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin in accordance with applicable regulatory requirements;
(xi) in connection with the lending of foreign securities by the Portfolio; and
(xii) for any other purpose, but only upon receipt of Proper Instructions specifying the foreign securities to be delivered and naming the person or persons to whom delivery of such securities shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES - FOREIGN SECURITIES. Upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, State Street shall pay out, or direct the
respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against reasonable expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of foreign securities;
(iii) for the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees hereunder, legal fees, accounting fees, and other operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through State Street or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(vi) for payment of part or all of the dividends received in respect of securities sold short;
(vii) in connection with the borrowing or lending of foreign securities; and
(viii) for any other purpose, but only upon receipt of Proper Instructions specifying the amount of such payment and naming the person or persons to whom such payment is to be made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision hereof to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.
State Street shall provide each Portfolio's adviser (and sub-adviser, where applicable), as identified in Proper Instructions by the Board, the information with respect to custody and settlement practices in countries in which State Street employs a Foreign Sub-Custodian described on Schedule C hereto, including without limitation information relating to Foreign Securities Systems, at the time or times set forth on such Schedule. State Street may revise Schedule C from time to time, provided that no such revision
shall result in the Board being provided with substantively less information than had been previously provided hereunder.
SECTION 4.5 REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of State Street or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. State Street or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms hereof unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.
SECTION 4.6 BANK ACCOUNTS. State Street shall identify on its books as belonging to Fund cash (including cash denominated in foreign currencies) deposited with State Street. Where State Street is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of State Street, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian. All accounts referred to in this Section shall be subject only to draft or order by State Street (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms hereof to hold cash received by or from or for the account of the Portfolio. Cash maintained on the books of State Street (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts.
SECTION 4.7 COLLECTION OF INCOME. State Street shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to the applicable Portfolio. In the event that extraordinary measures are required to collect such income, Fund and State Street shall consult as to such measures and as to the compensation and expenses of State Street relating to such measures.
SECTION 4.8 SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant to this Section 4, State Street will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist in the country where such securities are issued. Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of Fund to exercise shareholder rights.
SECTION 4.9 COMMUNICATIONS RELATING TO FOREIGN SECURITIES. State Street shall transmit promptly to Fund written information with respect to materials received by State Street via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, State Street shall transmit promptly to Fund written information with respect to materials so received by State Street from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. State Street shall not be liable for any untimely exercise of any action, right or power in connection with foreign securities or other property unless (i) State Street or the respective Foreign Sub-Custodian is in
actual possession of such foreign securities or property and (ii) State Street receives Proper Instructions with regard to the exercise of any such action, right or power, and both (i) and (ii) occur at least three business days prior to the date on which State Street is to take action to exercise such right or power.
SECTION 4.10 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which State Street employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, State Street from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At Fund's election, the Portfolios shall be entitled to be subrogated to the rights of State Street with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim.
SECTION 4.11 TAX LAW. State Street shall have no responsibility or liability for any obligations now or hereafter imposed on Fund, the Portfolios or State Street as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof (except taxes attributable to the domicile of State Street in the Commonwealth of Massachusetts, and in such case State Street shall notify Fund). It shall be the responsibility of Fund to notify State Street of the obligations imposed on Fund with respect to the Portfolios or State Street as custodian of the Portfolios by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of State Street with regard to such tax law shall be to use reasonable efforts to assist Fund with respect to any claim for exemption or refund under the tax law of countries for which Fund has provided such information.
SECTION 4.12 LIABILITY OF STATE STREET. State Street shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally herein and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, State Street shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss to the extent that the Sub-Custodian has acted with reasonable care.
SECTION 5 PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES. State Street shall receive from the distributor for the Shares or from the Transfer Agent and deposit into the account of the appropriate Portfolio such payments as are received for Shares thereof issued or sold from time to time by Fund. State Street will provide timely notification to Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose, State Street shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their Shares. In connection with the redemption or repurchase of Shares, State Street is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection with the redemption or repurchase of Shares, State Street shall honor checks drawn on State Street by a holder of Shares, which checks have been furnished by Fund to the holder of Shares, when presented to State Street in accordance with such procedures and controls as are mutually agreed upon from time to time between Fund and State Street.
SECTION 6 PROPER INSTRUCTIONS. Proper Instructions as used throughout this Agreement means a writing signed or initialed by one or more person or persons as the Board shall have from time to time authorized. Each such writing shall set forth the specific transaction or type of transaction involved, including a specific statement of the purpose for which such action is requested. Oral instructions will be considered Proper Instructions if State Street reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. Fund shall cause all oral instructions to be confirmed in writing. If given pursuant to procedures to be agreed upon by the parties, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that Fund and State Street agree to security procedures, including but not limited to, the security procedures selected by Fund in the Funds Transfer Addendum attached hereto. For purposes of this Section, Proper Instructions shall include instructions received by State Street pursuant to any three-party agreement that requires a segregated asset account in accordance with Section 2.9.
SECTION 7 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. State Street may in its discretion, without express authority from Fund on behalf of each applicable Portfolio: 1) surrender securities in temporary form for securities in definitive form; 2) endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and 3) in general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Portfolio except as otherwise directed by the Board.
SECTION 8 EVIDENCE OF AUTHORITY. State Street shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed by or on behalf of Fund. State Street may receive and accept a copy of a resolution certified by the Secretary or an Assistant Secretary of Fund ("CERTIFIED RESOLUTION") as conclusive evidence (a) of the authority of any person to act in accordance with such resolution or (b) of any determination or of any action by the Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by State Street of written notice to the contrary.
SECTION 9 DUTIES OF STATE STREET WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION OF NET ASSET VALUE
SECTION 9.1 ACCOUNTS AND RECORDS. State Street will prepare and maintain, under the direction of and as interpreted by Fund, Fund's or Portfolio's accountants and/or other advisors, in complete, accurate and current form such accounts and records: (A) required to be maintained by Fund with respect to portfolio transactions under the 1940 Act; (B) required as a basis for calculation of each Portfolio's net asset value; and (C) as otherwise agreed upon by the parties. Fund will advise State Street in writing of all applicable record retention requirements, other than those set forth in the 1940 Act. State Street will preserve such accounts and records in the manner and for the periods prescribed in the 1940 Act or for such longer period as is agreed
upon by the parties. Fund will furnish, in writing or its electronic or digital equivalent, accurate and timely information needed by State Street to complete such accounts and records when such information is not readily available from generally accepted securities industry services or publications. State Street shall, at Fund's request, supply Fund with a tabulation of securities owned by a Portfolio and held by State Street, including certificate numbers, if applicable, for such compensation as shall be agreed upon between Fund and State Street.
SECTION 9.2 DELIVERY OF ACCOUNTS AND RECORDS. Fund will turn over or cause to be turned over to State Street all accounts and records needed by State Street to perform its duties and responsibilities hereunder fully and properly. State Street may rely conclusively on the completeness and correctness of such accounts and records.
SECTION 9.3 ACCOUNTS AND RECORDS PROPERTY OF FUND. State Street acknowledges that all of the accounts and records maintained by State Street pursuant hereto are the property of Fund, and will be made available to Fund for inspection or reproduction within a reasonable period of time, upon demand. State Street will assist Fund's independent auditors, or upon the prior written approval of Fund, or upon demand, any regulatory body, in any requested review of Fund's accounts and records but Fund will reimburse State Street for all reasonable expenses and employee time invested in any such review outside of routine and normal periodic reviews. Upon receipt from Fund of the necessary information or instructions, State Street will supply information from the books and records it maintains for Fund that Fund may reasonably request for tax returns, questionnaires, periodic reports to shareholders and such other reports and information requests as Fund and State Street may agree upon from time to time.
SECTION 9.4 ADOPTION OF PROCEDURES. State Street and Fund may from time to time adopt such procedures as they agree upon, and State Street may conclusively assume that no procedure approved or directed by Fund, Fund's or Portfolio's accountants or other advisors conflicts with or violates any requirements of Fund's Prospectus, governing documents, any applicable law, rule or regulation, or any order, decree or agreement by which Fund may be bound. The Fund agrees to notify State Street promptly of any change in the Fund's circumstances and of any changes in statutes, regulations, rules, requirements or policies which may impact State Street's performance of its responsibilities hereunder or its related operational policies and procedures as they relate to the Fund in a manner different from or in addition to requirements applicable to investment companies registered under the 1940 Act in general.
SECTION 9.5 VALUATION OF ASSETS. State Street will value the assets of each Portfolio in accordance with Proper Instructions utilizing the pricing sources designated by Fund ("PRICING SOURCES") on the Price Source and Methodology Authorization Matrix, incorporated herein by this reference. State Street will assist with the shadow pricing of any money market Portfolios as requested by Fund. If so directed, State Street shall also calculate daily net income of a Portfolio as described in the prospectus and shall advise the Fund periodically of the division of such net income of its various components.
SECTION 9.6 LIMITATION OF LIABILITY. So long as and to the extent that it is in the exercise of reasonable care, State Street is not responsible or liable for, and Fund will indemnify and hold State Street harmless from and against, any and all costs, expenses, losses, damages, charges, counsel fees (including, without limitation, disbursements and the allocable cost of in-house counsel), payments and liabilities which may be asserted against or incurred by State Street or for which State Street may be held to be liable, arising out of or attributable to any error, omission,
inaccuracy or other deficiency in any Portfolio's accounts and records or other information provided to State Street by or on behalf of a Portfolio, including the accuracy of the prices quoted by the Pricing Sources or for the information supplied by Fund to value the assets, or the failure of Fund to provide, or provide in a timely manner, any accounts, records, or information needed by State Street to perform its duties hereunder.
SECTION 10 OPINION OF FUND'S INDEPENDENT ACCOUNTANT. State Street shall take all reasonable action, as Fund on behalf of each applicable Portfolio may from time to time request, to obtain from year to year favorable opinions from Fund's independent accountants with respect to its activities hereunder in connection with the preparation of Fund's Form N-1A, and Form N-SAR or other annual reports to the SEC and with respect to any other requirements thereof.
SECTION 11 REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. State Street shall provide Fund, on behalf of each of the Portfolios at such times as Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in any Securities System, relating to the services provided by State Street hereunder; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state.
SECTION 12 COMPENSATION OF STATE STREET. State Street shall be entitled to reasonable compensation for its services and expenses as custodian and recordkeeping agent, as agreed upon from time to time in a fee schedule, as amended from time to time ("FEE SCHEDULE") between Fund on behalf of each applicable Portfolio and State Street.
SECTION 13 RESPONSIBILITY OF STATE STREET. So long as and to the extent that State Street exercises reasonable care, State Street shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto received by it or delivered by it pursuant hereto and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. State Street shall be held to the exercise of reasonable care in carrying out the provisions hereof, but shall be kept indemnified by and shall be without liability to Fund for any action taken or omitted by it in good faith without negligence, including, without limitation, acting in accordance with any Proper Instruction. It shall be entitled to rely on and may act upon advice of counsel on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. State Street shall be without liability to Fund and the Portfolios for any loss, liability, claim or expense resulting from or caused by anything which is part of Country Risk (as defined in Section 3 hereof), including without limitation nationalization, expropriation, currency restrictions, or acts of war, revolution, riots or terrorism.
Except to the extent of State Street's own negligence or willful misconduct or the negligence or willful misconduct of a sub-custodian or agent, State Street shall be without liability to Fund for any loss, liability, claim or expense resulting from or caused by; (i) events or circumstances beyond the reasonable control of State Street or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption,
suspension or restriction of trading on or the closure of any securities market, power or other mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts ("Force Majeure Events"); (ii) errors by Fund or its duly-authorized investment manager or investment advisor in their instructions to State Street provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to deliver to State Street's sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (v) any delay or failure of any company, corporation, or other body in charge of registering or transferring securities in the name of State Street, Fund, State Street's sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus, dividends and rights and other accretions or benefits; (vi) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (vii) any provision of any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction.
State Street shall be liable for the acts or omissions of a Foreign Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth with respect to sub-custodians generally herein.
If Fund on behalf of a Portfolio requires State Street to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of State Street, result in State Street or its nominee assigned to Fund or the Portfolio being liable for the payment of money or incurring liability of some other form, Fund on behalf of the Portfolio, as a prerequisite to requiring State Street to take such action, shall provide indemnity to State Street in an amount as State Street may reasonably require.
If Fund requires State Street, its affiliates, subsidiaries or agents, to advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) or in the event that State Street or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from State Street's or its nominee's own negligent action, negligent failure to act or willful misconduct, any property at any time held for the account of the applicable Portfolio shall be security therefor and should Fund fail to repay State Street promptly, State Street shall be entitled to utilize available cash and to dispose of such Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall either party be liable for indirect, special or consequential damages.
SECTION 14 EFFECTIVE PERIOD, TERMINATION AND AMENDMENT. This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty (60) days after the date of such delivery or mailing; PROVIDED, however, that Fund shall not amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of the governing documents, and further provided, that Fund on behalf of one or more of the Portfolios may at any time by action of its Board (i) substitute another bank or trust company for State
Street by giving notice as described above to State Street, or (ii) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for State Street by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction.
Upon termination hereof, Fund on behalf of each applicable Portfolio shall pay to State Street such compensation and reimbursement as may be due as of the date of such termination in accordance with the Fee Schedule, and State Street shall pay amounts due to any Portfolio.
SECTION 15 SUCCESSOR CUSTODIAN AND RECORDKEEPING AGENT. Upon termination of State Street as recordkeeping agent, State Street shall, upon payment of all sums due to it from Fund that are not in dispute, deliver all accounts and records to the successor recordkeeping agent (or, if none, to Fund) at the office of State Street.
Upon termination of State Street as Custodian, if a successor custodian for one or more Portfolios shall be appointed by the Board, State Street shall deliver to such successor custodian at the office of State Street, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, State Street shall, in like manner, upon receipt of a Certified Resolution, deliver at the office of State Street and transfer such securities, funds and other properties in accordance with such resolution.
In the event that no written order designating a successor custodian or Certified Resolution shall have been delivered to State Street on or before the date when such termination shall become effective, then State Street shall have the right to deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by State Street on behalf of each applicable Portfolio and all instruments held by State Street relative thereto and all other property held by it hereunder on behalf of each applicable Portfolio, and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any Securities System. Thereafter, such bank or trust company shall be the successor of State Street hereunder.
In the event that accounts, records, securities, funds and other properties remain in the possession of State Street after the date of termination hereof owing to failure of Fund to procure the Certified Resolution to appoint a successor custodian or otherwise, State Street shall be entitled to fair compensation for its services during such period as State Street retains possession of such accounts, records, securities, funds and other properties and the provisions hereof relating to the duties and obligations of State Street shall remain in full force and effect.
SECTION 16 CONFIDENTIAL INFORMATION. The parties acknowledge that in the course of performing their responsibilities under the Agreement, they may be exposed to or acquire certain non-public information belonging to the other party ("Confidential Information"). The parties agree to hold any such Confidential Information in strict confidence and not to copy, reproduce, sell, assign, license, market, transfer or otherwise dispose of, give or disclose such Confidential Information to third parties or to use such Confidential Information for any
purposes whatsoever other than the provision of the services under this Agreement and to advise each of its officers, directors, employees and agents who may be exposed to such Confidential Information of their obligations to keep such information confidential. It is understood that in the event of a breach of this Section, damages may not be an adequate remedy and the non-breaching party shall be entitled to injunctive relief to restrain any such breach, threatened or actual.
The foregoing confidentiality obligations shall not apply to such Confidential Information (1) which at the time of disclosure, is publicly available or in the public knowledge; (2) which, after disclosure, lawfully becomes part of the public knowledge through publication or otherwise, but through no fault of the receiving party; (3) which the receiving party possesses at the time of disclosure of such Confidential Information and which was not acquired, directly or indirectly, from the disclosing party; (4) was acquired by the receiving party from a third party which has the right to disclose such Confidential Information; or (5) is independently developed by the receiving party without reference to the Confidential Information.
SECTION 17 GENERAL
SECTION 17.1 INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with the operation hereof, State Street and Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the provisions hereof as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by both parties and shall be annexed hereto, PROVIDED that no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of the governing documents. No interpretive or additional provisions made as provided in the preceding sentence shall be deemed to be an amendment of this Agreement.
SECTION 17.2 ADDITIONAL PORTFOLIOS. In the event that Fund establishes one or more additional series with respect to which it desires to have State Street render services as custodian and recordkeeping agent under the terms hereof, it shall so notify State Street in writing, and if State Street agrees to provide such services, such series shall become a Portfolio hereunder.
SECTION 17.3 MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with laws of The Commonwealth of Massachusetts.
SECTION 17.4 PRIOR AGREEMENTS. This Agreement supersedes and terminates, as of the date hereof, all prior agreements between Fund on behalf of each of the Portfolios and State Street relating to the custody or recordkeeping of Fund's assets, as more specifically set forth on Exhibit A hereto.
SECTION 17.5 NOTICES. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.
To Fund: To State Street: ING PILGRIM INVESTMENTS STATE STREET BANK AND TRUST COMPANY 7337 E. Doubletree Ranch Road 801 Pennsylvania Avenue Scottsdale, Arizona 85258-2034 Kansas City, MO 64105 Attention: Maria M. Anderson Attention: Vice President, Custody Telephone: 480-477-2169 Telephone: 816-871-4100 Telecopy: 480-477-2706 Telecopy: 816-871-9648 |
Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be conclusive evidence of posting.
SECTION 17.6 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, addenda, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 17.7 REMOTE ACCESS SERVICES ADDENDUM. State Street and Fund agree to be bound by the terms of the Remote Access Services Addendum attached hereto.
SECTION 17.8 ASSIGNMENT. Except as otherwise set forth herein, this Agreement may not be assigned by either party without the written consent of the other.
SECTION 17.9 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute but one and the same Agreement.
SECTION 17.10 SEVERABILITY. If any provision in this Agreement is determined to be invalid, illegal, in conflict with any law or otherwise unenforceable, the remaining provisions hereof will be considered severable and will not be affected thereby, and every remaining provision hereof will remain in full force and effect and will remain enforceable to the fullest extent permitted by applicable law.
SECTION 17.11 SHAREHOLDER COMMUNICATIONS ELECTION. SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, State Street needs Fund to indicate whether it authorizes State Street to provide Fund's name, address, and share position to requesting companies whose securities Fund owns. If Fund tells State Street "no", State Street will not
provide this information to requesting companies. If Fund tells State Street "yes" or does not check either "yes" or "no" below, State Street is required by the rule to treat Fund as consenting to disclosure of this information for all securities owned by Fund or any funds or accounts established by Fund. For Fund's protection, the Rule prohibits the requesting company from using Fund's name and address for any purpose other than corporate communications. Please indicate below whether Fund consents or objects by checking one of the alternatives below.
YES / / State Street is authorized to release Fund's name, address, and share positions. NO /X/ State Street is not authorized to release Fund's name, address, and share positions. |
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative effective as of the day and year first written above.
ON BEHALF OF EACH OF THE FUNDS
SET FORTH ON EXHIBIT A HERETO FUND SIGNATURE ATTESTED TO BY:
By: /s/ Michael J. Roland By: /s/ Robert S. Naka ----------------------------- --------------------------- Name: Michael J. Roland Name: Robert S. Naka ----------------------------- --------------------------- Title: Executive Vice President Title: Senior Vice President ----------------------------- --------------------------- |
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: /s/ illegible By: /s/ Angie Keough ----------------------------- --------------------------- Name: illegible Name: Angie Keough ----------------------------- --------------------------- Title: Senior Vice President Title: Legal Assistant ----------------------------- --------------------------- |
SCHEDULE A: STATE STREETGLOBAL CUSTODY NETWORK SUBCUSTODIANS
COUNTRY SUBCUSTODIAN Argentina Citibank, N.A. Australia Westpac Banking Corporation Austria Erste Bank der Osterreichischen Sparkassen AG Bahrain HSBC Bank Middle East (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Bangladesh Standard Chartered Bank Belgium Fortis Bank nv-sa Benin via Societe Generale de Banques en Cote d'Ivoire, Abidjan, Ivory Coast Bermuda The Bank of Bermuda Limited Bolivia Citibank, N. A. Botswana Barclays Bank of Botswana Limited Brazil Citibank, N.A. Bulgaria ING Bank N.V. Burkina Faso via Societe Generale de Banques en Cote d'Ivoire, Abidjan, Ivory Coast Canada State Street Trust Company Canada Chile BankBoston, N.A. People's Republic Hongkong and Shanghai Banking Corporation Limited, of China Shanghai and Shenzhen branches Colombia Cititrust Colombia S.A. Sociedad Fiduciaria Costa Rica Banco BCT S.A. Croatia Privredna Banka Zagreb d.d Cyprus The Cyprus Popular Bank Ltd. Czech Republic Ceskoslovenska Obchodni Banka, A.S. Denmark Danske Bank A/S Ecuador Citibank, N.A. Egypt HSBC Bank Egypt S.A.E. (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Estonia Hansabank Finland Nordea Bank Finland Plc. France BNP Paribas Securities Services, S.A. Germany Dresdner Bank AG |
COUNTRY SUBCUSTODIAN Ghana Barclays Bank of Ghana Limited Greece National Bank of Greece S.A. Guinea-Bissau via Societe Generale de Banques en Cote d'Ivoire, Abidjan, Ivory Coast Hong Kong Standard Chartered Bank Hungary HVB Bank Hungary Rt. Iceland Icebank Ltd. India Deutsche Bank AG Hongkong and Shanghai Banking Corporation Limited Indonesia Standard Chartered Bank Ireland Bank of Ireland Israel Bank Hapoalim B.M. Italy BNP Paribas Securities Services, S.A. Ivory Coast Societe Generale de Banques en Cote d'Ivoire Jamaica Scotiabank Jamaica Trust and Merchant Bank Ltd. Japan The Fuji Bank, Limited Sumitomo Mitsui Banking Corporation Jordan HSBC Bank Middle East (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Kazakhstan HSBC Bank Kazakhstan (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Kenya Barclays Bank of Kenya Limited Republic of Korea Hongkong and Shanghai Banking Corporation Limited Latvia A/s Hansabanka Lebanon HSBC Bank Middle East (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Lithuania Vilniaus Bankas AB Malaysia Standard Chartered Bank Malaysia Berhad Mali via Societe Generale de Banques en Cote d'Ivoire, Abidjan, Ivory Coast Mauritius Hongkong and Shanghai Banking Corporation Limited Mexico Banco Nacional de Mexico S.A. Morocco Banque Commerciale du Maroc |
COUNTRY SUBCUSTODIAN Namibia Standard Bank Namibia Limited - Netherlands Fortis Bank (Nederland) N.V. New Zealand Westpac Banking Corporation Niger via Societe Generale de Banques en Cote d'Ivoire, Abidjan, Ivory Coast Nigeria Stanbic Merchant Bank Nigeria Limited Norway Nordea Bank Norge ASA Oman HSBC Bank Middle East (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Pakistan Deutsche Bank AG Palestine HSBC Bank Middle East (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Panama BankBoston, N.A. Peru Citibank, N.A. Philippines Standard Chartered Bank Poland Bank Handlowy w Warszawie S.A. Portugal Banco Comercial Portugues Qatar HSBC Bank Middle East (as delegate of the Hongkong and Shanghai Banking Corporation Limited) Romania ING Bank N.V. Russia Credit Suisse First Boston AO - Moscow (as delegate of Credit Suisse First Boston - Zurich) Senegal via Societe Generale de Banques en Cote d'Ivoire, Abidjan, Ivory Coast Singapore The Development Bank of Singapore Limited Slovak Republic Ceskoslovenska Obchodni Banka, A.S. Slovenia Bank Austria Creditanstalt d.d. - Ljubljana South Africa Standard Bank of South Africa Limited Spain Banco Santander Central Hispano S.A. Sri Lanka Hongkong and Shanghai Banking Corporation Limited Swaziland Standard Bank Swaziland Limited Sweden Skandinaviska Enskilda Banken Switzerland UBS AG Taiwan - R.O.C. Central Trust of China |
COUNTRY SUBCUSTODIAN Thailand Standard Chartered Bank Togo via Societe Generale de Banques en Cote d'Ivoire, Abidjan, Ivory Coast Trinidad & Tobago Republic Bank Limited Tunisia Banque Internationale Arabe de Tunisie Turkey Citibank, N.A. Ukraine ING Bank Ukraine United Arab Emirates HSBC Bank Middle East (as delegate of the Hongkong and Shanghai Banking Corporation Limited) United Kingdom State Street Bank and Trust Company, London Branch Uruguay BankBoston, N.A. Venezuela Citibank, N.A. Vietnam The Hongkong and Shanghai Banking Corporation Limited Zambia Barclays Bank of Zambia Limited Zimbabwe Barclays Bank of Zimbabwe Limited |
SCHEDULE B: STATE STREETGLOBAL CUSTODY NETWORK
DEPOSITORIES OPERATING IN NETWORK MARKETS
COUNTRY DEPOSITORIES Argentina Caja de Valores S.A. Australia Austraclear Limited Reserve Bank Information and Transfer System Austria Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division) Belgium Caisse Interprofessionnelle de Depots et de Virements de Titres, S.A. Banque Nationale de Belgique Benin Depositaire Central - Banque de Reglement Brazil Companhia Brasileira de Liquidacao e Custodia Sistema Especial de Liquidacao e de Custodia (SELIC) Central de Custodia e de Liquidacao Financeira de Titulos Privados (CETIP) Bulgaria Central Depository AD Bulgarian National Bank Burkina Faso Depositaire Central - Banque de Reglement Canada Canadian Depository for Securities Limited Chile Deposito Central de Valores S.A. People's Republic of China China Securities Depository and Clearing Corporation Limited Shanghai Branch China Securities Depository and Clearing Corporation Limited Shenzhen Branch Colombia Deposito Centralizado de Valores Costa Rica Central de Valores S.A. Croatia Ministry of Finance National Bank of Croatia Sredisnja Depozitarna Agencija d.d. Czech Republic Stredisko cennych papiru - Ceska republika Czech National Bank Denmark Vaerdipapircentralen (Danish Securities Center) Egypt Misr for Clearing, Settlement, and Depository S.A.E. Estonia Eesti Vaartpaberite Keskdepositoorium Finland Finnish Central Securities Depository France Euroclear France |
COUNTRY DEPOSITORIES Germany Clearstream Banking AG, Frankfurt Greece Bank of Greece, System for Monitoring Transactions in Securities in Book-Entry Form Apothetirion Titlon AE - Central Securities Depository Guinea-Bissau Depositaire Central - Banque de Reglement Hong Kong Hong Kong Securities Clearing Company Limited Central Moneymarkets Unit Hungary Kozponti Elszamolohaz es Ertektar (Budapest) Rt. (KELER) Iceland Iceland Securities Depository Limited India National Securities Depository Limited Central Depository Services India Limited Reserve Bank of India Indonesia Bank Indonesia PT Kustodian Sentral Efek Indonesia Israel Tel Aviv Stock Exchange Clearing House Ltd. (TASE Clearinghouse) Italy Monte Titoli S.p.A. Ivory Coast Depositaire Central - Banque de Reglement Jamaica Jamaica Central Securities Depository Japan Japan Securities Depository Center (JASDEC) Bank of Japan Kazakhstan Central Depository of Securities Kenya Central Bank of Kenya Republic of Korea Korea Securities Depository Latvia Latvian Central Depository Lebanon Custodian and Clearing Center of Financial Instruments for Lebanon and the Middle East (Midclear) S.A.L. Banque du Liban Lithuania Central Securities Depository of Lithuania Malaysia Malaysian Central Depository Sdn. Bhd. Bank Negara Malaysia |
COUNTRY DEPOSITORIES Mali Depositaire Central - Banque de Reglement Mauritius Central Depository and Settlement Co. Ltd. Bank of Mauritius Mexico S.D. Indeval, S.A. de C.V. Morocco Maroclear Netherlands Nederlands Centraal Instituut voor Giraal Effectenverkeer B.V. (NECIGEF) New Zealand New Zealand Central Securities Depository Limited Niger Depositaire Central - Banque de Reglement Nigeria Central Securities Clearing System Limited Norway Verdipapirsentralen (Norwegian Central Securities Depository) Oman Muscat Depository & Securities Registration Company, SAOC Pakistan Central Depository Company of Pakistan Limited State Bank of Pakistan Palestine Clearing Depository and Settlement, a department of the Palestine Stock Exchange Peru Caja de Valores y Liquidaciones, Institucion de Compensacion y Liquidacion de Valores S.A Philippines Philippine Central Depository, Inc. Registry of Scripless Securities (ROSS) of the Bureau of Treasury Poland National Depository of Securities (Krajowy Depozyt Papierow Wartosciowych SA) Central Treasury Bills Registrar Portugal INTERBOLSA - Sociedade Gestora de Sistemas de Liquidacao e de Sistemas Centralizados de Valores Mobiliarios, S.A. Qatar Central Clearing and Registration (CCR), a department of the Doha Securities Market Romania National Securities Clearing, Settlement and Depository Company Bucharest Stock Exchange Registry Division National Bank of Romania Russia Vneshtorgbank, Bank for Foreign Trade of the Russian Federation Senegal Depositaire Central - Banque de Reglement |
COUNTRY DEPOSITORIES Singapore Central Depository (Pte) Limited Monetary Authority of Singapore Slovak Republic Stredisko cennych papierov SR, a.s. National Bank of Slovakia Slovenia KDD - Centralna klirinsko depotna druzba d.d. South Africa Central Depository Limited Share Transactions Totally Electronic (STRATE) Ltd. Spain Servicio de Compensacion y Liquidacion de Valores, S.A. Banco de Espana, Central de Anotaciones en Cuenta Sri Lanka Central Depository System (Pvt) Limited Sweden Vardepapperscentralen VPC AB (Swedish Central Securities Depository) Switzerland SegaIntersettle AG (SIS) Taiwan - R.O.C. Taiwan Securities Central Depository Co., Ltd. Thailand Thailand Securities Depository Company Limited Togo Depositaire Central - Banque de Reglement Tunisia Societe Tunisienne Interprofessionelle pour la Compensation et de Depots des Valeurs Mobilieres Turkey Takas ve Saklama Bankasi A.S. (TAKASBANK) Central Bank of Turkey Ukraine National Bank of Ukraine Mizhregionalny Fondovy Souz United Arab Emirates Clearing and Depository System, a department of theDubai Financial Market Venezuela Banco Central de Venezuela Zambia LuSE Central Shares Depository Limited Bank of Zambia |
TRANSNATIONAL
Euroclear
Clearstream Banking AG
SCHEDULE C: MARKET INFORMATION
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION ------------------------------- ----------------- (SCHEDULED FREQUENCY) THE GUIDE TO CUSTODY IN WORLD MARKETS An overview of settlement and safekeeping procedures, (hardcopy annually and regular custody practices and foreign investor considerations for website updates) the markets in which State Street offers custodial services. GLOBAL CUSTODY NETWORK REVIEW Information relating to Foreign Sub-Custodians in State (annually) Street's Global Custody Network. The Review stands as an integral part of the materials that State Street provides to its U.S. mutual fund clients to assist them in complying with SEC Rule 17f-5. The Review also gives insight into State Street's market expansion and Foreign Sub-Custodian selection processes, as well as the procedures and controls used to monitor the financial condition and performance of our Foreign Sub-Custodian banks. SECURITIES DEPOSITORY REVIEW Custody risk analyses of the Foreign Securities (annually) Depositories presently operating in Network markets. This publication is an integral part of the materials that State Street provides to its U.S. mutual fund clients to meet informational obligations created by SEC Rule 17f-7. GLOBAL LEGAL SURVEY With respect to each market in which State Street offers (annually) custodial services, opinions relating to whether local law restricts (i) access of a fund's independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (ii) a fund's ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (iii) a fund's ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (iv) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars. SUBCUSTODIAN AGREEMENTS Copies of the contracts that State Street has entered into (annually) with each Foreign Sub-Custodian that maintains U.S. mutual fund assets in the markets in which State Street offers custodial services. GLOBAL MARKET BULLETIN Information on changing settlement and custody conditions (daily or as necessary) in markets where State Street offers custodial services. Includes changes in market and tax regulations, depository developments, dematerialization information, as well as other market changes that may impact State Street's clients. FOREIGN CUSTODY ADVISORIES For those markets where State Street offers custodial (as necessary) services that exhibit special risks or infrastructures impacting custody, State Street issues market advisories to highlight those unique market factors which might impact our ability to offer recognized custody service levels. MATERIAL CHANGE NOTICES Informational letters and accompanying materials (presently on a quarterly confirming State Street's foreign custody arrangements, basis or as otherwise necessary) including a summary of material changes with Foreign Sub-Custodians that have occurred during the previous quarter. The notices also identify any material changes in the custodial risks associated with maintaining assets with Foreign Securities Depositories. |
FUNDS TRANSFER OPERATING GUIDELINES
1. OBLIGATION OF THE SENDER: State Street Bank and Trust Company and affiliates ("SSB") is authorized to promptly debit Client's account(s) upon the receipt of a payment order in compliance with any of the Security Procedures chosen by the Client, from those offered on the attached selection form (and any updated selection forms hereafter executed by the Client), for funds transfers and in the amount of money that SSB has been instructed to transfer. SSB is hereby instructed to accept funds transfer instructions only via the delivery methods and Security Procedures indicated on the attached selection form (and any updated selection forms hereafter executed by the Client). The Client agrees that the Security Procedures are reasonable and adequate for its wire transfer transactions and agrees to be bound by any payment orders, amendments and cancellations, whether or not authorized, issued in its name and accepted by SSB after being confirmed by any of the selected Security Procedures. The Client also agrees to be bound by any other valid and authorized payment order accepted by SSB. SSB shall execute payment orders in compliance with the selected Security Procedures and with the Client's/Investment Manager's instructions on the execution date provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. SSB will use reasonable efforts to execute on the execution date payment orders received after the customary deadline, but if it is unable to execute any such payment order on the execution date, such payment order will be deemed to have been received on the next business day.
2. SECURITY PROCEDURES: The Client acknowledges that the selected Security Procedures were selected by the Client from Security Procedures offered by SSB. The Client shall restrict access to confidential information relating to the Security Procedures to authorized persons as communicated in writing to SSB. The Client must notify SSB immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Client's authorized personnel. SSB shall verify the authenticity of all instructions according to the selected Security Procedures.
3. ACCOUNT NUMBERS: SSB shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern. Financial institutions that receive payment orders initiated by SSB at the instruction of the Client may also process payment orders on the basis of account numbers, regardless of any name included in the payment order. SSB shall be entitled to reasonably rely on any financial institution identification numbers included in any payment order, regardless of any financial institution name included in the payment order.
4. REJECTION: SSB reserves the right to decline to process or delay the
processing of a payment order which (a) is in excess of the collected balance in
the account to be charged at the time of SSB's receipt of such payment order;
(b) if initiating such payment order would cause SSB, in SSB's reasonable
judgment, to exceed any applicable volume, aggregate dollar, network, time,
credit or similar limits upon wire transfers; or (c) if SSB, in good faith, is
unable to satisfy itself that the transaction has been properly authorized.
5. CANCELLATION OR AMENDMENT: SSB shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the selected Security Procedures provided that such requests are received in sufficient time to afford SSB a reasonable opportunity to act prior to executing the payment order. However, SSB assumes no liability if the request for amendment or cancellation cannot be satisfied by SSB's reasonable efforts.
6. ERRORS: SSB shall assume no responsibility hereunder for failure to detect any erroneous payment order provided that SSB complies with the payment order instructions as received and SSB complies with the selected Security Procedures. The Security Procedures are established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.
7. INTEREST AND LIABILITY LIMITS: SSB shall assume no responsibility for
lost interest with respect to the refundable amount of any unauthorized payment
order, unless SSB is notified of the unauthorized payment order within thirty
(30) days of notification by SSB of the acceptance of such payment order. In no
event (including but not limited to failure to execute a payment order) shall
SSB be liable for special, indirect or consequential damages, even if advised of
the possibility of such damages.
8. AUTOMATED CLEARING HOUSE ("ACH") CREDIT ENTRIES/PROVISIONAL PAYMENTS:
When the Client initiates or receives ACH credit and debit entries pursuant to
these Guidelines and the rules of the National Automated Clearing House
Association and the Mid-America Payment Exchange or other similar body, SSB or
its agent will act as an Originating Depository Financial Institution and/or
Receiving Depository Financial Institution, as the case may be, with respect to
such entries. Credits given with respect to an ACH credit entry are provisional
until final settlement for such entry is received from the Federal Reserve Bank.
If such final settlement is not received, the Client agrees to promptly refund
the amount credited to the Client in connection with such entry, and the party
making payment to the Client via such entry shall not be deemed to have paid the
amount of the entry.
9. CONFIRMATIONS: Confirmation of SSB's execution of payment orders shall ordinarily be provided within 24 hours. Notice may be delivered through SSB's account statements, advices, information systems, or by facsimile or callback. The Client must report any objections to the execution of a payment order within 30 days of receipt of confirmation.
10. MISCELLANEOUS: SSB may use the Federal Reserve System Fedwire to execute payment orders, and any payment order carried in whole or in part through Fedwire will be subject to applicable Federal Reserve Board rules and regulations. SSB and the Client agree to cooperate to attempt to recover any funds erroneously paid to wrong parties, regardless of any fault of SSB or the Client, but the party responsible for the erroneous payment shall bear all costs and expenses incurred in trying to effect such recovery. These Guidelines may not be amended except by a written agreement signed by the parties.
11. LIABILITY ON FOREIGN ACCOUNTS: State Street shall not be required to repay any deposit made at a non-U.S. branch of State Street, or any deposit made with State Street and denominated in a non-U.S. dollar currency, if repayment of such deposit or the use of assets denominated in the non-U.S. dollar currency is prevented, prohibited or otherwise blocked due to: (a) an act of war, insurrection or civil strife; (b) any action by a non-U.S. government or instrumentality or authority asserting governmental, military or police power of any kind, whether such authority be recognized as a defacto or a dejure government, or by any entity, political or revolutionary movement or otherwise that usurps, supervenes or otherwise materially impairs the normal operation of civil authority; or (c) the closure of a non-U.S. branch of State Street in order to prevent, in the reasonable judgment of State Street, harm to the employees or property of State Street. The obligation to repay any such deposit shall not be transferred to and may not be enforced against any other branch of State Street.
The foregoing provisions constitute the disclosure required by Massachusetts General Laws, Chapter 167D, Section 36.
While State Street is not obligated to repay any deposit made at a non-U.S. branch or any deposit denominated in a non-U.S. currency during the period in which its repayment has been prevented, prohibited or otherwise blocked, State Street will repay such deposit when and if all circumstances preventing, prohibiting or otherwise blocking repayment cease to exist.
SECURITY PROCEDURES SELECTION FORM
Please select at least two of the funds transfer security procedures indicated below.
/ / SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a
cooperative society owned and operated by member financial institutions that
provides telecommunication services for its membership. Participation is limited
to securities brokers and dealers, clearing and depository institutions,
recognized exchanges for securities, and investment management institutions.
SWIFT provides a number of security features through encryption and
authentication to protect against unauthorized access, loss or wrong delivery of
messages, transmission errors, loss of confidentiality and fraudulent changes to
messages. SELECTION OF THIS SECURITY PROCEDURE WOULD BE MOST APPROPRIATE FOR
EXISTING SWIFT MEMBERS.
/ / REMOTE BATCH TRANSMISSION
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU)
data communications between the Client and/or its agent and SSB and/or its
agent. Security procedures include encryption and/or the use of a test key by
those individuals authorized as Automated Batch Verifiers or a callback
procedure to those individuals. CLIENTS SELECTING THIS OPTION SHOULD HAVE AN
EXISTING FACILITY FOR COMPLETING CPU-CPU TRANSMISSIONS. THIS DELIVERY MECHANISM
IS TYPICALLY USED FOR HIGH-VOLUME BUSINESS SUCH AS SHAREHOLDER REDEMPTIONS AND
DIVIDEND PAYMENTS.
/ / AUTOMATED CLEARING HOUSE (ACH)
SSB or its agent receives an automated transmission from a Client for the
initiation of payment (credit) or collection (debit) transactions through the
ACH network. The transactions contained on each transmission or tape must be
authenticated by the Client. The transmission is sent from the Client's or its
agent's system to SSB's or its agent's system with encryption.
/ / REPETITIVE WIRES
For situations where funds are transferred periodically from an existing
authorized account to the same payee (destination bank and account number) and
only the date and currency amount are variable, a repetitive wire may be
implemented. Repetitive wires will be subject to a $10 million limit. If the
payment order exceeds the $10 million limit, the instruction will be confirmed
by Telephone Confirmation (Call Back) or Test Key prior to execution. Repetitive
wire instructions must be reconfirmed annually. Clients may establish Repetitive
Wires by following the agreed upon security procedures as described by Telephone
Confirmation (Call Back) or Test Key. THIS ALTERNATIVE IS RECOMMENDED WHENEVER
FUNDS ARE FREQUENTLY TRANSFERRED BETWEEN THE SAME TWO ACCOUNTS. IF THIS OPTION
IS SELECTED, CHOOSE EITHER TELEPHONE CONFIRMATION OR TEST KEY TO BE USED AS A
SECONDARY PROCEDURE WHEN OVER $10 MILLION.
/ / STANDING INSTRUCTIONS
Funds are transferred by SSB to a counter party on the Client's established
list of authorized counter parties. Only the date and the dollar amount are
variable. Clients may establish Standby Instructions by following the agreed
upon security procedures as described by Telephone Confirmation (Call Back) or
Test Key. Additional paperwork will be required from insurance Clients using
1031 drawdowns. THIS OPTION IS USED FOR TRANSACTIONS THAT INCLUDE BUT ARE NOT
LIMITED TO FOREIGN EXCHANGE CONTRACTS, TIME DEPOSITS AND TRI-PARTY REPURCHASE
AGREEMENTS. IF THIS OPTION IS SELECTED, CHOOSE EITHER TELEPHONE CONFIRMATION OR
TEST KEY TO BE USED AS A SECONDARY PROCEDURE WHEN OVER $10 MILLION.
/ / TELEPHONE CONFIRMATION (CALL BACK)
This procedure requires Clients to designate individuals as authorized
initiators and authorized verifiers. SSB will verify that the instruction
contains the signature of an authorized person and prior to execution of the
payment order, will contact someone other than the originator at the Client's
location to authenticate the instruction. SELECTION OF THIS ALTERNATIVE IS
APPROPRIATE FOR CLIENTS WHO DO NOT HAVE THE CAPABILITY TO USE OTHER SECURITY
PROCEDURES. PLEASE COMPLETE THE TELEPHONE CONFIRMATION INSTRUCTIONS ATTACHED AS
A SCHEDULE HERETO.
/ / TEST KEY
Test Key confirmation will be used to verify all non-repetitive funds
transfer instructions received via facsimile or phone. SSB will provide test
keys if this option is chosen. SSB will verify that the instruction contains the
signature of an authorized person and prior to execution of the payment order,
will authenticate the test key provided with the corresponding test key at SSB.
SELECTION OF THIS ALTERNATIVE IS APPROPRIATE FOR CLIENTS WHO DO NOT HAVE THE
CAPABILITY TO USE OTHER SECURITY PROCEDURES.
The individual signing below must be authorized to sign contract on behalf of the client. The execution of payment orders under the selected Security Procedures is governed by the Funds Transfer Operating Guidelines, which are incorporated by reference.
On behalf of the ING Pilgrim funds listed on Exhibit A to the Custody and Investment Accounting Agreement, as amended
SCHEDULE TO FUNDS TRANSFER OPERATING GUIDELINES
AND SECURITY PROCEDURES SELECTION FORM
CLIENT/INVESTMENT MANAGER:______________________________________________
Company Name
KEY CONTACT INFORMATION
Whom shall we contact to implement your selection(s)?
CLIENT OPERATIONS CONTACT ALTERNATE CONTACT Name Name Address Address City/State/Zip Code City/State/Zip Code Telephone Number Telephone Number Facsimile Number Facsimile Number |
SWIFT Number
TELEPHONE CONFIRMATION INSTRUCTIONS
Authorized Initiators (Please Type or Print) - Please provide a listing of your
staff members who are currently authorized to INITIATE wire transfer
instructions:
NAME TITLE SPECIMEN SIGNATURE ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- |
Authorized Verifiers (Please Type or Print) - Please provide a listing of your staff members who will be CALLED BACK to verify the initiation of repetitive wires of $10 million or more and all non-repetitive wire instructions:
NAME CALLBACK PHONE NUMBER DOLLAR LIMITATION (IF ANY) ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- ----------------------- |
REMOTE ACCESS SERVICES ADDENDUM
TO CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT BY AND BETWEEN
STATE STREET BANK AND TRUST COMPANY AND ING PILGRIM FUNDS DATED NOVEMBER 1, 2001
State Street has developed proprietary accounting and other systems, and has acquired licenses for other such systems, which it utilizes in conjunction with the services we provide to you (the "Systems"). In this regard, we maintain certain information in databases under our control and ownership that we make available on a remote basis to our customers (the "Remote Access Services").
THE SERVICES. This addendum shall govern use of all Systems that State Street may from time to time agree to provide you, the Customer, and your designated investment advisors, consultants or other third parties authorized by State Street who agree to abide by the terms of this Addendum ("Authorized Designees") in order to provide Remote Access Services for the purpose of obtaining and analyzing reports and information.
SECURITY PROCEDURES. You agree to comply, and to cause your Authorized Designees to comply, with remote access operating standards and procedures and with user identification or other password control requirements and other security procedures as may be issued from time to time by State Street for use of the Systems and access to the Remote Access Services. You agree to advise State Street immediately in the event that you learn or have reason to believe that any person to whom you have given access to the Systems or the Remote Access Services has violated or intends to violate the terms of this Addendum and you will cooperate with State Street in seeking injunctive or other equitable relief. You agree to discontinue use of the Systems and Remote Access Services, if requested, for any security reasons cited by State Street.
FEES. Fees and charges (if any) for the use of the Systems and the Remote Access Services and related payment terms shall be as set forth in the fee schedule in effect from time to time between the parties (the "Fee Schedule"). You shall be responsible for any tariffs, duties or taxes imposed or levied by any government or governmental agency by reason of the transactions contemplated by this Addendum, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be imposed or assessed against State Street). Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street.
PROPRIETARY INFORMATION/INJUNCTIVE RELIEF. The Systems and Remote Access Services and the databases, computer programs, screen formats, report formats, interactive design techniques, formulae, processes, systems, software, know-how, algorithms, programs, training aids, printed materials, methods, books, records, files, documentation and other information made available to you by State Street as part of the Remote Access Services and through the use of the Systems and all copyrights, patents, trade secrets and other proprietary rights of State Street and its relevant licensors related thereto are the exclusive, valuable and confidential property of State Street and its relevant licensors, as applicable (the "Proprietary Information").
You agree on behalf of yourself and your Authorized Designees to keep the Proprietary Information confidential and to limit access to your employees and Authorized Designees (under a similar duty of confidentiality) who require access to the Systems for the purposes intended. The foregoing shall not apply to Proprietary Information in the public domain or required by law
to be made public.
You agree to use the Remote Access Services only in connection with the proper purposes of this Addendum. You will not, and will cause your employees and Authorized Designees not to, (i) permit any third party to use the Systems or the Remote Access Services, (ii) sell, rent, license or otherwise use the Systems or the Remote Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Addendum, (iii) use the Systems or the Remote Access Services for any fund, trust or other investment vehicle without the prior written consent of State Street, or (iv) allow or cause any information transmitted from State Street's databases, including data from third party sources, available through use of the Systems or the Remote Access Services, to be redistributed or retransmitted for other than use for or on behalf of yourself, as our Customer.
You agree that neither you nor your Authorized Designees will modify the Systems in any way, enhance or otherwise create derivative works based upon the Systems, nor will you or your Authorized Designees reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the Systems.
You acknowledge that the disclosure of any Proprietary Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing irreparable injury inadequately compensable in damages at law, and that State Street and its licensor, if applicable, shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the foregoing undertakings, in addition to any other legal remedies which may be available.
LIMITED WARRANTIES. State Street represents and warrants that it has the right to grant access to the Systems and to provide the Remote Access Services contemplated herein. Because of the nature of computer information technology, including but not limited to the use of the Internet, and the necessity of relying upon third-party sources, and data and pricing information obtained from third parties, the Systems and Remote Access Services are provided "AS IS", and you and your Authorized Designees shall be solely responsible for the investment decisions, results obtained, regulatory reports and statements produced using the Remote Access Services. State Street and its relevant licensors will not be liable to you or your Authorized Designees for any direct or indirect, special, incidental, punitive or consequential damages arising out of or in any way connected with the Systems or the Remote Access Services, nor shall either party be responsible for delays or nonperformance under this Addendum arising out of any cause or event beyond such party's control.
EXCEPT AS EXPRESSLY SET FORTH IN THIS ADDENDUM, STATE STREET FOR ITSELF AND ITS RELEVANT LICENSORS EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE.
INFRINGEMENT. State Street will defend or, at our option, settle any claim or action brought against you to the extent that it is based upon an assertion that access to any proprietary System developed and owned by State Street or use of the Remote Access Services through any such proprietary System by you under this Addendum constitutes direct infringement of any United
States patent or copyright or misappropriation of a trade secret, provided that you notify State Street promptly in writing of any such claim or proceeding and cooperate with State Street in the defense of such claim or proceeding. Should any such proprietary System or the Remote Access Services accessed thereby or any part thereof become, or in State Street's opinion be likely to become, the subject of a claim of infringement or the like under the patent or copyright or trade secret laws of the United States, State Street shall have the right, at State Street's sole option, to (i) procure for you the right to continue using such System or Remote Access Services, (ii) replace or modify such System or Remote Access Services so that the System or the Remote Access Services becomes noninfringing, or (iii) terminate access to the Remote Access Services without further obligation.
TERMINATION. Either party may terminate access to the Remote Access Services (i) for any reason by giving the other party at least one-hundred and eighty (180) days' prior written notice in the case of notice of termination by State Street to you or thirty (30) days' notice in the case of notice from you to State Street of termination, or (ii) immediately for failure of the other party to comply with any material term and condition of the Addendum by giving the other party written notice of termination. In the event of termination, you will return to State Street all Proprietary Information in your possession or in the possession of your Authorized Designees. The foregoing provisions with respect to confidentiality and infringement will survive termination for a period of three (3) years.
MISCELLANEOUS. Except as provided in the next sentence, this Addendum constitutes our entire understanding with respect to access to the Systems and the Remote Access Services. If any State Street custody, accounting or other services agreement with you contains terms and conditions relating to computer systems or data access, this Addendum shall constitute an amendment and supplement to them, and in the event of any inconsistency the provisions providing the greatest benefit to State Street shall control. This Addendum cannot be modified or altered except in a writing duly executed by both of us and shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.
CONFIRMED AND AGREED:
By: /s/ Michael J. Roland --------------------- Name: Michael J. Roland ----------------- Title: Executive Vice President ------------------------ Date: 11-1-01 |
Exhibit 99.(j)(i)(1)
FIRST AMENDMENT TO CUSTODIAN AND
INVESTMENT ACCOUNTING AGREEMENT
THIS FIRST AMENDMENT TO CUSTODIAN AND INVESTMENT ACCOUNTING AGREEMENT (the "Amendment") is made and entered into as of March 1, 2002 by and between EACH OF THE FUNDS SET FORTH ON EXHIBIT A DATED NOVEMBER 1, 2001, attached to the Agreement and attached hereto for reference (each a "Client") and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company ("State Street").
WITNESSETH:
WHEREAS, Client and State Street are parties to that certain Custodian and Investment Accounting Agreement dated as of November 1, 2001 (the "Agreement"); and
WHEREAS, Client and State Street desire to amend and supplement the Agreement upon the following terms and conditions.
NOW THEREFORE, for and in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Client and State Street hereby agree that the Agreement is amended and supplemented as follows:
1. Exhibit A shall be replaced in its entirety by the Exhibit A dated March 1, 2002 attached hereto and incorporated herein by this reference.
2. General Provisions. This Amendment will at all times and in all respects be construed, interpreted, and governed by the laws of The Commonwealth of Massachusetts, without giving effect to the conflict of laws provisions thereof. This Amendment may be executed in any number of counterparts, each constituting an original and all considered one and the same agreement. This Amendment is intended to modify and amend the Agreement and the terms of this Amendment and the Agreement are to be construed to be cumulative and not exclusive of each other. Except as provided herein, the Agreement is hereby ratified and confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized officers to be effective as of the date first above written.
STATE STREET BANK AND TRUST ON BEHALF OF EACH OF THE FUNDS SET FORTH COMPANY ON EXHIBIT A ATTACHED HERETO By: /s/ illegible By: /s/ Michael J. Roland ------------- --------------------- Name: illegible Name: Michael J. Roland --------- ----------------- Title: Senior Vice President Title: Executive Vice President --------------------- ------------------------ |
Exhibit 99.(j)(i)(2)
AMENDED AND RESTATED EXHIBIT A
WITH RESPECT TO THE
CUSTODIAN AND INVESTMENT ACCOUNTING AGREEMENT
DATED NOVEMBER 1, 2001 AND AMENDED MARCH 1, 2002
BETWEEN THE FUNDS AND
STATE STREET BANK AND TRUST COMPANY
EFFECTIVE AS OF NOVEMBER 22, 2002
LIST OF FUNDS
ENTITY NAME JURISDICTION ------------------------------------------------------- -------------------------------------- ING EQUITY TRUST Massachusetts Business Trust ING Biotechnology Fund ING Convertible Fund ING Equity and Bond Fund ING Financial Services Fund ING Growth Opportunities Fund ING Large Company Value Fund ING LargeCap Growth Fund ING MidCap Opportunities Fund ING MidCap Value Fund ING Principal Protection Fund ING Principal Protection Fund II ING Principal Protection Fund III ING Principal Protection Fund IV ING Principal Protection Fund V ING Principal Protection Fund VI* ING Real Estate Fund ING Research Enhanced Index Fund ING SmallCap Opportunities Fund ING SmallCap Value Fund ING Tax Efficient Equity Fund |
ENTITY NAME JURISDICTION ------------------------------------------------------- -------------------------------------- ING FUNDS TRUST Delaware Business Trust ING Classic Money Market Fund ING GNMA Income Fund ING High Yield Bond Fund ING High Yield Opportunity Fund ING Intermediate Bond Fund ING Lexington Money Market Trust ING Money Market Fund ING National Tax-Exempt Bond Fund ING Strategic Bond Fund ING National Tax-Exempt Money Market Fund ING INVESTMENT FUNDS, INC. Maryland Corporation ING MagnaCap Fund ING MAYFLOWER TRUST Massachusetts Business Trust ING Growth + Value Fund ING SENIOR INCOME FUND Delaware Business Trust ING PRIME RATE TRUST Massachusetts Business Trust ING VP NATURAL RESOURCES TRUST Massachusetts Business Trust ING VARIABLE INSURANCE TRUST Delaware Business Trust ING VP High Yield Bond Fund ING VARIABLE PRODUCTS TRUST Massachusetts Business Trust ING VP Convertible Portfolio ING VP Financial Services Portfolio ING VP Growth + Value Portfolio ING VP Growth Opportunities Portfolio ING VP High Yield Bond Portfolio ING VP Large Company Value Portfolio ING VP LargeCap Growth Portfolio ING VP MagnaCap Portfolio ING VP MidCap Opportunities Portfolio ING VP Research Enhanced Index Portfolio ING VP SmallCap Opportunities Portfolio USLICO SERIES FUND Massachusetts Business Trust Asset Allocation Portfolio Bond Portfolio Money Market Portfolio Stock Portfolio |
Last Approved: 11/22/02
Exhibit 99.(j)(ii)
FT INTERACTIVE
FEE ALLOCATION AGREEMENT
FT INTERACTIVE FEE ALLOCATION AGREEMENT, made as of the 21st day of August 2003 (the "Agreement") is entered into by and among the ING funds listed on SCHEDULE A attached hereto (each a "Fund," collectively the "Funds") each acting on its own behalf, and on behalf of its series portfolios.
WHEREAS, the Board of Directors/Trustees of each Fund (the "Board") has authorized the retention of an independent fair value pricing information service, FT Interactive Data Corporation ("FT"), in accordance with the Funds' valuation procedures; and
WHEREAS, ING Investments, LLC ("ING Investments"), has entered into a Services Agreement with FT dated as of the 1st day of March 2000 on behalf of certain Customers, as such term is defined in the Services Agreement. (All capitalized terms, unless herein defined, will have the meaning set forth in the Services Agreement.) The FundRun Schedule of Data Services commencing on February 3, 2003, as amended, sets forth the cost of FT's fair valuation services ("FT Fees") in connection with the certain Customers including the Funds set forth on SCHEDULE A; and
WHEREAS, the Funds now desire to establish (i) the criteria by which the FT Fees shall be allocated among the Funds in connection with the fees set forth in the FundRun Schedule of Data Services; and (ii) the basis on which additional Funds may be added to the Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED by and among the Funds as follows:
SECTION 1. ALLOCATION OF FT FEES
Each Fund shall pay on behalf of itself, and its series portfolios, a portion of the FT Fees based upon the following allocation:
Each Fund will pay a pro rata portion of the FT Fees based upon the percentage of each Fund's portfolios' net assets that are invested in equity securities traded on a foreign exchange as determined at each month-end.
SECTION 2. PAYMENT OF FT FEES
Each Fund will pay a portion of the FT Fees as specified in Section 1 above. Such amounts will be calculated by ING Fund Services, LLC and communicated to each Fund's Custodian. Payments shall be forwarded by each Fund to FT monthly as follows:
FT Interactive Data
P.O. Box 98616
Chicago, IL 60693
SECTION 3. ADDITIONAL FUNDS
(a) If ING Investments adds any additional Funds to the Services Agreement through an amendment to the FundRun Schedule of Data Services, in connection with FT's fair valuation of equity securities traded on a foreign exchange services, such Fund and its portfolios shall become subject to this Agreement immediately upon being added to the SCHEDULE A.
(b) Each additional Fund that becomes subject to this Agreement in accordance with Section 3(a) above shall pay a portion of the FT Fees as described in Section 1 above based on the percentage of such Fund's portfolios' net assets that are invested in equity securities traded on a foreign exchange as determined at the first month-end after such Fund becomes subject to this Agreement. Such allocation will be adjusted monthly thereafter.
SECTION 4. CONTINUATION AND TERMINATION
The Agreement shall become effective on the date first written above. It shall continue with respect to a Fund until such Fund is removed as a Customer from the FundRun Schedule of Data Services provided that such Fund's portion of the FT Fees have been paid for the period that the Fund utilized FT's services.
The Agreement shall terminate for all Funds upon termination of the Services Agreement and FundRun Schedule of Data Services provided that all FT Fees have been paid for the period that the Funds utilized FT's services.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their duly authorized officers as of the date and year first above written.
ON BEHALF OF ALL FUNDS
SET FORTH ON SCHEDULE A
/s/ Michael J. Roland --------------------- By: Michael J. Roland* Executive Vice President |
* Duly authorized to execute and deliver this Agreement on behalf of each Fund set forth on Schedule A to the Agreement.
Exhibit 99.(j)(ii)(1)
AMENDED SCHEDULE A
THE FUNDS
ING INVESTORS TRUST
Fund For Life Series(1)
ING AIM Mid Cap Growth Portfolio(1)
ING Alliance Mid Cap Growth Portfolio(1)
ING American Funds Growth Portfolio
ING American Funds Growth-Income Portfolio
ING American Funds International Portfolio
ING Capital Guardian Large Cap Value Portfolio(1)
ING Capital Guardian Managed Global Portfolio(1)
ING Capital Guardian Small Cap Portfolio(1)
ING Developing World Portfolio(1)
ING Eagle Asset Capital Appreciation Portfolio(1)
ING Evergreen Health Sciences Portfolio
ING Evergreen Omega Portfolio
ING FMR(SM) Diversified Mid Cap Portfolio(1)
ING Goldman Sachs Internet Tollkeeper(SM) Portfolio(1)
ING Hard Assets Portfolio(1)
ING International Portfolio(1)
ING Janus Special Equity Portfolio(1)
ING Jennison Equity Opportunities Portfolio(1)
ING JPMorgan Small Cap Equity Portfolio(1)
ING Julius Baer Foreign Portfolio(1)
ING Legg Mason Value Portfolio(1)
ING Limited Maturity Bond Portfolio(1)
ING Liquid Assets Portfolio(1)
ING Marsico Growth Portfolio(1)
ING Mercury Focus Value Portfolio(1)
ING Mercury Fundamental Growth Portfolio(1)
ING MFS Mid Cap Growth Portfolio(1)
ING MFS Research Portfolio(1)
ING MFS Total Return Portfolio(1)
ING PIMCO Core Bond Portfolio(1)
ING PIMCO High Yield Bond Portfolio(1)
ING Salomon Brothers All Cap Portfolio(1)
ING Salomon Brothers Investors Portfolio(1)
ING Stock Index Portfolio(1)
ING T. Rowe Price Capital Appreciation Portfolio(1)
ING T. Rowe Price Equity Income Portfolio(1)
ING UBS U.S. Balanced Portfolio(1)
ING Van Kampen Equity Growth Portfolio(1)
ING Van Kampen Global Franchise Portfolio(1)
ING Van Kampen Growth and Income Portfolio(1)
ING Van Kampen Real Estate Portfolio(1)
ING EQUITY TRUST
ING Convertible Fund
ING Disciplined LargeCap Fund
ING Equity and Bond Fund
ING Financial Services Fund
ING Growth Opportunities Fund
ING LargeCap Growth Fund
ING LargeCap Value Fund
ING MidCap Opportunities Fund
ING MidCap Value Fund
ING Principal Protection Fund
ING Principal Protection Fund II
ING Principal Protection Fund III
ING Principal Protection Fund IV
ING Principal Protection Fund V
ING Principal Protection Fund VI
ING Principal Protection Fund VII
ING Principal Protection Fund VIII
ING Principal Protection Fund IX
ING Principal Protection Fund X
ING Principal Protection Fund XI
ING Real Estate Fund
ING SmallCap Opportunities Fund
ING SmallCap Value Fund
ING Tax Efficient Equity Fund
ING FUNDS TRUST
ING Classic Money Market Fund
ING GNMA Income Fund
(1) Under the terms of the Management Agreement between ING Investors Trust and Directed Services, Inc., the Fund is subject to a unified fee arrangement. Accordingly, the portion of FT Fees allocated to the Fund under the Agreement will be borne directly by Directed Services, Inc. as provided in the Management Agreement.
ING High Yield Bond Fund
ING High Yield Opportunity Fund
ING Intermediate Bond Fund
ING Lexington Money Market Trust
ING Money Market Fund
ING National Tax-Exempt Bond Fund
ING INVESTMENT FUNDS, INC.
ING MagnaCap Fund
ING MAYFLOWER TRUST
ING Growth + Value Fund
ING International Value Fund
ING MUTUAL FUNDS
ING Emerging Countries Fund
ING Foreign Fund
ING Global Equity Dividend Fund
ING Global Real Estate Fund
ING International Fund
ING International SmallCap Growth Fund
ING Precious Metals Fund
ING Russia Fund
ING Worldwide Growth Fund
ING PRIME RATE TRUST
ING SENIOR INCOME FUND
ING VARIABLE INSURANCE TRUST
ING GET U.S. Core Portfolio - Series 1
ING GET U.S. Core Portfolio - Series 2
ING GET U.S. Core Portfolio - Series 3
ING GET U.S. Core Portfolio - Series 4
ING GET U.S. Core Portfolio - Series 5
ING GET U.S. Core Portfolio - Series 6
ING GET U.S. Opportunity Portfolio - Series 1
ING GET U.S. Opportunity Portfolio - Series 2
ING VP Worldwide Growth Portfolio
ING VARIABLE PRODUCTS TRUST
ING VP Convertible Portfolio
ING VP Disciplined LargeCap Portfolio
ING VP Financial Services Portfolio
ING VP Growth + Value Portfolio
ING VP Growth Opportunities Portfolio
ING VP High Yield Bond Portfolio
ING VP International Value Portfolio
ING VP LargeCap Growth Portfolio
ING VP MagnaCap Portfolio
ING VP MidCap Opportunities Portfolio
ING VP Real Estate Portfolio
ING VP SmallCap Opportunities Portfolio
ING VP EMERGING MARKETS FUND, INC.
ING VP NATURAL RESOURCES TRUST
USLICO SERIES FUND
The Asset Allocation Portfolio
The Bond Portfolio
The Money Market Portfolio
The Stock Portfolio
ING PARTNERS, INC.
ING Alger Aggressive Growth Portfolio
ING Alger Capital Appreciation Portfolio
ING Alger Growth Portfolio
ING American Century Small Cap Value Portfolio
ING Baron Small Cap Growth Portfolio
ING DSI Enhanced Index Portfolio
ING Goldman Sachs(R) Capital Growth Portfolio
ING Goldman Sachs(R) Core Equity Portfolio
ING JPMorgan Fleming International Portfolio
ING JPMorgan Mid Cap Value Portfolio
ING MFS Capital Opportunities Portfolio
ING MFS Global Growth Portfolio
ING MFS Research Equity Portfolio
ING OpCap Balanced Value Portfolio
ING PIMCO Total Return Portfolio
ING Salomon Brothers Aggressive Growth Portfolio
ING Salomon Brothers Fundamental Value Portfolio
ING Salomon Brothers Investors Value Portfolio
ING T. Rowe Price Growth Equity Portfolio
ING UBS Tactical Asset Allocation Portfolio
ING Van Kampen Comstock Portfolio
ING VP BALANCED PORTFOLIO, INC.
ING STRATEGIC ALLOCATION PORTFOLIOS, INC.
ING VP Strategic Allocation Balanced Portfolio
ING VP Strategic Allocation Growth Portfolio
ING VP Strategic Allocation Income Portfolio
ING GET FUND
ING GET Fund - Series E
ING GET Fund - Series G
ING GET Fund - Series H
ING GET Fund - Series I
ING GET Fund - Series J
ING GET Fund - Series K
ING GET Fund - Series L
ING GET Fund - Series M
ING GET Fund - Series N
ING GET Fund - Series P
ING GET Fund - Series Q
ING GET Fund - Series R
ING GET Fund - Series S
ING GET Fund - Series T
ING GET Fund - Series U
ING GET Fund - Series V
ING VP BOND PORTFOLIO
ING VP MONEY MARKET PORTFOLIO
ING VARIABLE FUNDS
ING VP Growth and Income Portfolio
ING VARIABLE PORTFOLIOS, INC.
ING VP Global Science and Technology Portfolio
ING VP Growth Portfolio
ING VP Index Plus LargeCap Portfolio
ING VP Index Plus MidCap Portfolio
ING VP Index Plus SmallCap Portfolio
ING VP International Equity Portfolio
ING VP Small Company Portfolio
ING VP Value Opportunity Portfolio
ING SERIES FUND, INC.
Brokerage Cash Reserves
ING Aeltus Money Market Fund
ING Balanced Fund
ING Bond Fund
ING Classic Principal Protection Fund I
ING Classic Principal Protection Fund II
ING Classic Principal Protection Fund III
ING Classic Principal Protection Fund IV
ING Equity Income Fund
ING Global Science and Technology Fund
ING Government Fund
ING Growth Fund
ING Index Plus LargeCap Fund
ING Index Plus MidCap Fund
ING Index Plus Protection Fund
ING Index Plus SmallCap Fund
ING International Growth Fund
ING Small Company Fund
ING Strategic Allocation Balanced Fund
ING Strategic Allocation Growth Fund
ING Strategic Allocation Income Fund
ING Value Opportunity Fund
Exhibit 99.(j)(iii)
PROXY AGENT
FEE ALLOCATION AGREEMENT
PROXY VOTING FEE ALLOCATION AGREEMENT, made as of the 21st day of August, 2003 (the "Agreement"), is entered into by and among ING Investments, LLC ("ING Investments"), Directed Services, Inc. ("DSI"), ING Life Insurance and Annuity Company ("ILIAC") and the ING funds listed on SCHEDULE A attached hereto (each a "Fund," and collectively the "Funds"), each acting on its own behalf, and on behalf of its series portfolios.
WHEREAS, each Fund is an investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), the series of which are managed by ING Investments, DSI or ILIAC (each an "Adviser," and collectively the "Advisers"); and
WHEREAS, the Board of Directors/Trustees of each Fund (the "Board") has adopted procedures and guidelines to govern the voting of proxies relating to each Fund's portfolio securities; and
WHEREAS, the Board has authorized the retention of an independent proxy voting service, Institutional Shareholder Services, Inc. ("ISS"), to assist in the voting of Fund proxies through the provision of vote analysis, implementation and recordkeeping and disclosure services; and
WHEREAS, the Advisers for the Funds have entered into a Master Services Agreement with ISS dated as of the 1st day of July, 2003 which sets forth the fees ("ISS Fees") for the ISS services ("Services") set forth on Addendum No. (ING Funds-ADN.US & Global Voting Agent Service.8/1/2003-I) to the Master Services Agreement in connection with Fund proxies that are to be paid in advance of receipt of such Services; and
WHEREAS, the Advisers and the Funds now desire to establish (i) the criteria by which the ISS Fees shall be allocated among the Advisers and the Funds in connection with the Services to be provided in connection with the Master Services Agreement; and (ii) the basis on which additional Advisers or Funds for which the Advisers may act as investment manager may be added to the Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED by and among the Advisers and the Funds as follows:
1. ALLOCATION OF ISS FEES ATTRIBUTABLE TO PROXY ADVISORY SERVICES.
The Advisers and each Fund, on behalf of itself and its series portfolios, shall pay a portion of the ISS Fees attributable to Proxy Advisory Services based upon the following allocation:
A. U.S. Proxy Advisory Service
The Advisers will pay fifty percent (50%) of the ISS Fees attributable
to U.S. Proxy Advisory Services. The amount will be allocated among the Advisers based upon Fund assets under management that are invested in U.S. equity positions, as of June 30, 2003, and will be adjusted semi-annually. Each Fund's Net Assets as of June 30, 2003 is listed on SCHEDULE B attached hereto.
Each Fund will pay a pro rata portion of the remaining fifty percent (50%) of the ISS Fees attributable to U.S. Proxy Advisory Services based upon the percentage of each Fund's net assets that are invested in U.S. equity positions as of June 30, 2003. Such allocations will be adjusted semi-annually based on the percentage of each Fund's net assets that are invested in U.S. equity positions.
B. Global Proxy Advisory Service
The Advisers will pay fifty percent (50%) of the ISS Fees attributable to Global Proxy Advisory Services. The amount will be allocated among the Advisers based on Fund assets under management that are invested in equity securities traded on a foreign exchange as of June 30, 2003, and will be adjusted semi-annually.
Each Fund will pay a pro rata portion of the remaining fifty percent (50%) of the ISS Fees attributable to Global Proxy Advisory Services based upon the percentage of each Fund's net assets that are invested in equity securities traded on a foreign exchange as of June 30, 2003. Such allocations will be adjusted semi-annually based on the percentage of each Fund's net assets that are invested in equity securities traded on a foreign exchange.
2. ALLOCATION OF ISS FEES ATTRIBUTABLE TO VOTING AGENT SERVICE.
The Advisers and each Fund, on behalf of itself, and its series portfolios, shall pay a portion of the ISS Fees attributable to Voting Agent Services based upon the following allocation:
A. Per Ballot
The Advisers shall pay fifty percent (50%) of the ISS Fees attributable to the Per Ballot portion of the Voting Agent Services. The amount will be allocated among the Advisers based on Fund assets under management that are invested in U.S. and foreign equity positions as of June 30, 2003, and will be adjusted semi-annually.
Each Fund, on behalf of itself, and its series portfolios, shall pay a pro rata portion of fifty percent (50%) of the ISS Fees attributable to the Per Ballot portion of the Voting Agent Services based upon the percentage of each Fund's net assets that are invested in U.S. and foreign equity positions as of June 30, 2003. Such allocations will be adjusted semi-annually based on the percentage of each Fund's net assets that are invested in equity
positions.
B. Per Account
The amount will be allocated among the Funds equally based upon the number of Funds or their series portfolios as of June 30, 2003. Such allocations will be adjusted semi-annually based on the number of Funds or their series portfolios.
3. ALLOCATION OF ISS FEES ATTRIBUTABLE TO VOTE DISCLOSURE SERVICES.
Each Fund shall pay on behalf of itself, and its series portfolios, the ISS Fees attributable to Vote Disclosure Services based up on the following allocation:
The amount will be allocated on a pro rata basis based upon the percentage of each Fund's net assets that are invested in equity positions as of June 30, 2003. Such allocations will be adjusted semi-annually based on the percentage of each Fund's net assets that are invested in equity positions.
4. ALLOCATION OF ISS FEES ATTRIBUTABLE TO CUSTOM POLICY SERVICE.
Each Fund shall pay on behalf of itself, and its series portfolios, the ISS Fees attributable to Custom Policy Service fees based upon the following allocation:
The amount will be allocated equally based upon the number of Funds or their series portfolios as of June 30, 2003. Such allocations will be adjusted semi-annually based on the number of Funds or their series portfolios.
5. PAYMENTS.
Each Adviser and Fund will pay a portion of the ISS Fees as specified in Sections 1, 2, 3 and 4 above. Such amounts will be calculated by and communicated to each Fund's Adviser and/or custodian as applicable by ING Funds Services, LLC. Payments shall be forwarded quarterly by each Adviser and/or custodian to ISS as follows:
Routing Number: 052001633
A/C # 03935295204
Bank of America
Rockville MD
6. ADDITIONAL FUNDS.
(a) If any Advisers are added to the Master Services Agreement, such Adviser shall become subject to this Agreement immediately upon being added to the Master Services Agreement.
(b) If the Advisers add any additional Funds to the Master Services Agreement, such Fund shall become subject to this Agreement
immediately upon being added to the Master Services Agreement.
(c) Each additional Adviser that becomes subject to this Agreement in accordance with Section 6(a) above shall pay a portion of the ISS Fees as described in Sections 1 and 2 above, as of the date such Adviser becomes subject to this Agreement. Such allocation will be adjusted semi-annually as described in Sections 1 and 2.
(d) Each additional Fund that becomes subject to this Agreement in accordance with Section 6(b) above shall pay a portion of the ISS Fees as described in Sections 1, 2, 3 and 4 above based on the Fund's net assets or number of Funds, as applicable, as of the date such Fund becomes subject to this Agreement. Such allocation will be adjusted semi-annually as described in Sections 1, 2, 3 and 4.
7. CONTINUATION AND TERMINATION.
The Agreement shall become effective on the date first written above. It shall continue with respect to an Adviser or a Fund until such Adviser or Fund is removed from the Master Services Agreement provided that such Adviser or Fund's portion of the ISS Fees has been paid for the period that the Adviser or Fund utilized the Services.
The Agreement shall terminate for all Advisers and Funds upon termination of the Master Services Agreement provided that all ISS Fees have been paid for the period that the Advisers and Funds utilized the Services.
8. COUNTERPART
This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their duly authorized officers as of the date and year first above written.
ON BEHALF OF: ALL FUNDS SET FORTH ON SCHEDULE A
/s/ James M. Hennessy --------------------- By: James M. Hennessy President Duly authorized to execute and deliver this Agreement on behalf of each Fund set forth on Schedule A to the Agreement. |
ING INVESTMENTS, LLC
/s/ Michael J. Roland --------------------- By: Michael J. Roland Executive Vice President |
DIRECTED SERVICES, INC.
/s/ David L. Jacobson --------------------- By: David L. Jacobson Executive Vice President |
ING LIFE INSURANCE AND ANNUITY COMPANY
/s/ Laurie M. Tillinghast ------------------------- By: Laurie M. Tillinghast Vice President |
Exhibit 99.(j)(iii)(1)
AMENDED SCHEDULE A
THE FUNDS
ING INVESTORS TRUST
Fund For Life Series(1)
ING AIM Mid Cap Growth Portfolio(1)
ING Alliance Mid Cap Growth Portfolio(1)
ING Capital Guardian Large Cap Value Portfolio(1)
ING Capital Guardian Managed Global Portfolio(1)
ING Capital Guardian Small Cap Portfolio(1)
ING Developing World Portfolio(1)
ING Eagle Asset Capital Appreciation Portfolio(1)
ING Evergreen Health Sciences Portfolio
ING Evergreen Omega Portfolio
ING FMR(SM) Diversified Mid Cap Portfolio(1)
ING Goldman Sachs Internet Tollkeeper(SM) Portfolio(1)
ING Hard Assets Portfolio(1)
ING International Portfolio(1)
ING Janus Special Equity Portfolio(1)
ING Jennison Equity Opportunities Portfolio(1)
ING JPMorgan Small Cap Equity Portfolio(1)
ING Julius Baer Foreign Portfolio(1)
ING Legg Mason Value Portfolio(1)
ING Lifestyle Aggressive Growth Portfolio
ING Lifestyle Growth Portfolio
ING Lifestyle Moderate Growth Portfolio
ING Lifestyle Moderate Portfolio
ING Limited Maturity Bond Portfolio(1)
ING Liquid Assets Portfolio(1)
ING Marsico Growth Portfolio(1)
ING Mercury Focus Value Portfolio(1)
ING Mercury Fundamental Growth Portfolio(1)
ING MFS Mid Cap Growth Portfolio(1)
ING MFS Research Portfolio(1)
ING MFS Total Return Portfolio(1)
ING PIMCO Core Bond Portfolio(1)
ING PIMCO High Yield Portfolio(1)
ING Salomon Brothers All Cap Portfolio(1)
ING Salomon Brothers Investors Portfolio(1)
ING Stock Index Portfolio(1)
ING T. Rowe Price Capital Appreciation Portfolio(1)
ING T. Rowe Price Equity Income Portfolio(1)
ING UBS U.S. Balanced Portfolio(1)
ING Van Kampen Equity Growth Portfolio(1)
ING Van Kampen Global Franchise Portfolio(1)
ING Van Kampen Growth and Income Portfolio(1)
ING Van Kampen Real Estate Portfolio(1)
ING EQUITY TRUST
ING Convertible Fund
ING Disciplined LargeCap Fund
ING Equity and Bond Fund
ING Financial Services Fund
ING Growth Opportunities Fund
ING LargeCap Growth Fund
ING LargeCap Value Fund
ING MidCap Opportunities Fund
ING MidCap Value Fund
ING Principal Protection Fund
ING Principal Protection Fund II
ING Principal Protection Fund III
ING Principal Protection Fund IV
ING Principal Protection Fund V
ING Principal Protection Fund VI
ING Principal Protection Fund VII
ING Principal Protection Fund VIII
ING Principal Protection Fund IX
ING Principal Protection Fund X
ING Principal Protection Fund XI
ING Real Estate Fund
ING SmallCap Opportunities Fund
ING SmallCap Value Fund
ING Tax Efficient Equity Fund
ING FUNDS TRUST
ING Classic Money Market Fund
(1) Under the terms of the Management Agreement between ING Investors Trust and Directed Services, Inc., the Fund is subject to a unified fee arrangement. Accordingly, the portion of FT Fees allocated to the Fund under the Agreement will be borne directly by Directed Services, Inc. as provided in the Management Agreement.
ING GNMA Income Fund
ING High Yield Bond Fund
ING High Yield Opportunity Fund
ING Intermediate Bond Fund
ING Lexington Money Market Trust
ING Money Market Fund
ING National Tax-Exempt Bond Fund
ING INVESTMENT FUNDS, INC.
ING MagnaCap Fund
ING MAYFLOWER TRUST
ING Growth + Value Fund
ING International Value Fund
ING MUTUAL FUNDS
ING Emerging Countries Fund
ING Foreign Fund
ING Global Equity Dividend Fund
ING Global Real Estate Fund
ING International Fund
ING International SmallCap Growth Fund
ING Precious Metals Fund
ING Russia Fund
ING Worldwide Growth Fund
ING PRIME RATE TRUST
ING SENIOR INCOME FUND
ING VARIABLE INSURANCE TRUST
ING GET U.S. Core Portfolio - Series 1
ING GET U.S. Core Portfolio - Series 2
ING GET U.S. Core Portfolio - Series 3
ING GET U.S. Core Portfolio - Series 4
ING GET U.S. Core Portfolio - Series 5
ING GET U.S. Core Portfolio - Series 6
ING GET U.S. Opportunity Portfolio - Series 1
ING GET U.S. Opportunity Portfolio - Series 2
ING VP Worldwide Growth Portfolio
ING VARIABLE PRODUCTS TRUST
ING VP Convertible Portfolio
ING VP Disciplined LargeCap Portfolio
ING VP Financial Services Portfolio
ING VP Growth + Value Portfolio
ING VP Growth Opportunities Portfolio
ING VP High Yield Bond Portfolio
ING VP International Value Portfolio
ING VP LargeCap Growth Portfolio
ING VP MagnaCap Portfolio
ING VP MidCap Opportunities Portfolio
ING VP Real Estate Portfolio
ING VP SmallCap Opportunities Portfolio
ING VP EMERGING MARKETS FUND, INC.
ING VP NATURAL RESOURCES TRUST
USLICO SERIES FUND
The Asset Allocation Portfolio
The Bond Portfolio
The Money Market Portfolio
The Stock Portfolio
ING PARTNERS, INC.
ING Alger Aggressive Growth Portfolio
ING Alger Capital Appreciation Portfolio
ING Alger Growth Portfolio
ING American Century Small Cap Value Portfolio
ING Baron Small Cap Growth Portfolio
ING DSI Enhanced Index Portfolio
ING Goldman Sachs(R) Capital Growth Portfolio
ING Goldman Sachs(R) Core Equity Portfolio
ING JPMorgan Fleming International Portfolio
ING JPMorgan Mid Cap Value Portfolio
ING MFS Capital Opportunities Portfolio
ING MFS Global Growth Portfolio
ING MFS Research Equity Portfolio
ING OpCap Balanced Value Portfolio
ING PIMCO Total Return Portfolio
ING Salomon Brothers Aggressive Growth Portfolio
ING Salomon Brothers Fundamental Value Portfolio
(1) Under the terms of the Management Agreement between ING Investors Trust and Directed Services, Inc., the Fund is subject to a unified fee arrangement. Accordingly, the portion of FT Fees allocated to the Fund under the Agreement will be borne directly by Directed Services, Inc. as provided in the Management Agreement.
ING Salomon Brothers Investors Value Portfolio ING T. Rowe Price Growth Equity Portfolio ING UBS Tactical Asset Allocation Portfolio ING Van Kampen Comstock Portfolio
ING VP BALANCED PORTFOLIO, INC.
ING STRATEGIC ALLOCATION PORTFOLIOS, INC.
ING VP Strategic Allocation Balanced Portfolio
ING VP Strategic Allocation Growth Portfolio
ING VP Strategic Allocation Income Portfolio
ING GET FUND
ING GET Fund - Series E
ING GET Fund - Series G
ING GET Fund - Series H
ING GET Fund - Series I
ING GET Fund - Series J
ING GET Fund - Series K
ING GET Fund - Series L
ING GET Fund - Series M
ING GET Fund - Series N
ING GET Fund - Series P
ING GET Fund - Series Q
ING GET Fund - Series R
ING GET Fund - Series S
ING GET Fund - Series T
ING GET Fund - Series U
ING GET Fund - Series V
ING VP BOND PORTFOLIO
ING VP MONEY MARKET PORTFOLIO
ING VARIABLE FUNDS
ING VP Growth and Income Portfolio
ING VARIABLE PORTFOLIOS, INC.
ING VP Global Science and Technology Portfolio
ING VP Growth Portfolio
ING VP Index Plus LargeCap Portfolio
ING VP Index Plus MidCap Portfolio
ING VP Index Plus SmallCap Portfolio
ING VP International Equity Portfolio
ING VP Small Company Portfolio
ING VP Value Opportunity Portfolio
ING SERIES FUND, INC.
Brokerage Cash Reserves
ING Aeltus Money Market Fund
ING Balanced Fund
ING Bond Fund
ING Classic Principal Protection Fund I
ING Classic Principal Protection Fund II
ING Classic Principal Protection Fund III
ING Classic Principal Protection Fund IV
ING Equity Income Fund
ING Global Science and Technology Fund
ING Government Fund
ING Growth Fund
ING Index Plus LargeCap Fund
ING Index Plus MidCap Fund
ING Index Plus Protection Fund
ING Index Plus SmallCap Fund
ING International Growth Fund
ING Small Company Fund
ING Strategic Allocation Balanced Fund
ING Strategic Allocation Growth Fund
ING Strategic Allocation Income Fund
ING Value Opportunity Fund
(1) Under the terms of the Management Agreement between ING Investors Trust and Directed Services, Inc., the Fund is subject to a unified fee arrangement. Accordingly, the portion of FT Fees allocated to the Fund under the Agreement will be borne directly by Directed Services, Inc. as provided in the Management Agreement.
Exhibit 99.(j)(iv)
ALLOCATION AGREEMENT
FIDELITY BOND
THIS AGREEMENT made as of this 24th day of May, 2002 by and among any of the Funds listed on Schedule A and any separate classes thereof and all future investment companies and any separate classes thereof (the "Funds"), which are named insureds under a joint liability policy as described below and for which ING Investments, LLC acts as investment manager are entered into under the following circumstances:
A. Section 17(g) of the Investment Company Act of 1940, as amended ("the 1940 Act") provides that the Securities and Exchange Commission ("SEC") is authorized to require that directors, officers and employees of registered investment companies be covered under a liability, errors and omissions insurance policy, and the SEC has promulgated rules and regulations dealing with this subject ("Rule 17g-1");
B. The Funds are named as joint insureds under the terms of a joint insurance policy ("Policy") which insures against illegal profit or gain, intentional wrongful acts, libel, slander, defamation, ERISA claims, insider trading, as well as other coverage as outlined in the Policy, by the directors, officers and employees;
C. A majority of those members of the Board of Directors/Trustees of each of the Funds, who are not "interested persons" as defined by Section 2(a)(19) of the 1940 Act, have given due consideration to all factors relevant to the form, amount and apportionment of premiums and recoveries under such Policy and the Board of Directors/Trustees of each Fund has approved the term and amount of the Policy, the portion of the premium payable by that party, and the manner in which recovery on the Policy, if any, shall be shared by and among the parties thereto; and
D. The Funds now desire to enter into the agreement required by Rule 17g-1 of the 1940 Act to establish the manner in which recovery under the Policy, if any, shall be shared.
NOW, THEREFORE, IT IS HEREBY AGREED by and among the parties as follows:
1. Payment of Premiums.
Each Fund shall pay a portion of the premium due under the Policy derived by multiplying the premium by a fraction, (i) the denominator of which is the total net assets of all the Funds combined and (ii) the numerator of which is the total net assets of each of the Funds individually. The net assets of the classes are deemed to be represented by the net assets of their respective funds. Each of the Funds agrees that the appropriateness of the allocation of said premium will be determined no less often than annually. No adjustment of the allocation of said premium will be implemented without approval of the Boards of each of the Funds.
2. Allocation of Recoveries
(a) If more than one of the parties hereto is damaged in a single loss for which recovery is received under the policy, each such party shall receive that portion of the recovery which represents the loss sustained by that party, unless the recovery is inadequate to fully indemnify such party sustaining loss.
(b) If the recovery is inadequate to fully indemnify each such party sustaining a loss, the recovery shall be allocated among such parties as follows:
(i) Each Party sustaining a loss shall be allocated an amount equal to the lesser of its actual loss or the minimum amount of policy which would be required to be maintained by such party under a single insured policy (determined as of the time of loss) in accordance with the provisions of Rule 17g-1.
(ii) The remaining portion of the proceeds shall be allocated to each party sustaining a loss not fully covered by the allocation under subparagraph (i) in the proportion that each such party's last payment of premium bears to the sum of the last such premium payments of all such parties. If such allocation would result in any party which had sustained a loss receiving a portion of the recovery in excess of the loss actually sustained, such excess portion shall be allocated among the other parties whose losses would not be fully indemnified. The allocation shall bear the same proportion as each such party's last payment of premium bears to the sum of the last premium payments of all parties entitled to receive a share of the excess. Any allocation in excess of a loss actually sustained by any such party shall be reallocated in the same manner.
3. OBLIGATION TO MAINTAIN MINIMUM COVERAGE.
Each of the Funds represents and warrants to each of the other parties hereto that the minimum amount of coverage required of it by Rule 17g-1 as of the date hereof is as reflected in the schedule attached hereto. Each of the Funds agrees that it will determine, no less than at the end of each calendar quarter, the minimum amount of coverage which would be required of it by Rule 17g-1 if a determination with respect to the adequacy of the coverage were currently being made. In the event that the total amount of the minimum coverage thus determined exceeds the amount of coverage of the then effective policy, the Boards of each of the Funds will be notified and will determine whether it is necessary or appropriate to increase the total amount of coverage of the policy to an amount not less than the total amount of such minimums, or to secure such excess coverage for one or more of the parties hereto, which, when added to the total coverage of the policy, will equal an amount of such minimums. Unless a Fund elects to terminate this Agreement (pursuant to Paragraph 4) and its participation in a joint-insured policy, each Fund agrees to pay its fair portion of the new or additional premium (taking into account all of the then existing circumstances).
4. CONTINUATION AND TERMINATION. This Agreement shall become effective on the date first written above, subject to the condition that the Fund's Board of Directors/Trustees, including a majority of those Directors/Trustees who are not interested persons (as such term is defined in the 1940 Act) of the Manager, shall have approved this Agreement. This Agreement shall supersede all prior agreements relating to an allocation of premium on any joint insured policy and shall apply to the present liability policy coverage and any renewal or replacement thereof. It shall continue until terminated by any party hereto upon the giving of not less than sixty (60) days notice to the other parties hereto in writing.
5. AMENDMENTS. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. A written amendment of this Agreement is effective upon the approval of the Board of Directors/Trustees and the Manager.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed by their duly authorized officers as of the date first above written.
On Behalf of: All ING Funds Listed on Schedule A
By:/s/ Michael J. Roland --------------------- Michael J. Roland Executive Vice President |
Exhibit 99.(j)(iv)(1)
AMENDED SCHEDULE A
WITH RESPECT TO THE
ALLOCATION AGREEMENT - BLANKET BOND
FUNDS
Fund For Life Series(1)
ING AIM Mid Cap Growth Portfolio(1)
ING Alliance Mid Cap Growth Portfolio(1)
ING American Funds Growth Portfolio
ING American Funds Growth-Income Portfolio
ING American Funds International Portfolio
ING Capital Guardian Large Cap Value Portfolio(1)
ING Capital Guardian Managed Global Portfolio(1)
ING Capital Guardian Small Cap Portfolio(1)
ING Classic Money Market Fund
ING Convertible Fund
ING Developing World Portfolio(1)
ING Disciplined LargeCap Fund
ING Eagle Asset Capital Appreciation Portfolio(1)
ING Emerging Countries Fund
ING Equity and Bond Fund
ING Evergreen Health Sciences Portfolio
ING Evergreen Omega Portfolio
ING Financial Services Fund
ING FMR(SM) Diversified Mid Cap Portfolio(1)
ING Foreign Fund
ING GET U.S. Core Portfolio - Series 1
ING GET U.S. Core Portfolio - Series 2
ING GET U.S. Core Portfolio - Series 3
ING GET U.S. Core Portfolio - Series 4
ING GET U.S. Core Portfolio - Series 5
ING GET U.S. Core Portfolio - Series 6
ING GET U.S. Core Select Portfolio - Series 1
ING GET U.S. Core Select Portfolio - Series 2
ING GET U.S. Opportunity Portfolio - Series 1
ING GET U.S. Opportunity Portfolio - Series 2
ING Global Equity Dividend Fund
ING Global Real Estate Fund
ING GNMA Income Fund
ING Goldman Sachs Internet Tollkeeper(SM) Portfolio(1)
ING Growth + Value Fund
ING Growth Opportunities Fund
ING Hard Assets Portfolio(1)
ING High Yield Bond Fund
ING High Yield Opportunity Fund
ING Intermediate Bond Fund
ING International Fund
ING International Portfolio(1)
ING International SmallCap Growth Fund
ING International Value Fund
ING Janus Special Equity Portfolio(1)
ING Jennison Equity Opportunities Portfolio(1)
ING JPMorgan Small Cap Equity Portfolio(1)
ING Julius Baer Foreign Portfolio(1)
ING LargeCap Growth Fund
ING LargeCap Value Fund
ING Legg Mason Value Portfolio(1)
ING Lexington Money Market Trust
ING Lifestyle Aggressive Growth Portfolio
ING Lifestyle Growth Portfolio
ING Lifestyle Moderate Growth Portfolio
ING Lifestyle Moderate Portfolio
ING Limited Maturity Bond Portfolio(1)
ING Liquid Assets Portfolio(1)
ING MagnaCap Fund
ING Marsico Growth Portfolio(1)
ING Mercury Focus Value Portfolio(1)
ING Mercury Fundamental Growth Portfolio(1)
ING MFS Mid Cap Growth Portfolio(1)
ING MFS Research Portfolio(1)
ING MFS Total Return Portfolio(1)
(1) Under the terms of the Management Agreement between ING Investors Trust and Directed Services, Inc., the Fund is subject to a unified fee arrangement. Accordingly, the portion of Blanket Bond premium allocated to the Fund under the Agreement will be borne directly by Directed Services, Inc. as provided in the Management Agreement.
ING MidCap Opportunities Fund
ING MidCap Value Fund
ING Money Market Fund
ING National Tax-Exempt Bond Fund
ING PIMCO Core Bond Portfolio(1)
ING PIMCO High Yield Portfolio(1)
ING Precious Metals Fund
ING PRIME RATE TRUST
ING Principal Protection Fund
ING Principal Protection Fund II
ING Principal Protection Fund III
ING Principal Protection Fund IV
ING Principal Protection Fund V
ING Principal Protection Fund VI
ING Principal Protection Fund VII
ING Principal Protection Fund VIII
ING Principal Protection Fund IX
ING Principal Protection Fund X
ING Principal Protection Fund XI
ING Real Estate Fund
ING Russia Fund
ING Salomon Brothers All Cap Portfolio(1)
ING Salomon Brothers Investors Portfolio(1)
ING SENIOR INCOME FUND
ING SmallCap Opportunities Fund
ING SmallCap Value Fund
ING Stock Index Portfolio(1)
ING T. Rowe Price Capital Appreciation Portfolio(1)
ING T. Rowe Price Equity Income Portfolio(1)
ING Tax Efficient Equity Fund
ING UBS U.S. Balanced Portfolio(1)
ING Van Kampen Equity Growth Portfolio(1)
ING Van Kampen Global Franchise Portfolio(1)
ING Van Kampen Growth and Income Portfolio(1)
ING Van Kampen Real Estate Portfolio(1)
ING VP Convertible Portfolio
ING VP Disciplined LargeCap Portfolio
ING VP EMERGING MARKETS FUND, INC.
ING VP Financial Services Portfolio
ING VP Growth + Value Portfolio
ING VP Growth Opportunities Portfolio
ING VP High Yield Bond Portfolio
ING VP International Value Portfolio
ING VP LargeCap Growth Portfolio
ING VP MagnaCap Portfolio
ING VP MidCap Opportunities Portfolio
ING VP NATURAL RESOURCES TRUST
ING VP Real Estate Portfolio
ING VP SmallCap Opportunities Portfolio
ING VP Worldwide Growth Portfolio
ING Worldwide Growth Fund
The Asset Allocation Portfolio
The Bond Portfolio
The Money Market Portfolio
The Stock Portfolio
(1) Under the terms of the Management Agreement between ING Investors Trust and Directed Services, Inc., the Fund is subject to a unified fee arrangement. Accordingly, the portion of Blanket Bond premium allocated to the Fund under the Agreement will be borne directly by Directed Services, Inc. as provided in the Management Agreement.
Exhibit 99.(j)(v)
ALLOCATION AGREEMENT
DIRECTORS & OFFICERS LIABILITY
THIS AGREEMENT made as of this 24th day of May, 2002 by and among the Funds listed on Schedule A and any separate classes thereof and all future investment companies and any separate classes thereof (the "Funds"), which are named insureds under a joint liability policy as described below and for which ING Investments, LLC acts as investment manager are entered into under the following circumstances:
A. Section 17d-1(d)(7) of the Investment Company Act of 1940, as amended ("the 1940 Act") provides that the Securities and Exchange Commission ("SEC") is authorized to require that directors, officers and employees of registered investment companies be covered under a liability, errors and omissions insurance policy, and the SEC has promulgated rules and regulations dealing with this subject ("Rule 17d-1(d)(7)");
B. The Funds are named as joint insureds under the terms of a joint insurance policy ("Policy") which insures against illegal profit or gain, intentional wrongful acts, libel, slander, defamation, ERISA claims, insider trading, as well as other coverage as outlined in the Policy, by the directors, officers and employees;
C. A majority of those members of the Board of Directors/Trustees of each of the Funds, who are not "interested persons" as defined by Section 2(a)(19) of the 1940 Act, have given due consideration to all factors relevant to the form, amount and apportionment of premiums and recoveries under such Policy and the Board of Directors/Trustees of each Fund has approved the term and amount of the Policy, the portion of the premium payable by that party, and the manner in which recovery on the Policy, if any, shall be shared by and among the parties thereto; and
D. The Funds now desire to enter into the agreement required by Rule 17d-1(d)(7) of the 1940 Act to establish the manner in which recovery under the Policy, if any, shall be shared.
NOW, THEREFORE, IT IS HEREBY AGREED by and among the parties as follows:
1. PAYMENT OF PREMIUMS.
Each Fund shall pay a portion of the premium due under the Policy derived by multiplying the premium by a fraction, (i) the denominator of which is the total net assets of all the Funds combined and (ii) the numerator of which is the total net assets of each of the Funds individually. The net assets of the classes are deemed to be represented by the net assets of their respective funds. Each of the Funds agrees that the appropriateness of the allocation of said premium will be determined no less often than annually. No adjustment of the allocation of said premium will be implemented without approval of the Boards of each of the Funds.
2. ALLOCATION OF RECOVERIES
(a) If more than one of the parties hereto is damaged in a single loss for which recovery is received under the policy, each such party shall receive that portion of the recovery which represents the loss sustained by that party, unless the recovery is inadequate to fully indemnify such party sustaining loss.
(b) If the recovery is inadequate to fully indemnify each such party sustaining a loss, the recovery shall be allocated among such parties as follows:
(i) Each Party sustaining a loss shall be allocated an amount equal to the lesser of its actual loss or the minimum amount of policy which would be required to be maintained by such party under a single insured policy (determined as of the time of loss) in accordance with the provisions of Rule 17d-1(d)(7).
(ii) The remaining portion of the proceeds shall be allocated to each party sustaining a loss not fully covered by the allocation under subparagraph (i) in the proportion that each such party's last payment of premium bears to the sum of the last such premium payments of all such parties. If such allocation would result in any party which had sustained a loss receiving a portion of the recovery in excess of the loss actually sustained, such excess portion shall be allocated among the other parties whose losses would not be fully indemnified. The allocation shall bear the same proportion as each such party's last payment of premium bears to the sum of the last premium payments of all parties entitled to receive a share of the excess. Any allocation in excess of a loss actually sustained by any such party shall be reallocated in the same manner.
3. OBLIGATION TO MAINTAIN MINIMUM COVERAGE.
Each of the Funds represents and warrants to each of the other parties hereto that the minimum amount of coverage required of it by Rule 17d-1(d)(7) as of the date hereof is as reflected in the schedule attached hereto. Each of the Funds agrees that it will determine, no less
than at the end of each calendar quarter, the minimum amount of coverage which would be required of it by Rule 17d-1(d)(7) if a determination with respect to the adequacy of the coverage were currently being made. In the event that the total amount of the minimum coverage thus determined exceeds the amount of coverage of the then effective policy, the Boards of each of the Funds will be notified and will determine whether it is necessary or appropriate to increase the total amount of coverage of the policy to an amount not less than the total amount of such minimums, or to secure such excess coverage for one or more of the parties hereto, which, when added to the total coverage of the policy, will equal an amount of such minimums. Unless a Fund elects to terminate this Agreement (pursuant to Paragraph 4) and its participation in a joint-insured policy, each Fund agrees to pay its fair portion of the new or additional premium (taking into account all of the then existing circumstances).
4. CONTINUATION AND TERMINATION. This Agreement shall become effective on the date first written above, subject to the condition that the Fund's Board of Directors/Trustees, including a majority of those Directors/Trustees who are not interested persons (as such term is defined in the 1940 Act) of the Manager, shall have approved this Agreement. This Agreement shall supersede all prior agreements relating to an allocation of premium on any joint insured policy and shall apply to the present liability policy coverage and any renewal or replacement thereof. It shall continue until terminated by any party hereto upon the giving of not less than sixty (60) days notice to the other parties hereto in writing.
5. AMENDMENTS. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. A written amendment of this Agreement is effective upon the approval of the Board of Directors/Trustees and the Manager.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed by their duly authorized officers as of the date first above written.
On Behalf of: All ING Funds Listed on Schedule A
By:/s/ Michael J. Roland --------------------- Name: Michael J. Roland Title: Executive Vice President |
Exhibit 99.(j)(v)(1)
AMENDED SCHEDULE A
WITH RESPECT TO THE
ALLOCATION AGREEMENT - DIRECTORS & OFFICERS LIABILITY
FUNDS
Fund For Life Series(1)
ING AIM Mid Cap Growth Portfolio(1)
ING Alliance Mid Cap Growth Portfolio(1)
ING American Funds Growth Portfolio
ING American Funds Growth-Income Portfolio
ING American Funds International Portfolio
ING Capital Guardian Large Cap Value Portfolio(1)
ING Capital Guardian Managed Global Portfolio(1)
ING Capital Guardian Small Cap Portfolio(1)
ING Classic Money Market Fund
ING Convertible Fund
ING Developing World Portfolio(1)
ING Disciplined LargeCap Fund
ING Eagle Asset Capital Appreciation Portfolio(1)
ING Emerging Countries Fund
ING Equity and Bond Fund
ING Evergreen Health Sciences Portfolio
ING Evergreen Omega Portfolio
ING Financial Services Fund
ING FMR(SM) Diversified Mid Cap Portfolio(1)
ING Foreign Fund
ING GET U.S. Core Portfolio - Series 1
ING GET U.S. Core Portfolio - Series 2
ING GET U.S. Core Portfolio - Series 3
ING GET U.S. Core Portfolio - Series 4
ING GET U.S. Core Portfolio - Series 5
ING GET U.S. Core Portfolio - Series 6
ING GET U.S. Core Select Portfolio - Series 1
ING GET U.S. Core Select Portfolio - Series 2
ING GET U.S. Opportunity Portfolio - Series 1
ING GET U.S. Opportunity Portfolio - Series 2
ING Global Equity Dividend Fund
ING Global Real Estate Fund
ING GNMA Income Fund
ING Goldman Sachs Internet Tollkeeper(SM) Portfolio(1)
ING Growth + Value Fund
ING Growth Opportunities Fund
ING Hard Assets Portfolio(1)
ING High Yield Bond Fund
ING High Yield Opportunity Fund
ING Intermediate Bond Fund
ING International Fund
ING International Portfolio(1)
ING International SmallCap Growth Fund
ING International Value Fund
ING Janus Special Equity Portfolio(1)
ING Jennison Equity Opportunities Portfolio(1)
ING JPMorgan Small Cap Equity Portfolio(1)
ING Julius Baer Foreign Portfolio(1)
ING LargeCap Growth Fund
ING LargeCap Value Fund
ING Legg Mason Value Portfolio(1)
ING Lexington Money Market Trust
ING Lifestyle Aggressive Growth Portfolio
ING Lifestyle Growth Portfolio
ING Lifestyle Moderate Growth Portfolio
ING Lifestyle Moderate Portfolio
ING Limited Maturity Bond Portfolio
ING Liquid Assets Portfolio(1)
ING MagnaCap Fund
ING Marsico Growth Portfolio(1)
ING Mercury Focus Value Portfolio(1)
ING Mercury Fundamental Growth Portfolio(1)
ING MFS Mid Cap Growth Portfolio(1)
ING MFS Research Portfolio(1)
ING MFS Total Return Portfolio(1)
ING MidCap Opportunities Fund
ING MidCap Value Fund
ING Money Market Fund
ING National Tax-Exempt Bond Fund
(1) Under the terms of the Management Agreement between ING Investors Trust and Directed Services, Inc., the Fund is subject to a unified fee arrangement. Accordingly, the portion of D&O premium allocated to the Fund under the Agreement will be borne directly by Directed Services, Inc. as provided in the Management Agreement.
ING PIMCO Core Bond Portfolio(1)
ING PIMCO High Yield Portfolio(1)
ING Precious Metals Fund
ING PRIME RATE TRUST
ING Principal Protection Fund
ING Principal Protection Fund II
ING Principal Protection Fund III
ING Principal Protection Fund IV
ING Principal Protection Fund V
ING Principal Protection Fund VI
ING Principal Protection Fund VII
ING Principal Protection Fund VIII
ING Principal Protection Fund IX
ING Principal Protection Fund X
ING Principal Protection Fund XI
ING Real Estate Fund
ING Russia Fund
ING Salomon Brothers All Cap Portfolio(1)
ING Salomon Brothers Investors Portfolio(1)
ING SENIOR INCOME FUND
ING SmallCap Opportunities Fund
ING SmallCap Value Fund
ING Stock Index Portfolio(1)
ING T. Rowe Price Capital Appreciation Portfolio(1)
ING T. Rowe Price Equity Income Portfolio(1)
ING Tax Efficient Equity Fund
ING UBS U.S. Balanced Portfolio(1)
ING Van Kampen Equity Growth Portfolio(1)
ING Van Kampen Global Franchise Portfolio(1)
ING Van Kampen Growth and Income Portfolio(1)
ING Van Kampen Real Estate Portfolio
ING VP Convertible Portfolio
ING VP Disciplined LargeCap Portfolio
ING VP EMERGING MARKETS FUND, INC.
ING VP Financial Services Portfolio
ING VP Growth + Value Portfolio
ING VP Growth Opportunities Portfolio
ING VP High Yield Bond Portfolio
ING VP International Value Portfolio
ING VP LargeCap Growth Portfolio
ING VP MagnaCap Portfolio
ING VP MidCap Opportunities Portfolio
ING VP NATURAL RESOURCES TRUST
ING VP Real Estate Portfolio
ING VP SmallCap Opportunities Portfolio
ING VP Worldwide Growth Portfolio
ING Worldwide Growth Fund
The Asset Allocation Portfolio
The Bond Portfolio
The Money Market Portfolio
The Stock Portfolio
(1) Under the terms of the Management Agreement between ING Investors Trust and Directed Services, Inc., the Fund is subject to a unified fee arrangement. Accordingly, the portion of D&O premium allocated to the Fund under the Agreement will be borne directly by Directed Services, Inc. as provided in the Management Agreement.
Exhibit 99.(j)(vi)
AGENCY AGREEMENT
THIS AGREEMENT made the 30th day of November, 2000, by and between each of the following registered investment companies (1) LEXINGTON MONEY MARKET TRUST, a Massachusetts business trust; (2) PILGRIM EQUITY TRUST, a Massachusetts business trust, currently consisting of Pilgrim Index Plus Protection Fund and Pilgrim MidCap Opportunities Fund; (3) PILGRIM GROWTH OPPORTUNITIES FUND, a Massachusetts business trust; (4) PILGRIM MAYFLOWER TRUST, a Massachusetts business trust, consisting of Pilgrim Growth + Value Fund, Pilgrim International Value Fund and Pilgrim Research Enhanced Index Fund; (5) PILGRIM NATURAL RESOURCES TRUST, a Massachusetts business trust; (6) PILGRIM PRIME RATE TRUST, a Massachusetts business trust; (7) PILGRIM SMALLCAP OPPORTUNITIES FUND, a Massachusetts business trust; (8) PILGRIM VARIABLE PRODUCTS TRUST, a Massachusetts business trust, consisting of Pilgrim VP Convertible Portfolio, Pilgrim VP Emerging Countries Portfolio, Pilgrim VP Financial Services Portfolio, Pilgrim VP Growth & Income Portfolio, Pilgrim VP Growth + Value Portfolio, Pilgrim VP Growth Opportunities Portfolio, Pilgrim VP High Yield Bond Portfolio, Pilgrim VP International Portfolio, Pilgrim VP International SmallCap Growth Portfolio, Pilgrim VP International Value Portfolio, Pilgrim VP LargeCap Growth Portfolio, Pilgrim VP MagnaCap Portfolio, Pilgrim VP MidCap Opportunities Portfolio, Pilgrim VP Research Enhanced Index Portfolio, Pilgrim VP SmallCap Opportunities Portfolio and Pilgrim VP Worldwide Growth Portfolio; (9) PILGRIM FUNDS TRUST, a Delaware business trust, consisting of Pilgrim European Equity Fund, Pilgrim Global Communications Fund, Pilgrim Global Information Technology Fund, Pilgrim Intermediate Bond Fund, Pilgrim Internet Fund, ING Pilgrim Money Market Fund, Pilgrim National Tax-Exempt
Bond Fund and Pilgrim Tax Efficient Equity Fund; (10) PILGRIM MUTUAL FUNDS, a
Delaware business trust, consisting of Pilgrim Balanced Fund, Pilgrim
Convertible Fund, Pilgrim Emerging Countries Fund, Pilgrim High Yield Fund II,
Pilgrim International Core Growth Fund, Pilgrim International SmallCap Growth
Fund, Pilgrim LargeCap Growth Fund, Pilgrim MidCap Growth Fund, Pilgrim Money
Market Fund, Pilgrim SmallCap Growth Fund, Pilgrim Strategic Income Fund and
Pilgrim Worldwide Growth Fund; (11) PILGRIM SENIOR INCOME FUND, a Delaware
business trust; (12) PILGRIM ADVISORY FUNDS, INC., a Maryland corporation,
consisting of Pilgrim Asia-Pacific Equity Fund; (13) PILGRIM BANK AND THRIFT
FUND, INC., a Maryland corporation; (14) PILGRIM EMERGNG MARKETS FUND, INC., a
Maryland corporation; (15) PILGRIM GNMA INCOME FUND, INC., a Maryland
corporation; (16) PILGRIM PRECIOUS METALS FUND, INC., a Maryland corporation;
(17) PILGRIM GROWTH AND INCOME FUND, INC., a Maryland corporation; (18) PILGRIM
INVESTMENT FUNDS, INC., a Maryland corporation, consisting of Pilgrim High Yield
Fund and Pilgrim MagnaCap Fund; (19) PILGRIM INTERNATIONAL FUND, INC., a
Maryland corporation, and (20) PILGRIM RUSSIA FUND, INC., a Maryland
corporation, and any other registered investment companies set forth on Exhibit
A, attached hereto, as amended from time to time (each such registered
investment company (1-20) and any investment company added to Exhibit A in the
future) hereinafter jointly and severally referred to as "Fund") each having its
principal place of business at 7337 E. Doubletree Ranch Road, Scottsdale,
Arizona, 85258-2034, and DST SYSTEMS, INC., a corporation organized and existing
under the laws of the State of Delaware, having its principal place of business
at 333 West 11th Street, 5th Floor, Kansas City, Missouri 64105 ("DST"):
WITNESSETH:
WHEREAS, Fund desires to appoint DST as Transfer Agent and Dividend Disbursing Agent, and DST desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
1. DOCUMENTS TO BE FILED WITH APPOINTMENT.
In connection with the appointment of DST as Transfer Agent and Dividend Disbursing Agent for Fund, there will be filed with DST the following documents:
A. A certified copy of the resolutions of the Board of Directors or Trustees of Fund appointing DST as Transfer Agent and Dividend Disbursing Agent, approving the form of this Agreement, and designating certain persons to sign stock certificates, if any, and give written instructions and requests on behalf of Fund;
B. A certified copy of the Articles of Incorporation or Declaration of Trust of Fund and all amendments thereto;
C. A certified copy of the Bylaws of Fund;
D. Copies of Registration Statements and amendments thereto, filed with the Securities and Exchange Commission;
E. Specimens of all forms of outstanding stock certificates, in the forms approved by the Board of Directors or Trustees of Fund, with a certificate of the Secretary of Fund, as to such approval;
F. Specimens of the signatures of the officers of Fund authorized to sign stock certificates and individuals authorized to sign written instructions and requests;
G. An opinion of counsel for Fund with respect to:
(1) Fund's organization and existence under the laws of its state of organization,
(2) The status of all shares of stock of Fund covered by the appointment under the Securities Act of 1933, as amended, and any other applicable federal or state statute, and
(3) That all issued shares are, and all unissued shares will be, when issued, validly issued, fully paid and nonassessable.
2. CERTAIN REPRESENTATIONS AND WARRANTIES OF DST.
DST represents and warrants to Fund that:
A. It is a corporation duly organized and existing and in good standing under the laws of Delaware.
B. It is duly qualified to carry on its business in the State of Missouri.
C. It is empowered under applicable laws and by its Articles of Incorporation and bylaws to enter into and perform the services contemplated in this Agreement.
D. It is registered as a transfer agent to the extent required under the Securities Exchange Act of 1934.
E. All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
F. It has and will continue to have and maintain the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
3. CERTAIN REPRESENTATIONS AND WARRANTIES OF FUND.
Fund represents and warrants to DST that:
A. It is duly organized as heretofore described and existing and in good standing under the laws of the State/Commonwealth of organization set forth after its name in the opening paragraph or, if it does not appear in such opening paragraph, on Exhibit A.
B. It is an open-end or closed-end management investment company registered under the Investment Company Act of 1940, as amended.
C. A registration statement under the Securities Act of 1933 has been filed and will be effective with respect to all shares of Fund being offered for sale.
D. All requisite steps have been and will continue to be taken to register Fund's shares for sale in all applicable states and such registration will be effective at all times shares are offered for sale in such state.
E. Fund is empowered under applicable laws and by its charter or declaration and bylaws to enter into and perform this Agreement.
4. SCOPE OF APPOINTMENT.
A. Subject to the conditions set forth in this Agreement, Fund hereby appoints DST as Transfer Agent and Dividend Disbursing Agent.
B. DST hereby accepts such appointment and agrees that it will act as Fund's Transfer Agent and Dividend Disbursing Agent. DST agrees that it will also act as agent in connection with Fund's periodic withdrawal payment accounts and other open accounts or similar plans for shareholders, if any.
C. Fund agrees to use its best efforts to deliver to DST in Kansas City, Missouri, as soon as they are available, all of its shareholder account records.
D. DST, utilizing DST's computerized data processing systems for securityholder accounting for open-end funds (the "TA2000(R) System"), and subject to the provisions of Sections 19, 20 and 21 of this Agreement, will perform the following services as transfer, dividend disbursing and shareholders' servicing agent for Fund, and as agent of Fund for shareholder accounts thereof, in a timely manner: issuing
(including countersigning), transferring and canceling share certificates; maintaining all shareholder accounts; providing transaction journals; preparing shareholder meeting lists (one annually at no charge, lists for additional meetings will be charged for), mailing proxies and proxy materials, receiving and tabulating proxies, certifying the shareholder votes in Fund (all proxy activities are subject to proxy fees and reimbursable fees); mailing shareholder reports and prospectuses supplied to DST by Fund or its agents; withholding, as required by Federal law and as directed by Fund, taxes on nonresident alien and foreign corporation accounts, for pension and deferred income, backup withholding or other instances agreed upon by Fund and DST; disbursing income dividends and capital gains distributions to shareholders, preparing, filing and mailing U.S. Treasury Department Forms 1099, 1042, 1042S and backup withholding as required for all shareholders and as directed by Fund; preparing and mailing confirmation forms to shareholders and dealers, as instructed, for all purchases and liquidations (not applicable to closed-end funds except for transfers into or out of a shareholders' account) of shares of Fund and other confirmable transactions in shareholders' accounts; recording reinvestment of dividends and distributions in shares of Fund; providing or making available on-line daily and monthly reports as provided by the TA2000 System and as requested by Fund or its management company; maintaining those records necessary to carry out DST's duties hereunder, including all information reasonably required by Fund to account for all transactions (non-valued in closed-end funds) in Fund shares, calculating the appropriate sales charge with respect to each purchase of Fund shares as set forth in the prospectus for Fund (not applicable to closed-end funds); solely for open-end funds: determining the portion of each sales charge payable to the
dealer participating in a sale in accordance with schedules delivered to DST by Fund's principal underwriter or distributor (hereinafter "principal underwriter") from time to time, disbursing dealer commissions collected to such dealers, determining the portion of each sales charge payable to such principal underwriter and disbursing such commissions to the principal underwriter; receiving correspondence pertaining to any former, existing or new shareholder account, processing such correspondence for proper recordkeeping, and responding promptly to shareholder correspondence; mailing to dealers confirmations of wire order trades (not applicable to closed-end funds); mailing copies of shareholder statements to shareholders and registered representatives of dealers in accordance with Fund's instructions; and, solely in the case of open-end funds, processing, generally on the date of receipt, purchases or redemptions or instructions to settle any mail or wire order purchase or redemption (or in the case of closed-end funds, effecting transfer of certificates) received in proper order as set forth in the prospectus and DST's Procedures, as hereinafter defined, rejecting promptly any requests not received in proper order (as defined by Fund or its agents or DST's Procedures), and, solely in the case of open-end funds, causing exchanges of shares to be executed in accordance with Fund's instructions, the applicable prospectus, DST's Procedures and the general exchange privilege application.
E. At the request of an Authorized Person (a person identified as such on Exhibit D, attached hereto and incorporated herein for reference), DST shall use reasonable efforts to provide the services set forth in this Agreement in connection with transactions (i) on behalf of retirement plans and participants in retirement plans and transactions ordered by brokers as part of a "no transaction fee" program ("NTF"),
the processing of which transactions require DST to use methods and procedures other than those usually employed by DST to perform shareholder servicing agent services, (ii) involving the provision of information to DST after the commencement of the nightly processing cycle of TA2000 System or (iii) which require more manual intervention by DST, either in the entry of data or in the modification or amendment of reports generated by the TA2000 System than is usually required by non-retirement plan, non-NTF and pre-nightly transactions (the "Exception Services").
F. Fund shall have the right to add new series to the TA2000 System upon at least thirty (30) days' prior written notice to DST provided that the requirements of the new series are generally consistent with services then being provided by DST under this Agreement and any new series shall be provided services in accordance with the Fee Schedules then attached to the existing Agency Agreements between DST and the various Funds of Pilgrim Capital Corporation, which agreements pre-date this Agency Agreement. Rates or charges for additional series shall be as set forth in Exhibit B, as hereinafter defined, for the remainder of the contract term except as such series use functions, features or characteristics for which DST has imposed an additional charge as part of its standard pricing schedule. In the latter event, rates and charges shall be in accordance with DST's then-standard pricing schedule.
G. DST shall use reasonable efforts to provide, reasonably promptly under the circumstances, the same services with respect to any new, additional functions or features or any changes or improvements to existing functions or features as provided for in Fund's instructions, prospectus or application as amended from time to time, for Fund provided (i) DST is advised in advance by Fund of any changes
therein, (ii) the TA2000 System and the mode of operations utilized by DST as then constituted support such additional functions and features, and (iii) any new or increased services to be provided by DST or commenced to be used by Fund in addition to those currently used at execution hereof or any new products or functionality added to the TA2000 System shall be provided in accordance with the Fee Schedules then attached to the existing Agency Agreements between DST and the various Funds of Pilgrim Capital Corporation, which agreements pre-date this Agency Agreement, or, if not referenced in such fee schedules, at mutually agreed to fees and charges. If any addition to, improvement of or change in the features and functions currently provided by the TA2000 System or the operations as requested by Fund requires an enhancement or modification to the TA2000 System or to operations as presently conducted by DST, DST shall not be liable therefor until such modification or enhancement is, if DST agrees to develop or institute it, developed (at Fund's expense) and installed on the TA2000 System or a new mode of operation is instituted. If any new, additional function or feature or change or improvement to existing functions or features or new service or mode of operation measurably increases DST's cost of performing the services required hereunder at the current level of service, DST shall advise Fund of the amount of such increase and if Fund elects to utilize such function, feature or service, DST shall be entitled to increase its fees by the amount of the increase in costs. In no event shall DST be responsible for or liable to provide any additional function, feature, improvement or change in method of operation until it has consented thereto in writing.
5. LIMIT OF AUTHORITY.
Unless otherwise expressly limited by the resolution of appointment or by subsequent action by Fund, the appointment of DST as Transfer Agent will be construed to cover the full amount of authorized stock of the class or classes for which DST is appointed as the same will, from time to time, be constituted, and any subsequent increases in such authorized amount.
In case of such increase Fund will file with DST:
A. If the appointment of DST was theretofore expressly limited, a certified copy of a resolution of Fund's Board of Directors or Trustees, as applicable, increasing the authority of DST;
B. A certified copy of the amendment to Fund's Articles of Incorporation or Declaration of Trust, as applicable, authorizing the increase of stock;
C. A certified copy of the order or consent of each governmental or regulatory authority required by law to consent to the issuance of the increased stock, and an opinion of counsel that the order or consent of no other governmental or regulatory authority is required;
D. Opinion of counsel for Fund stating:
(1) The status of the additional shares of stock of Fund under the Securities Act of 1933, as amended, and any other applicable federal or state statute and that said shares may be legally issued; and
(2) That the additional shares are, or when issued will be, validly issued, fully paid and nonassessable by Fund.
6. COMPENSATION AND EXPENSES.
A. In consideration for its services hereunder as Transfer Agent and Dividend Disbursing Agent, Fund will pay to DST from time to time a reasonable compensation for all services rendered as Agent, and also all its reasonable out-of-pocket expenses, charges, counsel fees, and other disbursements (Compensation and Expenses) incurred in connection with the agency. Such compensation is set forth in a separate schedule to be agreed to, from time to time, by Fund and DST, the current copy of which is attached hereto as Exhibit B and incorporated herein by reference. If Fund has not paid such Compensation and Expenses to DST within a reasonable time, DST may, after written notice to Fund, charge against any monies held under this Agreement, the amount of any Compensation and/or Expenses for which it shall be entitled to reimbursement under this Agreement.
B. Fund also agrees promptly to reimburse DST for all reasonable reimbursable expenses or disbursements incurred by DST in connection with the performance of services under this Agreement including, but not limited to, expenses for postage, express delivery services, freight charges, envelopes, checks, drafts, forms (continuous or otherwise), specially requested reports and statements, telephone calls, telegrams, stationery supplies, counsel fees, outside printing and mailing firms (including DST Output SRI, Inc.), magnetic tapes, reels or cartridges (if sent to a Fund or to third party at Fund's request) and magnetic tape handling charges, off-site record storage, media for storage of records (e.g., microfilm, microfiche, optical platters, computer tapes), computer equipment installed at Fund's request at Fund's or a third party's premises, telecommunications equipment, telephone/ telecommunication lines between Fund and its agents, on one hand, and DST on the
other, proxy mailing, soliciting, processing and/or tabulating costs, second-site backup computer facility, transmission of statement data for remote printing or processing, and NSCC transaction fees (as well as any other expenses set forth on Exhibit C, as amended from time to time) to the extent any of the foregoing are paid or incurred by DST. Fund agrees to pay postage expenses at least one day in advance if so requested. In addition, any other expenses incurred by DST at the request or with the consent of Fund will be promptly reimbursed by Fund.
C. Amounts due hereunder shall be due and paid on or before the thirtieth (30th) calendar day after receipt of the statement therefor by Fund (the "Due Date"). Fund is aware that its failure to pay all amounts in a timely fashion so that they will be received by DST on or before the Due Date will give rise to costs to DST not contemplated by this Agreement, including but not limited to carrying, processing and accounting charges. Accordingly, subject to Section 6.D. hereof, in the event that any amounts due hereunder are not received by DST by the Due Date, Fund shall pay a late charge equal to the rate set forth in the fee schedule times the amount overdue, times the number of days from the Due Date up to and including the day on which payment is received by DST divided by 365. The parties hereby agree that such late charge represents a fair and reasonable computation of the costs incurred by reason of late payment or payment of amounts not properly due. Acceptance of such late charge shall in no event constitute a waiver of Fund's or DST's default or prevent the non-defaulting party from exercising any other rights and remedies available to it.
D. In the event that any charges are disputed, Fund shall, on or before the Due Date, pay all undisputed amounts due hereunder and notify DST in writing of any
disputed charges for out-of-pocket expenses that it is disputing in good faith. Payment for such disputed charges shall be due on or before the close of the fifth (5th) business day after the day on which DST provides to Fund documentation which an objective observer would agree reasonably supports the disputed charges (the "Revised Due Date"). Late charges shall not begin to accrue as to charges disputed in good faith until the first day after the Revised Due Date.
7. OPERATION OF DST SYSTEMS.
In connection with the performance of its services under this Agreement, DST is responsible for such items as:
A. That entries in DST's records and in Fund's records on the TA2000 System created by DST accurately reflect the orders, instructions, and other information received by DST from Fund, Fund's principal manager, underwriter or distributor or Fund's investment adviser, sponsor, custodian or administrator (each an "Authorized Person"), broker-dealers and shareholders;
B. That shareholder lists, shareholder account verifications, confirmations and other shareholder account information to be produced from its records or data be available and accurately reflect the data in Fund's records on the TA2000 System;
C. The accurate and timely issuance of dividend and distribution checks in accordance with instructions received from Fund and the data in Fund's records on the TA2000 System;
D. That redemption transactions and payments with respect to shares of open-end funds and transfers with respect to closed-end funds be effected timely, under normal circumstances on the day of receipt, and accurately in accordance with instructions received by DST from dealers, shareholders, or an Authorized Person of Fund
provided such instructions are in proper order as set forth elsewhere in this Agreement and are consistent with the data in Fund's records on the TA2000 System;
E. The deposit daily in Fund's appropriate special bank account of all checks and payments received by DST from NSCC, broker-dealers or shareholders for investment in shares of open-end funds;
F. Notwithstanding anything herein to the contrary, with respect to "as of" adjustments, DST will not necessarily assume one hundred percent (100%) responsibility for losses resulting from "as of's" due to clerical errors or misinterpretations of shareholder instructions. DST shall not be liable for any action taken, suffered, or omitted by it or for any error of judgment made by it with respect to "as of" adjustments in the absence of bad faith, willful misconduct, knowing violations of applicable law pertaining to the manner in which transfer agency services are to be performed by DST, reckless disregard of the performance of its duties, or negligence on its part. DST's liability hereunder shall extend only to losses that are "material", that is, that, on a given, day arise from dilution or a pricing error that is (i) greater than a negligible amount per shareholder, (ii) equals or exceeds one ($.01) full cent per share times the number of shares outstanding with respect to whether recompense of Fund is required, or (iii) equals or exceeds the product of one-half of one percent (1/2%) times Fund's Net Asset Value per share times the number of shares outstanding with respect to whether recompense at the shareholder level is required (or such other amounts as may be adopted by applicable accounting or regulatory authorities from time to time);
G. Notwithstanding anything in this Agreement to the contrary, DST shall perform the services set forth in Section 4.D. of, and elsewhere in, this Agreement, including but not limited to the requiring of proper forms of instructions, signatures and signature guarantees and any necessary documents supporting the opening of shareholder accounts (where required), transfers, redemptions and other shareholder account transactions, in conformance with DST's present procedures as set forth in its Legal Manual, Third Party Check Procedures, Checkwriting Draft Procedures, and Signature Guarantee Procedures with such changes or deviations therefrom as may be from time to time required or approved by Fund, its investment adviser or principal underwriter, or their or DST's counsel (the "Procedures") and the rejection of orders or instructions not in good order in accordance with the applicable prospectus or the Procedures;
H. The maintenance of customary records in connection with its agency, and particularly those records required to be maintained pursuant to subparagraph (2) (iv) of paragraph (b) of Rule 31a-1 under the Investment Company Act of 1940, if any; and
I. The maintenance of a current, duplicate set of Fund's essential records as of the close of business on the prior business day at a secure separate location, in a form available and usable forthwith in the event of any breakdown or disaster disrupting its main operation.
8. INDEMNIFICATION.
A. DST shall at all times use reasonable care, due diligence and act
in good faith in performing its duties under this Agreement. DST
shall provide its services as transfer agent in accordance with
Section 17A of the Exchange Act, and the rules
and regulations thereunder. In the absence of bad faith, willful misconduct, knowing violations of applicable law pertaining to the manner in which transfer agency services are to be performed by DST (excluding any violations arising directly or indirectly out of the actions of DST-unaffiliated third parties), reckless disregard of the performance of its duties, or negligence on its part, DST shall not be liable for any action taken, suffered, or omitted by it or for any error of judgment made by it in the performance of its duties under this Agreement. For those activities or actions delineated in the Procedures, DST shall be presumed to have used reasonable care, due diligence and acted in good faith if it has acted in accordance with the Procedures, copies of which have been provided to Fund, as amended from time to time with approval of counsel, or for any deviation therefrom approved by an Authorized Person, Fund or Fund's or DST's counsel.
B. DST shall not be responsible for, and Fund shall indemnify and hold DST harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability which may be asserted against DST or for which DST may be held to be liable, arising out of or attributable to:
(1) All actions of DST required to be taken by DST pursuant to this Agreement, provided that DST has acted in accordance with the standards specified in Paragraph A;
(2) Fund's refusal or failure to comply with the terms of this Agreement, Fund's negligence or willful misconduct, or the breach of any representation or warranty of Fund hereunder;
(3) The good faith reliance on or the carrying out of any written or recorded oral instructions or requests of persons designated by Fund in writing from time
to time as authorized to give instructions on its behalf or of representatives of an Authorized Person or DST's good faith reliance on or use of information, data, records and documents received from, or which have been prepared and/or maintained by or on behalf of, an Authorized Person;
(4) Defaults by dealers or shareowners with respect to payment for share orders previously entered;
(5) The offer or sale of Fund's shares in violation of any requirement under federal securities laws or regulations or the securities laws or regulations of any state or in violation of any stop order or other determination or ruling by any federal agency or state with respect to the offer or sale of such shares in such state (unless such violation results from DST's failure to comply with written instructions of Fund or of any officer of Fund that no offers or sales be input into Fund's securityholder records in or to residents of such state);
(6) Fund's or its agents' and Authorized Persons' omissions, errors and mistakes: (a) in the use of (i) the TA2000 System, (ii) the data center, computer and related equipment used to access the TA2000 System (the "DST Facilities"), and (iii) control procedures in the TA2000 System, and (b) in the verification of output and (c) in the remote input of data;
(7) Errors, inaccuracies and omissions in, or errors, inaccuracies or omissions of DST arising out of or resulting from such errors, inaccuracies and omissions in, Fund's records, shareholder records and other records, delivered to DST hereunder by Fund or its prior agent(s) (but not including errors, inaccuracies or omissions resulting from the negligence or willful
misconduct of DST while DST was acting as sub-agent on behalf of Investors Fiduciary Trust Company, Fund's prior transfer agent);
(8) Actions or omissions to act by Fund or agents designated by Fund with respect to duties assumed thereby as provided for in Section 21 hereof; and
(9) DST's performance of AGREED UPON Exception Services except where DST acted or omitted to act in bad faith, with reckless disregard of its obligations or with gross negligence.
C. Except where DST is entitled to indemnification under Section 8.B. hereof, and subject to the provisions Section 7.F. hereof, DST shall indemnify and hold Fund harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of DST's failure to comply with the terms of this Agreement or arising out of or attributable to DST's negligence or willful misconduct or material breach of any representation or warranty of DST hereunder.
D. EXCEPT FOR VIOLATIONS OF SECTION 23, IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY, FOR CONSEQUENTIAL DAMAGES FOR ANY ACT OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THE POSSIBILITY THEREOF.
E. Promptly after receipt by an indemnified person of notice of the commencement of any action, such indemnified person will, if a claim in respect thereto is to be made against an indemnifying party hereunder, notify the indemnifying party in writing of
the commencement thereof; but the failure so to notify the indemnifying party will not relieve an indemnifying party from any liability that it may have to any indemnified person for contribution or otherwise under the indemnity agreement contained herein except to the extent it is prejudiced as a proximate result of such failure to timely notify. In case any such action is brought against any indemnified person and such indemnified person seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, assume the defense thereof (in its own name or in the name and on behalf of any indemnified party or both with counsel reasonably satisfactory to such indemnified person); provided, however, if the defendants in any such action include both the indemnified person and an indemnifying party and the indemnified person shall have reasonably concluded that there may be a conflict between the positions of the indemnified person and an indemnifying party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified persons which are inconsistent with those available to an indemnifying party, the indemnified person or indemnified persons shall have the right to select one separate counsel (in addition to counsel provided by the indemnifying party) to assume such legal defense and to otherwise participate in the defense of such action on behalf of such indemnified person or indemnified persons at such indemnified party's sole expense. Upon receipt of notice from an indemnifying party to such indemnified person of its election so to assume the defense of such action and approval by the indemnified person of counsel, which approval shall not be unreasonably withheld (and any disapproval shall be accompanied by a written statement of the reasons therefor), the indemnifying party
will not be liable to such indemnified person hereunder for any legal or other expenses subsequently incurred by such indemnified person in connection with the defense thereof. An indemnifying party will not settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified persons are actual or potential parties to such claim, action, suit or proceeding) unless such settlement, compromise or consent includes an unconditional release of each indemnified person from all liability arising out of such claim, action, suit or proceeding. An indemnified party will not, without the prior written consent of the indemnifying party, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder. If it does so, it waives its right to indemnification therefor.
9. CERTAIN COVENANTS OF DST AND FUND.
A. All requisite steps will be taken by Fund from time to time when and as necessary to register Fund's shares for sale in all states in which Fund's shares shall at the time be offered for sale and require registration. If at any time Fund receives notice of any stop order or other proceeding in any such state affecting such registration or the sale of Fund's shares, or of any stop order or other proceeding under the federal securities laws affecting the sale of Fund's shares, Fund will give prompt notice thereof to DST.
B. DST hereby agrees to perform such transfer agency functions as are set forth in section 4.D. above and establish and maintain facilities and procedures reasonably
acceptable to Fund for safekeeping of stock certificates, check forms, and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices, and to carry such insurance as it considers adequate and reasonably available.
C. To the extent required by Section 31 of the Investment Company Act of 1940 as amended and Rules thereunder, DST agrees that all shareholder- or Fund-related records maintained by DST relating to the services performed by DST under this Agreement are the property of Fund and will be preserved, and will, upon receipt of payment of all sums due to DST in connection with DST's performance under this Agreement, be surrendered promptly to Fund on request.
D. DST agrees to furnish Fund semiannual reports of its financial condition, consisting of a balance sheet, earnings statement and any other readily and publicly available financial information reasonably requested by Fund. The annual financial statements will be certified by DST's certified public accountants. DST agrees to provide such reports as are produced by the TA2000 System respecting its services under this Agreement to Fund's Board as the Fund Board may reasonably request.
E. DST represents and agrees that it will use its reasonable efforts to keep current on the trends of the investment company industry relating to shareholder services and will use its reasonable efforts to continue to modernize and improve.
F. DST will permit Fund and its authorized representatives to make periodic inspections of its operations as such would involve Fund upon reasonable prior notice and at reasonable times during business hours.
G. DST agrees to use its reasonable efforts to provide in Kansas City at Fund's expense two (2) man weeks of training for Fund's personnel in connection with use and
operation of the TA2000 System. All travel and reimbursable expenses incurred by Fund's personnel in connection with and during training at DST's Facility shall be borne by Fund. At Fund's option and expense, DST also agrees to use its best efforts to provide an additional two (2) man weeks of training at Fund's facility for Fund's personnel in connection with the TA2000 System. Reasonable travel, per diem and reimbursable expenses incurred by DST personnel in connection with and during training at Fund's facility or in connection with the conversion shall be borne by Fund.
10. RECAPITALIZATION OR READJUSTMENT.
In case of any recapitalization, readjustment or other change in the capital structure of Fund requiring a change in the form of stock certificates, DST will, upon agreement with Fund as to the charges to apply thereto, issue or register certificates in the new form in exchange for, or in transfer of, the outstanding certificates in the old form, upon receiving:
A. Written instructions from an officer of Fund;
B. Certified copy of the amendment to the Articles of Incorporation or other document effecting the change;
C. Certified copy of the order or consent of each governmental or regulatory authority required by law to the issuance of the stock in the new form, and an opinion of counsel that the order or consent of no other government or regulatory authority is required;
D. Specimens of the new certificates in the form approved by the Board of Directors or Trustees of Fund, with a certificate of the Secretary of Fund as to such approval;
E. Opinion of counsel for Fund stating:
(1) The status of the shares of stock of Fund in the new form under the Securities Act of 1933, as amended and any other applicable federal or state statute; and
(2) That the issued shares in the new form are, and all unissued shares will be, when issued, validly issued, fully paid and nonassessable by the Fund.
11. STOCK CERTIFICATES.
Fund will furnish DST with a sufficient supply of blank stock certificates and from time to time will renew such supply upon the request of DST. Such certificates will be signed manually or by facsimile signatures of the officers of Fund authorized by law and by bylaws to sign stock certificates and, if required, will bear the corporate seal or facsimile thereof.
12. DEATH, RESIGNATION OR REMOVAL OF SIGNING OFFICER.
Fund will file promptly with DST written notice of any change in the officers authorized to sign stock certificates, written instructions or requests, together with two certificates of the Secretary or Clerk bearing the specimen signature of each newly authorized officer. In case any officer of Fund who has signed manually or whose facsimile signature has been affixed to blank stock certificates dies, resigns, or is removed prior to the issuance of such certificates, DST may issue or register such stock certificates as the stock certificates of Fund notwithstanding such death, resignation, or removal, until specifically directed to the contrary by Fund in writing. In the absence of such direction, Fund will file promptly with DST such approval, adoption, or ratification as may be required by law.
13. FUTURE AMENDMENTS OF CHARTER AND BYLAWS.
Fund will promptly file with DST copies of all material amendments to its Articles of Incorporation or Declaration of Trust, as applicable, or bylaws made after the date of this Agreement.
14. INSTRUCTIONS, OPINION OF COUNSEL AND SIGNATURES.
At any time DST may apply to any person authorized by Fund, including without limitation the duly authorized representative of any Authorized Person and any Authorized Personnel set forth on Exhibit D to this Agreement, to give instructions to DST, and may with the approval of a Fund officer consult with legal counsel for Fund or its own legal counsel at the expense of Fund, with respect to any matter arising in connection with the agency and it will not be liable for any action taken or omitted by it in good faith in reliance upon such instructions or upon the opinion of such counsel. DST will be protected in acting upon any paper or document reasonably believed by it to be genuine and to have been signed by the proper person or persons and will not be held to have notice of any change of authority of any person, until receipt of written notice thereof from Fund. It will also be protected in recognizing stock certificates which it reasonably believes to bear the proper manual or facsimile signatures of the officers of Fund, and the proper countersignature of any former Transfer Agent or Registrar, or of a present or former co-Transfer Agent or co-Registrar.
15. FORCE MAJEURE AND DISASTER RECOVERY PLANS.
A. DST SHALL NOT BE RESPONSIBLE OR LIABLE FOR ITS FAILURE OR DELAY IN PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT ARISING OUT OF OR CAUSED, DIRECTLY OR INDIRECTLY, BY CIRCUMSTANCES BEYOND ITS REASONABLE CONTROL, INCLUDING, WITHOUT LIMITATION: ANY INTERRUPTION, LOSS OR MALFUNCTION OR ANY UTILITY, TRANSPORTATION, COMPUTER (HARDWARE OR SOFTWARE) OR COMMUNICATION SERVICE; INABILITY TO OBTAIN LABOR, MATERIAL, EQUIPMENT OR TRANSPORTATION, OR A DELAY IN
MAILS; GOVERNMENTAL OR EXCHANGE ACTION, STATUTE, ORDINANCE, RULINGS, REGULATIONS OR DIRECTION; WAR, STRIKE, RIOT, EMERGENCY, CIVIL DISTURBANCE, TERRORISM, VANDALISM, EXPLOSIONS, LABOR DISPUTES, FREEZES, FLOODS, FIRES, TORNADOS, ACTS OF GOD OR PUBLIC ENEMY, REVOLUTIONS, OR INSURRECTION; OR ANY OTHER CAUSE, CONTINGENCY, CIRCUMSTANCE OR DELAY NOT SUBJECT TO DST'S CONTROL WHICH PREVENTS OR HINDERS DST'S PERFORMANCE HEREUNDER.
B. DST currently maintains an agreement with a third party whereby DST is to be permitted to use on a "shared use" basis a "hot site" (the "Recovery Facility") maintained by such party in event of a disaster rendering the DST Facilities inoperable. DST has developed and is continually revising a business contingency plan (the "Business Contingency Plan") detailing which, how, when, and by whom data maintained by DST at the DST Facilities will be installed and operated at the Recovery Facility. Provided Fund is paying its pro rata portion of the charge therefor, DST would, in event of a disaster rendering the DST Facilities inoperable, use reasonable efforts to convert the TA2000 System containing the designated Fund data to the computers at the Recovery Facility in accordance with the then current Business Contingency Plan.
C. DST also currently maintains, separate from the area in which the operations that provide the services to Fund hereunder are located, a Crisis Management Center consisting of phones, computers and the other equipment necessary to operate a full service transfer agency business in the event one of its operations areas is rendered
inoperable. The transfer of operations to other operating areas or to the Crisis Management Center is also covered in DST's Business Contingency Plan.
16. CERTIFICATION OF DOCUMENTS.
The required copy of the Articles of Incorporation or Declaration of Trust of Fund and copies of all amendments thereto will be certified by the Secretary of State (or other appropriate official) of the State of Incorporation, and if such Articles of Incorporation or Declaration of Trust and amendments are required by law to be also filed with a county, city or other officer of an official body, a certificate of such filing will appear on the certified copy submitted to DST. A copy of the order or consent of each governmental or regulatory authority required by law to the issuance of the stock will be certified by the Secretary or Clerk of such governmental or regulatory authority, under proper seal of such authority. The copy of the Bylaws and copies of all amendments thereto, and copies of resolutions of the Board of Directors or Trustees of Fund, as applicable, will be certified by the Secretary or Clerk or an Assistant Secretary or Clerk of Fund under Fund's seal.
17. RECORDS.
DST will maintain customary records in connection with its agency, and particularly will maintain those records required to be maintained pursuant to subparagraph (2) (iv) of paragraph (b) of Rule 31a-1 under the Investment Company Act of 1940, if any.
18. DISPOSITION OF BOOKS, RECORDS AND CANCELED CERTIFICATES.
DST may send periodically to Fund, or to where designated by the Secretary or an Assistant Secretary of Fund, all books, documents, and records no longer deemed needed for current purposes and all stock certificates which have been canceled in transfer or in exchange, upon the understanding that such books, documents, records, and stock certificates will be maintained by Fund under and in accordance with the requirements of Section 17Ad-7
adopted under the Securities Exchange Act of 1934. Such materials will not be destroyed by Fund without the consent of DST (which consent will not be unreasonably withheld), but will be safely stored for possible future reference and maintained, preserved and made available to DST and the U.S. Securities and Exchange Commission in accordance with the requirement of Sections 17Ad-7 under the Securities Exchange Act of 1934 (17 C.F.R. Section 240.17Ad-7).
19. PROVISIONS RELATING TO DST AS TRANSFER AGENT.
A. DST will make original issues of stock certificates upon written
request of an officer of Fund, and upon mutual agreement as to the
charges to apply thereto and being furnished with a certified copy
of a resolution of the Board of Directors or Trustees authorizing
such original issue, an opinion of counsel as outlined in Section
1.G. of this Agreement, any documents required by Sections 5. or
10. of this Agreement, and necessary funds for the payment of any
original issue tax.
B. Before making any original issue of certificates, Fund will furnish DST with sufficient funds to pay all required taxes on the original issue of the stock, if any. Fund will furnish DST such evidence as may be required by DST to show the actual value of the stock. If no taxes are payable, DST will be furnished with an opinion of outside counsel to that effect.
C. Shares of stock will be transferred and new certificates issued in transfer, or, except in the case of closed-end funds, shares of stock will be accepted for redemption and funds remitted therefor, or book entry transfer will be effected, upon surrender of the old certificates in form or receipt by DST of instructions deemed by DST properly endorsed for transfer or, except in the case of closed-end funds, redemption accompanied by such documents as DST may deem necessary to evidence the
authority of the person making the transfer or redemption. DST reserves the right to refuse to transfer or redeem shares until it is satisfied that the endorsement or signature on the certificate or any other document is valid and genuine, and for that purpose, unless Fund has instructed DST not to require a signature guarantee, DST may require a guaranty of signature in accordance with the Procedures. DST shall have the right to refuse to transfer or redeem shares until it is satisfied that the requested transfer or redemption is legally authorized, and it will incur no liability for the refusal in good faith to make transfers or redemptions that, in its judgment, are improper or unauthorized. DST may, in effecting transfers or redemptions, rely upon Simplification Acts, Uniform Commercial Code, or other statutes that protect it and Fund in not requiring complete fiduciary documentation. In cases in which DST is not directed or otherwise required to maintain the consolidated records of shareholder's accounts, DST will not be liable for any loss that may arise by reason of not having such records.
D. When mail is used for delivery of stock certificates, DST will forward stock certificates in "nonnegotiable" form by first class or registered mail and stock certificates in "negotiable" form by registered mail, all such mail deliveries to be covered while in transit to the addressee by insurance arranged for by DST.
E. DST will issue and mail subscription warrants, certificates representing stock dividends, exchanges or split ups, or act as Conversion Agent upon receiving written instructions from any officer of Fund and such other documents as DST deems necessary upon agreement between DST and Fund as to the charges to apply thereto.
F. DST will issue, transfer, and split up certificates and will issue certificates of stock representing full shares upon surrender of scrip certificates aggregating one full share or more when presented to DST for that purpose upon receiving written instructions from an officer of Fund and such other documents as DST may deem necessary.
G. DST may issue new certificates in place of certificates represented to have been lost, destroyed, stolen or otherwise wrongfully taken upon receiving instructions from Fund and indemnity satisfactory to DST and Fund, and may issue new certificates in exchange for, and upon surrender of, mutilated certificates. Such instructions from Fund will be in such form as will be approved by the Board of Directors or Trustees of Fund and will be in accordance with the provisions of law and the bylaws of Fund governing such matter.
H. DST will supply a shareholder's list to Fund for its annual meeting upon receiving a request from an officer of Fund. It will also supply lists at such other times as may be requested by an officer of Fund, subject to payment of applicable charges therefor.
I. Upon receipt of written instructions of an officer of Fund, DST will address and mail notices to shareholders.
J. In case of any request or demand for the inspection of the stock books of Fund or any other books or records in the possession of DST, DST will endeavor to notify Fund and to secure instructions as to permitting or refusing such inspection. DST reserves the right, however, to exhibit the stock books or other books or records to any person in case it is advised by its counsel that it may be held responsible for the failure to exhibit the stock books or other books to such person.
20. PROVISIONS RELATING TO DIVIDEND DISBURSING AGENCY.
A. DST will, at the expense of Fund, provide a special form of check containing the imprint of any device or other matter desired by Fund. Said checks must, however, be of a form and size convenient for use by DST.
B. If Fund desires to include additional printed matter, financial statements, ETC., with the dividend checks, the same will be furnished to DST within a reasonable time prior to the date of mailing of the dividend checks, at the expense of Fund.
C. If Fund desires its distributions mailed in any special form of envelopes, sufficient supply of the same will be furnished to DST, but the size and form of said envelopes will be subject to the approval of DST. If stamped envelopes are used, they must be furnished by Fund; or if postage stamps are to be affixed to the envelopes, the stamps or the cash necessary for such stamps must be furnished by Fund in advance of such mailing.
D. DST is hereby authorized to open and to maintain at a Bank acceptable to Fund one or more non-interest bearing deposit accounts as Agent for Fund, into which the funds for payment of dividends, distributions, redemptions or other disbursements provided for hereunder will be deposited, and against which checks will be drawn.
E. DST is authorized and directed to stop payment of checks theretofore issued hereunder, but not presented for payment, when the payees thereof allege either that they have not received the checks or that such checks have been mislaid, lost, stolen, destroyed or through no fault of theirs, are otherwise beyond their control, and cannot be produced by them for presentation and collection, and, to issue and deliver duplicate checks in replacement thereof.
21. ASSUMPTION OF DUTIES BY FUND OR AGENTS DESIGNATED BY FUND.
A. Fund or its designated agents other than DST may assume certain duties and responsibilities of DST or those services of Transfer Agent and Dividend Disbursement Agent as those terms are referred to in Section 4.D. of this Agreement including but not limited to answering and responding to telephone inquiries from shareholders and brokers, accepting shareholder and broker instructions (either or both oral and written) and transmitting orders based on such instructions to DST, preparing and mailing confirmations, obtaining certified TIN numbers, classifying the status of shareholders and shareholder accounts under applicable tax law, establishing shareholder accounts on the TA2000 System and assigning social codes and Taxpayer Identification Number codes thereof, and disbursing monies of Fund, said assumption to be embodied in writing to be signed by both parties.
B. To the extent Fund or its agent or affiliate assumes such duties and responsibilities, DST shall be relieved from all responsibility and liability therefor and is hereby indemnified and held harmless against any liability therefrom and in the same manner and degree as provided for in Section 8 hereof.
C. DST MAY, SUBJECT TO THE WRITTEN CONSENT OF THE FUND, APPOINT OTHER PARTIES QUALIFIED TO PERFORM TRANSFER AGENCY SERVICES ("SUB-TRANSFER AGENTS") TO CARRY OUT SOME OR ALL OF ITS RESPONSIBILITIES UNDER THIS AGREEMENT; PROVIDED, HOWEVER, THAT A SUB-TRANSFER AGENT SHALL BE THE AGENT OF DST AND NOT THE AGENT OF THE FUND, AND THAT UNLESS THE SUB-TRANSFER AGENT IS APPOINTED AT THE DIRECTION OF THE FUND, DST SHALL BE FULLY RESPONSIBLE FOR THE ACTS OF A SUB-TRANSFER AGENT AND SHALL NOT BE RELIEVED OF ANY OF ITS RESPONSIBILITIES HEREUNDER BY THE APPOINTMENT OF A SUB-TRANSFER AGENT.
D. Initially Fund shall be responsible for the following: (i) answering and responding to phone calls from shareholders and broker-dealers, and (ii) scanning items into the AWD(TM) System as such calls or items are received by Fund, and (iii) entering and confirming wire order trades.
22. TERMINATION OF AGREEMENT.
A. This Agreement shall be in effect from the date set forth on the first page (the "Effective Date") through May 31, 2002 and thereafter shall remain in effect unless terminated by either party upon receipt of six (6) months written notice from the other party, provided, however, that the effective date of any termination shall not occur during the period from December 15 through March 30 of any year to avoid adversely impacting year end.
B. Each party, in addition to any other rights and remedies, shall have the right to terminate this Agreement forthwith upon the occurrence at any time of any of the following events with respect to the other party:
(1) Any interruption or cessation of operations by the other party or its assigns that materially interferes with the business operation of the first party;
(2) The bankruptcy of the other party or its assigns or the appointment of a receiver for the other party or its assigns;
(3) Failure by the other party or its assigns to perform its duties in accordance with the Agreement, which failure materially adversely affects the business operations of the first party and which failure continues for thirty (30) days after receipt of written notice from the first party; and
(4) The acquisition of a controlling interest in DST Systems, Inc. or its assigns, by any broker, dealer, investment adviser or investment company except as may presently exist.
C. In the event of any termination, Fund will promptly pay DST all
amounts due to DST hereunder. In addition, if this Agreement is
terminated by Fund for any reason other than those set forth in
Section 22.B. hereof, then Fund shall pay to DST on the last
business day of each of the next three (3) whole or partial
calendar months (commencing with the last day of the month in
which termination actually occurs if termination does not occur on
the last business day of the month, and with the last business day
of the immediately following month if termination actually occurs
on the last business day of a month) an amount equal to the
average monthly fees, exclusive of the out-of-pocket expenses,
paid by or on behalf of each terminating party under the affected
Agreement during the six (6) calendar months preceding the month
during which the termination notice was received by DST.
D. If the termination date set forth in the original termination notice is extended by any terminating party (which extension shall require the agreement of DST), then the fees and charges payable by the terminating party under this Agreement shall increase by twenty percent (20%) during the period commencing with the original termination date set forth in the initial termination notice and concluding with the day upon which termination actually occurs. These provisions are in addition to any other contractual provision or compensation agreements that may be in existence at the time of an actual transfer.
E. DST shall, upon termination of this Agreement and receipt of payment of all outstanding bills and invoices, deliver to the successor so specified or appointed, or
to Fund, at DST's office, all records then held by DST hereunder, all funds and other properties of Fund deposited with or held by DST hereunder. In the event no written order designating a successor (which may be Fund) shall have been delivered to DST on or before the date when such termination shall become effective, then DST shall deliver the records, funds and properties of Fund to a bank or trust company at the selection of DST or if a satisfactory successor cannot be obtained, DST may deliver the assets to Fund, at DST's offices or as otherwise agreed to between the parties in any event upon written notice to Fund. Thereafter Fund or such bank or trust company shall be the successor under this Agreement and shall be entitled to reasonable compensation for its services. Notwithstanding the foregoing requirement as to delivery upon termination of this Agreement, DST may make any other delivery of the funds and property of Fund that shall be permitted by the Investment Company Act of 1940 and Fund's Articles of Incorporation, Declaration of Trust, and/or Bylaws then in effect. Except as otherwise provided herein, neither this Agreement nor any portion thereof may be assigned by DST without the consent of Fund.
F. In the event of termination, DST shall provide reasonable assistance to Fund and its designated successor transfer agent and other information relating to its services provided hereunder (subject to the recompense of DST for such assistance at its standard rates and fees for personnel then in effect at that time); provided, however, as used herein "reasonable assistance" and "other information" shall not include assisting any new service or system provider to modify, alter, enhance, or improve such new service or system provider's system or to improve, enhance, or alter its current, or to provide any new, functionality or to require DST to disclose any DST
Protected Information, as defined in Section 23 of this Agreement, or any information which is otherwise confidential to DST. DST's assistance shall be billed at its then current rates. DST's present rates, which are subject to annual increase as DST's labor costs for such personnel increase, are as is set forth in Exhibit B to this Agreement.
G. Nothing in this Agreement is intended to, nor does it, compel DST to disclose non-public information concerning its operations or operating systems, including but not limited to the TA2000 System, or to provide programming assistance or information which might tend to improve, enhance, or add functionality to anyone else's operating systems.
23. CONFIDENTIALITY.
A. DST agrees that, except as provided in the last sentence of
Section 19.J hereof, or as otherwise required by law, DST will
keep confidential all records of and information relating to Fund
or its shareholders or shareholder accounts in its possession and
will not disclose the same to any person except at the request or
with the consent of Fund.
B. Fund agrees to keep confidential all provisions, terms and conditions of this Agreement, all financial statements and other financial records (other than statements and records relating solely to Fund's business dealings with DST) and all manuals, systems and other technical information and data, not publicly disclosed, relating to DST's operations and programs furnished to it by DST pursuant to this Agreement and will not disclose the same to any person except at the request or with the consent of DST.
C. Fund acknowledges that DST has proprietary rights in and to the computerized data processing recordkeeping system used by DST to perform services hereunder including but not limited to the maintenance of shareholder accounts and records, processing of related information and generation of output, the TA2000 System, including without limitation any changes or modifications of the TA2000 System and any other DST programs, data bases, supporting documentation, or procedures (collectively "DST Protected Information") which Fund's access to the TA2000 System or software or DST Facilities may permit Fund or its employees or agents to become aware of or to access and that the DST Protected Information constitutes confidential material and trade secrets of DST. Fund agrees to maintain the confidentiality of the DST Protected Information.
D. Fund acknowledges that any unauthorized use, misuse, disclosure or taking of DST Protected Information which is confidential as provided by law, or which is a trade secret, residing or existing internal or external to a computer, computer system, or computer network, or the knowing and unauthorized accessing or causing to be accessed of any computer, computer system, or computer network, may be subject to civil liabilities and criminal penalties under applicable state law. Fund will advise all of its employees and agents who have access to any DST Protected Information or to any computer equipment capable of accessing DST hardware or software of the foregoing.
E. Fund acknowledges that disclosure of the DST Confidential Information may give rise to an irreparable injury to DST inadequately compensable in damages. Accordingly, DST may seek (without the posting of any bond or other security) injunctive relief against the breach of the foregoing undertaking of confidentiality
and nondisclosure, in addition to any other legal remedies that
may be available, and Fund consents to the obtaining of such
injunctive relief. All of the undertakings and obligations
relating to confidentiality and nondisclosure, whether contained
in this Section or elsewhere in this Agreement shall survive the
termination or expiration of this Agreement for a period of ten
(10) years.
24. CHANGES AND MODIFICATIONS.
A. During the term of this Agreement DST will use on behalf of Fund without additional cost all modifications, enhancements, or changes which DST may make to the TA2000 System in the normal course of its business and which are applicable to functions and features offered by Fund, unless substantially all DST clients are charged separately for such modifications, enhancements or changes, including, without limitation, substantial system revisions or modifications necessitated by changes in existing laws, rules or regulations. Fund agrees to pay DST promptly for modifications and improvements that are charged for separately at the rate provided for in DST's standard pricing schedule that shall be identical for substantially all clients, if a standard pricing schedule shall exist. If there is no standard pricing schedule, the parties shall mutually agree upon the rates to be charged.
B. DST shall have the right, at any time and from time to time, to alter and modify any systems, programs, procedures or facilities used or employed in performing its duties and obligations hereunder; provided that Fund will be notified as promptly as possible prior to implementation of such alterations and modifications and that no such alteration or modification or deletion shall materially adversely change or affect the operations and procedures of Fund in using or employing the TA2000 System or DST Facilities hereunder or the reports to be generated by such system
and facilities hereunder, unless Fund is given thirty (30) days prior notice to allow Fund to change its procedures and DST provides Fund with revised operating procedures and controls.
C. All enhancements, improvements, changes, modifications or new features added to the TA2000 System however developed or paid for shall be, and shall remain, the confidential and exclusive property of, and proprietary to, DST.
25. SUBCONTRACTORS.
Nothing herein shall impose any duty upon DST in connection with or make DST liable for the actions or omissions to act of unaffiliated third parties such as, by way of example and not limitation, the banks at which the deposit accounts are maintained, The National Securities Clearing Corporation, airborne services, the U.S. mails and telecommunication companies, provided, if DST selected such company, DST shall have exercised due care in selecting the same.
26. LIMITATIONS ON LIABILITY.
A. If Fund is comprised of more than one Portfolio, each Portfolio shall be regarded for all purposes hereunder as a separate party apart from each other Portfolio. Unless the context otherwise requires, with respect to every transaction covered by this Agreement, every reference herein to Fund shall be deemed to relate solely to the particular Portfolio to which such transaction relates. Under no circumstances shall the rights, obligations or remedies with respect to a particular Portfolio constitute a right, obligation or remedy applicable to any other Portfolio or the rights, obligations or remedies with respect to a particular Fund constitute a right, obligation or remedy applicable to any other Fund. The use of this single document to memorialize the separate agreement of each Portfolio or Fund is understood to be for clerical
convenience only and shall not constitute any basis for joining the Portfolios or Funds for any reason.
B. Notice is hereby given that a copy of Fund's Articles of Incorporation or Trust Agreement (as applicable) and all amendments thereto is on file with the Secretary of State of the state of its organization; that this Agreement has been executed on behalf of Fund by the undersigned duly authorized representative of Fund in his/her capacity as such and not individually; and that the obligations of this Agreement shall only be binding upon the assets and property of Fund and shall not be binding upon any director, trustee, officer or shareholder of Fund individually.
27. NOTICES.
All notices, consents, requests, instructions, approvals and other communications provided for herein shall be validly given, made or served if in writing and delivered personally, sent by mail, registered or certified, return receipt requested, postage prepaid, by telegram or by facsimile transmission:
If to Fund:
The ING Pilgrim Family of Funds
7337 E. Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
Telephone No.: (408) 477-2117
Telecopier No.: (408) 477-2082
Attn: Rob Naka, Senior Vice President
And if to DST:
DST Systems, Inc.
210 West 10th Street, 7th Floor
Kansas City, Missouri 64105
Telephone No.: (816) 843-7500
Telecopier No.: (816) 843-7502
Attn: Jonathan Boehm, Group Vice President
With a copy of non-operational notices to:
DST Systems, Inc.
333 West 11th Street, 5th Floor
Kansas City, Missouri 64105
Telephone No.: (816) 435-8688
Telecopier No.: (816) 435-8630
Attn: Legal Department
or to such other address as DST or Fund may from time to time designate in writing delivered as provided above.
28. MISCELLANEOUS.
A. This Agreement is executed and delivered in the State of Missouri and shall be construed according to, and the rights and liabilities of the parties hereto shall be governed by, the laws of the State of Missouri, excluding that body of law applicable to choice of law.
B. All terms and provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.
C. The representations and warranties, all indemnifications and any limitations on liability set forth in this Agreement are intended to and shall continue after and survive the expiration, termination or cancellation of this Agreement until any statute of limitations applicable to the matter at issues shall have expired.
D. No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed each party hereto.
E. The captions in this Agreement are included for convenience of reference only, and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
F. 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.
G. If any part, term or provision of this Agreement is by the courts held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain the particular part, term or provision held to be illegal or invalid.
H. This Agreement may not be assigned any party hereto without prior written consent of the other parties.
I. Neither the execution nor performance of this Agreement shall be deemed to create a partnership or joint venture by and between Fund and DST. It is understood and agreed that all services performed hereunder by DST shall be as an independent contractor and not as an employee of Fund. This Agreement is between DST and Fund and neither this Agreement nor the performance of services under it shall create any rights in any third parties. There are no third party beneficiaries hereto.
J. Except as specifically provided herein, this Agreement does not in any way affect any other agreements entered into among the parties hereto and any actions taken or omitted by any party hereunder shall not affect any rights or obligations of any other party hereunder.
K. The failure of either party to insist upon the performance of any terms or conditions of this Agreement or to enforce any rights resulting from any breach of any of the terms or conditions of this Agreement, including the payment of damages, shall not be construed as a continuing or permanent waiver of any such terms, conditions,
rights or privileges, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred.
L. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement, draft or agreement or proposal with respect to the appointment of DST as Agent for the Fund and the provision by DST of transfer agency services as such Agent between any Fund and DST, whether oral or written.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized officers, to be effective as of the day and year first above written.
DST SYSTEMS, INC.
By: /s/ Jonathan Boehm ------------------------------- Title: Group VP ---------------------------- Date: 11/30/2000 ----------------------------- |
LEXINGTON MONEY MARKET TRUST
PILGRIM EQUITY TRUST
Pilgrim Index Plus Protection Fund
Pilgrim MidCap Opportunities Fund
PILGRIM GROWTH OPPORTUNITIES FUND
PILGRIM MAYFLOWER TRUST
Pilgrim Growth + Value Fund
Pilgrim International Value Fund
Pilgrim Research Enhanced Index Fund
PILGRIM NATURAL RESOURCES TRUST
PILGRIM PRIME RATE TRUST
PILGRIM SMALLCAP OPPORTUNITIES FUND
PILGRIM VARIABLE PRODUCTS TRUST
Pilgrim VP Convertible Portfolio
Pilgrim VP Emerging Countries Portfolio
Pilgrim VP Financial Services Portfolio
Pilgrim VP Growth & Income Portfolio
Pilgrim VP Growth + Value Portfolio
Pilgrim VP Growth Opportunities Portfolio
Pilgrim VP High Yield Bond Portfolio
Pilgrim VP International Portfolio
Pilgrim VP International SmallCap Growth Portfolio
Pilgrim VP International Value Portfolio
Pilgrim VP LargeCap Growth Portfolio
Pilgrim VP MargnaCap Portfolio
Pilgrim VP MidCap Opportunities Portfolio
Pilgrim VP Research Enhanced Index Portfolio
Pilgrim VP SmallCap Opportunities Portfolio
Pilgrim VP Worldwide Growth Portfolio
PILGRIM FUNDS TRUST
Pilgrim European Equity Fund
Pilgrim Global Communications Fund
Pilgrim Global Information Technology Fund
Pilgrim Intermediate Bond Fund
Pilgrim Internet Fund
ING Pilgrim Money Market Fund
Pilgrim National Tax-Exempt Bond Fund
Pilgrim Tax Efficient Equity Fund
PILGRIM MUTUAL FUNDS
Pilgrim Balanced Fund
Pilgrim Convertible Fund
Pilgrim Emerging Countries Fund
Pilgrim High Yield Fund II
Pilgrim International Core Growth Fund
Pilgrim International SmallCap Growth Fund
Pilgrim LargeCap Growth Fund
Pilgrim MidCap Growth Fund
Pilgrim Money Market Fund
Pilgrim SmallCap Growth Fund
Pilgrim Strategic Income Fund
Pilgrim Worldwide Growth Fund
PILGRIM SENIOR INCOME FUND
PILGRIM ADVISORY FUNDS, INC.
Pilgrim Asia-Pacific Equity Fund
PILGRIM BANK AND THRIFT FUND, INC.
PILGRIM EMERGING MARKETS FUND, INC.
PILGRIM GNMA INCOME FUND, INC.
PILGRIM PRECIOUS METALS FUND, INC.
PILGRIM GROWTH AND INCOME FUND, INC.
PILGRIM INVESTMENT FUNDS, INC.
Pilgrim High Yield Fund
Pilgrim MagnaCap Fund
PILGRIM INTERNATIONAL FUND, INC.,
PILGRIM RUSSIA FUND, INC.
By: /s/ Robert S. Naka ----------------------------------- Title: Senior Vice President -------------------------------- Date: 11/30/2000 --------------------------------- |
EXHIBIT B, p. 1
DST SYSTEMS, INC.
PILGRIM TRANSFER AGENCY FEE SCHEDULE
EFFECTIVE AUGUST 1, 2000 - MAY 31, 2002
ASSET BASED FEES:
NET ASSETS PER PORTFOLIO:
$0 - $100,000,000 9.0 basis pts per year $100,000,001- $300,000,000 8.5 basis pts per year $300,000,001 - $500,000,000 7.5 basis pts per year Greater than $500,000,000 7.25 basis pts per year |
(APPLIES TO ALL LEXINGTON AND PILGRIM CUSIPS, INCLUDING NEW Q SHARE
PORTFOLIO CLASSES ESTABLISHED AS A RESULT OF THE NORTHSTAR CONVERSION)
EXCEPTIONS:
Prime Rate Trust 2.4 basis pts per year Bank & Thrift 24.2 basis pts per year Pilgrim Investment Plan $7,200 per year Northstar Funds Covered under separate agreement ING Money Market Portfolio 6.0 basis pts per year (effective 12/1/01) |
BUNDLED PRODUCTS AND SERVICES:
The above asset fees cover a comprehensive bundle of products and services. The following products and services are not covered by the asset fees and will continue to be billed separately using the current rates, subject to current allowable periodic increases:
- AWD License Fees
- Escheatment
- Programming
- FANMail
- Vision
EXHIBIT B, p. 2
Additional products and services not currently utilized would be priced separately and would be billed in addition to the asset fees.
-Computer/Technical Personnel (2000 Rates):
Business Analyst/Tester:
Dedicated - $79,040 per year
On Request - $72.80 per hour
COBOL Programmer:
Dedicated - $129,480 per year
On Request - $100.88 per hour
Workstation Programmer:
Dedicated - $157,040 per year
On Request - $128.96 per hour
-Full Service Support (2000 Rates):
Senior Staff Support - $70.00 per hour
Staff Support - $50.00 per hour Clerical Support - $40.00 per hour
RATE ADJUSTMENT TRIGGERS:
The above asset fees would be adjusted monthly based on the following triggers:
Should either "Average Assets per Account" or "Average Assets per CUSIP" decrease 10% in a given month from their baseline March through May 2000 averages, the basis point fee rates would be adjusted up using the formula: Previous Rate divided by .9. When/if a rate adjustment is made, both trigger ratios would be reset at new levels equal to 10% below their previous level. Subsequent adjustments to the rates would be triggered should these ratios decrease in additional 10% increments. Downward adjustments would be made to the rates using the same formula should the trigger ratios increase in 10% increments, but only to the extent that previous upward rate adjustments have been made. The basis point fee rates could not be adjusted below the original rates listed above.
TRIGGERS:
AVERAGE ASSETS PER ACCOUNT AVERAGE ASSETS PER CUSIP -------------------------- ------------------------- Bank & Thrift $ 9,733 $ 184,696,341 Prime Rate $ 113,660 $ 1,259,736,679 All Others $ 29,452 $ 63,379,993 |
EXHIBIT B, p. 3
NOTES TO THE ABOVE FEE SCHEDULE
A. The above schedule does not include reimbursable expenses that are incurred on the Fund's behalf. Examples of reimbursable expenses include but are not limited to those set forth on Exhibit C to this Agreement. Reimbursable expenses are billed separately from service fees on a monthly basis.
B. Any fees or reimbursable expenses not paid within 30 days of the date of the original invoice will be charged a late payment fee of 1.5% per month until payment is received.
C. The above fees, except for those indicated by an "*", are guaranteed through May 31, 2002. All items marked by an "*" are subject to change with 60 day notice.
EXHIBIT B.1, p.1
TA2000 VOICE SYSTEM
FEE SCHEDULE
PER CALL SERVICE FEE
Utilization of DST's TA2000 Voice System is based on a service fee of $.20 per
call. Each call has a maximum duration of seven (7) minutes. This charge is a
flat rate regardless of the number or type of transactions that a shareholder
processes during the call. A given call could result in inquiries and/or
transactions being processed for various funds in the complex. Therefore, on a
monthly basis, DST will report the number of inquiries and/or transactions
processed by fund. A percentage of the total will be derived and reported for
each fund. As a result of this process, DST will allocate the charges among the
individual funds.
MULTIPLE CALL FLOWS
An additional fee of $500 per month will be charged for each additional call
flow that requires different flows, functions, vocabulary, processing, rules or
access method. An additional fee of $200 per month will be charged for each
additional call flow that is identical in flows, functions, vocabulary,
processing rules or access method.
MINIMUM MONTHLY CHARGE
DST's commitment to the reliability and continued enhancement of the TA2000
Voice System necessitates a minimum monthly charge for the service. The minimum
monthly charge will only be assessed when it is greater than the monthly service
fees. The minimum monthly charge will be implemented on a graduated basis based
on the number of cusips and shareholders in a fund complex and is the sum of the
cusip and account charges. The schedule for this charge is as follows:
YEARS CHARGE PER CHARGE PER OF CUSIP AUTHORIZED SHAREHOLDER SERVICE FOR SERVICE* ACCOUNT** ------- ---------------- ----------- 1 $ 50 $ .002 2 $ 75 $ .003 3 $ 100 $ .004 |
* CUSIPS ADDED TO THE SERVICE will be subject to the same minimums being charged to the other cusips in the complex at the time the cusips are added.
** THE PER ACCOUNT CHARGE is based on the total number of shareholder accounts in authorized cusips at the end of each month.
OUT OF POCKET COSTS
Each fund complex will require a unique WATS number for their shareholders to
call. Each WATS number will require a specific number of trunks to service a
given volume of shareholder calls. All installation and monthly usage charges
associated with these will be billed through monthly out-of-pocket invoices.
EXHIBIT B.2, p. 1
NSCC FEES AND OUT-OF-POCKET EXPENSES
DST Fees
DST charges $1,500 per cusip per year for the NSCC platform
Settling Bank Fees
Fund may be charged fees by the Settling Bank at which the net settlement account resides for monthly maintenance of this account. These are negotiated directly between Fund and the Settling Bank.
NSCC Participant Fees
The NSCC charges $40 per month per management company for CPU access/shared line costs.
A combined participant base fee of $200 per month is charged for the following services:
FUND/SERV:
The NSCC charges an activity charge of $.30 per inputted transaction. Transactions include purchases, redemptions and exchanges.
NETWORKING: The NSCC charges the following activity fee:
- $.02 per account for funds paying dividends on a monthly basis
- $.01 per account for funds paying dividends other than monthly
COMMISSION SETTLEMENT: The NSCC charges the following processing fee:
- $.30 per hundred records, per month, for one to 500,000 records; there is a $50 per month minimum processing charge
- $.20 per hundred records, per month, for 500,001 to 1,000,000 records
- $.10 per hundred records, per month, for 1,000,001 records and above
Note: Participant fees are cumulative when Fund/SERV, Networking and/or Commission Settlement are used in conjunction with each other.
EXHIBIT C
REIMBURSABLE EXPENSES
Forms
Postage (to be paid in advance if so requested)
Mailing Services
Computer Hardware and Software - specific to Fund or installed at remote
site at Fund's direction
Telecommunications Equipment and Lines/Long Distance Charges
Magnetic Tapes, Reels or Cartridges
Magnetic Tape Handling Charges
Microfiche/Microfilm/CD ROM
Freight Charges
Printing
Bank Wire and ACH Charges
Proxy Processing - per proxy mailed
not including postage
Includes: Proxy Card Printing Outgoing Envelope Return Envelope Tabulation and Certification Tax Certification Mailings (e.g., W-8 & W-9) (Postage associated with the return envelope is included) N.S.C.C. Communications Charge (Fund/Serv and Networking) Record Storage (hardcopy/microfiche/on-call) Second Site Disaster Currently $.10 Backup Fee (per account) through 12/31/01, subject to annual adjustment Transmission of Statement Data for Currently $.035/per Remote Processing record Travel, Per Diem and other Billables Incurred by DST personnel traveling to, at and from Fund at the request of Fund |
EXHIBIT D
AUTHORIZED PERSONNEL
Pursuant to Section 8.A. of the Agency Agreement between Fund and DST (the "Agreement"), Fund authorizes the following Fund personnel to provide instructions to DST, and receive inquiries from DST in connection with the Agreement:
NAME TITLE _____________________________ ___________________________ _____________________________ ___________________________ _____________________________ ___________________________ _____________________________ ___________________________ _____________________________ ___________________________ _____________________________ ___________________________ _____________________________ ___________________________ |
This Exhibit may be revised by Fund by providing DST with a substitute Exhibit D. Any such substitute Exhibit B shall become effective twenty-four (24) hours after DST's receipt of the document and shall be incorporated into the Agreement.
ACKNOWLEDGMENT OF RECEIPT:
DST SYSTEMS, INC.
By: /s/ Jonathan Boehm --------------------------- Title: Group VP ------------------------ Date: 11/30/2000 ------------------------- |
LEXINGTON MONEY MARKET TRUST
PILGRIM EQUITY TRUST
Pilgrim Index Plus Protection Fund
Pilgrim MidCap Opportunities Fund
PILGRIM GROWTH OPPORTUNITIES FUND
PILGRIM MAYFLOWER TRUST
Pilgrim Growth + Value Fund
Pilgrim International Value Fund
Pilgrim Research Enhanced Index Fund
PILGRIM NATURAL RESOURCES TRUST
PILGRIM PRIME RATE TRUST
PILGRIM SMALLCAP OPPORTUNITIES FUND
PILGRIM VARIABLE PRODUCTS TRUST
Pilgrim VP Convertible Portfolio
Pilgrim VP Emerging Countries Portfolio
Pilgrim VP Financial Services Portfolio
Pilgrim VP Growth & Income Portfolio
Pilgrim VP Growth + Value Portfolio
Pilgrim VP Growth Opportunities Portfolio
Pilgrim VP High Yield Bond Portfolio
Pilgrim VP International Portfolio
Pilgrim VP International SmallCap Growth Portfolio
Pilgrim VP International Value Portfolio
Pilgrim VP LargeCap Growth Portfolio
Pilgrim VP MargnaCap Portfolio
Pilgrim VP MidCap Opportunities Portfolio
Pilgrim VP Research Enhanced Index Portfolio
Pilgrim VP SmallCap Opportunities Portfolio
Pilgrim VP Worldwide Growth Portfolio
PILGRIM FUNDS TRUST
Pilgrim European Equity Fund
Pilgrim Global Communications Fund
Pilgrim Global Information Technology Fund
Pilgrim Intermediate Bond Fund
Pilgrim Internet Fund
ING Pilgrim Money Market Fund
Pilgrim National Tax-Exempt Bond Fund
Pilgrim Tax Efficient Equity Fund
PILGRIM MUTUAL FUNDS
Pilgrim Balanced Fund
Pilgrim Convertible Fund
Pilgrim Emerging Countries Fund
Pilgrim High Yield Fund II
Pilgrim International Core Growth Fund
Pilgrim International SmallCap Growth Fund
Pilgrim LargeCap Growth Fund
Pilgrim MidCap Growth Fund
Pilgrim Money Market Fund
Pilgrim SmallCap Growth Fund
Pilgrim Strategic Income Fund
Pilgrim Worldwide Growth Fund
PILGRIM SENIOR INCOME FUND
PILGRIM ADVISORY FUNDS, INC.
Pilgrim Asia-Pacific Equity Fund
PILGRIM BANK AND THRIFT FUND, INC.
PILGRIM EMERGING MARKETS FUND, INC.
PILGRIM GNMA INCOME FUND, INC.
PILGRIM PRECIOUS METALS FUND, INC.
PILGRIM GROWTH AND INCOME FUND, INC.
PILGRIM INVESTMENT FUNDS, INC.
Pilgrim High Yield Fund
Pilgrim MagnaCap Fund
PILGRIM INTERNATIONAL FUND, INC.,
PILGRIM RUSSIA FUND, INC.
By: /s/ Robert S. Naka ----------------------------- Title: Senior Vice President -------------------------- Date: 11/30/2000 --------------------------- |
Exhibit 99.(j)(vi)(1)
[ING FUNDS LOGO]
February 25, 2004
Nick Horvath
DST Systems, Inc.
333 West 11th St., 5th Floor
Kansas City, Missouri 64105
Dear Mr. Horvath:
Pursuant to the Agency Agreement dated November 30, 2000, as amended, between the Funds (as defined in the Agreement) and DST Systems, Inc. (the "Agreement"), we hereby notify you of our intention to retain you as Transfer Agent and Dividend Disbursing Agent to render such services to ING Evergreen Health Sciences Portfolio, ING Evergreen Omega Portfolio, ING Lifestyle Aggressive Growth Portfolio, ING Lifestyle Growth Portfolio, ING Lifestyle Moderate Growth Portfolio and ING Lifestyle Moderate Portfolio, each a new series of ING Investors Trust, ING Principal Protection Fund X and ING Principal Protection Fund XI, each a new series of ING Equity Trust, and ING VP Real Estate Portfolio, a new series of ING Variable Products Trust, (the "New Funds"), upon all of the terms and conditions set forth in the Agreement. Upon your acceptance, the Agreement will be modified to give effect to the foregoing by adding the above-mentioned New Funds to AMENDED AND RESTATED EXHIBIT A of the Agreement.
The AMENDED AND RESTATED EXHIBIT A has also been updated by the removal of ING Strategic Bond Fund, ING VP Emerging Countries Portfolio, ING VP International Portfolio and ING VP International SmallCap Portfolio as these funds have been dissolved.
Please signify your acceptance to act as Transfer Agent and Dividend Disbursing Agent under the Agreement with respect to the New Funds, by signing below.
Very sincerely,
/s/ Robert S. Naka ------------------ Robert S. Naka Senior Vice President ING Investors Trust ING Equity Trust ING Variable Products Trust |
ACCEPTED AND AGREED TO:
DST Systems, Inc.
By: /s/ Nick Horvath ---------------- Name: Nick Horvath |
7337 E. Doubletree Ranch Rd. Tel: 480-477-3000 ING Investors Trust Scottsdale, AZ 85258-2034 Fax: 480-477-2700 ING Equity Trust www.ingfunds.com ING Variable Products Trust |
AMENDED AND RESTATED EXHIBIT A
WITH RESPECT TO THE
AGENCY AGREEMENT
BETWEEN
THE FUNDS
AND
DST SYSTEMS, INC.
TYPE OF STATE OF TAXPAYER TAXPAYER/FUND NAME ORGANIZATION ORGANIZATION I.D. NO. ------------------ ------------ ------------ -------- ING CORPORATE LEADERS TRUST FUND Trust New York 13-6061925 ING EQUITY TRUST Business Trust Massachusetts N/A ING Convertible Fund 33-0552461 ING Disciplined LargeCap Fund 06-1533751 ING Equity and Bond Fund 33-0552418 ING Financial Services Fund 95-4020286 ING Growth Opportunities Fund 04-2886865 ING LargeCap Growth Fund 33-0733557 ING LargeCap Value Fund 20-0437128 ING MidCap Opportunities Fund 06-1522344 ING MidCap Value Fund 86-1048451 ING Principal Protection Fund 86-1033467 ING Principal Protection Fund II 86-1039030 ING Principal Protection Fund III 86-1049217 ING Principal Protection Fund IV 82-0540557 ING Principal Protection Fund V 27-0019774 ING Principal Protection Fund VI 48-1284684 ING Principal Protection Fund VII 72-1553495 ING Principal Protection Fund VIII 47-0919259 ING Principal Protection Fund IX 20-0453800 ING Principal Protection Fund X 20-0584080 ING Principal Protection Fund XI 20-0639761 ING Real Estate Fund 43-1969240 ING SmallCap Opportunities Fund 04-2886856 ING SmallCap Value Fund 86-1048453 ING Tax Efficient Equity Fund 23-2978988 ING FUNDS TRUST Business Trust Delaware N/A ING Classic Money Market Fund 23-2978935 ING GNMA Income Fund 22-2013958 ING High Yield Bond Fund 23-2978938 ING High Yield Opportunity Fund 33-0715888 |
TYPE OF STATE OF TAXPAYER TAXPAYER/FUND NAME ORGANIZATION ORGANIZATION I.D. NO. ------------------ ------------ ------------ -------- ING FUNDS TRUST (CONTD.) ING Intermediate Bond Fund 52-2125227 ING Lexington Money Market Trust 13-6766350 ING Money Market Fund 86-0955273 ING National Tax-Exempt Bond Fund 23-2978941 ING INVESTMENT FUNDS, INC. Corporation Maryland N/A ING MagnaCap Fund 22-1891924 ING INVESTORS TRUST Business Trust Massachusetts N/A ING American Funds Growth Portfolio 55-0839555 ING American Funds Growth-Income Portfolio 55-0839542 ING American Funds International Portfolio 55-0839952 ING Evergreen Health Sciences Portfolio 20-0573913 ING Evergreen Omega Portfolio 20-0573935 ING Lifestyle Aggressive Growth Portfolio 20-0573999 ING Lifestyle Growth Portfolio 20-0573986 ING Lifestyle Moderate Growth Portfolio 20-0573968 ING Lifestyle Moderate Portfolio 20-0573946 ING MAYFLOWER TRUST Business Trust Massachusetts N/A ING Growth + Value Fund 06-1465531 ING International Value Fund 06-1472910 ING MUTUAL FUNDS Business Trust Delaware N/A ING Emerging Countries Fund 33-0635177 ING Foreign Fund 72-1563685 ING Global Equity Dividend Fund 55-0839557 ING Global Real Estate Fund 86-1028620 ING International Fund 22-3278095 ING International SmallCap Growth Fund 33-0591838 ING Precious Metals Fund 13-2855309 ING Russia Fund 22-3430284 ING Worldwide Growth Fund 33-0552475 ING PRIME RATE TRUST Business Trust Massachusetts 95-6874587 ING SENIOR INCOME FUND Business Trust Delaware 86-1011668 ING VARIABLE INSURANCE TRUST Business Trust Delaware N/A ING GET U.S. Core Portfolio - Series 1 43-2007006 ING GET U.S. Core Portfolio - Series 2 41-2107140 ING GET U.S. Core Portfolio - Series 3 32-0090501 |
TYPE OF STATE OF TAXPAYER TAXPAYER/FUND NAME ORGANIZATION ORGANIZATION I.D. NO. ------------------ ------------ ------------ -------- ING VARIABLE INSURANCE TRUST (CONT.) ING GET U.S. Core Portfolio - Series 4 32-0090502 ING GET U.S. Core Portfolio - Series 5 32-0090504 ING GET U.S. Core Portfolio - Series 6 32-0090505 ING GET U.S. Opportunity Portfolio - Series 1 43-2007032 ING GET U.S. Opportunity Portfolio - Series 2 TBD ING VP Worldwide Growth Portfolio 25-6705433 ING VARIABLE PRODUCTS TRUST Business Trust Massachusetts N/A ING VP Convertible Portfolio 86-1028318 ING VP Disciplined LargeCap Fund 06-6397003 ING VP Financial Services Portfolio 86-1028316 ING VP Growth + Value Portfolio 06-6396994 ING VP Growth Opportunities Portfolio 06-6493759 ING VP High Yield Bond Portfolio 06-6396995 ING VP International Value Portfolio 06-6453493 ING VP LargeCap Growth Portfolio 86-1028309 ING VP MagnaCap Portfolio 06-6493762 ING VP MidCap Opportunities Portfolio 06-6493760 ING VP Real Estate Portfolio 20-0453833 ING VP SmallCap Opportunities Portfolio 06-6397002 ING VP EMERGING MARKETS FUND, INC. Corporation Maryland 06-1287459 ING VP NATURAL RESOURCES TRUST Business Trust Massachusetts 22-2932678 USLICO SERIES FUND Business Trust Massachusetts N/A The Asset Allocation Portfolio 54-1499147 The Bond Portfolio 54-1499901 The Money Market Portfolio 54-1499149 The Stock Portfolio 54-1499398 |
Last Approved: February 25, 2004
Exhibit 99.(k)(i)
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT which was made as of the 20th day of October, 1992, amended and restated as of February 17, 1995, April 7, 1995, May 2, 1996, April, 7, 1997, and February 2, 1999, and as further amended and restated on the 27th day of April, 2000, by and between PILGRIM PRIME RATE TRUST (formerly Pilgrim America Prime Rate Trust), a Massachusetts Business Trust (hereinafter referred to as the "Trust"), and PILGRIM GROUP, INC. (formerly Pilgrim America Group, Inc.), a corporation organized and existing under the laws of Delaware (hereinafter called the "Administrator").
W I T N E S S E T H:
WHEREAS, the Trust is a closed-end management investment company, registered as such under the Investment Company Act of 1940; and
WHEREAS, the Trust's name was changed to Pilgrim Prime Rate Trust on November 16, 1998; and
WHEREAS, the Administrator's name was changed to Pilgrim Group, Inc. on October 30, 1998; and
WHEREAS, the Administrator is engaged in the business of providing management and administrative services, as an independent contractor; and
WHEREAS, the Trust desires to retain the Administrator to furnish management and administrative services to the Trust pursuant to the terms and provisions of this Agreement, and the Administrator is interested in providing said services.
NOW, THEREFORE, in consideration of the covenants and the mutual promises hereinafter set forth, the parties hereto, intending to be legally bound hereby, mutually agree as follows:
1. The Trust hereby employs the Administrator and the Administrator
hereby accepts such employment, to render management and administrative services
to the Trust, subject to the supervision and direction of the Trust's Board of
Trustees. The Administrator shall furnish to the Trust the services of executive
and administrative personnel to supervise the performance of all administrative
functions concerning the operation of the Trust, other than the investment
management function. The Administrator shall, as part of its duties hereunder
(i) monitor the provisions of the loan agreements and any agreements with
respect to participations and assignments and be responsible for recordkeeping
with respect to senior loans in the Trust's portfolio; (ii) administer the
Trust's corporate affairs including preparing and filing all reports required by
the Commonwealth of Massachusetts; (iii) furnish the Trust such office space,
equipment, and personnel as is needed by the Trust; (iv) furnish clerical and
bookkeeping services as are needed by the Trust; (v) prepare and furnish annual
and other reports to shareholders, the Securities and Exchange Commission, the
New York Stock Exchange and to any appropriate governmental body; (vi) prepare
and file any federal, state and local income tax returns as requested by the
Trust; (vii) provide shareholder services as are needed by the Trust; (viii)
permit its officers and employees to serve without compensation as trustees or
officers of the Trust if elected to such positions; and (ix) in general,
supervise the performance of all
administrative functions of the Trust, subject to the ultimate supervision and direction of the Trust's Board of Trustees.
2. The Administrator shall, for all purposes herein, be deemed to be an independent contractor, and shall, unless otherwise expressly provided and authorized, have no authority to act for or represent the Trust in any way, or in any way be deemed an agent for the Trust. It is expressly understood and agreed that the services to be rendered by the Administrator to the Trust under the provisions of this Agreement are not to be deemed exclusive, and the Administrator shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be impaired thereby.
3. The Administrator agrees to use its best judgment and efforts in performing the services to the Trust as contemplated hereunder, and for this purpose the Administrator shall, at its own expense, maintain such staff and employ or retain such personnel and consult with such other persons as it shall from time to time determine to be necessary to the performance of its obligations under this Agreement.
4. In performing the administrative services hereunder, the Administrator shall at all times comply with the applicable provisions of the Investment Company Act of 1940 and any other federal or state securities laws.
5. The Administrator shall bear and pay the costs of rendering the services to be performed by it under this Agreement. Without limiting the generality of the foregoing, the Administrator shall bear the following expenses: the salaries and expenses of all personnel of the Trust and the Administrator, except for the fees and expenses of Trustees not affiliated with the Trust or the Administrator; costs to prepare information for determination of net asset value by the Trust's recordkeeping and accounting agent; expenses to maintain the Trust's books and
records that are not maintained by the Trust's Manager, Custodian or Transfer Agent; costs incurred to assist in the preparation of financial information for the Trust's income tax returns, proxy statements, quarterly and annual shareholder reports; expenses to provide shareholder services in connection with the Trust's dividend reinvestment and cash purchase plans; expenses to provide shareholder services in preparation of tender offers, if any, or to shareholders proposing to transfer their shares to a third party; and all expenses incurred by the Administrator or by the Trust in rendering the administrative services pursuant to the terms of this Agreement.
6. The Trust shall bear and pay for all other expenses of its operation, except for those expenses expressly assumed by the Manager to the Trust pursuant to an Investment Management Agreement between the Manager and the Trust, including, but not limited to, the fees payable to the Manager; the fees and expenses of Trustees who are not affiliated with the Manager or the Administrator; the fees and certain expenses of the Trust's Custodian and Transfer Agent, including the cost of providing records to the Administrator in connection with its obligation of maintaining required records of the Trust; the charges and expenses of the Trust's legal counsel and independent accountants; commissions and any issue or transfer taxes chargeable to the Trust in connection with its transactions; all taxes and corporate fees payable by the Trust to governmental agencies; the fees of any trade association of which the Trust is a member; the cost of share certificates representing shares of the Trust; organizational and offering expenses of the Trust and the fees and expenses involved in registering and maintaining registration of the Trust and of its shares with the Securities and Exchange Commission, the New York Stock Exchange and qualifying its shares under applicable state securities laws including the preparation and printing of the Trust's registration statements and prospectuses for such purposes; allocable communications expenses, with respect to investor services and all expenses
of stockholders and Trustees' meetings and of preparing, printing and mailing reports, proxy statements and prospectuses to stockholders; the cost of insurance; and litigation and indemnification expenses and extraordinary expenses not incurred in the ordinary course of the Trust's business.
7. To the extent the Administrator incurs any costs or performs any services which are an obligation of the Trust, as set forth herein, the Trust shall promptly reimburse the Administrator for such costs and expenses. To the extent the services for which the Trust is obligated to pay are performed by the Administrator, the Administrator shall be entitled to recover from the Trust only to the extent of its costs for such services.
8. (a) The Trust agrees to pay to the Administrator, and the Administrator agrees to accept, as full compensation for all administrative services furnished or provided to the Trust and as full reimbursement for all expenses assumed by the Administrator, an administration fee computed at the annual rate of 0.25% of the average daily net assets of the Trust, plus the proceeds of any outstanding borrowings.
(b) The administration fee shall be accrued daily by the Trust and paid to the Administrator at the end of each calendar month.
9. The Administrator agrees that neither it nor any of its officers or employees shall take any short position in the capital stock of the Trust. This prohibition shall not prevent the purchase of such shares by any of the officers and directors or bona fide employees of the Administrator or any trust, pension, profit-sharing or other benefit plan for such persons or affiliates thereof.
10. Nothing herein contained shall be deemed to require the Trust to take any action contrary to its Trust Indenture or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the conduct of the affairs of the Trust.
11. (a) In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of obligations or duties hereunder on the part of the Administrator, the Administrator shall not be subject to liability to the Trust or to any shareholder of the Trust for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security by the Trust.
(b) Notwithstanding the foregoing, the Administrator agrees to reimburse the Trust for any and all costs, expenses, and counsel and Trustees' fees reasonably incurred by the Trust in the preparation, printing and distribution of amendments to its registration statement, holding of meetings of its shareholders or Trustees, the conduct of factual investigations, any legal or administrative proceedings including any applications for exemptions or determinations by the Securities and Exchange Commission which the Trust incurs as the result of action or inaction of the Administrator or any of its shareholders where the action or inaction necessitating such expenditures (i) is directly or indirectly related to any transactions or proposed transaction in the shares or control of the Administrator or its affiliates (or litigation relates to any pending or proposed future transaction in such shares or control) which shall have been undertaken without the prior, express approval of the Trust's Board of Trustees; or (ii) is within the sole control of the Administrator or any of its affiliates or any of their officers, directors, employees or shareholders. The Administrator shall not be obligated pursuant to the provisions of this Subparagraph 11(b), to reimburse the Trust for any expenditures related to the institution of an administrative proceeding or civil litigation by the Trust or a Trust shareholder seeking to recover all or a portion of the proceeds derived by any shareholder of the Administrator or any of its
affiliates from the sale of his shares of the Administrator, or similar matters.
So long as this Agreement is in effect, the Administrator shall pay to the Trust
the amount due for expenses subject to this Subparagraph 11(b) within thirty
(30) days after a bill or statement has been received by the Trust therefor.
This provision shall not be deemed to be a waiver of any claim the Trust may
have or may assert against the Administrator or others or costs, expenses, or
damages heretofore incurred by the Trust for costs, expenses, or damages by the
Trust may hereafter incur which are not reimbursable to it hereunder.
(c) No provision of this Agreement shall be construed to protect any Trustee or officer of the Trust, or the Administrator, from liability in violation of Section 17(h) and (i) of the Investment Company Act of 1940, as amended.
12. (a) This Agreement shall become effective at the close of business on the date hereof and shall continue in effect from year to year thereafter so long as such continuation is specifically approved at least annually by (i) the Board of Trustees of the Trust, and (ii) the vote of a majority of the Trustees of the Trust who are not parties to this Agreement or interested persons thereof, cast in person at a meeting called for the purpose of voting on such approval.
(b) This Agreement may be terminated at any time, without penalty, by the Trust by giving 60 days' written notice of such termination to the Administrator at its principal place of business, or may be terminated at any time by the Administrator by giving 60 days' written notice of such termination to the Trust at its principal place of business.
13. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby.
14. This Agreement may be amended only by written instrument signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their respective officers on the day and year first above written.
PILGRIM PRIME RATE TRUST
Attest: By: /s/ Daniel A. Norman --------------------- Senior Vice President /s/ Robert S. Naka ------------------ Vice President |
PILGRIM GROUP, INC.
By: /s/ James M. Hennessy ---------------------- Attest: Executive Vice President and Secretary /s/ Robert S. Naka ------------------ Vice President |
Exhibit 99.(k)(iii)
Execution Copy
REVOLVING CREDIT AND SECURITY AGREEMENT
among
ING PRIME RATE TRUST,
as Borrower
CRC FUNDING, LLC
as Conduit Lender
CITIBANK, N.A.,
as Secondary Lender
and
CITICORP NORTH AMERICA, INC.,
as Agent
Dated as of July 16, 2003
SIDLEY AUSTIN BROWN & WOOD LLP
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION SECTION 1.01. DEFINITIONS 1 SECTION 1.02. RULES OF CONSTRUCTION 25 SECTION 1.03. COMPUTATION OF TIME PERIODS 25 ARTICLE II ADVANCES TO THE BORROWER SECTION 2.01. ADVANCE FACILITY 26 SECTION 2.02. MAKING OF ADVANCES 26 SECTION 2.03. NOTELESS AGREEMENT; EVIDENCE OF INDEBTEDNESS 27 SECTION 2.04. MATURITY OF THE ADVANCES 28 SECTION 2.05. PREPAYMENT OF THE ADVANCES 28 SECTION 2.06. YIELD 29 SECTION 2.07. INCREASED COSTS 29 SECTION 2.08. COMPENSATION 31 SECTION 2.09. ADDITIONAL YIELD ON EURODOLLAR RATE ADVANCES 31 SECTION 2.10. TERMINATION OR REDUCTION OF THE TOTAL COMMITMENT 31 SECTION 2.11. RESCISSION OR RETURN OF PAYMENT 31 SECTION 2.12. FEES PAYABLE BY BORROWER 32 SECTION 2.13. POST-DEFAULT INTEREST 32 SECTION 2.14. PAYMENTS 32 SECTION 2.15. RATABLE PAYMENTS 33 SECTION 2.16. BORROWER'S OBLIGATIONS ABSOLUTE 33 ARTICLE III CONDITIONS PRECEDENT SECTION 3.01. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT 33 SECTION 3.02. CONDITIONS PRECEDENT TO ALL ADVANCES 35 |
ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER 35 ARTICLE V COVENANTS SECTION 5.01. AFFIRMATIVE COVENANTS OF THE BORROWER 39 SECTION 5.02. NEGATIVE COVENANTS OF THE BORROWER 44 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. EVENTS OF DEFAULT 46 ARTICLE VII PLEDGE OF PLEDGED COLLATERAL; RIGHTS OF THE AGENT SECTION 7.01. SECURITY INTERESTS 50 SECTION 7.02. SUBSTITUTION OF COLLATERAL AND RELEASE OF SECURITY INTEREST 51 SECTION 7.03. APPLICATION OF PROCEEDS 52 SECTION 7.04. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT 53 SECTION 7.05. REMEDIES CUMULATIVE 54 SECTION 7.06. ENFORCEMENT OF REMEDIES UNDER THE CUSTODIAL AGREEMENT AND LOAN DOCUMENTS 54 ARTICLE VIII THE AGENT SECTION 8.01. AUTHORIZATION AND ACTION 55 SECTION 8.02. DELEGATION OF DUTIES 55 SECTION 8.03. AGENT'S RELIANCE, ETC. 55 SECTION 8.04. INDEMNIFICATION 56 SECTION 8.05. SUCCESSOR AGENT 56 ARTICLE IX MISCELLANEOUS SECTION 9.01. NO WAIVER; MODIFICATIONS IN WRITING 57 |
SECTION 9.02. NOTICES, ETC. 57 SECTION 9.03. TAXES 58 SECTION 9.04. COSTS AND EXPENSES; INDEMNIFICATION 60 SECTION 9.05. EXECUTION IN COUNTERPARTS 61 SECTION 9.06. ASSIGNABILITY 61 SECTION 9.07. GOVERNING LAW 63 SECTION 9.08. SEVERABILITY OF PROVISIONS 63 SECTION 9.09. CONFIDENTIALITY 63 SECTION 9.10. MERGER 64 SECTION 9.11. NO PROCEEDINGS; NO RECOURSE 65 SECTION 9.12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES 65 SECTION 9.13. LOAN DOCUMENTS 65 SECTION 9.14. SUBMISSION TO JURISDICTION; WAIVERS 66 SECTION 9.15. E-MAIL REPORTS 66 SECTION 9.16. WAIVER OF JURY TRIAL 67 SECTION 9.17. SEVERAL OBLIGATIONS 67 SECTION 9.18. LIMITATION ON LIABILITY 67 |
SCHEDULES
Schedule I Form of Investor Report Schedule II Form of Weekly Portfolio Report Schedule III Scope of Audit Procedures Schedule IV Industry Classifications EXHIBITS EXHIBIT A Form of Advance Note (if requested) EXHIBIT B Form of Notice of Borrowing EXHIBIT C Form of Assignment and Acceptance |
REVOLVING CREDIT AND SECURITY AGREEMENT
REVOLVING CREDIT AND SECURITY AGREEMENT, dated as of July 16, 2003
among CRC FUNDING, LLC, as the Conduit Lender, CITIBANK, N.A., the other
Secondary Lenders (as hereinafter defined) from time to time parties hereto,
CITICORP NORTH AMERICA, INC., as agent for the Secured Parties (as hereinafter
defined) (in such capacity, together with its successors and assigns, the
"Agent") and ING PRIME RATE TRUST (together with its permitted successors and
assigns, the "Borrower").
W I T N E S S E T H:
WHEREAS, the Borrower desires that the Conduit Lender and the Secondary Lenders from time to time make advances to the Borrower on the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, the Conduit Lender and the Secondary Lenders are willing to make such advances to the Borrower for such purposes on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings indicated:
"ADJUSTED ASSET VALUE" means in respect of any Borrowing Base Eligible Asset, as of any date of determination, an amount equal to the product of (i) the Asset Value of such Borrowing Base Eligible Asset as of such date, and (ii) the applicable Advance Rate for such Borrowing Base Eligible Asset.
"ADMINISTRATION AGREEMENT" means the Amended and Restated Administration Agreement dated as of October 20, 1992, as amended and restated as of February 17, 1995, April 7, 1995, May 2, 1996, April 7, 1997, February 2, 1999 and April 27, 2000, and as amended as of November 2, 2001 between the Administrator and the Borrower, as the same may be amended, supplemented, waived or modified as permitted under this Agreement.
"ADMINISTRATOR" means ING Funds Services, LLC (formerly known as Pilgrim Group, Inc.), together with its permitted successors and assigns.
"ADMINISTRATOR LETTER AGREEMENT" means the Letter Agreement dated as of the date hereof from the Administrator to the Agent on behalf of the Secured Parties, as the same may from time to time be amended, supplemented, waived or modified.
"ADVANCE" means each advance by the Conduit Lender or a Secondary Lender to the Borrower on a Borrowing Date pursuant to ARTICLE II; provided that if the Conduit Lender assigns a portion of any Advance made by it to a Lender pursuant to an Asset Purchase Agreement or otherwise, the portion of such Advance retained by the Conduit Lender and the portion of such Advance acquired by such Lender shall each be deemed to constitute a separate Advance for purposes of this Agreement.
"ADVANCE NOTE" means each promissory note, if any, issued by the Borrower to the Conduit Lender or a Secondary Lender in accordance with the provisions of SECTION 2.03, substantially in the form of EXHIBIT A hereto, as the same may from time to time be amended, supplemented, waived or modified.
"ADVANCE RATE" means (i) in respect of Cash, 100%, (ii) in respect of Eligible Commercial Paper Notes, Eligible Money Market Funds and Eligible Government Securities, 95%, (iii) in respect of Class A Loan Assets, 80%, (iv) in respect of Class B Loan Assets, 70%, (v) in respect of Class C Loan Assets, 60%, (vi) in respect of Class D Loan Assets, 50%, (vii) in respect of Class A Bond Asset, 80%, (viii) in respect of Class B Bond Assets, 72%, (ix) in respect of Class C Bond Assets, 62%, (x) in respect of Class D Bond Assets, 58%, (xi) in respect of Class E Bond Assets, 45%, and (xii) in respect of Class F Bond Assets, 28%.
"ADVERSE CLAIM" means any Lien or other right, claim, encumbrance or any other type of preferential arrangement in, of or on any Person's assets or properties in favor of any other Person, other than Permitted Liens.
"ADVISER" means ING Investments, LLC, together with its permitted successors and assigns.
"ADVISER LETTER AGREEMENT" means the Letter Agreement dated as of the date hereof from the Adviser to the Agent on behalf of the Secured Parties, as the same may from time to time be amended, supplemented, waived or modified.
"ADVISORY AGREEMENT" means the Investment Management Agreement, September 1, 2000, between the Adviser and the Borrower, as the same may be amended, supplemented, waived or modified as permitted under this Agreement.
"AFFECTED PERSON" means any Lender, any Secondary Lender, any other entity which enters into a commitment to make or purchase any Advance or any interest therein, any of their respective Affiliates, any corporation controlling any Lender or any Secondary Lender and any permitted assignee or participant of any Lender or any Secondary Lender.
"AFFILIATE" means, in respect of a referenced Person, another Person controlling, controlled by or under common control with such referenced Person (which in the case of the Conduit Lender and the Agent, shall also include any entity which is a special purpose entity that
issues promissory notes and has a relationship to the Agent comparable to that of the Conduit Lender). The terms "control," "controlling," "controlled" and the like mean the direct or indirect possession of the power to direct or cause the direction of the management or policies of a Person or the disposition of its assets or properties, whether through ownership, by contract, arrangement or understanding, or otherwise.
"AGENT" has the meaning assigned to such term in the introduction to this Agreement.
"AGENT'S ACCOUNT" means the special account (account number 40517805, ABA No. 021000089) of the Agent maintained at the office of Citibank at its Principal Office or to such other account in the United States as the Agent shall designate in writing to the Borrower.
"AGGREGATE CUSTODIAN'S ADVANCE AMOUNT" means the sum of (i) the aggregate unpaid Dollar amount of all outstanding Custodian's Overdraft Advances of cash, (ii) the aggregate Value of all Custodian's Overdraft Advances of assets (other than cash) to the extent not reimbursed by the Borrower, and (iii) the accrued and unpaid interest, if any, on the amounts set forth in CLAUSES (i) and (ii) above.
"AGREEMENT" means this Revolving Credit and Security Agreement, as the same may from time to time be amended, supplemented, waived or modified.
"ALTERNATE BASE RATE" means in respect of any Advance for any Settlement Period, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the sum of (i) the Applicable Margin PLUS (ii) the highest of:
(a) the Base Rate;
(b) one-half of one percent (0.5%) above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by Citibank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by Citibank from three New York certificate of deposit dealers of recognized standing selected by Citibank, in either case, adjusted to the nearest 1/16 of one percent or, if there is no nearest 1/16 of one percent, to the next higher 1/16 of one percent; and
(c) one half of one percent (0.5%) per annum above the Federal Funds Rate.
"APPLICABLE LAW" means any Law of any Authority, including, without limitation, all Federal and state banking or securities laws, to which the Person in question is subject or by which it or any of its property is bound.
"APPLICABLE MARGIN" means, with respect to the Eurodollar Rate and the Alternate Base Rate, 1.00% per annum.
"ASSET COVERAGE TEST" means, as of any date of determination, the
Borrower's "senior securities representing indebtedness" (as defined in
Section 18(g) of the Investment Company Act) have "asset coverage" (as defined
in Section 18(h) of the Investment Company Act) of at least 300% (computed on
such date of determination regardless of whether or not dividends or
distributions are being made on such date, or whether Debt is being incurred on
such date).
"ASSET PURCHASE AGREEMENT" means the Asset Purchase Agreement entered into by a Secondary Lender (other than Citibank) concurrently with the Assignment and Acceptance pursuant to which such Secondary Lender became party to this Agreement.
"ASSETS" means a collective reference to all items which would be classified as an "asset" on the balance sheet of the Borrower in accordance with GAAP.
"ASSET VALUE" means, as of any day of determination (i) in respect of Cash, the amount of such Cash, and (ii) in respect of any other Asset, the Value of such Asset computed in the manner as such Value is required to be computed by the Borrower in accordance with the Prospectus and in accordance with Applicable Law, including without limitation the Investment Company Act; PROVIDED, that the Asset Value of any Asset shall be net of the Borrower's liabilities relating thereto, including without limitation all of the Borrower's obligations to pay any unpaid portion of the purchase price thereof; PROVIDED, FURTHER, that for any Asset for which independent reliable market quotations (which may consist of only an independent dealer quotation) are not available (or which is not otherwise valued for the Borrower by an independent recognized pricing source), the Asset Value of such Asset shall be deemed zero for purposes of this definition.
"ASSIGNEE RATE" means in respect of any Advance by a Secondary Lender or acquired by a Lender (other than the Conduit Lender) for any Settlement Period an interest rate per annum equal to the sum of the Applicable Margin plus the Eurodollar Rate for such Settlement Period; PROVIDED, HOWEVER, that in case of:
(i) any Settlement Period on or prior to the first day of which the applicable Lender (other than the Conduit Lender) or the applicable Secondary Lender shall have notified the Agent that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender or such Secondary Lender to fund such Advance at the Assignee Rate set forth above (and such Lender or such Secondary Lender shall not have subsequently notified the Agent that such circumstances no longer exist),
(ii) any Settlement Period of one to (and including) 27 days,
(iii) any Settlement Period as to which the Agent receives notice after 12:00 noon (New York City time) on the second Business Day preceding the first
day of such Settlement Period, that such Advance will not be funded by the Conduit Lender through the issuance of promissory notes, or
(iv) any Settlement Period for which the aggregate principal amount of all outstanding Advances is less than $1,000,000,
solely with respect to the affected Lender's or Secondary Lender's pro rata
share of such Advances in the case of CLAUSE (i) above, but with respect to the
aggregate principal amount of such Advance in the case of CLAUSES (ii) through
(iv) above, the "Assignee Rate" for such Settlement Period shall be an interest
rate per annum equal to the Alternate Base Rate in effect on the first day of
such Settlement Period.
"ASSIGNMENT AND ACCEPTANCE" means the Assignment and Acceptance, in
substantially the form of EXHIBIT C hereto, entered into by a Secondary Lender,
any Eligible Assignee and the Agent, and, if required by the terms of
SECTION 9.06(b), the Borrower, pursuant to which such Eligible Assignee may
become a party to this Agreement.
"AUTHORITY" means any governmental or quasi-governmental authority (including without limitation the National Association of Securities Dealers, the stock exchanges, the SEC and any accounting board or authority (whether or not a part of government) which is responsible for the establishment or interpretation of national or international accounting principals, in each case whether foreign or domestic), whether executive, legislative, judicial, administrative or other, or any combination thereof, including, without limitation, any Federal, state, territorial, county, municipal or other government or governmental or quasi-governmental agency, arbitrator, board, body, branch, bureau, commission, corporation, court, department, instrumentality, master, mediator, panel, referee, system or other political unit or subdivision or other entity of any of the foregoing, whether domestic or foreign, having the force of law.
"AUTHORIZED OFFICER" means the president, the executive vice president, the senior vice president, vice president, treasurer, assistant treasurer or any other duly authorized officer of the Borrower; PROVIDED, that the Agent shall have received a manually signed certificate of the Secretary of the Borrower as to the incumbency of, and bearing a manual specimen signature of, such duly authorized officer.
"AUTHORIZED SIGNATORY" means any Authorized Officer or any duly authorized employee of ING Investments, LLC, PROVIDED, that the Agent shall have received a manually signed certificate of the Secretary of the Borrower as to the incumbency of, and bearing a specimen signature of, such duly authorized person or employee.
"BASE RATE" means the rate of interest from time to time announced publicly by Citibank at its Principal Office as its base rate. The Base Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer of Citibank.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is subject to the provisions of Title I of ERISA and is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group.
"BOND ASSET" means any Asset that is a direct interest in a non-governmental bond obligation.
"BORROWER" has the meaning assigned to such term in the introduction to this Agreement.
"BORROWER INFORMATION" has the meaning assigned to such term in
SECTION 9.09(c).
"BORROWER OBLIGATIONS" means all indebtedness, whether absolute, fixed or contingent, at any time or from time to time owing by the Borrower to any Secured Party under or in connection with this Agreement or any other Program Document, including without limitation, all amounts payable by the Borrower in respect of the Advances, with interest thereon, and the amounts payable under SECTIONS 2.05, 2.06, 2.07, 2.08, 2.09, 2.11, 2.12, 2.13, 7.04(b), 9.03 and 9.04 of this Agreement.
"BORROWER REPRESENTATIVES" has the meaning assigned to such term in
SECTION 9.09(b).
"BORROWER'S ACCOUNT" means the special account (account number 5568-37-00, ABA No. 011-000-028) of the Borrower maintained with the Custodian, or such other account as the Borrower shall from time to time designate in writing to the Agent.
"BORROWING BASE" means on the date any determination thereof is made, an amount equal to (i) the aggregate Adjusted Asset Value of all Eligible Collateral as of such date of determination MINUS (ii) the Borrowing Base Excess Amount as of such date of determination.
"BORROWING BASE ELIGIBLE ASSET" means Cash, any Eligible Loan Asset,
any Eligible Credit-Linked Note, any Eligible Bond Asset, an Eligible Commercial
Paper Note, Eligible Money Market Funds and any Eligible Government Security
which the Borrower is permitted to purchase in accordance with the Investment
Policies and Restrictions which are free and clear of all Adverse Claims;
PROVIDED that such Asset does not constitute (i) a Derivative Transaction,
Margin Stock, an Equity Security, a Non-OECD Asset or a Foreign Currency Asset,
(ii) an Asset which is the subject of a reverse repurchase agreement, dollar
roll, securities lending transaction or other Derivatives Transaction (other
than Derivatives Transactions entered into solely to protect against interest
rate risk which have not been entered into for speculative purposes), including,
without limitation, any cash or other Asset maintained in a segregated account
with the Custodian relating to any outstanding reverse repurchase agreement
entered into by the Borrower; or (iii) an Asset held by a sub-custodian of the
Custodian which is not located in the United States.
"BORROWING BASE EXCESS AMOUNT" means as of any date any determination thereof is made, an amount equal to the sum (without duplication) of:
(i) the amount by which the aggregate Adjusted Asset Value of all Eligible Collateral (other than Cash and Eligible Government Securities, but including Eligible Commercial Paper Notes and Eligible Money Market Funds) issued or
Guaranteed by or owing from any Person (together with all Affiliates of such Person), exceeds five percent (5%) of the aggregate Adjusted Asset Value of all Eligible Collateral;
PLUS (ii) the amount by which the aggregate Adjusted Asset Value of all Eligible Collateral issued or Guaranteed by or owing from one or more Persons in a single Industry Class, exceeds twenty percent (20%) of the aggregate Adjusted Asset Value of all Eligible Collateral;
PLUS (iii) the amount by which the aggregate Adjusted Asset Value of all Eligible Collateral which constitute Foreign Assets exceeds twenty-five percent (25%) of the aggregate Adjusted Asset Value of all Eligible Collateral;
PLUS (iv) the amount by which the aggregate Adjusted Asset Value of all Eligible Collateral which constitute Foreign Assets relating to Obligors in any single OECD Country (other than the United States) exceeds ten percent (10%) of the aggregate Adjusted Asset Value of all Eligible Collateral;
PLUS (v) the amount by which the aggregate Adjusted Asset Value of all Eligible Collateral which constitutes Distressed Loan Assets or Distressed Bond Assets exceeds ten percent (10%) of the aggregate Adjusted Asset Value of all Eligible Collateral;
PLUS (vi) the amount by which the aggregate Adjusted Asset Value of all Loan Assets which constitute Eligible Collateral which constitute participation interests purchased or otherwise acquired from any Selling Institution (together with all Affiliates of such Selling Institution), exceeds ten percent (10%) of the aggregate Adjusted Asset Value of all Eligible Collateral;
PLUS (vii) the amount by which the aggregate Adjusted Asset Value of all Eligible Collateral which constitutes Unsecured Loan Assets exceeds ten percent (10%) of the aggregate Adjusted Asset Value of all Eligible Collateral;
PLUS (viii) the amount by which the aggregate Adjusted Asset Value of all Eligible Collateral which constitutes Loan Assets in respect of which the interest payable on the principal amount thereof is not calculated by reference to a Floating Rate, exceeds ten percent (10%) of the aggregate Adjusted Asset Value of all Eligible Collateral;
PLUS (ix) the aggregate maximum unused commitments of the Borrower to fund advances or make extensions of credit under the Loan Documents relating to the Pledged Collateral;
PLUS (x) the amount by which the aggregate Adjusted Asset Value of all Eligible Collateral which constitute Eligible Credit-Linked Notes exceeds ten percent (10%) of the aggregate Adjusted Asset Value of all Eligible Collateral; and
PLUS (xi) the amount by which the aggregate Adjusted Asset Value of all Eligible Collateral which constitute Class E Bond Assets or Class F Bond Assets exceeds twenty percent (20%) of the aggregate Adjusted Asset Value of all Eligible Collateral.
"BORROWING BASE TEST" means as of any date of determination that the Borrowing Base shall be equal to or greater than the Credits Outstanding.
"BORROWING DATE" has the meaning assigned to such term in
SECTION 2.02.
"BUSINESS DAY" means any day on which (i) banks are not authorized or required to close in New York, New York or the New York Stock Exchange is not authorized or required to close, and (ii) if this definition of "Business Day" is utilized in connection with a Eurodollar Rate Advance, dealings in dollar deposits are carried out in the London interbank market.
"CASH" means a demand deposit of United States Dollars immediately available on the day in question in an account maintained by the Custodian and in respect of which all actions have been taken under this Agreement and the Control Agreement to create and perfect in the Agent, for the benefit of the Secured Parties, a first-priority perfected security interest.
"CITIBANK" means Citibank, N.A. and its successors.
"CLASS A BOND ASSET" means, as of any date of determination, a Borrowing Base Eligible Asset (i) that is a Bond Asset related to corporate bond obligations and (ii) in respect of which such corporate bond obligations are rated as of such date of determination no less than "BBB-" from S&P and "Baa3" from Moody's, or which, if rated only by S&P or Moody's, shall be rated no less than "BBB-" from S&P or "Baa3" from Moody's, or which, if unrated, are in the reasonable judgment of the Adviser of equivalent credit quality.
"CLASS B BOND ASSET" means, as of any date of determination, a Borrowing Base Eligible Asset (i) that is a Bond Asset related to corporate bond obligations, (ii) that is not a Class A Bond Asset and (iii) in respect of which such corporate bond obligations are rated as of such date of determination no less than "BB-" from S&P and "Ba3" from Moody's, or which, if rated only by S&P or Moody's, shall be rated no less than "BB-" from S&P or "Ba3" from Moody's, or which, if unrated, are in the reasonable judgment of the Adviser of equivalent credit quality.
"CLASS C BOND ASSET" means, as of any date of determination, a
Borrowing Base Eligible Asset (i) that is a Bond Asset related to corporate bond
obligations, (ii) that is not a Class A Bond Asset or Class B Bond Asset and
(iii) in respect of which such corporate bond obligations are rated as of such
date of determination no less than "B" from S&P and "B2" from Moody's, or which,
if rated only by S&P or Moody's, shall be rated no less than "B" from S&P or
"B2" from Moody's, or which, if unrated, are in the reasonable judgment of the
Adviser of equivalent credit quality.
"CLASS D BOND ASSET" means, as of any date of determination, a Borrowing Base Eligible Asset (i) that is a Bond Asset related to corporate bond obligations, (ii) that is not a
Class A Bond Asset, Class B Bond Asset or Class C Bond Asset and (iii) in respect of which such corporate bond obligations are rated as of such date of determination no less than "B-" from S&P and "B3" from Moody's, or which, if rated only by S&P or Moody's, shall be rated no less than "B-" from S&P or "B3" from Moody's, or which, if unrated, are in the reasonable judgment of the Adviser of equivalent credit quality.
"CLASS E BOND ASSET" means, as of any date of determination, a Borrowing Base Eligible Asset (i) that is a Bond Asset related to corporate bond obligations, (ii) that is not a Class A Bond Asset, Class B Bond Asset, Class C Bond Asset or Class D Bond Asset and (iii) in respect of which such corporate bond obligations are rated as of such date of determination no less than "CCC" from S&P and "Caa2" from Moody's, or which, if rated only by S&P or Moody's, shall be rated no less than "CCC" from S&P or "Caa2" from Moody's, or which, if unrated, are in the reasonable judgment of the Adviser of equivalent credit quality.
"CLASS F BOND ASSET" means, as of any date of determination, a Borrowing Base Eligible Asset (i) that is a Bond Asset related to corporate bond obligations and (ii) is either (a) a Distressed Bond Asset or in respect of which such corporate bond obligations are rated as of such date of determination less than "CCC" from S&P or "Caa2" from Moody's, or which, if unrated, are in the reasonable judgment of the Adviser of equivalent credit quality or (b) unrated by S&P or Moody's and the Adviser has assigned no other equivalent rating thereto.
"CLASS A LOAN ASSET" means as of any date of determination, a Borrowing Base Eligible Asset which (i) is a Loan Asset, (ii) is not a Distressed Loan Asset, and (iii) has an Asset Value which is ninety percent (90%) or more of its par value as of such date of determination.
"CLASS B LOAN ASSET" means as of any date of determination, a Borrowing Base Eligible Asset which (i) is a Loan Asset, (ii) is not a Distressed Loan Asset, and (iii) has an Asset Value which is less than ninety percent (90%) of its par value as of such date of determination.
"CLASS C LOAN ASSET" means as of any date of determination, a Borrowing Base Eligible Asset which (i) is a Distressed Loan Asset, and (ii) has an Asset Value which is ninety percent (90%) or more of its par value as of such date of determination.
"CLASS D LOAN ASSET" means as of any date of determination, a Borrowing Base Eligible Asset which (i) is a Distressed Loan Asset, and (ii) has an Asset Value which is less than ninety percent (90%) of its par value as of such date of determination.
"CLOSING DATE" means the first date on which the conditions precedent specified in Section 3.01 shall have been fully satisfied.
"CODE" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.
"COLLATERAL ACCOUNT" means, collectively, Account Number 556-837-00, ABA Number 011-00002 and Account Number 379-26-342, ABA Number 011-00002, established by the Borrower at State Street Bank and Trust Company.
"COMPLIANCE CERTIFICATION DATE" has the meaning assigned to such term
in SECTION 2.05(b).
"CONDUIT LENDER" means CRC Funding, LLC, together with its successors and assigns that constitute special purpose entities that issue promissory notes or other debt securities.
"CONTROL AGREEMENT" means the Control Agreement, dated as of the date hereof among the Borrower, the Agent and the Custodian, as the same may from time to time be amended, supplemented, waived or modified.
"CP RATE" for each day during a Settlement Period for any Advance means the per annum rate equivalent to the weighted average of the per annum rates paid or payable by the Conduit Lender from time to time as interest on or otherwise (by means of interest rate hedges or otherwise) in respect of those promissory notes issued by the Conduit Lender that are allocated, in whole or in part, by the Agent (on behalf of the Conduit Lender) to fund the making or maintenance of such Advance on such day during such Settlement Period as determined by the Agent (on behalf of the Conduit Lender) and reported to the Borrower, which rates shall reflect and give effect to the commissions of placement agents and dealers in respect of such promissory notes, to the extent such commissions are allocated, in whole or in part, to such promissory notes by the Agent on behalf of the Conduit Lender; PROVIDED, HOWEVER, that if any component of such rate is a discount rate, in calculating the "CP Rate" for such day the Agent shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum.
"CREDITS OUTSTANDING" means at any time a determination thereof is
made, an amount equal to the sum of (i) the outstanding principal amount of all
Advances, PLUS (ii) the Yield that would accrue on the aggregate outstanding
principal amount of the Advances through the sixty (60) day period following
such date of determination, computed by reference to the Assignee Rate based
upon the applicable Eurodollar Rates plus the Applicable Margin for a thirty
(30) day period in effect as of the time of determination, plus (iii) the
Aggregate Custodian's Advance Amount plus (iv) the sum of (a) the aggregate
outstanding principal balance of all advances and other extensions of credit and
(b) any unpaid and past due interest, fees or other obligations, in each case,
under the Existing 1998 Credit Agreement.
"CUSTODIAL AGREEMENT" means the Custodian and Investment Accounting Agreement, dated as of November 1, 2001 by and among the Borrower, one or more other funds that are advised by the Adviser (or any Affiliate thereof) and the Custodian, as amended by a First Amendment to Custodian and Investment Accounting Agreement dated as of March 1, 2002 and as the same may from time to time be amended, restated, supplemented, waived or modified as permitted under the Program Documents.
"CUSTODIAN" means State Street Bank and Trust Company, as custodian under the Custodial Agreement, and as securities intermediary and collateral agent under the Custodial Agreement and the Control Agreement, and its permitted successors and assigns.
"CUSTODIAN'S OVERDRAFT ADVANCES" means any advance of cash, assets or securities by the Custodian pursuant to or in connection with the Custodial Agreement.
"DEBT" means with respect to any Person, at any date, without duplication, (i) all "senior securities representing indebtedness" (as defined in Section 18(g) of the Investment Company Act), (ii) all obligations of such Person for borrowed money, including without limitation, all obligations of such Person which are evidenced by letters of credit or letter of credit reimbursement arrangements, (iii) all obligations of such Person evidenced by bonds, debentures, notes, acceptances or other similar instruments, (iv) all obligations of such Person to pay the deferred purchase price of property or services, (v) all obligations of such Person as lessee which are capitalized in accordance with GAAP, (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, (vii) payment obligations, fixed or contingent, under investment, financial derivative or similar contracts (other than covered short sales), (viii) all Debt of others Guaranteed by such Person, and (ix) to the extent not otherwise included, all items which in accordance with GAAP would be included in determining total liabilities as shown on the liabilities side of such Person's balance sheet.
"DEFAULT" means any event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default.
"DERIVATIVES TRANSACTION" means any financial futures contract, option, forward contract, warrant, swap, swaption, collar, floor, cap and any other agreement, instrument and derivative and other transactions of a similar nature (whether currency linked, index linked, insurance risk linked, credit risk linked or otherwise).
"DETERMINATION DATE" means (i) each Borrowing Date, (ii) each Weekly Determination Date, (iii) each date any Restricted Payment is made or any Senior Security is issued, and (iv) during the continuance of a Default or an Event of Default, each Business Day which the Agent may designate in its sole discretion as a "Determination Date" (which may be daily).
"DISTRESSED BOND ASSET" means a Bond Asset (a) the Obligor of which is the subject of a bankruptcy, insolvency, liquidation or other similar proceedings, (b) which is in default (unless cured or waived) beyond the applicable grace period, if any, as to payment of principal or interest or other amount owing under the instruments or agreements under which it was issued or otherwise evidenced, or (c) which is rated lower than "Caa2" by Moody's or lower than "CCC" by S&P or which, if unrated, is in the reasonable judgment of the Adviser of equivalent credit quality.
"DISTRESSED LOAN ASSET" means a Loan Asset (i) the Obligor of which is the subject of a bankruptcy, insolvency, liquidation or other similar proceedings, (ii) which is in default (unless cured or waived) beyond the applicable grace period, if any, as to payment of principal or interest or other amount owing under the applicable Loan Documents, (iii) which is otherwise classified by the Adviser or the Borrower as "non-performing", (iv) in respect of which the related Obligor is rated "Caa" or lower by Moody's or "CCC" or lower by S&P or which, if unrated, is in the reasonable judgment of the Adviser of equivalent credit quality, (v)
which is not part of a senior credit facility, or (vi) which is otherwise not classified as a "Senior Loan" by the Adviser.
"DOLLARS" and "$" mean lawful money of the United States of America.
"EDISON CREDIT FACILITY" means that certain Revolving Loan Agreement dated as of July 16, 1998 by and among the Borrower, the Adviser, Edison Asset Securitization, L.L.C., as the lender, and General Electric Capital Corporation, as lender, operating agent and as collateral agent, as amended.
"ELIGIBLE ASSIGNEE" means Citicorp North America, Inc., Citibank, any of their respective Affiliates, any Person managed by Citibank, Citicorp North America, Inc. or any of their respective Affiliates or any other financial or other institution acceptable to the Agent.
"ELIGIBLE BOND ASSET" at any time means a Bond Asset: (i) with respect to which the interest payable on the principal amount thereof by the related Obligor is payable in cash; (ii) which is not part of an issuance of corporate debt securities with an original aggregate principal amount as of the Origination Date of such Bond Asset of less than $100,000,000; and (iii) which has a scheduled maturity date no later than the thirtieth (30th) anniversary after the related Origination Date.
"ELIGIBLE COLLATERAL" means at any time the Pledged Collateral which constitutes Borrowing Base Eligible Assets.
"ELIGIBLE COMMERCIAL PAPER NOTE" means a promissory note (i) issued in the commercial paper market by an obligor having its principal office in the United States, having a maturity of not more than 270 days and which (a) if rated by both S&P and Moody's, is rated at least "A-l" by S&P and at least "P-l" by Moody's, and (b) if rated by S&P or Moody's (but not both), is rated at least "A-l" by S&P or at least "P-l" by Moody's (ii) custodied with the Custodian or a sub-custodian pursuant to the Custodian Agreement, (iii) subject to the Custodian's control in accordance with the Control Agreement, (iv) credited to the Collateral Account, and (v) in respect of which all actions have been taken under this Agreement and the Control Agreement to create and perfect in the Agent, for the benefit of the Secured Parties, a first-priority perfected security interest.
"ELIGIBLE CREDIT-LINKED NOTE" means any Asset (i) which references an
asset (the "Referenced Asset") of the type described in either (a) CLAUSES (i)
through (iii) of the definition of "Eligible Bond Asset" or (b) CLAUSES (i)
through (x) of the definition of "Eligible Loan Asset", (ii) in respect of which
(a) under certain credit conditions (which may include failure to pay or
bankruptcy or insolvency of the Obligor in respect of such Referenced Asset),
the Borrower shall be required to accept such Referenced Asset (or a similar
asset) as payment in full, or (b) in the absence of such credit conditions, the
Borrower shall receive periodic interest and principal in full at the maturity
of such Asset, (iii) which is (a) custodied with the Custodian or a
sub-custodian pursuant to the Custodian Agreement, (b) subject to the
Custodian's control in accordance with the Control Agreement, and (c) credited
to the Collateral Account, and (iv) in respect of which all actions have been
taken under this Agreement and the Control Agreement to
create and perfect in the Agent, for the benefit of the Secured Parties, a first-priority perfected security interest.
"ELIGIBLE GOVERNMENT SECURITIES" means all "Government Securities" (as defined in the Investment Company Act and which for the purposes hereof shall include any securities issued or guaranteed as to principal and interest by an agency of the government of the United States) held in an account maintained by the Custodian and in respect of which all actions have been taken under this Agreement and the Control Agreement to create and perfect in the Agent, for the benefit of the Secured Parties, a first-priority perfected security interest.
"ELIGIBLE LOAN ASSET" at any time means a Loan Asset: (i) with respect to which the interest payable on the principal amount thereof by the related Obligor is payable in cash; (ii) in respect of which the Borrower's interest is not a subparticipation; (iii) which has a scheduled final maturity date no later than the tenth (10th) anniversary after the related Origination Date; (iv) which is part of a senior credit facility, with respect to which such Loan Asset is not by its terms subordinated (pursuant to contractual provisions or otherwise) to the prior payment of any other liabilities or any equity interests of the related Obligor; (v) which is part of a syndicated credit facility where the sum of the aggregate revolving loan commitment amount plus the aggregate outstanding principal amount of all loans under such facility on the Origination Date of such Loan Asset is at least equal to $100,000,000; (vi) which relates to Loan Documents in which the Borrower's interest (direct or participating) in the aggregate outstanding principal amount of all loans thereunder is no greater than thirty-three and one-third percent (33.33%); (vii) in respect of which the related Loan Documents are not subject to any confidentiality arrangement which would preclude the Agent from reviewing such Loan Documents; (viii) in which the Borrower's interest in all collateral security therefor and principal and interest payments thereunder is no less than pro rata and pari passu with all other lenders thereunder or participants therein, as the case may be; (ix) in respect of which the credit rating of the related Transaction Agent or its controlling Affiliate is no less than "A-" from S&P or "A3" from Moody's; (x) in respect of which, if the Borrower's interest therein is that of a participant, the credit rating of the related Selling Institution is no less than "A-" from S&P and "A3" from Moody's; and (xi) the pledge of which under Article VII of this Agreement, would not conflict with or constitute a default under or be prohibited by any anti-assignment or other provisions contained in the related Loan Documents, except for anti-assignment provisions rendered ineffective by applicable law.
"ELIGIBLE MONEY MARKET FUNDS" means shares of money market, mutual or similar funds rated at least AAA by S&P and Aaa by Moody's and held in an account maintained by the Custodian and in respect of which all actions have been taken under this Agreement and the Control Agreement to create and perfect in the Agent, for the benefit of the Secured Parties, a first-priority perfected security interest.
"E-MAIL REPORT" has the meaning assigned to such term in SECTION 9.15.
"EQUITY SECURITIES" means common and preferred stock, warrants, membership interests or partnership interests and securities that are convertible into common or preferred stock, membership interests or partnership interests, including without limitation common stock
purchase warrants and rights, equity interests in trusts, partnerships, limited liability companies, joint ventures or similar enterprises.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
"ERISA GROUP" means the Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b), (c), (m) or (n) of the Code.
"EUROCURRENCY LIABILITIES" has the meaning assigned to such term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"EURODOLLAR ADDITIONAL YIELD" means additional Yield on the outstanding principal of each Advance during the Settlement Period in respect of such Advance in respect of which Yield is computed by reference to the Eurodollar Rate, for such Settlement Period, at a rate per annum equal at all times during such Settlement Period to the remainder obtained by subtracting (i) the Eurodollar Rate for such Settlement Period from (ii) the rate obtained by dividing such Eurodollar Rate referred to in CLAUSE (i) above by that percentage equal to one-hundred percent (100%) minus the Eurodollar Rate Reserve Percentage of the applicable Lender (other than the Conduit Lender) or Secondary Lender, as the case may be, for such Settlement Period.
"EURODOLLAR RATE" means, for any Advance for any Settlement Period, an interest rate per annum equal to the rate per annum at which deposits in Dollars are offered by the principal office of Citibank in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two (2) Business Days before the first day of such Settlement Period in an amount substantially equal to the outstanding principal amount of such Advance on such first day and for a period equal to such Settlement Period.
"EURODOLLAR RATE ADVANCE" means an Advance the Yield on which is computed with reference to the Eurodollar Rate.
"EURODOLLAR RATE RESERVE PERCENTAGE" for any Settlement Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Settlement Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) (or if more than one such percentage shall be applicable, the daily average of such percentages for those days in such Settlement Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for any applicable Lender (other than the Conduit Lender) or Secondary Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities (or any other category of liabilities that includes deposits by reference to which the interest rate on Eurocurrency Liabilities is determined) having a term comparable to such Settlement Period.
"EVENT OF DEFAULT" means any of the events, acts or occurrences set forth in SECTION 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision.
"EXISTING 1998 CREDIT AGREEMENT" means that certain Second Amended and Restated Credit Agreement, dated as of September 2, 1998, by and among the Borrower (formerly known as Pilgrim America Prime Rate Trust), the financial institutions from time to time party thereto and Bank of America, N.A. (formerly known as Bank of America National Trust and Savings Association), as Syndication Agent, State Street Bank and Trust Company, as Administrative Agent, Deutsche Bank AG, as Documentation Agent, and Commerzbank AG, as Co-Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.
"FACILITY" has the meaning assigned to such term in SECTION 9.09(b).
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Citibank from three Federal funds brokers of recognized standing selected by it.
"FEE LETTER" means that certain letter agreement dated the date hereof between the Borrower and the Agent, as the same may from time to time be amended, supplemented, waived or modified.
"FLOATING RATE" means an interest rate calculated by reference to the prime rate, the London interbank offered rate, the certificate of deposit rate, the federal funds rate or any other per annum rate commonly referred to in the United States banking industry as a "floating rate."
"FOREIGN CURRENCY ASSET" means any Asset which is denominated or payable in a currency other than Dollars.
"FOREIGN ASSET" means any Loan Asset or Bond Asset, as applicable, the Obligor of which is organized under the laws of any OECD Country (other than the United States of America).
"GAAP" means generally accepted accounting principles in the United States, in effect from time to time, consistently applied.
"GOVERNMENTAL AUTHORIZATIONS" means all franchises, permits, licenses, approvals, consents and other authorizations of all Authorities.
"GOVERNMENTAL FILINGS" means all filings, including franchise and similar tax filings, and the payment of all fees, assessments, interests and penalties associated with such filing with all Authorities.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); PROVIDED that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning.
"INDUSTRY CLASS" means, for purposes of computing the Borrowing Base, any industry class set forth on SCHEDULE IV hereto, as such SCHEDULE IV may be amended and supplemented from time to time in accordance with this Agreement.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor and Collateral Agency Agreement dated as of July 16, 2003, by and among the Borrower, the Agent, State Street Bank and Trust Company, as agent for the secured parties under the Existing 1998 Credit Agreement, and State Street Bank and Trust Company, as information agent.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder, as modified or interpreted by orders of the SEC, or other interpretative releases or letters issued by the SEC or its staff, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provision shall be deemed to be a reference to any successor statutory or regulatory provision.
"INVESTMENT POLICIES AND RESTRICTIONS" means the provisions dealing
with investment objectives, policies, distributions, investment restrictions,
tender offers, repurchases, leverage and diversification status as set forth in
the Prospectus in effect on the Closing Date or as modified in accordance with
SECTION 5.02(i).
"INVESTOR REPORT" means the Investor Report of the Borrower substantially in the form of Schedule I hereto.
"LAW" means any action, code, consent decree, constitution, decree, directive, enactment, finding, guideline, law, injunction, interpretation, judgment, order, ordinance, policy statement, proclamation, promulgation, regulation, requirement, rule, rule of law, rule of public
policy, settlement agreement, statute, or writ, of any Authority, or any particular section, part or provision thereof.
"LENDERS" means the Conduit Lender, together with all Persons which acquire or are obligated to acquire any interest in any Advance from the Conduit Lender under an Asset Purchase Agreement or in the case of Citibank, under any similar arrangement.
"LENDER TERMINATION DATE" means the date which is the earlier to occur of (i) one (1) Business Day prior to the Secondary Lender Stated Expiration Date, and (ii) the date on which the Total Commitment is reduced to zero or terminated pursuant to the terms hereof, including, without limitation, pursuant to SECTION 2.10 or SECTION 6.01.
"LETTER AGREEMENTS" means, collectively, the Administrator Letter Agreement and the Adviser Letter Agreement.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien or security interest (statutory or other), or preference, priority or other security agreement or preferential arrangement, or other claim or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any financing lease having substantially the same economic effect as any of the foregoing.
"LIQUIDATION FEE" means, in respect of any Advance for any Settlement Period which is funded by the Conduit Lender during which the principal on such Advance is repaid by the Borrower in whole or in part prior to the end of said Settlement Period, the amount, if any, by which (i) the additional Yield (calculated without taking into account any Liquidation Fee or any shortened duration of such Settlement Period) which would have accrued during such Settlement Period on the reduction of the outstanding principal amount of such Advance relating to such Settlement Period had such reductions remained as outstanding principal, exceeds (ii) that income, if any, received by the Conduit Lender's investing the proceeds of such reductions of principal.
"LOAN ASSET" means any Asset that is a direct or participation or subparticipation interest in or assignment or novation of a loan or other extension of credit (other than a Bond Asset).
"LOAN DOCUMENTS" means with respect to any Loan Asset, each loan agreement, promissory note, collateral security agreement, participation certificate, guarantee and any other agreement or document evidencing, securing, governing or executed in connection with such Loan Asset, including without limitation, the agreements and instruments in respect of which the Borrower acquired such Loan Asset.
"MARGIN STOCK" has the meaning assigned to such term in Regulation U.
"MATERIAL ADVERSE EFFECT" means a (i) material adverse effect on the ability of the Borrower, the Adviser or the Administrator to perform its obligations under this Agreement or the Control Agreement or to perform any material obligation under any other Program Document
to which it is a party or any Loan Document, (ii) a material adverse effect on any Secured Party's right, title and interest in the Pledged Collateral or on the rights and remedies of any Secured Party under any Program Document, (iii) a material adverse effect on the validity or enforceability of this Agreement or any other Program Document to which the Borrower, the Adviser or the Administrator is a party or any Loan Document, (iv) a material adverse effect on the business, financial condition, operations, Assets or properties of the Borrower, the Adviser or the Administrator, (v) a material Adverse Claim on any of the Assets of the Borrower, or (vi) a Default or Event of Default.
"MATURITY DATE" means (i) with respect to any Advance funded by a Lender, the Lender Termination Date (or if such day is not a Business Day, the Business Day immediately preceding such date), and (ii) with respect to any Advance made by a Secondary Lender, the Secondary Lender Termination Date (or if such day is not a Business Day, the Business Day immediately preceding such date).
"MOODY'S" means Moody's Investors Service, Inc., together with its successors.
"MULTIEMPLOYER PLAN" means an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA.
"NON-OECD ASSET" means any Asset issued or guaranteed by any Person organized outside of any OECD Country and, in the case of any Loan Asset or Bond Asset, the Obligor of which is organized outside of any OECD Country.
"NOTICE OF BORROWING" has the meaning assigned to such term in
SECTION 2.02.
"NOTICE OF EXCLUSIVE CONTROL" has the meaning assigned to such term in the Control Agreement.
"OBLIGOR" means (i) in respect of any Loan Asset, the Person primarily obligated under the related Loan Documents to repay the loan or extension of credit which is the subject of such Loan Asset and (ii) in respect of any Bond Asset, the issuer thereof and any other Person primarily obligated to repay the bond obligations thereunder.
"OECD COUNTRY" means any country which is a member of the Organization for Economic Cooperation and Development and which has a sovereign credit rating for "foreign currency" of at least "AA-" and "Aa3" from S&P and Moody's, respectively.
"ORIGINATION DATE" means (i) in respect of any Loan Asset, the initial date on which the proceeds of the loan or other extension of credit which is the subject of such Loan Asset was advanced to the Obligor under the related Loan Documents and (ii) in respect of any Bond Asset, the initial date on which the proceeds of the issuance of such securities which is the subject of such Bond Asset was advanced to the Obligor thereof.
"OTHER TAXES" has the meaning assigned to such term in
SECTION 9.03(b).
"PARENT" means ING Groep N.V., together with its successors.
"PERCENTAGE" of any Secondary Lender means, (i) with respect to Citibank, the percentage set forth on the signature page to this Agreement, or such amount as reduced by any Assignment and Acceptance entered into with an Eligible Assignee, or (ii) with respect to a Secondary Lender that has entered into an Assignment and Acceptance, the amount set forth therein as such Secondary Lender's Percentage, or such amount as reduced by an Assignment and Acceptance entered into between such Secondary Lender and an Eligible Assignee.
"PERMITTED DEBT" means (i) Debt arising under this Agreement or the
other Program Documents to the Secured Parties, (ii) Debt in favor of the
Custodian relating to Custodian's Overdraft Advances incurred in the ordinary
course of the Borrower's business, which are not overdue and which do not exceed
the amount permitted by SECTION 5.02(o), (iii) fee and expense obligations to
the Custodian and other similar agents which are providing services in respect
of the Borrower's Assets arising in the ordinary course of the Borrower's
business which are not overdue for a period in excess of thirty (30) days, (iv)
Debt (other than Debt for borrowed money) arising in connection with
transactions in the ordinary course of the Borrower's business in connection
with its purchasing of securities, Derivatives Transactions or dollar rolls to
the extent such transactions are permitted under the Investment Company Act and
the Investment Policies and Restrictions, (v) obligations of the Borrower to
fund future extensions of credit under the Loan Documents relating to its Loan
Assets which do not exceed twenty percent (20%) of the aggregate Asset Value of
the Borrower's Assets and which meet the Borrower's diversification requirements
set forth in the Prospectus which are not overdue, (vi) Debt representing
accrued expenses and current trade account payables incurred in the ordinary
course of the Borrower's business which are not overdue for a period of more
than thirty (30) days or which are being diligently contested in good faith,
(vii) Debt in respect of judgments or awards that have been in force for less
than the applicable period for taking an appeal so long as such judgments or
awards do not constitute an Event of Default and so long as execution is not
levied thereunder or in respect of which the Borrower (A) shall at the time in
good faith be diligently prosecuting an appeal or proceeding for review and in
respect of which a stay of execution shall have been obtained pending such
appeal or review, or (B) shall have obtained an unsecured performance bond in
respect of such judgment or award, and (viii) Debt arising in connection with
reverse repurchase agreements which are permitted under the Investment Company
Act and the Investment Policies and Restrictions, and which have been entered
into in the ordinary course of the Borrower's business, (ix) on the Closing
Date, Debt created under the Edison Credit Facility, all of which Debt shall be
repaid with the initial Advance made pursuant to this Agreement and (x) Debt
arising under the Existing 1998 Credit Agreement in an aggregate outstanding
principal amount not to exceed $90,000,000.
"PERMITTED LIENS" means (i) Liens of any Secured Party created by or pursuant to this Agreement or the Control Agreement, (ii) Liens of the Custodian securing the Custodian's Overdraft Advances to the extent such Custodian's Overdraft Advances do not exceed the amount permitted by SECTION 5.02(o), (iii) Liens of the Custodian which are by the terms of the Control Agreement expressly subordinated to the payment of the Borrower Obligations, (iv) Liens (other than non-possessory Liens which pursuant to Applicable Law are, or may be, entitled to take priority (in whole or in part) over prior, perfected liens and security interests) with respect to taxes, assessments and other governmental charges or levies for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted
and with respect to which adequate reserves have been set aside in accordance with GAAP, provided that enforcement of such Liens is stayed pending such contest, (v) Liens securing Debt permitted under clause (x) of the definition of Permitted Debt, (vi) Liens incidental to the conduct of the Borrower's business securing the performance of fee and expense obligations to the Custodian and other similar agents which are providing services in respect of the Borrower's Assets arising in the ordinary course of the Borrower's business which are not overdue for a period in excess of thirty (30) days, and (vii) Liens in respect of Debt permitted under clauses (iv) and (viii) of the definition of Permitted Debt.
"PERMITTED SENIOR SECURITIES" means "senior securities" within the meaning of the Investment Company Act which constitute Advances under this Agreement, notes or similar instruments issued as of the Closing Date in favor of the lenders under the Existing 1998 Credit Agreement, Derivatives Transactions, repurchase transactions, reverse repurchase transactions, preferred shares (to the extent the Borrower shall be in compliance with the terms of SECTION 5.01(e)(xii) in respect thereof) or commitments of the Borrower to fund future advances or other extensions of credit under any Loan Document, to the extent the issuance of any such senior security by the Borrower is not in contravention of the Investment Company Act or the Investment Policies and Restrictions.
"PERSON" means an individual or a corporation (including a business trust), partnership, trust, incorporated or unincorporated association, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind.
"PLAN" means an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code.
"PLEDGED COLLATERAL" shall have the meaning assigned to such term in
SECTION 7.01.
"POST-DEFAULT RATE" means in respect of all amounts payable to any Secured Party under any Program Document not paid when due (whether at stated maturity, by acceleration or otherwise), including, without limitation, the principal and Yield on any Advance not paid when due, a rate per annum during the period commencing on the due date until such amount is paid in full equal to the Base Rate as in effect from time to time plus two percent (2.00%).
"PRINCIPAL OFFICE" means the principal office of Citibank presently located at 399 Park Avenue, New York, New York or at such other location as Citibank shall designate in writing to the Borrower.
"PRIVATE AUTHORIZATIONS" means all franchises, permits, licenses, approvals, consents and other authorizations of all Persons (other than Authorities) including, without limitation, those with respect to trademarks, service marks, trade names, copyrights, computer software programs, technical and other know-how.
"PROCEEDS" shall have, with reference to any asset or property, the meaning assigned to it under the UCC and, in any event, shall include, but not be limited to, any and all amounts from time to time paid or payable under or in connection with such asset or property.
"PRODUCT INFORMATION" shall have the meaning assigned to such term in
SECTION 9.09(b).
"PROGRAM DOCUMENTS" means this Agreement, the Advance Notes, if any, the Letter Agreements, the Asset Purchase Agreements, the Advisory Agreement, the Administration Agreement, the Control Agreement, the Custodial Agreement, the Intercreditor Agreement, the Fee Letter, the Loan Documents and the other agreements, documents and instruments entered into or delivered in connection herewith or therewith.
"PROGRAM TERMINATION DATE" means the later to occur of (i) the Secondary Lender Termination Date, and (ii) the date that all Borrower Obligations have been finally paid in full; PROVIDED, HOWEVER, that if any payment in respect of any Borrower Obligation made to any Secured Party must be rescinded or returned for any reason whatsoever (including the insolvency or bankruptcy of the Borrower) such Borrower Obligation shall be deemed to be reinstated as though such payment had not been made and the Program Termination Date shall be deemed to have not occurred.
"PROSPECTUS" means with respect to the Borrower, the prospectus dated July 1, 2003 filed with the SEC as a part of the Borrower's registration statement on Form N-2, as amended (or any successor SEC form), and shall include, without limitation, the related statement of additional information, if any, included in such registration statement, and all supplements, amendments and modifications thereto as of the Closing Date, and as further supplemented, amended or modified in accordance with Applicable Law, including, without limitation, the Securities Act and the Investment Company Act.
"REGISTER" shall have the meaning assigned to such term in
SECTION 9.06(f).
"REGULATION T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"REGULATION X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time.
"REQUESTED AMOUNT" shall have the meaning assigned to such term in
SECTION 2.02(a).
"RESTRICTED PAYMENTS" means (i) the declaration of any distributions or dividends (other than distributions payable solely in shares of beneficial interest in the Borrower) on, or the payment on account of, or the setting apart of assets for the purchase, redemption, retirement or other acquisition of, any shares of beneficial interests in the Borrower, including, without
limitation, all common and preferred shares, whether now or hereafter outstanding, either directly or indirectly, whether in cash, property or in obligations of the Borrower, and (ii) the payment of fees and expenses to the Adviser or the Administrator or any Affiliate of the Adviser or the Administrator, as applicable, as compensation for the provision of managerial, administrative services or otherwise.
"S&P" means Standard & Poor's Ratings Group, together with its successors.
"SEC" means the Securities and Exchange Commission or any other governmental authority of the United States of America at the time administrating the Securities Act, the Investment Company Act or the Exchange Act.
"SECONDARY LENDER COMMITMENT" means (i) with respect to each Secondary Lender party to this Agreement as of the Closing Date, the amount set forth on the signature page to this Agreement, as such amount shall be adjusted by any Assignment and Acceptance entered into between such Secondary Lender and an Eligible Assignee in accordance with and subject to SECTION 9.06(b), or (ii) with respect to a Secondary Lender that has entered into an Assignment and Acceptance, the amount set forth therein as such Secondary Lender's "Secondary Lender Commitment", in each case as such amount may be reduced by an Assignment and Acceptance entered into between such Secondary Lender and an Eligible Assignee in accordance with and subject to SECTION 9.06(b), and as may be further reduced (or terminated) pursuant to the next sentence. Any reduction (or termination) of the Total Commitment pursuant to the terms of this Agreement shall reduce ratably (or terminate) each Secondary Lender's Secondary Lender Commitment. References to the unused portion of any Secondary Lender's Secondary Lender Commitment shall mean, at any time, such Secondary Lender's Secondary Lender Commitment then in effect, minus the outstanding principal amount of the Advances funded by such Secondary Lender.
"SECONDARY LENDER STATED EXPIRATION DATE" means July 13, 2004; PROVIDED that prior to such date (or the date so extended pursuant to this proviso), upon the Borrower written request to the Agent, which request shall be received by the Agent not more than sixty (60) days nor less than thirty (30) days prior to the then current Secondary Lender Stated Expiration Date, one or more Secondary Lenders having 100% of the Total Commitment may, in their sole discretion, consent, which consent shall be given no less than twenty (20) days prior to the then current Secondary Lender Stated Expiration Date (the date any such consent is given, the "Extension Date"), to the extension of the Secondary Lender Stated Expiration Date to the date occurring 364 days after such Extension Date; PROVIDED, HOWEVER, that any failure of any Secondary Lender to respond to the Borrower's request for such extension shall be deemed a denial of such request by such Secondary Lender.
"SECONDARY LENDER TERMINATION DATE" means the earlier of (i) the Secondary Lender Stated Expiration Date, and (ii) the date the Total Commitment shall terminate pursuant to SECTION 2.10 or SECTION 6.01.
"SECONDARY LENDERS" means Citibank and each Eligible Assignee that becomes a party to this Agreement pursuant to SECTION 9.06.
"SECURED PARTIES" means the Agent, the Lenders, the Secondary Lenders and their respective successors and assigns.
"SECURED PARTY REPRESENTATIVES" shall have the meaning assigned to such term in SECTION 9.09(c).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as from time to time in effect, or any successor law, rules or regulations, and any reference to any statutory or regulatory provisions shall be deemed to be a reference to any successor statutory or regulatory provision.
"SELLING INSTITUTION" means, in respect of any Loan Asset which constitutes a participation interest, the Person which has granted or sold to the Borrower a participation interest in the loan or other extension of credit which is the subject of such Loan Asset.
"SETTLEMENT DATE" means the date which is two (2) Business Days after the end of each Settlement Period; provided, that, for purposes of the payment of Yield, with respect to any Settlement Period for which Yield is computed by reference to the Eurodollar Rate, the Settlement Date shall be the last day of the Settlement Period.
"SETTLEMENT PERIOD" means in respect of any Advance:
(a) in the case of any Settlement Period in respect of which Yield in respect of such Advance is computed by reference to the CP Rate, the period beginning on the date such Advance was made and ending on the last day of the calendar month in which such Advance was made and, unless the Conduit Lender shall have notified the Agent and the Borrower that such Advance will not continue to be funded by the Conduit Lender through the issuance of commercial paper (in which case such Advance shall be automatically continued at the end of the then current Settlement Period as an Advance in respect of which Yield shall be computed by reference to the Alternate Base Rate), thereafter each successive period commencing on the first day of each calendar month during the term of this Agreement and ending on the last day of such calendar month during the term of this Agreement; PROVIDED, HOWEVER, that in the case of any Settlement Period for any Advance which commences before the Maturity Date for such Advance and would otherwise end on a date occurring after such Maturity Date, such Settlement Period shall end on such Maturity Date and the duration of each Settlement Period which commences on or after the Maturity Date for such Advance may be any period (including, without limitation, a period of one day) as shall be selected from time to time by the Agent;
(b) in the case of any Settlement Period in respect of which Yield in respect of such Advance is computed by reference to the Eurodollar Rate, the period beginning on the date such Advance was made and ending on the last day of the calendar month in which such Advance was made and thereafter each successive period commencing on the first day of each calendar month during the term of this Agreement and ending on the last day of such calendar month during the term of this Agreement; PROVIDED, HOWEVER, that any Settlement Period which is other than the monthly Settlement Period shall be of such duration as shall be selected by the Agent; and
(c) in the case of any Settlement Period in respect of which Yield is computed by reference to the Alternate Base Rate, such Settlement Period shall be of such duration as shall be selected by the Agent.
"SPECIFIED LOAN DOCUMENTS" shall have the meaning assigned to such term in the Control Agreement.
"TAXES" shall have the meaning assigned to such term in
SECTION 9.03(a).
"TOTAL COMMITMENT" means $325,000,000 as such amount may be reduced pursuant to SECTIONS 2.10 or 9.01. References to the unused portion of the Total Commitment shall mean, at any time, the Total Commitment then in effect, minus the outstanding principal amount of the Advances.
"TRANSACTION AGENT" means a commercial bank, insurance company, finance company or other financial institution that is acting as agent or trustee under the Loan Documents relating to any Loan Asset.
"UCC" means the Uniform Commercial Code, as from time to time in effect in the applicable jurisdictions.
"UNSECURED LOAN ASSETS" means Loan Assets which are not fully secured under the related Loan Documents by a first-priority perfected Lien on assets or properties of the related Obligor with value as reasonably determined by the Adviser at the time of the Borrower's purchase of such Loan Asset in reliance upon appraisals, financial statements or market valuation techniques, in an amount no less than the outstanding debt of such Obligor under the related Loan Documents.
"VALUE" shall have the meaning assigned to such term in
Section 2(a)(41) of the Investment Company Act.
"WEEKLY DETERMINATION DATE" means the last Business Day of each calendar week.
"WEEKLY PORTFOLIO REPORT" shall have the meaning assigned to such term in SECTION 5.01(e)(ix).
"YIELD" means for each Advance for each Settlement Period:
(i) for each day during such Settlement Period to the extent such Advance will be funded or maintained on such day by the Conduit Lender through the issuance of promissory notes,
(ii) for each day during such Settlement Period to the extent such Advance will be funded or maintained on such day by the Conduit Lender through the sale of a participation, or by a Secondary Lender or a Lender (other than the Conduit Lender),
where:
AR = the Assignee Rate for such Advance for such Settlement Period
P = the outstanding principal amount of such Advance on such day
CPR = the CP Rate for such Advance on such day
LF = the Liquidation Fee, if any, for such Advance for such Settlement Period (expressed as a daily amount);
PROVIDED, FURTHER, that Yield for any Advance shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason.
SECTION 1.02. RULES OF CONSTRUCTION.
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires (i) singular words shall
connote the plural as well as the singular, and vice versa (except as
indicated), as may be appropriate, (ii) the words "herein," "hereof and
"hereunder" and other words of similar import used in this Agreement refer to
this Agreement as a whole and not to any particular appendix, article, schedule,
section, paragraph, clause, exhibit or other subdivision, (iii) the headings,
subheadings and table of contents set forth in this Agreement are solely for
convenience of reference and shall not constitute a part of this Agreement nor
shall they affect the meaning, construction or effect of any provision hereof,
(iv) references in this Agreement to "including" shall mean including without
limiting the generality of any description preceding such term, and for purposes
hereof the rule of ejusdem generis shall not be applicable to limit a general
statement, followed by or referable to an enumeration of specific matters, to
matters similar to those specifically mentioned, and (v) each of the parties to
this Agreement and its counsel have reviewed and revised, or requested revisions
to, this Agreement, and the usual rule of construction that any ambiguities are
to be resolved against the drafting party shall be inapplicable in the
construction and interpretation of this Agreement.
SECTION 1.03. COMPUTATION OF TIME PERIODS.
Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" both mean "to but excluding".
ARTICLE II
ADVANCES TO THE BORROWER
SECTION 2.01. ADVANCE FACILITY.
On the terms and conditions hereinafter set forth, including without limitation, SECTIONS 3.01 and 3.02, the Conduit Lender may, in its sole discretion, make Advances to the Borrower on any Borrowing Date from the date hereof to the Lender Termination Date. On the terms and conditions hereinafter set forth, including without limitation, SECTIONS 3.01 and 3.02 and during the period from the date hereof to the Secondary Lender Termination Date if the Conduit Lender has declined to make an Advance, the Secondary Lenders shall make Advances to the Borrower, ratably in accordance with their respective Secondary Lender Commitments. Under no circumstances shall the Conduit Lender or any Secondary Lender be obligated to make any such Advance, to the extent that after giving effect to the making of such Advance the aggregate principal amount of all outstanding Advances would exceed the Total Commitment.
SECTION 2.02. MAKING OF ADVANCES.
(a) The Borrower shall give the Agent written notice (which notice
shall be irrevocable and effective only upon receipt by the Agent) of each
request for an Advance (each such request a "NOTICE OF BORROWING") not
later than 12:00 noon (New York City time) on the day which is two (2)
Business Days prior to the proposed borrowing date, which notice shall
specify (i) the proposed borrowing date therefor (each such date, a
"BORROWING DATE"), and (ii) the aggregate principal amount of the proposed
borrowing (the "REQUESTED AMOUNT"). Any such Notice of Borrowing shall be
substantially in the form of EXHIBIT B hereto, dated the date such request
is being made, signed by an Authorized Signatory and otherwise
appropriately completed. The Requested Amount specified in any Notice of
Borrowing shall be at least $1,000,000 and in integral multiples of
$1,000,000 in excess thereof. The Borrower shall not request more than two
(2) borrowings in any calendar week.
(b) During the period prior to the Lender Termination Date, the Conduit Lender shall promptly notify the Agent whether it has determined to make a proposed Advance, and the Agent shall promptly thereafter notify the Borrower whether the Conduit Lender has determined to make such Advance. If the Conduit Lender has declined to make a proposed Advance, the Agent shall promptly send notice of the proposed borrowing to all of the Secondary Lenders concurrently by telecopier, telex or cable specifying the Borrowing Date for such borrowing, each Secondary Lender's Percentage multiplied by the Requested Amount and whether the Yield for such Advance is calculated based on the Eurodollar Rate or the Alternate Base Rate. On each Borrowing Date, the Conduit Lender or the Secondary Lenders shall, subject to the terms and conditions of this Agreement, make available to the Borrower at the Borrower's
Account Advances in an amount equal to the Requested Amount in immediately available funds. To the extent not covered by SECTION 2.08, the Borrower shall indemnify the Conduit Lender, each Secondary Lender and the Agent against any loss or expense incurred by them as a result of any failure by the Borrower to accept any Advance requested in a Notice of Borrowing or as a result of the failure of the Borrower to receive any Advance requested in a Notice of Borrowing as a result of the failure of any condition precedent to the making of such Advance to be satisfied, including, without limitation, any loss or expense incurred by reason of the liquidation or reemployment of funds acquired or requested to fund such Advance.
SECTION 2.03. NOTELESS AGREEMENT; EVIDENCE OF INDEBTEDNESS.
(a) Each Lender and each Secondary Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender or such Secondary Lender, as applicable, resulting from each Advance made by such Lender or such Secondary Lender, as applicable, from time to time, including the amounts of principal and Yield thereon and paid to such Lender or Secondary Lender, as applicable, from time to time hereunder.
(b) The Agent shall maintain accounts in which it will record (i) the amount of each Advance made hereunder and the Settlement Period with respect thereto, (ii) the amount of any principal and Yield due and payable or to become due and payable from the Borrower to each Lender and each Secondary Lender hereunder, and (iii) the amount of any sum received by the Agent hereunder from the Borrower and each Lender's and each Secondary Lender's share thereof.
(c) The entries maintained in the accounts maintained pursuant to CLAUSES (a) and (b) of this SECTION 2.03 shall be rebuttable presumptive evidence of the existence and amounts of the Borrower Obligations therein recorded (absent manifest error); PROVIDED, HOWEVER, that the failure of the Agent, any Lender or any Secondary Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Borrower Obligations in accordance with their terms.
(d) The Conduit Lender and any Secondary Lender may request that its
Advances be evidenced by an Advance Note. In such event, the Borrower shall
(as soon as reasonably practicable) prepare, execute and deliver to such
Conduit Lender or Secondary Lender, as applicable, an Advance Note payable
to the order of such Conduit Lender or Secondary Lender, as applicable.
Thereafter, the Advances evidenced by such Advance Note and interest
thereon shall at all times (including after any assignment pursuant to
SECTION 9.06) be represented by one or more Advance Notes payable to the
order of the payee named therein or any assignee pursuant to SECTION 9.06,
except to the extent that any such Conduit Lender, Secondary Lender or
assignee subsequently returns to the Borrower any such Advance Note for
cancellation and requests that such Advances once again be evidenced as
described in CLAUSES (a) and (b) of this SECTION 2.03 above. In connection
with any assignment pursuant to SECTION 9.06, if such assigning Secondary
Lender shall have an Advance Note issued to it, such assigning Secondary
Lender shall promptly return its Advance Note to the Borrower marked
"cancelled".
SECTION 2.04. MATURITY OF THE ADVANCES.
The principal amount of, and the accrued and unpaid Yield on each outstanding Advance shall be due and payable by the Borrower on the Maturity Date for such Advance.
SECTION 2.05. PREPAYMENT OF THE ADVANCES.
(a) The Borrower shall have the right at any time and from time to time, upon not less than one (1) Business Day's prior written or telephonic notice (in the case of telephonic notice, promptly confirmed in writing) to the Agent specifying the date and amount of such prepayment, to prepay (without any premium or penalty, except for any Liquidation Fee or amount payable under SECTION 2.08) all or a portion of the outstanding Advances, together with unpaid Yield on all Advances that are paid in full on such date of prepayment, on a Business Day; PROVIDED, that any such prepayment, if a partial prepayment, shall be at least $1,000,000 and in integral multiples of $100,000 in excess thereof (or, in the case of any prepayment required under SECTION 2.05(b), at least $10,000 and in integral multiples of $10,000 in excess thereof).
(b) If on any Determination Date the Borrower is not in full
compliance with the Borrowing Base Test, the Borrower shall on the next
succeeding Business Day after such Determination Date (each such date, a
"COMPLIANCE CERTIFICATION DATE"), (I) notify the Agent of such failure to
comply and the amount of any prepayment required to be made, or additional
Borrowing Base Eligible Assets required to be pledged, under this CLAUSE
(b), and (II) prepay Advances (together with Yield thereon) and/or pledge
to the Agent additional Borrowing Base Eligible Assets in an amount
necessary to cause the Borrower to be in full compliance with the Borrowing
Base Test on such Compliance Certification Date; PROVIDED, HOWEVER, that to
the extent the Borrower does not have sufficient available funds and/or
additional Borrowing Base Eligible Assets to pledge to the Agent to fully
cure such compliance shortfall on such Compliance Certification Date, then
the Borrower shall (i) on such Compliance Certification Date prepay
outstanding Advances in the amount of its available funds and pledge any
Borrowing Base Eligible Assets to the Agent, if applicable; (ii) no later
than the close of business on the twelfth (12th) Business Day following
such Determination Date either (A) acquire and pledge to the Agent under
this Agreement and the Control Agreement additional Borrowing Base Eligible
Assets having an Adjusted Asset Value at least sufficient to cause the
Borrowing Base to be at least equal to the product of (x) 1.05 and (y) the
Credits Outstanding as determined on such Compliance Certification Date, or
(B) prepay Advances in a principal amount (and pay the Yield thereon) at
least sufficient to cause the Borrowing Base to be at least equal to the
product of (x) 1.05 and (y) the Credits Outstanding as determined on such
Compliance Certification Date; and (iii) no later than the close of
business on such Compliance Certification Date, deliver to the Agent a
certificate, signed by an Authorized Signatory of the Borrower, that (1)
certifies the amount of the compliance shortfall, (2) specifies whether the
Borrower shall either (x) prepay the Advances in accordance with CLAUSE (B)
above, or (y) acquire additional Borrowing Base Eligible Assets in
accordance with CLAUSE (A) above and specifies the identity and Adjusted
Asset Value of the Borrowing Base Eligible Assets for which the Borrower
has entered into corrective trades
in order to satisfy the requirements of CLAUSE (A) of this SECTION 2.05(b), and (3) certifies that the requirements of this SECTION 2.05(b) shall be satisfied on or prior to the twelfth (12th) Business Day following such Determination Date.
(c) The amount of each prepayment under this SECTION 2.05 shall be applied ratably to the Advances of each Lender and each Secondary Lender in the order in which such Advances were made by such Lender or Secondary Lender.
SECTION 2.06. YIELD.
The Borrower hereby agrees to pay the Yield computed with reference to the principal amount of each Advance outstanding from time to time. Yield accruing in respect of any Advance for any Settlement Period shall be due and payable on the Settlement Date immediately succeeding such Settlement Period and as required by SECTION 2.05. It is the intention of the parties hereto that the Yield on the Advances shall not exceed the maximum rate permissible under applicable law. Accordingly, anything herein or in any Advance Note to the contrary notwithstanding, in the event any Yield is charged to, collected from or received from or on behalf of the Borrower by the Lenders or the Secondary Lenders pursuant hereto or thereto in excess of such maximum lawful rate, then the excess of such payment over that maximum shall be applied first to the payment of amounts then due and owing by the Borrower to the Secured Parties under the Program Documents (other than in respect of principal and Yield on Advances), then to the reduction of the outstanding principal balance of the Advances then due, and then any excess amount to be returned to the Borrower.
SECTION 2.07. INCREASED COSTS.
(a) If, due to either (i) the introduction of or any change (other than any change by way of imposition or increase of reserve requirements reflected in the Eurodollar Rate Reserve Percentage) in or in the interpretation of any Applicable Law or (ii) the compliance with any directive or guideline issued by, or request from, any central bank or other Authority (whether or not having the force of law), there shall be any increase in the cost to any Affected Person of agreeing to make or making, funding or maintaining Eurodollar Rate Advances to the Borrower, then the Borrower from time to time shall, as promptly as practicable upon written demand by such Affected Person pay to the Agent for the account of such Affected Person additional amounts sufficient to compensate such Affected Person for such increased cost; PROVIDED, HOWEVER, that no additional amounts shall be required under this SECTION 2.07 with respect to (i) income or profits taxes (or franchise taxes imposed in lieu thereof), (ii) Taxes or Other Taxes in effect on the date that such Affected Person became a party to this Agreement or otherwise became committed to purchase or acquire any interest in any Advances (whether by assignment, participation or otherwise), except to the extent that such Affected Person's assignor or predecessor was entitled to such additional amounts, and (iii) Taxes to the extent avoidable had such Person complied with the provisions of SECTION 9.03(f). In determining such amount, such Affected Person may in good faith use any reasonable averaging and attribution methods, consistent with the averaging and attribution methods generally used by such Affected Person in determining amounts of this type with respect to other borrowers. Each such Affected Person shall, together with
its written demand therefor, deliver to the Borrower and the Agent a certificate setting forth in reasonable detail the amount of such increased cost and the basis for the calculation of such amount, which certificate shall be conclusive and binding for all purposes, absent manifest error.
(b) If an Affected Person determines that the compliance with (i) any Applicable Law or (ii) any directive or guideline issued by, or request from, any central bank or other Authority (whether or not having the force of law), in either case, affects or would affect the amount of capital required or expected to be maintained by such Affected Person and that the amount of such capital is increased by or based upon the existence of such Affected Person's commitment under the Program Documents or upon such Affected Person's making, funding or maintaining Advances, then, as promptly as practicable upon written demand of such Affected Person (with a copy of such demand to the Agent), the Borrower shall pay to the Agent for the account of such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in light of the circumstances. Each such Affected Person shall, together with its written demand therefore, deliver to the Borrower and the certificate setting forth in reasonable detail such amounts and the basis for the calculation of such amounts, which certificate shall be conclusive and binding for all purposes, absent manifest error.
(c) Upon the occurrence of any event giving rise to the Borrower's obligation to pay additional amounts to any Affected Person pursuant to SECTIONS 2.07(a), 2.07(b) or 9.03, such Affected Person will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Affected Person) to designate a different lending office; provided, however, that such designation is made on such terms that such Affected Person and its lending office suffer no significant economic, legal or regulatory disadvantage, with the object of avoiding future consequence of the event giving rise to the operation of any such Section. If such additional amounts are not eliminated by any such designation and such Affected Person does not waive payment of such additional amounts, the Agent, may at its sole discretion within sixty (60) days, recommend a replacement Affected Person not so affected. If after the sixty (60) day period described in the preceding sentence a replacement for such Affected Person has not been procured, the Borrower may propose a replacement for such Affected Person and, upon approval of the Agent (which approval shall not be unreasonably withheld or delayed), such Affected Person shall assign its interests under the applicable Program Documents to such replacement entity. The parties hereby agree that unless and until the Affected Person to be replaced (i) is paid in full for all amounts due and owing hereunder and under any other Program Document, and (ii) enters into assignment documents with the replacement entity which are reasonably satisfactory to such Affected Person, it shall have no obligation to assign any of its rights and interests hereunder. Each such Affected Person agrees to take all actions necessary to permit a replacement to succeed to its rights and obligations hereunder and under the other Program Documents. The Borrower agrees to pay all reasonable expenses incurred by any Affected Person in utilizing another lending office of such Affected Person or in assigning its interest pursuant to this SECTION 2.07(c).
Nothing in this SECTION 2.07(c) shall affect or postpone any of the obligations of the Borrower or the rights of any Secured Party.
SECTION 2.08. COMPENSATION.
Without duplication of any amount due by the Borrower in respect of any Liquidation Fee, the Borrower shall compensate each Affected Person, upon its written request (which request shall set forth in reasonable detail the basis for requesting such amounts and the details showing the basis of the calculation of such amounts), for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by such Affected Person to lenders of funds borrowed by it to make or carry its Eurodollar Rate Advances and any loss sustained by such Affected Person in connection with the re-employment of such funds), which such Affected Person may sustain: (i) if for any reason (other than a default by such Affected Person) a borrowing of any Eurodollar Rate Advance by the Borrower does not occur on a date specified therefor in the Notice of Borrowing, (ii) if any prepayment of any of the Borrower's Eurodollar Rate Advances occurs on a date which is not the last day of a Settlement Period applicable thereto, (iii) if any prepayment of any of the Borrower's Eurodollar Rate Advances is not made on any date specified in a notice of prepayment given by the Borrower, or (iv) as a consequence of any other default by the Borrower to repay its Eurodollar Rate Advances when required by the terms of this Agreement.
SECTION 2.09. ADDITIONAL YIELD ON EURODOLLAR RATE ADVANCES.
So long as any Affected Person shall be required under regulations of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities, the Borrower shall pay as promptly as practicable following written demand therefor to such Affected Person Eurodollar Additional Yield on the principal amount of each outstanding Advance on each date on which Yield is payable on such Advance. Such Eurodollar Additional Yield shall be determined on a reasonable basis by such Affected Person and notified to the Borrower through the Agent within thirty (30) days after any payment is made with respect to which such additional Yield is requested. Each such Affected Person shall, together with the written demand therefor, deliver to the Borrower and the Agent a certificate setting forth in reasonable detail the amount of such Eurodollar Additional Yield and the basis for the calculation of such amount, which certificate shall be conclusive and binding for all purposes, absent manifest error.
SECTION 2.10. TERMINATION OR REDUCTION OF THE TOTAL COMMITMENT.
(a) The Borrower may at any time, upon thirty (30) days prior written notice to the Agent terminate in whole or reduce in part the unused portion of the Total Commitment; PROVIDED, that each such partial reduction of the Total Commitment shall be in an amount equal to at least $5,000,000 or an integral multiple thereof.
SECTION 2.11. RESCISSION OR RETURN OF PAYMENT.
The Borrower further agrees that, if at any time all or any part of any payment theretofore made by it to any Secured Party or their designees is or must be rescinded or returned
for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Borrower or any of its Affiliates), the obligation of the Borrower to make such payment to such Secured Party shall, for the purposes of this Agreement, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence and this Agreement shall continue to be effective or be reinstated, as the case may be, as to such obligations, all as though such payment had not been made.
SECTION 2.12. FEES PAYABLE BY BORROWER.
The Borrower agrees to pay to the Agent and the Secondary Lenders such fees as are set forth in the Fee Letter.
SECTION 2.13. POST-DEFAULT INTEREST.
The Borrower hereby promises to pay interest on the unpaid principal amount of each Advance and any other amount payable by the Borrower hereunder, in each case, which shall not be paid in full when due, for the period commencing on the due date thereof until but not including the date the same is paid in full at the Post-Default Rate. Interest payable at the Post-Default Rate shall be payable on the Agent's demand.
SECTION 2.14. PAYMENTS.
(a) All amounts owing and payable by the Borrower to the Agent, any Lender or any Secondary Lender, in respect of the Advances or otherwise under this Agreement or any other Program Document, including, without limitation, the principal amount of outstanding Advances, Yield, fees, indemnities, expenses or other amounts payable under the Program Documents, shall be paid in Dollars, in immediately available funds on or prior to 12:00 noon (New York City time) on the date due without counterclaim, setoff, deduction, defense, abatement, suspension or deferment to the Agent's Account. Any payment paid after 12:00 noon (New York City time) on any day shall be deemed to have been made on the next Business Day for all purposes of this Agreement.
(b) All computations of interest at the Post-Default Rate and all computations of Yield, fees and other amounts hereunder shall be made on the basis of a year of 360 days for the actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit.
(c) Upon receipt of funds deposited into the Agent's Account, the Agent shall distribute such funds, FIRST to the Lenders and the Secondary Lenders on a pro rata basis in accordance with such amounts owed to each Lender and Secondary Lender in payment in full of all accrued and unpaid Yield owing to the Lenders and Secondary Lenders, SECOND to the Lenders, the Secondary Lenders or the Agent, on a pro rata basis in accordance with such amounts owed to each such Person in payment of any other fees or other amounts owed by the Borrower to the Lenders, the Secondary Lenders and the Agent under this Agreement and the other Program Documents (other than in respect of
the principal amount of the Advances), and THIRD to the payment of the principal amount of the Advances owing to such Lenders and Secondary Lenders on a pro rata basis in accordance with such amounts owed to each such Lender and Secondary Lender.
(d) During the continuance of an Event of Default all payments in respect of the Borrower Obligations, payable by or on behalf of the Borrower, including all Proceeds resulting from the sale or disposition of the Pledged Collateral shall be remitted to the Agent's Account and applied in accordance with Section 7.03(a).
SECTION 2.15. RATABLE PAYMENTS.
If any Secondary Lender or Lender (other than the Conduit Lender), whether by setoff, bankers' lien, counterclaim or otherwise, has payment made to it with respect to any Borrower Obligations owing to it in a greater proportion than that received by any other Lender or Secondary Lender entitled to receive a ratable share of such payments, such Lender or Secondary Lender agrees, promptly upon demand, to purchase for cash without recourse or warranty a portion of the unpaid Borrower Obligations held by the other Lenders and Secondary Lenders so that after such purchase each Lender and Secondary Lender will hold its ratable proportion of such unpaid Borrower Obligations; provided that if all or any portion of such excess amount is thereafter recovered from such Secondary Lender or Lender, as the case may be, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.
SECTION 2.16. BORROWER'S OBLIGATIONS ABSOLUTE.
The Borrower's obligations under this Agreement and under the other Program Documents to which it is a party shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms hereof and thereof, under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower, the Adviser, the Administrator or any other Person may have or have had against any Secured Party or any other Person.
ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.01. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AGREEMENT.
The effectiveness of this Agreement and the Conduit Lender's and any the Secondary Lender's obligations hereunder shall be subject to the conditions precedent that the Agent shall have received (or waived receipt thereof) on or before the initial Borrowing Date the following, each (unless otherwise indicated) in form and substance reasonably satisfactory to the Agent in sufficient copies for the Conduit Lenders and the Secondary Lenders:
(a) each of the Program Documents duly executed and delivered by the parties thereto, which shall each be in full force and effect;
(b) the Prospectus, as in effect on the Closing Date;
(c) the signed opinions of counsel to the Borrower, the Adviser and the Administrator addressed to the Agent, each the Conduit Lender and each Secondary Lender as to such matters as the Agent shall have reasonably requested;
(d) if requested by the Conduit Lender or any Secondary Lender pursuant to SECTION 2.03 on or prior to the Closing Date, an Advance Note duly executed and completed by the Borrower to the Conduit Lender or such Secondary Lender, as applicable;
(e) copies of all Governmental Authorizations, material Private Authorizations and Governmental Filings, if any, which may be required to be made or obtained by the Borrower in connection with the transactions contemplated by the Program Documents;
(f) a certificate of the Secretary or Assistant Secretary of each of the Borrower, the Adviser and the Administrator certifying (i) as to its certificate of incorporation or declaration of trust, as applicable and by-laws, (ii) solely as to the Borrower, as to the resolutions of its Board of Trustees approving this Agreement, the other Program Documents to which it is a party and the transactions contemplated hereby and thereby, (iii) that its representations and warranties set forth in the Program Documents to which it is a party are true and correct, and (iv) the incumbency and specimen signature of each of its officers authorized to execute the Program Documents to which it is a party;
(g) copies of proper financing statements naming the Borrower as debtor and the Agent as secured party to be filed under the UCC in all jurisdictions that the Agent may deem necessary or desirable in order to perfect the Agent's interests in the Pledged Collateral contemplated by this Agreement;
(h) copies of proper termination financing statements, if any, necessary to release all Adverse Claims of any Person in the Assets of the Borrower previously granted by the Borrower;
(i) completed requests for information, dated on or before the date of the initial Borrowing Date, listing all effective financing statements filed in the jurisdictions referred to in subsection (g) above that name the Borrower (under its present name and any previous name) as debtor, together with copies of such other financing statements;
(j) a pro-forma Investor Report, which shall evidence compliance with the Borrowing Base Test, the Asset Coverage Test and certain other terms of the Program Documents after giving effect to the initial borrowing of Advances under this Agreement; and
(k) the fees, if any, to be received by it on or prior to the Closing Date under this Agreement and the Fee Letter.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL ADVANCES.
The obligation of the Conduit Lenders and the Secondary Lenders to make any Advance (including the initial Advances) on any Borrowing Date shall be subject to the fulfillment of the following conditions:
(a) each of the representations and warranties of the Borrower, the Custodian, the Adviser and the Administrator contained in this Agreement, the Letter Agreements and the other Program Documents shall be true and correct as of such date and shall continue to be true immediately after giving effect to such Advance;
(b) no Default or Event of Default shall have occurred and be continuing or shall result from the making of such Advance;
(c) immediately after giving effect to such Advance the Borrower shall be in full compliance with each of the Borrowing Base Test and the Asset Coverage Test;
(d) immediately after the making of any such Advance, the aggregate outstanding principal amount of all Advances shall not exceed the Total Commitment; and
(e) the Agent shall have received an Investor Report and such other instruments, certificates and documents as the Agent shall reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
The Borrower represents and warrants to each of the Secured Parties on and as of the Closing Date, each Borrowing Date and each Weekly Determination Date, as follows:
(a) DUE ORGANIZATION. The Borrower is a Massachusetts business trust, duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, with full power and authority to own and operate its Assets, to conduct the business in which it is now engaged and to execute and deliver and perform its obligations under this Agreement and the other Program Documents to which it is a party, except where the failure to hold such power and authority could not reasonably be expected to result in a Material Adverse Effect.
(b) DUE QUALIFICATION AND GOOD STANDING. The Borrower is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business, assets and properties, including, without limitation, the performance of its obligations under this Agreement and the other Program Documents to which it is a party, requires such qualification, except where the failure to be so qualified or to be in good standing could not reasonably be expected to have a Material Adverse Effect.
(c) DUE AUTHORIZATION; EXECUTION AND DELIVERY; LEGAL, VALID AND BINDING; ENFORCEABILITY. The execution and delivery by the Borrower of, and the performance by the Borrower of its obligations under, the Program Documents to which it is a party are within its powers and have been duly authorized by all requisite action by the Borrower and have been duly executed and delivered by the Borrower and constitute the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
(d) NONCONTRAVENTION. Neither the execution and delivery by the Borrower of this Agreement, the other Program Documents to which it is a party, nor the consummation of the transactions herein or therein contemplated, nor compliance with the terms, conditions and provisions hereof or thereof by it, will (i) conflict with, or result in a breach or violation of, or constitute a default under its declaration of trust or other organizational documents, (ii) conflict with or contravene (A) any Applicable Law, (B) any contractual restriction binding on or affecting the Borrower or any of its Assets, or (C) any order, writ, judgment, award, injunction or decree binding on or affecting the Borrower or any of its Assets, (iii) result in a breach or violation of, or constitute a default under, or permit the acceleration of any obligation or liability in, or but for any requirement of the giving of notice or the passage of time (or both) would constitute such a conflict with, breach or violation of, or default under, or permit any such acceleration in, any contractual obligation or any agreement or document to which it is a party or by which it or any of its properties is bound (or to which any such obligation, agreement or document relates), or (iv) result in any Adverse Claim upon any Asset of the Borrower.
(e) GOVERNMENTAL AUTHORIZATIONS; PRIVATE AUTHORIZATIONS; GOVERNMENTAL FILINGS. The Borrower has obtained all necessary Governmental Authorizations and Private Authorizations, and made all Governmental Filings necessary for the execution and delivery by the Borrower of, and the performance by the Borrower of its obligations under, this Agreement, the other Program Documents to which it is a party and the agreements, certificates and instruments contemplated hereby or thereby, except in the case of Private Authorizations, where the failure to obtain such Private Authorizations could not reasonably be expected to have a Material Adverse Effect.
(f) SECURITY INTEREST. This Agreement and the Control Agreement and the actions required to be taken pursuant to the terms hereof and thereof are, and at all times shall be, effective to create and perfect in the Agent for the benefit of the Secured Parties a first-priority perfected security interest in the Pledged Collateral (subject to the Lien of the Custodian securing the Custodian's Overdraft Advances to the extent permitted by SECTION 5.02(o) and other Permitted Liens) free and clear of all Adverse Claims.
(g) BORROWING BASE ELIGIBLE ASSETS, ADVERSE CLAIMS, ETC. The Borrower owns each Borrowing Base Eligible Asset free and clear of Adverse Claims; and as of the initial Borrowing Date and at all times thereafter, the Agent has a first-priority perfected
security interest in the Pledged Collateral (subject to the Lien of the Custodian securing the Custodian's Overdraft Advances to the extent permitted by SECTION 5.02(o) and other Permitted Liens) free and clear of all Adverse Claims.
(h) NO FINANCING STATEMENT. No effective financing statements or other instruments similar in effect covering any Asset of the Borrower are on file in any recording office, except those filed in favor of the Agent pursuant to this Agreement.
(i) PRINCIPAL OFFICE; ORGANIZATION. The Borrower's principal place of
business and chief executive office is at the addresses referred to in
SECTION 5.01(d), the Borrower's jurisdiction of organization is the
Commonwealth of Massachusetts and the Borrower has not transacted any
business under any name other than "ING Prime Rate Trust".
(j) PENDING LITIGATION OR OTHER PROCEEDING. There are no pending or, to the best of the Borrower's knowledge, threatened investigations, litigation, suits or proceedings involving the Borrower which could reasonably be expected to have a Material Adverse Effect.
(k) INVESTMENT COMPANY ACT, ETC. The Borrower is and will continue to
be registered as a diversified, closed-end management investment company as
such term is used in the Investment Company Act and is in compliance in all
material respect with the Investment Company Act and the Investment
Policies and Restrictions (other than with respect to the Borrower's
minimum "asset coverage" (as defined in and determined pursuant to
Section 18 of the Investment Company Act) which compliance shall be without
qualification).
(1) INFORMATION AND REPORTS. The Prospectus, each Investor Report, each Weekly Portfolio Report, each Notice of Borrowing and all other written information, written reports, certificates and written statements provided by or on behalf of the Borrower to any Secured Party for purposes of or in connection with this Agreement, the other Program Documents to which the Borrower is a party or the transactions contemplated hereby or thereby to be performed by the Borrower is, and all such information hereafter provided by or on behalf of the Borrower to any Secured Party is and will be (except for projections and forward looking statements (other than any pro forma Investor Report)) true, correct and complete in all material respects on the date such information is stated or certified and no such information contains, or will contain, any material misrepresentation or any omission to state therein matters necessary to make the statements made therein not misleading under the circumstances in which they were made or delivered as of the time when made or delivered.
(m) APPLICABLE LAW. The Borrower is in full compliance with all Applicable Law, including, without limitation, the Securities Act and the Investment Company Act, including the rules and regulations promulgated thereunder, except where the failure to so comply could not give rise to a reasonable possibility of a Material Adverse Effect (other than with respect to the Borrower's minimum "asset coverage" (as defined in and
determined pursuant to Section 18 of the Investment Company Act), which compliance shall be without qualification).
(n) ERISA. The Borrower is not nor has during the past five (5) years
been a member of an ERISA Group and does not have nor during the past five
(5) years had any liability or obligation with respect to any Plan,
Multiemployer Plan or Benefit Arrangement; provided, however, that the
Borrower may incur liabilities or obligations under a plan or arrangement
in the form of (i) the Form of Retirement Plan For Each Closed End Fund or
(ii) the Form of Amended and Restated Deferred Compensation Agreement.
(o) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing and on each Borrowing Date each of the conditions precedent to the making of Advances set forth in Section 3.02 have been fully satisfied.
(p) BORROWING BASE TEST; ASSET COVERAGE TEST, ETC. The Borrowing Base
Test and the Asset Coverage Test are fully satisfied and will be fully
satisfied and immediately after the making of each Advance; provided, that
if on any date this representation is made (other than a Borrowing Date)
the Borrower is in full compliance with the requirements set forth in
SECTION 2.05(b), the Borrower shall be deemed to be in compliance with this
CLAUSE (p) to the extent it relates to the Borrowing Base Test as of such
date.
(q) INTERNAL REVENUE CODE. The Borrower is qualified, and intends to continue to qualify, as a "regulated investment company" within the meaning of the Code, and as such its income is not, and will not be, subject to tax at the corporate level under the Code.
(r) TAXES. The Borrower has filed all United States Federal income tax returns and all other material tax returns which are required to be filed by it, if any, and has paid all material taxes due pursuant to such returns, if any, or pursuant to any assessment received by the Borrower, except for any taxes or assessments which are being contested in good faith by appropriate proceedings and with respect thereto adequate reserves have been established in accordance with GAAP.
(s) FINANCIAL CONDITION. The statement of assets and liabilities of the Borrower as at February 28, 2002, certified by KPMG LLP, certified public accountants, fairly present in conformity with GAAP the financial position of the Borrower at such date and since such date there has been no material adverse change in the business, financial condition or results of operations of the Borrower.
(t) REGULATIONS T, U AND X. Neither the making of any Advance nor the use of proceeds thereof will violate the provisions of Regulation U or Regulation X. The Borrower's use of the proceeds of the Advances will not violate Regulation T.
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that it shall from the date hereof until the Program Termination Date:
(a) COMPLIANCE WITH AGREEMENTS, LAWS, ETC. (i) Duly observe, comply with and conform to all requirements of Applicable Law relative to the conduct of its business or to its Assets, including without limitation the Investment Company Act, (ii) preserve and keep in full force and effect the legal existence of the Borrower and the rights, privileges, qualifications and franchises of the Borrower, (iii) comply in all material respects with the terms and conditions of each Program Document to which it is a party, and (iv) obtain, maintain and keep in full force and effect all Governmental Authorizations, Private Authorizations and Governmental Filings which are necessary or appropriate to properly carry out its business and the transactions contemplated to be performed by the Borrower under this Agreement and the other Program Documents to which it is a party, except with respect to clauses (i) through (iv) above where the failure to so observe, comply, preserve, keep, obtain, maintain and conform could not reasonably be expected to have a Material Adverse Effect (other than with respect to the Borrower's minimum "asset coverage" (as defined and determined pursuant to Section 18 of the Investment Company Act) which compliance shall be without qualification).
(b) TAXES. Cause to be computed, paid and discharged when due all material taxes, assessments and other governmental charges or levies imposed upon it, or upon any income or Assets of the Borrower, prior to the day on which penalties are attached thereto, unless and to the extent that the same shall be contested in good faith by appropriate proceedings and with respect to which adequate reserves have been established on the books of the Borrower in accordance with GAAP.
(c) FURTHER ASSURANCES. Promptly, at its expense, execute and deliver such further instruments and take such further action as is necessary in order to (i) establish and protect the rights, interests and remedies created, or intended to be created, in favor of the Secured Parties including, without limitation, all such actions which are necessary or reasonably advisable to maintain and protect the Secured Parties' first-priority perfected (subject to the Lien of the Custodian securing the Custodian's Overdraft Advances to the extent permitted by Section 5.02(o) and other Permitted Liens) security interest in the Pledged Collateral free and clear of Adverse Claims, and (ii) enable the Secured Parties to enforce their rights and remedies under the Program Documents to which the Borrower is a party, including, without limitation, to do all things necessary at the reasonable request of the Agent during the continuance of an Event of Default to have each Loan Asset and the related Loan Documents assigned to the Agent or its designee.
(d) CONTINUED EXISTENCE. Keep the Commonwealth of Massachusetts as
its jurisdiction of organization and keep its principal place of business
and chief executive office at the address of the Borrower set forth in
Section 9.02 or, upon thirty (30) days'
prior written notice to the Agent, in any other jurisdiction of organization or at any other locations in jurisdictions where all actions to protect and perfect the Agent's first-priority perfected (subject to the Lien of the Custodian securing the Custodian's Overdraft Advances to the extent permitted by Section 5.02(o) and other Permitted Liens) security interest in the Pledged Collateral have been taken and completed.
(e) FINANCIAL STATEMENTS: ACCOUNTANTS' REPORTS; OTHER INFORMATION. Provide to the Agent (with enough additional copies for the Conduit Lender and each Secondary Lender):
(i) as soon as available, and in any event within ninety (90) days after the end of each fiscal year of the Borrower, a statement of assets and liabilities of the Borrower as at the end of such fiscal year, and statements of operations and of changes in net assets of the Borrower for such fiscal year, and the Borrower's portfolio of investments as of the end of such fiscal year, with an audit report thereon issued by KPMG LLP or other independent certified public accountants of nationally recognized standing, together with the comparable report for the prior fiscal year;
(ii) as soon as available, and in any event within sixty (60) days after the end of each first semi-annual fiscal period of the Borrower, a statement of assets and liabilities of the Borrower as at the end of such period, a statement of operations and of changes in net assets of the Borrower for such period, and the portfolio of investments as of the end of such period, all in reasonable detail and stating in comparative form the respective figures for the comparable period in the preceding year, prepared in accordance with GAAP, consistently applied and all certified (subject to normal year-end adjustment) as to fairness of presentation in all material respects by an Authorized Officer;
(iii) as soon as available, and in any event within sixty (60) days after the end of the first and third fiscal quarters of the Borrower's fiscal years, a list setting forth each of the senior loan assets held by the Borrower and the Value thereof, in each case, as of the last day of such quarter;
(iv) simultaneously with the delivery of each set of financial statements referred to in clauses (i) and (ii) above, a statement of an Authorized Officer to the effect that nothing has come to the attention of such Authorized Officer to cause him/her to believe that any Default or Event of Default existed on the date of such statements;
(v) as soon as possible, and in any event within three (3) Business Days of the Borrower's actual knowledge of the occurrence of any Default or Event of Default, a certificate of an Authorized Officer setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;
(vi) as soon as possible, and in any event within two (2) Business Days, after the Borrower has actual knowledge of any failure by the Custodian to
perform or observe any term, covenant or agreement on its part to be performed under the Custodial Agreement which failure gives rise to a reasonable possibility of a Material Adverse Effect, written notice thereof executed by an Authorized Officer;
(vii) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed;
(viii) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and unless duplicative of any deliveries to be made under clauses (i) or (ii) above, annual and semi-annual reports which the Borrower shall have filed with the SEC;
(ix) on or before the second Business Day of each week, weekly portfolio reports and weekly covenant compliance certificates in substantially the form of Schedule II attached hereto (each a "Weekly Portfolio Report") as of the Determination Date occurring on the Business Day immediately prior thereto (and, if applicable, reflecting compliance with the requirements of SECTION 2.05(b) on the Determination Date occurring during the immediately preceding calendar week), signed by an Authorized Signatory;
(x) on or before the tenth (10th) Business Day of each calendar month (or during the continuance of a Default or Event of Default more frequently as the Agent shall reasonably request (which may be daily)), an Investor Report substantially in the form of Schedule I hereto, as of the last Business Day of the immediately preceding calendar month (or other relevant period if delivered on a daily or weekly basis), together with a certificate of an Authorized Signatory in substantially the form of Annex A to the Investor Report;
(xi) promptly upon its receipt of and contemporaneously with its giving of any notice relating to the termination of the Custodial Agreement or the Control Agreement, copies of any such notice;
(xii) prior to the issuance by the Borrower of any preferred shares, notice of such issuance which notice shall include the offering materials to be used in connection with the issuance of such preferred shares;
(xiii) prompt notice of any amendment or modification to the Investment Policies and Restrictions which notice shall include, in reasonable detail, a description of any such change;
(xiv) from time to time upon the reasonable request of the Agent, copies of a current report identifying the locations of any Pledged Collateral maintained by the Borrower or which is in the possession of or is maintained in securities
accounts with an agent or sub-custodian of the Custodian which report shall specify the Pledged Collateral held by each agent or sub-custodian; and
(xv) from time to time such additional information regarding the financial condition or business of the Borrower as the Agent may reasonably request.
(f) MAINTENANCE OF INSURANCE. Maintain in force with financially sound and reputable insurers, policies with respect to its assets and property and business against such risks and in such amounts as are usually insured against in the same general area in the case of entities engaged in similar lines of business and as may be required by the Investment Company Act.
(g) MAINTENANCE OF BUSINESS. Remain at all times a closed-end investment company for the purposes of the Investment Company Act and continue to engage in business of the same general type as now conducted by the Borrower, and will continue to be a Massachusetts business trust and will preserve, renew and keep in full force and effect its existence and rights, privileges and franchises necessary or reasonably desirable in the normal conduct of business and will at all times remain registered under the Investment Company Act.
(h) AUDITS. Annually (or more frequently as the Agent, for itself and as agent for the Secured Parties may require after the occurrence of and during the continuance of a Default or an Event of Default) and at the sole cost and expense of the Borrower (i) cause an independent nationally recognized accounting firm reasonably satisfactory to the Agent, to enter the premises of the Borrower and any Person to whom the Borrower delegates all or any portion of its duties under any Program Document to which it is a party (including, without limitation, the Adviser and the Administrator) and examine and audit the books, records and accounts of the Borrower and such other Person relating to its business, financial condition, operations and the Borrower's and such other Person's performance under the Program Documents to which it is a party, (ii) permit such accounting firm to discuss the Borrower's and such other Person's affairs and finances with the officers, partners, employees and accountants of any of them, (iii) cause such accounting firm to provide to the Agent, with a certified report in respect of the foregoing, which shall be in form reasonably satisfactory to the Agent setting forth the results of such accounting firm's audit of the Borrower's performance under the Program Documents as determined pursuant to the scope of audit and procedures set forth on Schedule III hereto, and (iv) authorize such accounting firm to discuss such affairs, finances and performance with representatives of the Agent and their designees; provided, that, such examination and audit of information provided to the Borrower in connection with any Loan Document (which, for the avoidance of doubt, does not include the Loan Documents relating to any Eligible Loan Asset) shall be subject to any prohibition set forth in written confidentiality agreements entered into by the Borrower with respect thereto.
(i) ACCESS TO RECORDS. Annually (or more frequently as the Agent, for itself and as agent for the Secured Parties may require after the occurrence of and during the continuance of a Default or an Event of Default) permit the Agent or any Person
designated by the Agent to, upon reasonable advance notice and during normal hours, visit and inspect at reasonable intervals its and any Person to which it delegates any of its duties under the Program Documents to which it is a party (including, without limitation, the Adviser and the Administrator) books, records and accounts relating to its business, financial condition, operations, Assets and its performance under the Program Documents to which it is a party and to discuss the foregoing with its and such Person's officers, partners, employees and accountants, all as often as the Agent may reasonably request; provided, that, the Agent shall use reasonable efforts to coordinate their inspections; provided, however, that if under the terms of any agreement with any Person which is not an Affiliate of the Adviser, the Administrator or the Borrower to whom the Adviser, the Administrator or the Borrower has delegated any of its duties under any Program Document, only the Borrower, the Adviser or the Administrator, as the case may be, is permitted to visit and inspect such Person's books, records and accounts, it shall at the request of the Agent, exercise or cause the applicable Adviser, Administrator or the Borrower, as the case may be, to exercise the rights specified in this Section 5.01(i) on behalf of such requesting parties, as frequently as the terms of any such agreement permit, but in no event less frequently than annually; provided, further, that the Agent's and its designees' right to review information provided to the Borrower in connection with any Loan Document (which, for the avoidance of doubt, does not include the Loan Documents relating to any Eligible Loan Asset) shall be subject to the prohibitions of any written confidentiality agreements entered into by the Borrower with respect thereto, provided, that the Borrower had used reasonable efforts to permit the Agent or its designees to review such information by complying with any terms of such confidentiality agreement which would permit disclosure of confidential information to the third parties.
(j) INVESTMENT POLICIES AND RESTRICTIONS. At all times be in compliance in all material respects with Investment Policies and Restrictions and maintain necessary liquidity to meet its obligations to fund future advances or other extensions of credit under the Loan Documents relating to its Loan Assets.
(k) DEFENSE OF SECURED PARTIES' INTEREST. Warrant and defend each of the Secured Parties' right and interest in, to and under the Pledged Collateral against all Adverse Claims of all Persons whomsoever.
(l) CUSTODY AND CONTROL. At all times cause all Borrowing Base
Eligible Assets of the Borrower (including all instruments, if any,
evidencing the same and all Specified Loan Documents) to constitute Pledged
Collateral and to be (i) custodied with the Custodian or a sub-custodian of
the Custodian pursuant to the Custodial Agreement, and (ii) subject to the
Custodian's control and custody in accordance with the Control Agreement;
provided, that if such Pledged Collateral is a Loan Asset and concurrently
with any request to register such Loan Asset in the name of the Borrower,
the Borrower shall deliver instructions to all Selling Institutions,
Transaction Agents and Obligors related to such Loan Asset requiring that
any instrument evidencing such Loan Asset be delivered to the Custodian. At
all times cause all Loan Documents (other than the Specified Loan
Documents) to be held at the address of the Borrower set forth in
Section 9.02
or, such other location of the Borrower in Arizona as the Borrower shall designate upon twenty (20) day's prior written notice to the Agent.
(m) NOTICE OF LITIGATION OR OTHER PROCEEDINGS. Promptly give notice in writing to the Agent of all litigation, arbitration proceedings and regulatory proceedings affecting the Borrower or the Assets of the Borrower, except such litigation, arbitration proceedings and regulatory proceedings which could not reasonably be expected to have a Material Adverse Effect.
(n) MAINTENANCE OF BOOKS OF RECORD AND ACCOUNT. Keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities in accordance with the requirements of the SEC or under the Investment Company Act.
(o) PROCEEDS OF PLEDGED COLLATERAL. Cause all Proceeds of the Pledged Collateral to be remitted to the Collateral Account if a Default or Event of Default shall be continuing or would occur as a result of the failure to so remit such Proceeds.
(p) USE OF PROCEEDS. Use the net proceeds of any Advance made hereunder solely for the purpose of (i) purchasing Assets, (ii) refinancing Debt under the Edison Credit Facility as of the Closing Date (iii) paying principal and Yield in respect of outstanding Advances, or (iv) for general corporate purposes.
(q) INVESTMENT ADVISER. Except as consented to by the Agent (which consent shall not be unreasonably withheld), at all times maintain ING Investments, LLC as the Borrower's investment adviser, provided that the Agent shall in no event be obligated to consent to any change of the Adviser unless such successor investment adviser has entered into a letter agreement with the Agent substantially identical to the Adviser Letter Agreement. The parties hereto acknowledge, agree and consent to the sub-advisory agreements by and among the Adviser and ING Aeltus Investment Management, Inc., a Connecticut corporation, on terms as set forth on the Prospectus as of the date hereof.
(r) ADMINISTRATOR. Except as consented to by the Agent (which consent shall not be unreasonably withheld), at all times maintain ING Funds Services, LLC as the Borrower's administrator, provided that the Agent shall in no event be obligated to consent to any change of the Administrator unless such successor administrator has entered into a letter agreement with the Agent substantially identical to the Administrator Letter Agreement.
SECTION 5.02. NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that from the date hereof until the Lender Termination Date the Borrower shall not:
(a) IMPAIRMENT OF RIGHTS. Enter into any agreement containing any provision which would be violated or breached by the performance of its obligations under any Program Document to which the Borrower is a party the continuation of which could reasonably be expected to have a Material Adverse Effect or which could reasonably be expected to result in any material liability to a Secured Party.
(b) PROSPECTUS AND INVESTMENT POLICIES AND RESTRICTIONS. Purchase any Assets or engage in any line of business not contemplated by the Prospectus or the Investment Policies and Restrictions.
(c) CREATION OF DEBT. Create, assume or suffer to exist any Debt, except for Permitted Debt.
(d) MERGERS; SALE OF ASSETS. Adopt or carry out any plan of liquidation, partial liquidation, reorganization, incorporation, recapitalization, merger or consolidation nor sell, transfer or otherwise dispose of all or substantially all of its Assets (whether in one transaction or a series of related transactions), without the prior written consent of the Agent (which consent shall not be unreasonably withheld or delayed).
(e) ADVANCES AND EXTENSIONS OF CREDIT. Make any advance or other extension of credit to any Person except in the ordinary course of the Borrower's business and as expressly contemplated by the Investment Policies and Restrictions.
(f) CUSTODIAL AGREEMENT; INVESTMENT POLICIES AND RESTRICTIONS;
PROSPECTUS. Without the prior written consent (which consent shall not be
unreasonably withheld or delayed) of the Agent, (i) cancel or terminate the
Custodial Agreement or (ii) permit or consent to any material amendment,
modification or waiver of the Custodial Agreement unless the Borrower has
delivered to the Agent a copy thereof together with a certificate of an
Authorized Officer certifying that such amendment, modification or waiver
could not reasonably be expected to have a Material Adverse Effect, or
(iii) take any action inconsistent in any material respect with the
Prospectus or the Investment Policies and Restrictions.
(g) AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Except in connection with the issuance of preferred stock, amend, terminate, supplement or otherwise modify in any material respect its declaration of trust, by-laws or other organizational documents, unless the Borrower has delivered to the Agent a copy thereof and a certificate of an Authorized Officer certifying that to the actual knowledge of such Authorized Officer such amendment, modification or waiver could not reasonably be expected to have a Material Adverse Effect.
(h) ERISA. Become a member of an ERISA Group or incur any liability or obligation with respect to any Plan, Multiemployer Plan or any Benefit Arrangement; provided, however, that the Borrower may incur liabilities or obligations under a plan or arrangement in the form of (i) the Form of Retirement Plan For Each Closed End Fund or (ii) the Form of Amended and Restated Deferred Compensation Agreement; provided, further, that the Borrower give the Agent at least ten (10) days prior written notice of any such amendment to the forms of the plan or agreement that materially increases the Borrower's liabilities under the plan or agreement.
(i) INVESTMENT POLICIES AND RESTRICTIONS. Without the prior written consent (which consent shall not be unreasonably withheld or delayed) of the Agent (i) unless required by a change in Applicable Law (including, without limitation, the Investment
Company Act and the Securities Act) make or permit any material change in the Investment Policies and Restrictions, or (ii) make or permit any change in any Industry Class used to compute the Borrowing Base.
(j) LIENS. Create, assume or suffer to exist any Adverse Claim on any Asset now owned or hereafter acquired by it.
(k) SENIOR SECURITIES. Issue any "senior securities", as such term is defined and used in the Investment Company Act other than Permitted Senior Securities.
(l) MARGIN REQUIREMENTS. Extend credit to others for the purpose of buying or carrying any "margin stock" in such a manner as to violate Regulation T, Regulation U or Regulation X or use the proceeds of any Advance to purchase or carry Margin Stock or, without limiting the foregoing, have more than twenty percent (20%) of its total Assets constitute Margin Stock.
(m) RESTRICTED PAYMENTS. Make any Restricted Payment (i) if any
Default or Event of Default shall be continuing or shall result therefrom,
(ii) if immediately after giving effect to such payment the Borrower will
not be in full compliance with the Borrowing Base Test and the Asset
Coverage Test, (iii) at any time after the Agent shall have delivered a
Notice of Exclusive Control to the Custodian (unless such Notice of
Exclusive Control has been revoked in writing by the Agent), or (iv) at any
time after the Maturity Date of the Advances shall have occurred.
(n) NAME CHANGE. Change its name (i) without giving the Agent at least ten (10) days prior written notice, and (ii) unless all actions necessary and reasonably appropriate to protect and perfect the Secured Parties' first-priority perfected security interest (subject to any Permitted Liens) in the Pledged Collateral have been taken and completed.
(o) CUSTODIAN'S OVERDRAFT ADVANCES. Permit the Aggregate Custodian's Advance Amount to at any time exceed $50,000,000.
(p) NOTICE OF EXCLUSIVE CONTROL; PLEDGED COLLATERAL. After the Borrower has received written notice of delivery by the Agent to the Custodian of a Notice of Exclusive Control, unless such Notice of Exclusive Control is revoked in writing by the Agent, give any instruction to the Custodian in respect of any Pledged Collateral without the prior written consent of the Agent.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT.
If any of the following events shall occur and be continuing (each an "Event of Default"):
(a) the Borrower shall fail to make or cause to be made in the manner and when due (i) except as expressly provided in SECTION 2.05(b), any payment of principal to be made or to be caused to be made by it under this Agreement or any of the other Program Documents to which it is a party and such failure shall continue for one (1) Business Day, or (ii) any payment of interest, fees or other deposit to be made or caused to be made by it under this Agreement or any of the other Program Documents to which it is a party and such failure shall continue for three (3) Business Days; or
(b) the Borrower shall (i) fail to be in compliance with the Asset
Coverage Test, provided that if an Authorized Officer has certified that
the Borrower is taking all steps necessary to cause the Borrower to be in
full compliance with the Asset Coverage Test within ten (10) Business Days
after the first date of the Borrower's knowledge of such noncompliance,
such event shall not constitute an Event of Default unless such failure
shall continue for ten (10) Business Days after such first date, or (ii)
fail to comply with SECTION 2.05(b), CLAUSES (e)(v), (e)(vi), (g) or (p) of
SECTION 5.01, SECTION 5.02 or SECTION 9.11; or
(c) (i) the Borrower shall fail to perform or observe any other term,
covenant or agreement on its part to be performed or observed under this
Agreement or any other Program Document to which it is a party, or (ii) the
Adviser shall fail to perform any of its obligations under the Adviser
Letter Agreement, (iii) the Administrator shall fail to perform any of its
obligations under the Administrator Letter Agreement, or (iv) the Custodian
shall fail to perform or observe any term, covenant or agreement on its
part to be performed or observed under the Control Agreement, or (v) the
Custodian shall fail to perform or observe any term, covenant or agreement
on its part to be performed under the Custodial Agreement, which in the
case of this clause (v), could reasonably be expected to have a Material
Adverse Effect, and such failure described in each of clause (i) through
(v) above shall continue unremedied for thirty (30) days after such person
has knowledge, or has received notice, of such failure; or
(d) any representation or warranty made or deemed made by the Borrower, the Adviser, the Administrator or the Custodian under or in connection with this Agreement or any other Program Document or any certificate or report delivered by or on behalf of the Borrower, the Adviser, the Administrator or the Custodian in connection therewith shall have been false or incorrect in any material respect on or as of the date made or deemed made or delivered; or
(e) the Agent shall for any reason cease to have a valid and perfected first-priority security interest in the Pledged Collateral (subject to the Lien of the Custodian securing the Custodian's Overdraft Advances to the extent permitted by Section 5.02(o) and other Permitted Liens) free and clear of all Adverse Claims or the Custodian, as collateral agent and/or securities intermediary under the Control Agreement, shall not have custody and control, as contemplated by the Control Agreement, of the Pledged Collateral; or
(f) the Borrower, the Adviser, the Administrator or the Custodian shall generally not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower, the Adviser, the Administrator or the Custodian seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of sixty (60) days, or any of the actions sought in such proceeding (including an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower, the Adviser, the Administrator or the Custodian shall take any corporate action to authorize any of the actions set forth above in this subsection; or
(g) any provision of any Program Document shall cease to be a legal, valid and binding obligation of any of the parties purported to be bound thereby, enforceable in accordance with its respective terms or the Borrower, the Adviser, the Administrator or the Custodian shall so assert in writing; or
(h) any judgment or order, or any series of judgments or orders, shall have been entered against the Borrower, provided that (i) such judgments or orders that have not been vacated, discharged, settled, paid or satisfied shall aggregate to $1,000,000 or more at any one time outstanding (excluding any judgments or orders related to any payment to or application by the Borrower that is rescinded or must otherwise be returned or paid over as a result of any bankruptcy, insolvency or similar proceeding involving any other Person), and (ii) enforcement actions have been commenced with respect thereto and have not been dismissed or stayed or bonded pending appeal within sixty (60) days of such entry; or
(i) either (1) State Street Bank and Trust Company shall at any time cease to serve as Custodian under the Custodial Agreement or the Control Agreement, unless a successor thereto reasonably satisfactory to the Agent shall have assumed the duties of Custodian thereunder and in accordance with the terms of the Program Documents, or (2) the Custodian or the Borrower shall have given notice of the termination of the Custodial Agreement or the Control Agreement; provided, however, that events specified in clause (2) above shall not constitute an Event of Default if prior to the tenth (10th) Business Day immediately preceding the effective date of such termination a successor custodian reasonably satisfactory to the Agent shall have been appointed as custodian under the Custodial Agreement and shall have assumed the obligations of the Custodian under the Custodial Agreement and the Control Agreement and the Agent shall have received such certificates and opinions as they shall have reasonably requested; or
(j) any event or condition shall occur which results in (x) the acceleration of the maturity of any Debt of the Borrower which Debt in the aggregate is at least $1,000,000 or (y) the acceleration of the maturity of the Debt under the Existing 1998
Credit Agreement or otherwise enables (or, with the giving of notice or lapse of time or both would enable) the holders of such Debt under the Existing 1998 Credit Agreement (or any Person acting on behalf of such holders) to accelerate the maturity thereof; or
(k) any change in Applicable Law (including, without limitation, the Investment Company Act and the Securities Act) shall be enacted or promulgated which (i) would limit in any material respect the ability of the Agent, or any Secured Party to foreclose upon its interest in, or in the event of such foreclosure to dispose of, the Pledged Collateral or to be granted the security interest in Pledged Collateral as contemplated by this Agreement and the Control Agreement, or (ii) unless such changes have been consented to in writing by the Agent (which consent shall not be unreasonably withheld or delayed), would require any material change to the Investment Policies and Restrictions; or
(l) the Adviser or the Administrator shall cease to be a wholly owned direct or indirect subsidiary of the Parent; or
(m) the Advisory Agreement in effect on the Closing Date (or any replacement advisory agreement approved of in writing by the Agent), or the Administration Agreement in effect on the Closing Date (or any replacement administration agreement approved of in writing by the Agent), in either case, shall be terminated, amended, waived or otherwise modified if such termination, amendment, waiver or other modification would require the consent of the Borrower's shareholders under Applicable Law, unless (i) the Agent has consented to the same in writing and (ii) (x) in the case of the Advisory Agreement, if terminated, a replacement investment advisory agreement has been entered into with a successor investment adviser which is substantially similar in all material respects to the Advisory Agreement in effect prior to any such termination, and (y) in the case of the Administration Agreement, if terminated, a replacement administration agreement has been entered into with a successor administrator which is substantially similar in all material respects to the Administration Agreement in effect prior to any such termination; or
(n) ING Investments, LLC, any Affiliate of ING Investments, LLC organized under the laws of a jurisdiction located in the United States and having its primary operations and offices in the United States, or another wholly-owned direct or indirect subsidiary of the Parent consented to in writing by the Agent, in each case which has executed a letter agreement in favor of the Agent on behalf of the Secured Parties substantially identical in all material respects to the Adviser Letter Agreement), is not the current investment adviser for the Borrower;
(o) ING Fund Services, LLC, or any Affiliate of ING Fund Services, LLC organized under the laws of a jurisdiction located in the Untied States and having its primary operations and offices in the United States, or another wholly-owned direct or indirect subsidiary of the Parent consented to in writing by the Agent, in each case which has executed a letter agreement in favor of the Agent on behalf of the Secured Parties substantially identical in all material respects to the Administrator Letter Agreement), is not the current administrator for the Borrower;
(p) either of the Adviser or the Administrator shall (i) sell or otherwise dispose of all or substantially all of its assets, (ii) consolidate with or merge into any other Person unless it is the survivor, or (iii) acquire all or substantially all of the assets of another Person, unless in each case the Agent has consented to the same in writing; or
(q) the ratings issued with respect to the Parent's senior unsecured long-term debt securities (without third-party credit enhancement) shall be less than BBB- by S&P or less than Baa3 by Moody's or, if no such ratings exist from S&P and Moody's, is in the sole judgment of the Agent of less than such credit quality;
then, and in any such event, in addition to all rights and remedies specified in
this Agreement, including without limitation, Article VII, and the rights and
remedies of a secured party under Applicable Law including, without limitation
the UCC, the Agent, upon direction of the Conduit Lender, may by notice to the
Borrower, declare the Lender Termination Date and the Secondary Lender
Termination Date to have occurred and declare the outstanding Advances to be due
and payable (in which case the Lender Termination Date, the Secondary Lender
Termination Date and the Maturity Date shall be deemed to have occurred);
provided, that, upon the occurrence of any event (without any requirement for
the passage of time or the giving of notice, or both) described in subsection
(f) of this SECTION 6.01, the Lender Termination Date, the Secondary Lender
Termination Date and the Maturity Date shall be deemed to have automatically
occurred.
ARTICLE VII
PLEDGE OF PLEDGED COLLATERAL; RIGHTS OF THE AGENT
SECTION 7.01. SECURITY INTERESTS.
In consideration of the Lenders and the Secondary Lenders making and maintaining the Advances, and as collateral security for the prompt, complete and unconditional payment and performance of all of the Borrower Obligations, the Borrower hereby pledges (and in the case of all Pledged Collateral other than the Loan Assets), hypothecates, assigns, transfers, sets over and delivers to the Agent for the benefit of the Secured Parties and grants to the Agent for the benefit of the Secured Parties a continuing Lien upon and security interest in, all of the Borrower's right, title and interest in, to and under all of the Borrower's accounts, equipment, fixtures, inventory, investment property, payment intangibles, goods, chattel paper (both tangible and intangible), general intangibles, letter-of-credit rights, financial assets, supporting obligations, commercial tort claims, contract rights, instruments, promissory notes and documents, together with all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto, and all products and proceeds thereof, whether now owned or existing or hereafter arising or acquired and wheresoever located (collectively, the "Pledged Collateral"). For the avoidance of doubt, the Pledged Collateral shall include, but not be limited to, the following assets and properties of the Borrower:
(i) all of the Assets, investments and property from time to time credited to the Collateral Account, and all security entitlements with respect to the Collateral Account, all Assets held by the Custodian as bailee and agent for the
Agent pursuant to the Control Agreement and all Loan Assets of the Borrower evidenced by, secured by or governed by any Loan Document;
(ii) the Collateral Account (together with all other accounts in which the distributions referred to in clause (iii) below are remitted);
(iii) all interest, dividends, stock dividends, stock splits, distributions and other money or property of any kind distributed in respect of the assets, investments, property and security entitlements described in CLAUSE (i) above, including without limitation all principal, interest, fees and other payments in respect of such Loan Assets;
(iv) all rights and remedies of the Borrower under the Loan
Documents and the Custodial Agreement in respect of the assets,
investments, property and security entitlements described in CLAUSE
(i) above;
(v) all security interests, liens, collateral, property, guaranties, supporting obligations, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of the assets, investments, property and security entitlements described in CLAUSE (i) above;
(vi) all accounts, contract rights, documents, instruments, securities, investment property, chattel paper, general intangibles (including payment intangibles), inventory, goods, equipment and all other property of every kind and nature, now owned or hereafter acquired in respect of the assets, investments, property and security entitlements described in CLAUSE (i) above);
(vii) all books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) relating to the assets, investments, property and security entitlements described in CLAUSE (i) above; and
(viii) all Proceeds of any and all of the foregoing.
Notwithstanding the foregoing provisions of this SECTION 7.01, the Pledged Collateral shall not include Margin Stock. Terms not otherwise defined in this Section 7.01 shall have the meaning set forth in Article 9 of the UCC.
SECTION 7.02. SUBSTITUTION OF COLLATERAL AND RELEASE OF SECURITY INTEREST.
(a) (a) Subject to Section 5.02(p), so long as no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such sale, disposition or substitution and the Borrowing Base Test will be satisfied immediately following such sale, disposition or substitution, the Borrower may originate entitlement orders and instructions with respect to the Collateral Account and may sell or dispose of
or substitute Pledged Collateral in accordance with the terms of this Agreement and the Control Agreement.
(b) On the Program Termination Date the Lien granted under this Agreement shall be automatically terminated and released and the Agent at the written request of the Borrower shall execute, deliver and file such instruments as the Borrower shall reasonably request in order to reassign, release or terminate its security interest in the Pledged Collateral. Any and all actions under this SECTION 7.02 shall be without any recourse to, or representation or warranty by, the Agent or any Secured Party and shall be at the sole cost and expense of the Borrower.
SECTION 7.03. APPLICATION OF PROCEEDS.
(a) After the occurrence and during the continuance of an Event of Default, all amounts remitted to the Agent's Account in respect of the Borrower Obligations, including without limitation all Proceeds resulting from the sale or other disposition of the Pledged Collateral shall be applied by the Agent in the following order and priority:
FIRST, to the payment of all amounts advanced or expended by the Agent and all costs and expenses incurred by the Agent in connection with the enforcement of the Secured Parties' rights and remedies under the Program Documents;
SECOND, to the extent funds are remaining after the above application, to the Lenders and the Secondary Lenders to the payment of all accrued and unpaid Yield on all outstanding Advances on a pro-rata basis according to the amount of accrued Yield owing to each Lender and each Secondary Lender;
THIRD, to the extent funds are remaining after the above applications, to the Secured Parties to the payment of all fees payable under the Fee Letter on a pro rata basis according to the amount of such fees owing to each such Secured Party;
FOURTH, to the extent funds are remaining after the above applications, to the Lenders and the Secondary Lenders to the payment of the principal amount of each outstanding Advance on a pro-rata basis according to the amount of principal owing to each Lender and each Secondary Lender;
FIFTH, to the extent funds are remaining after the above applications, to the Secured Parties to the payment of all other amounts payable to the Secured Parties pursuant to this Agreement and the other Program Documents on a pro rata basis according to the amounts owed to each such Secured Party.
The Agent shall, after the final payment in full of all Advances and the occurrence of the Program Termination Date, remit the remaining excess Proceeds which it had received from the sale or disposition of the Pledged Collateral to the Borrower's Account.
(b) For purposes of determining the application to be made of such monies and other cash proceeds by the Agent to other Secured Parties pursuant to this SECTION 7.03,
the Agent may rely exclusively upon a certificate or other statement of such Secured Party, setting forth in reasonable detail the amount then owing to such Secured Party. The Agent shall not be liable for any application of funds in accordance with any certificate or direction delivered pursuant to this SECTION 7.03; PROVIDED, HOWEVER, that no application of funds in accordance with any certificate delivered pursuant to this SECTION 7.03 shall be deemed to restrict or limit the right of any party to contest with the purported obligee its respective liability in respect of the amount set forth in such certificate.
SECTION 7.04. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT.
(a) The Agent (for itself and on behalf of the other Secured Parties) shall have all of the rights and remedies of a secured party under the UCC and other Applicable Law. Upon the occurrence and during the continuance of an Event of Default, the Agent or its designees may (i) deliver a Notice of Exclusive Control to the Custodian; (ii) instruct the Custodian to deliver any or all of the Pledged Collateral and any Loan Documents relating to the Pledged Collateral to the Agent or its designees and otherwise give all instructions and entitlement orders to the Custodian regarding the Pledged Collateral; (iii) require the Borrower to terminate the purchase of any additional Assets, whereupon the Borrower agrees to cease purchasing Assets; (iv) require that the Borrower or the Custodian immediately take action to liquidate the Assets to pay amounts due and payable in respect of the Borrower Obligations; (v) sell or otherwise dispose of the Pledged Collateral, all without judicial process or proceedings; (vi) take control of the Proceeds of any such Pledged Collateral; (vii) subject to the provisions of the applicable Loan Documents, exercise any consensual or voting rights in respect of the Pledged Collateral; (viii) release, make extensions, discharges, exchanges or substitutions for, or surrender all or any part of the Pledged Collateral; (ix) enforce the Borrower's rights and remedies under the Custodial Agreement with respect to the Pledged Collateral; (x) institute and prosecute legal and equitable proceedings to enforce collection of, or realize upon, any of the Pledged Collateral; (xi) require that the Borrower and the Custodian promptly take action to liquidate the Pledged Collateral to pay amounts due and payable in respect of the Borrower Obligations; (xii) remove from the Borrower's, the Adviser's, the Administrator's and their respective agents' place of business all books, records and documents relating to the Pledged Collateral unless copies thereof shall have been provided to the Agent which copies of such books and records shall thereafter be deemed to be originals thereof; and/or (xiii) notify all Selling Institutions, Transaction Agents and Obligors related to the Loan Assets which constitute Pledged Collateral to make payments in respect thereof directly to the Agent's Account; (xiv) at the request of the Agent execute all documents and agreements which are necessary or appropriate to have the Pledged Collateral which constitutes Loan Assets to be assigned to the Agent or its designee; and (xv) endorse the name of the Borrower upon any items of payment relating to the Pledged Collateral or upon any proof of claim in bankruptcy against an account debtor. For purposes of taking the actions described in SUBSECTIONS (i) through (xv) of this SECTION 7.04(a) the Borrower hereby irrevocably appoints the Agent as its artorney-in-fact (which appointment being coupled with an interest is irrevocable while any of the Borrower Obligations remain unpaid), with power
of substitution, in the name of the Agent or in the name of the Borrower or otherwise, for the use and benefit of the Agent, but at the cost and expense of the Borrower and with notice to the Borrower.
(b) All sums paid or advanced by the Agent in connection with the foregoing and all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable outside attorneys' fees and expenses) incurred in connection therewith, together with interest thereon at the Post-Default Rate from the date of payment until repaid in full, shall be paid by the Borrower to the Agent on demand and shall constitute and become a part of the Borrower Obligations secured hereby.
SECTION 7.05. REMEDIES CUMULATIVE.
Each right, power, and remedy of the Agent and the other Secured Parties, or any of them, as provided for in this Agreement or in the other Program Documents or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Agreement or in the other Program Documents or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by the Agent or any other Secured Party of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by such Persons of any or all such other rights, powers, or remedies.
SECTION 7.06. ENFORCEMENT OF REMEDIES UNDER THE CUSTODIAL AGREEMENT AND LOAN DOCUMENTS.
The Borrower agrees that it shall (i) during the continuance of a Default or an Event of Default, upon the request of the Agent (and at the Borrower's own expense) diligently enforce the rights and remedies under the Custodial Agreement and at law or equity against the Custodian for any material breach by the Custodian of any term, covenant or agreement thereunder relating to or affecting any Pledged Collateral, and (ii) diligently enforce its rights and remedies under the Loan Documents relating to the Pledged Collateral. The Borrower shall at all times enforce its rights and remedies under the Custodial Agreement and the Loan Documents with the same degree of care and diligence that it would exercise if this Agreement had not been entered into; PROVIDED that during the continuance of a Default or an Event of Default, the Borrower shall not, in enforcing such rights and remedies, settle any claim against the Custodian without the prior written consent of the Agent (which consent shall not be unreasonably withheld or delayed).
The Borrower agrees that to the extent not expressly prohibited by the terms of the related Loan Documents, after the occurrence and during the continuance of an Event of Default, it shall (i) upon the written request of the Agent promptly forward to the Agent all information and notices which it receives under or in connection with the Loan Documents relating to the Pledged Collateral, and (ii) act and refrain from acting, in respect of any request, act, decision or vote under the Loan Documents relating to the Pledged Collateral only in accordance with the direction of the Agent.
ARTICLE VIII
THE AGENT
SECTION 8.01. AUTHORIZATION AND ACTION.
Each of the Secure Parties hereby irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Program Documents as are delegated to the Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. The Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Program Documents, or any fiduciary relationship with any Secured Party, and no implied covenants, functions, responsibilities, duties or obligations or liabilities on the part of the Agent shall be read into this Agreement or any other Program Document or otherwise exist for the Agent. As to any matters not expressly provided for by this Agreement or the other Program Documents, the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Lenders or the Secondary Lenders; PROVIDED, HOWEVER, that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement, the other Program Documents or Applicable Law. Each Secured Party agrees that in any instance in which the Program Documents provide that the Agent's consent may not be unreasonably withheld, provide for the exercise of the Agent's reasonable discretion, or provide to a similar effect, it shall not in its instructions to the Agent withhold its consent or exercise its discretion in an unreasonable manner.
SECTION 8.02. DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement and each other Program Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
SECTION 8.03. AGENT'S RELIANCE, ETC.
Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or any of the other Program Documents, except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent: (i) may consult with legal counsel (including counsel for the Borrower, the Adviser or the Administrator) and independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to any Lender or any Secondary Lender and shall not be responsible to any Lender or any Secondary Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement or the other Program Documents; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Program Documents or any Loan Documents on the part of the Borrower, the Adviser, the Administrator, the Custodian or any other Person or to inspect the property (including the books and records) of the Borrower, the Adviser or the Administrator;
(iv) shall not be responsible to any Lender or any Secondary Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the other Program Documents, any Loan Document or any other instrument or document furnished pursuant hereto or thereto; and (v) shall incur no liability under or in respect of this Agreement or any other Program Document by acting upon any notice, consent, certificate or other instrument or writing (which may be delivered by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 8.04. INDEMNIFICATION
Each of the Secondary Lenders agrees to indemnify and hold the Agent harmless (to the extent not reimbursed by or on behalf of the Borrower) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any other Program Document or any action taken or omitted by the Agent under this Agreement or any other Program Document; PROVIDED, that no Secondary Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each of the Secondary Lenders agrees to reimburse the Agent promptly upon demand for any out-of-pocket expenses (including reasonable counsel fees) incurred by the Agent in connection with the administration or enforcement (whether through negotiations, legal proceedings or otherwise) or legal advice in respect of rights or responsibilities under this Agreement or the other Program Documents, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrower. Each Secondary Lender shall be obligated to pay its Proportionate Share of all amounts payable to the Agent under this SECTION 8.04. As used in this SECTION 8.04, the term "Proportionate Share" in respect of any Secondary Lender means the fraction, expressed as a percentage, the numerator of which is the Secondary Lender Commitment of such Secondary Lender and the denominator of which is the Total Commitment.
SECTION 8.05. SUCCESSOR AGENT. The Agent may, upon thirty (30) days'
notice to the Borrower, the Conduit Lender and the Secondary Lenders, resign as
Agent. If the Agent shall resign, then the Lenders and the Secondary Lenders
during such thirty (30) day period shall appoint from among the Secondary
Lenders a successor agent. If for any reason a successor agent is not so
appointed and does not accept such appointment during such thirty (30) day
period, the Agent may appoint a successor agent. Any resignation of the Agent
shall be effective upon the appointment of a successor agent pursuant to this
Section 8.05 and the acceptance of such appointment by such successor. After the
effectiveness of any retiring Agent's resignation hereunder as Agent, the
retiring Agent shall be discharged from its duties and obligations hereunder and
under the other Program Documents and the provisions of this Article VIII and
Section 9.04 shall continue in effect for its benefit with respect to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement and under the other Program Documents.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NO WAIVER; MODIFICATIONS IN WRITING.
No failure or delay on the part of any Secured Party in exercising any right, power or remedy hereunder or with respect to the Advances shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any Secured Party at law or in equity. No amendment, modification, supplement, termination or waiver of this Agreement shall be effective unless the same shall be in writing and signed by the Borrower, the Agent and the Conduit Lender. Any waiver of any provision of this Agreement, and any consent to any departure by the Borrower from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances.
SECTION 9.02. NOTICES, ETC.
Except where telephonic instructions are authorized herein to be given, all notices, demands, instructions and other communications required or permitted to be given to or made upon any party hereto shall be in writing and shall be personally delivered or sent by registered, certified or express mail, postage prepaid, or by prepaid telegram (with messenger delivery specified in the case of a telegram), or by facsimile transmission, or by prepaid courier service, and shall be deemed to be given for purposes of this Agreement on the day that such writing is received by the intended recipient thereof. Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this SECTION 9.02. notices, demands, instructions and other communications in writing shall be given to or made upon the respective parties hereto at their respective addresses (or to their respective facsimile numbers) indicated below, and, in the case of telephonic instructions or notices, by calling the telephone number or numbers indicated for such party below. For all purposes under this Agreement, delivery of any telephonic or facsimile notice to the Borrower to the care of the Adviser shall be deemed to have been delivered to the Borrower.
If to the Conduit Lender: CRC Funding, LLC c/o Citicorp North America, Inc. 450 Mamaroneck Avenue Harrison, New York 10528 Attention: U.S. Securitization Telephone No.: (914) 899-7122 Facsimile No.: (914) 899-7890 If to the Agent: Citicorp North America, Inc. U.S. Securitization 450 Mamaroneck Avenue Harrison, New York 10528 |
Attention: U.S. Securitization Telephone No.: (914) 899-7122
Facsimile No.: (914) 899-7890 If to Citibank: Citibank, N.A. 388 Greenwich Street New York, New York 10013 Attention: Portfolio Management Telephone No.: (212) 816-0777 Facsimile No.: (212) 816-0270 If to the Borrower: ING Prime Rate Trust 7337 East Doubletree Ranch Road Scottsdale, AZ 85258 Attention: Dan Norman, Senior Vice President Telephone No.: (480) 477-2112 Facsimile No.: (480) 477-2076 With a copy to: ING Investments, LLC 7337 East Doubletree Ranch Road Scottsdale, AZ 85258 Attention: Dan Norman Telephone No.: (480) 477-2112 Facsimile No.: (480) 477-2076 SECTION 9.03. TAXES. |
(a) Any and all payments by the Borrower under this Agreement or any
other Program Document to which it is a party shall be made, in accordance
with this Agreement, free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the
case of the Secured Parties, (i) all taxes imposed by the United States
federal government and (ii) income, profits and franchise taxes imposed on
it by any taxing Authority in any jurisdiction which asserts jurisdiction
to impose such taxes on the basis of contacts which the Secured Party in
question maintains with such jurisdiction other than contacts arising
solely out of the execution, delivery or performance of the Program
Documents or the transactions contemplated thereby (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities
being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any other Program Document to which it is a party to any
Secured Party, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions
applicable to additional sums payable under this SECTION 9.03) such Secured
Party receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with Applicable Law.
(b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made by the Borrower hereunder or under any other Program Document to which it is a party or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or under any other Program Document to which it is a party (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each of the Secured Parties for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this SECTION 9.03) paid by any Secured Party in respect of the Borrower and any liability (including penalties, interest and expenses) (other than such as are the result of such Person's action or failure to take action) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days from the date the Secured Party makes written demand therefor to the Borrower.
(d) Within thirty (30) days after the date of receiving a receipt for any payment of Taxes or Other Taxes, the Borrower will furnish to the Agent the original or a certified copy of a receipt evidencing payment thereof.
(e) With respect to an assignment or appointment of a successor agent, the assignee or successor agent (including such that is already a party to this Agreement) shall not be entitled to increased amounts or Other Taxes pursuant to this SECTION 9.03 in excess of the amount to which its transferor or predecessor, as the case may be, was entitled.
(f) To the extent legally entitled to do so, each Secured Party and participant shall provide to the Borrower and Agent (as applicable) such forms or other certifications at such time(s) and in such manner(s) as will permit payments to be made under this Agreement without deduction for, or at a reduced rate of, withholding taxes.
(g) If any Secured Party determines, in its sole discretion, that it has actually received or realized any refund or tax, any reduction of, or credit against, its tax liabilities or otherwise recovered any amount that would not have been received, realized or recovered but for any deduction or withholding, or payment of any additional amount, by the Borrower pursuant to this SECTION 10.03 or SECTION 2.07, then so long as no Default or Event of Default shall have occurred and be continuing, such Secured Party shall reimburse the Borrower an amount that the Secured Party shall, in its sole discretion, determine is equal to the net benefit after tax, and net of all expenses incurred by the Secured Party in connection with its receipt or realization of such refund, reduction, credit or recovery; provided that nothing in this paragraph (g) shall require any Secured Party to make available its tax returns (or any other information relating to its taxes which it deems to be confidential). The Borrower shall return such amount to the
applicable Secured Party in the event that the Secured Party is subsequently required to repay such refund of tax or is not entitled to such reduction of, or credit against, its tax liabilities.
(h) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreement and obligations of the Borrower contained in this SECTION 9.03 shall survive the termination of this Agreement and the payment in full of principal and Yield hereunder until the expiration of all applicable statutes of limitation.
SECTION 9.04. COSTS AND EXPENSES; INDEMNIFICATION.
(a) The Borrower agrees to promptly pay on written demand all costs
and expenses (excluding any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, in each case, now or hereafter imposed, levied, collected,
withheld or assessed) of each of the Secured Parties in connection with the
preparation, review, negotiation, reproduction, execution, delivery,
administration, modification, amendment and enforcement of this Agreement
and the other Program Documents to which the Borrower is a party,
including, without limitation, the reasonable fees and disbursements of
counsel for the Secured Parties with respect thereto and with respect to
advising the Secured Parties as to their rights, remedies and
responsibilities under this Agreement and the other Program Documents to
which the Borrower is a party, UCC filing fees, periodic auditing expenses
incurred in connection and regulatory costs associated with clauses (h) and
(i) of SECTION 5.01 and all other fees and expenses.
(b) The Borrower agrees to indemnify and hold harmless each Secured Party and each of their Affiliates and the respective officers, directors, employees, agents, managers of, and any Person controlling any of, the foregoing (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, obligations, expenses, penalties, actions, suits, judgments and disbursements of any kind or nature whatsoever, (including, without limitation, the reasonable fees and disbursements of counsel), but excluding in all cases any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, in each case, now or hereafter imposed levied, collected, withheld or assessed (collectively the "Liabilities") that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of the execution, delivery, enforcement, performance, administration of or otherwise arising out of or incurred in connection with this Agreement, any Loan Document or any other Program Document to which the Borrower is a party or any transaction contemplated hereby or thereby (and regardless of whether or not any such transactions are consummated), including, without limitation any such Liability that is incurred or arises out of or in connection with, or by reason of any one or more of the following: (i) preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with this Agreement or any other Program Document or any of the transactions contemplated hereby or thereby; (ii) any breach or alleged breach of any covenant by the Borrower, the Adviser, the Administrator or the Custodian contained in
any Program Document; (iii) any representation or warranty made or deemed made by the Borrower or the Custodian contained in any Program Document or in any certificate, statement or report delivered in connection therewith is, or is alleged to be, false or misleading; (iv) any failure by the Borrower, the Adviser, the Administrator or the Custodian to comply with any Applicable Law or contractual obligation binding upon it; (v) any failure to vest, or delay in vesting, in the Secured Parties a first-priority perfected (subject to the Lien of the Custodian securing the Custodian's Overdraft Advances to the extent permitted by Section 5.02(o) and other Permitted Liens) security interest in all of the Pledged Collateral; (vi) any action or omission, not expressly authorized by the Program Documents, by the Borrower, the Adviser, the Administrator or the Custodian, which has the effect of reducing or impairing the Pledged Collateral or the rights of the Agent or the Secured Parties with respect thereto; (vii) any Default or Event of Default; and (viii) any claim that any Secured Party has assumed any obligation or liability of the Borrower under any Loan Document or otherwise; and (ix) any transactions related to the funding, carrying or repayment of the outstanding principal amount of the Advances in connection with the Program Documents; EXCEPT to the extent any such Liability is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence, bad faith or willful misconduct.
(c) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this SECTION 9.04 shall survive the termination of this Agreement and the payment in full of principal and Yield on the Advances.
SECTION 9.05. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement.
SECTION 9.06. ASSIGNABILITY.
(a) This Agreement and the Conduit Lender's rights and obligations herein (including the outstanding Advances) shall be assignable by such Conduit Lender to an Eligible Assignee; PROVIDED, that without the prior written consent of the Borrower (which consent shall not be unreasonably withheld or delayed and which consent shall, in any event, not be required if an Event of Default shall have occurred and be continuing) such Conduit Lender shall not assign its rights and obligations under this Agreement to any Person other than to a U.S. Affiliate of the Agent which is a special purpose entity that issues promissory notes. Each such assignor shall notify the Agent and the Borrower of any such assignment. Each such assignor may, in connection with the assignment or participation, disclose to the assignee or participant any information relating to the Borrower, including the Pledged Collateral, furnished to such assignor by or on behalf of the Borrower or by the Agent; PROVIDED that, prior to any such disclosure, the assignee or participant agrees to preserve the confidentiality of any confidential information relating to the Borrower received by it from any of the foregoing entities. Notwithstanding the
foregoing, without the consent of the Borrower, the Conduit Lender may, pursuant to an Asset Purchase Agreement or otherwise, sell, assign, transfer and convey all or any portion of the Advances maintained by the Conduit Lender, together with all rights hereunder and under the Program Documents in respect thereof, to any bank or financial institution which is also a Secondary Lender.
(b) Each Secondary Lender may, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed and which consent shall, in any event, not be required if an Event of Default shall have occurred and be continuing), assign to any Eligible Assignee or to any other Secondary Lender all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Secondary Lender Commitment and the outstanding Advances or interests therein owned by it); provided that the Borrower's consent to any such assignment shall not be required if the assignee is an existing Secondary Lender or a U.S. Affiliate of an existing Secondary Lender. The parties to each such assignment shall execute and deliver to the Agent an Assignment and Acceptance. Notwithstanding the foregoing, each Secondary Lender may assign any of its rights (including, without limitation, rights to payment of principal and Yield on the Advances) under this Agreement to any Federal Reserve Bank without notice to or consent of the Borrower.
(c) The Agent may, with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed and which consent shall, in any event, not be required if an Event of Default has occurred and is continuing), assign this Agreement and its rights and obligations hereunder; provided that the Borrower's consent to any such assignment shall not be required if the assignee is a U.S. Affiliate of the Agent.
(d) The Borrower may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the Agent.
(e) The Borrower acknowledges and agrees that each Lender's (other than the Conduit Lender) and each Secondary Lender's source of funds may derive in part from its participants. Accordingly, references in SECTIONS 2.06, 2.07, 2.08, 2.09, 9.03 and 9.04 and the other terms and provisions of this Agreement and the other Program Documents to rates, determinations, reserve and capital adequacy requirements, accounting principles, expenses, increased costs, reduced receipts and the like as they pertain to the Lender and the Secondary Lenders shall be deemed also to include those of each of its participants; PROVIDED that no participant shall be entitled to any amount under any such Sections or provisions, which is greater than the amount the related Lender or Secondary Lender, as the case may be, would have been entitled to under any such Sections or provisions if the applicable participation had not occurred.
(f) The Agent shall maintain at its address specified in SECTION 9.02 or such other address as the Agent shall designate in writing to the Lenders and Secondary Lenders a copy of this Agreement and each signature page hereto and each Assignment and Acceptance delivered to and accepted by it and a register (the "REGISTER") for the recordation of the names and addresses of the Secondary Lenders, their Secondary Lender Commitments, effective dates and Secondary Lender Stated Expiration Date, and
the aggregate outstanding principal amount of the outstanding Advances made by each Secondary Lender under this Agreement. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Secondary Lenders may treat each Person whose name is recorded in the Register as a Secondary Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Secondary Lender at any reasonable time and from time to time upon reasonable prior notice.
SECTION 9.07. GOVERNING LAW.
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.
SECTION 9.08. SEVERABILITY OF PROVISIONS.
Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
SECTION 9.09. CONFIDENTIALITY.
(a) By accepting delivery of this Agreement, the Borrower agrees not
to disclose to any person or entity the existence of this Agreement, any
term sheet related hereto or the Program Documents or the terms hereof or
thereof (including, without limitation, any specific pricing information
provided by the Agent, any Secondary Lender or any Lender or the amount or
terms of any fees payable to the Agent, any Secondary Lender or any Lender
in connection with the transactions contemplated by the Program Documents),
the proposal or structure of such transactions, any related structures
developed by the Agent, any Secondary Lender or any Lender for the
Borrower, any related analyses, computer models, information or documents,
any written or oral reports from the Agent, any Secondary Lender or any
Lender to the Borrower or any related written information or the existence
or status of any ongoing negotiations between the Borrower and the Agent,
any Secondary Lender or any Lender concerning the transactions contemplated
by the Program Documents (collectively, the "Product Information"), except
(i) to its and its affiliates' officers, directors, employees, agents,
accountants, legal counsel and other representatives (collectively, the
"Borrower Representatives") who have a need to know the Product Information
for the purpose of assisting in the negotiation and completion of the
transactions contemplated by the Program Documents and who agree to be
bound by the provisions of this section applicable to the Borrower, or (ii)
to the extent required by applicable law, regulation, subpoena or other
legal process. The Borrower will be responsible for any failure of any
Borrower Representative to comply with the provisions of this section
applicable to the Borrower.
(b) Neither the Agent, any Secondary Lender nor any Lender will disclose to any person or entity the confidential or proprietary information of the Borrower furnished to the Agent, any Secondary Lender or any Lender in connection with the transactions contemplated by the Program Documents (the "Borrower Information"), except (i) to its and its affiliates' officers, directors, employees, agents, accountants, legal counsel and other representatives (collectively, the "Lender Representatives") who have a need to know the Borrower Information for the purpose of assisting in the negotiation and completion of the transactions contemplated by the Program Documents and who agree to be bound by the provisions in this section applicable to the Agent, the Secondary Lenders and the Lenders, (ii) to the extent required by applicable law, regulation, subpoena or other legal process, (iii) to the extent requested by any governmental or regulatory authority having jurisdiction over the Agent, any Secondary Lender or any Lender or any Lender Representative, (iv) to the rating agencies, or (v) to credit enhancers and dealers and investors in respect of promissory notes of any Lender or any Secondary Lender in accordance with the customary practices of such Lender or Secondary Lender for disclosures to credit enhancers, dealers or investors, as the case may be, it being understood that any such disclosure to dealers or investors will not identify the Borrower or any of its affiliates by name. The Agent, each Secondary Lender and each Lender will be responsible for any failure of the Agent, such Secondary Lender, such Lender, or any Lender Representative of the Agent, such Secondary Lender or such Lender, as applicable, to comply with the provisions of this section applicable thereto.
(c) Notwithstanding any other provision of this Agreement, each party (and each participant pursuant to Section 9.06) (and each employee, representative or other agent of such party (or participant)) may disclose to any and all persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the transactions contemplated by the Program Documents and all materials of any kind (including opinions or other tax analyses) that are provided to such party relating to such U.S. tax treatment and U.S. tax structure, other than any information for which nondisclosure is reasonably necessary in order to comply with applicable securities laws.
(d) Product Information and Borrower Information shall not include, however, information that is a matter of general public knowledge or has heretofore been or is hereafter published in any source generally available to the public other than as a result of a disclosure by any person required to keep such information confidential as provided in this section.
(e) The obligations of the Borrower, the Agent, each Secondary Lender and each Lender under this section shall be in effect from the date of this Agreement until three years from the date of this Agreement.
SECTION 9.10. MERGER.
The Program Documents taken as a whole incorporate the entire agreement between the parties thereto concerning the subject matter thereof. The Program Documents supersede any prior agreements among the parties relating to the subject matter thereof.
SECTION 9.11. NO PROCEEDINGS; NO RECOURSE.
(a) Each of the parties to this Agreement and each assignee of any Advance or any interest therein and each entity which enters into a commitment to make Advances to the Borrower hereunder hereby agrees that it will not institute against the Conduit Lender any proceeding of the type referred to in SECTION 6.01(f) so long as any commercial paper or other senior indebtedness issued by the Conduit Lender shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such commercial paper or other senior indebtedness shall have been outstanding.
(b) The obligations of the Conduit Lender under and in connection with this Agreement and the other Program Documents are solely the obligations of the Conduit Lender. It is expressly agreed that no recourse shall be had for the payment of any amount owing in respect of this Agreement or any other Program Document or for any other obligation or claim arising out of or based upon this Agreement or any other Program Document, against any member, stockholder, employee, officer, manager, director, organizer or incorporator of the Conduit Lender or against any member, stockholder, employee, officer, manager, director, organizer or incorporator of any such member, stockholder or manager.
SECTION 9.12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made hereunder, in the other Program Documents and in any document, certificate or statement delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery of this Agreement and the making of the Advances hereunder.
SECTION 9.13. LOAN DOCUMENTS.
No obligation or liability of the Borrower is intended to be assumed by the Agent, or any other Secured Party under or as a result of this Agreement or the other Program Documents, and the transactions contemplated hereby and thereby, including, without limitation, under any Loan Document and, to the maximum extent permitted under provisions of law, the Agent and the other Secured Parties expressly disclaim any such assumption. If an Event of Default under SECTION 6.01(f) in respect of the Borrower shall have occurred and is continuing or the Agent shall have delivered a Notice of Exclusive Control to the Custodian, and such notice has not been revoked by the Agent, the Borrower will use its best efforts to obtain and give all necessary consents under all Loan Documents relating to any Pledged Collateral and execute and deliver all agreements and documents which are necessary or appropriate in order to enable the Secured Parties to enforce their rights and remedies hereunder and under the other Program Documents, including, without limitation, to permit the Pledged Collateral which constitutes Loan Assets to be assigned to the Agent or its designees. In addition, the Borrower shall pay all assignment fees which are required to be paid pursuant to the Loan Documents relating to the Pledged Collateral in connection with the foregoing. The Agent and the Secured Parties acknowledge that in order to enforce certain of their remedies in respect of the Pledged Collateral which constitutes Loan Assets after the occurrence and during the continuance of an
Event of Default, certain provisions of the related Loan Documents may need to be complied with, including provisions requiring the consent of the related Transaction Agent and/or Obligor.
The Agent agrees that if it would be prevented from reviewing any Loan Document relating to an Eligible Loan Asset in connection with the exercise of its rights under SECTION 5.01(i) or SECTION 7.04, as a result of any confidentiality agreement entered into by the Borrower in respect thereof, and if it's review of such Loan Documents would be permitted if it agrees to maintain the confidentiality of such Loan Documents in accordance with the terms of such confidentiality agreement (each such confidentiality agreement a "Subject Confidentiality Agreement"), the Agent hereby agrees to abide by the terms of such Subject Confidentiality Agreement in respect of such Loan Documents.
SECTION 9.14. SUBMISSION TO JURISDICTION; WAIVERS.
The Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to this Agreement or the other Program Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts of any of them;
(b) consents that any such action or proceeding may be brought in any of such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in SECTION 9.02 or at such other address as may be permitted thereunder;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction or court; and
(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.
SECTION 9.15. E-MAIL REPORTS.
Subject to the following terms and conditions, the Borrower may, unless otherwise notified to the contrary by the Agent, transmit Investor Reports and Weekly Portfolio Reports to the Agent by electronic mail (each an "E-Mail Report"). Each E-Mail Report shall be formatted as the Agent may reasonably designate from time to time. Each E-Mail Report shall
be sent to the Agent at an electronic mail address designated by the Agent, and the executed "summary sheet" for each E-Mail Report shall be transmitted via facsimile transmission to the Agent at the facsimile numbers specified for the Agent in SECTION 9.02.
SECTION 9.16. WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER PROGRAM DOCUMENT OR FOR ANY COUNTERCLAIM THEREIN OR RELATING THERETO.
SECTION 9.17. SEVERAL OBLIGATIONS.
Except for the commitment of the Secondary Lenders to make Advances if the Conduit Lender has declined to make an Advance to the extent expressly required by SECTION 2.02, no Lender or Secondary Lender shall be responsible for the failure of any other Lender or Secondary Lender to make any Advance or to perform any obligation on this Agreement or any other Program Document. The Agent shall not have any liability to the Borrower, any Lender or any Secondary Lender for the Borrower's, any Lender's, any Secondary Lender's, as the case may be, performance of, or failure to perform, any of their respective obligations and duties under this Agreement or any other Program Document.
SECTION 9.18. LIMITATION ON LIABILITY.
No claim may be made by the Borrower or any other Person against the Agent, any Lender or any Secondary Lender or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory or liability arising out of or related to the transactions contemplated by this Agreement or any other Program Document, or any act, omission or event occurring in connection therewith; and the Borrower hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. As provided for in Section 1 of Article IX of the Agreement and Declaration of Trust, made as of December 2, 1987, as amended April 12, 1996, October 23, 1998, October 20, 2000 and February 20, 2002, of the Borrower (under which the Borrower is organized as a voluntary association with transferable shares under the laws of the Commonwealth of Massachusetts), the shareholders, trustees, officers, employees and other agents of the Borrower shall not personally be bound by or liable for the matters set forth herein or in any other Program Document, nor shall resort be had to their private property for the satisfaction of any obligation or claim hereunder or under any other Program Document.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
CRC FUNDING, LLC, as Conduit Lender By: Citicorp North America, Inc., its Attorney-In-Fact
By: /s/ Susan M. Olsen --------------------------------------------------- Name: Susan M. Olsen Title: Vice President |
CITICORP NORTH AMERICA, INC., as Agent
By: /s/ Susan M. Olsen --------------------------------------------------- Name: Susan M. Olsen Title: Vice President |
CITIBANK, N.A., as Secondary Lender
By: /s/ Susan M. Olsen --------------------------------------------------- Name: Susan M. Olsen Title: Vice President Percentage: 100% |
ING PRIME RATE TRUST,
as Borrower
By: /s/ Daniel A. Norman --------------------------------------------------- Name: Daniel A. Norman Title: Senior Vice President |
SCHEDULE I
FORM OF INVESTOR REPORT
See Attached
BAM
PORTFOLIO DATA WORKSHEET
BAM VERSION 2.0 ------------------------------------- --------- CUSTOMER NO (#) 1 Obtain from Harrison (Madeleine Macintyre). FACILITY NO (#) 1691 Obtain from Harrison (Madeleine Macintyre). REPORT MONTH (#) 6 The formula should yield a number between 1 and 12. REPORT YEAR (#) 2003 The formula should yield a number like 1997, 1998, etc. "AS OF" DATE 6/27/2003 The "as of" date for the Outstanding Capital Balance, etc. SELLER REPORT/FILE VERSION NO 2.0 Used to verify what version of the file the customer is using. |
Dollar Amounts
/ / Thousand (x $1,000) /X/ Whole Dollars ($1) or Dollars and Cents ($ 1.00) / / Millions (x $1,000,000) |
All dollar amounts in this BAMI worksheet must be consistent. E.g., If the Thousands option is selected above, all dollar amounts will be multiplied by 1,000 when they are transferred into the portfolio database.
ALL AMOUNTS IN THIS BAM WORKSHEET MUST BE EXPRESSED IN US$
For Non-US$ denominated Seller Reports use the Seller Report's exchange rate in the formulas entered below
I. AGINGS DATA
ENTER FORMULAS ENTER (OR POINT TO) THE AGINGS BUCKET THAT POINT TO THE DESCRIPTIONS USED IN THIS DEAL (E.G., DATA IN THE SELLER CURRENT, 1-30 DAYS PAST DUE, ETC.) REPORT. ----------------------------------------- ------------------ AGING BUCKET DESCRIPTION AGING AMOUNTS ----------------------------------------- ------------------ 1 2 3 4 5 6 7 8 9 10 |
II. REQUIRED DATA ELEMENTS
Enter formulas to link to the data or calculation results in the Seller Report
worksheet.
If a line item does not apply to this deal, leave the cell blank.
DESCRIPTION VALUE ----------- ----- 1 COLLECTIONS - PRINCIPAL ($) Required for all deals. 2 COLLECTIONS - FINANCE CHARGES ($) Applicable only to interest-bearing receivables. 3 ASSET DILUTIONS ($) 4 ASSET GROSS WRITE OFFS ($) Required for all deals. 5 ASSET RECOVERIES ($) Required for all deals. 6 SALES ($) 7 AVERAGE MATURITY (DAYS) As used in the calculation of the liquidation yield reserve. 8 BREAKAGE RESERVE ($) 9 CAPITAL COVERAGE (%) 1530.170% 10 COLLECTION AGENT FEE RESERVE ($) 11 DEFAULT RECEIVABLES ($) 12 DEFAULT RATIO (%) 13 DELINQUENT RECEIVABLES ($) 14 DELINQUENCY RATIO (%) 15 CURRENT LOSS-TO-LIQUIDATION RATIO (%) 16 ROLLING AVERAGE LTL RATIO (%) As defined in the transaction documentation. (3-month/6-month/12-month/etc.) 17 DILUTION RESERVE ($) 18 ELIGIBLE ASSET SHARE (%) 100.000% 19 LOSS PROTECTION (%) 1530.170% Required for all deals. 20 LOSS RECOURSE ($) { One or the other is required for all deals. 21 LOSS RESERVE ($) 1,196,561,978 { One or the other is required for all deals. 22 NET ASSET POOL BALANCE ($) 836,523,312 Required for all deals. 23 OTHER RECOURSE ($) { One or the other may apply, but not both 24 OTHER RESERVES ($) { One or the other may apply, but not both 25 TOTAL CAPITAL OUTSTANDING ($) 98,000,000 Required for all deals. 26 TOTAL NUMBER OF OBLIGORS (#) 27 YIELD RECOURSE ($) { One or the other may apply, but not both 28 YIELD RESERVE ($) { One or the other may apply, but not both 29 Reserved for Future Use 30 Reserved for Future Use OTHER FORMS OF LOSS PROTECTION 31 SUBORDINATED DEBT ($) { One or more may apply 32 LETTERS OF CREDIT ($) { One or more may apply 33 CASH COLLATERAL ($) { One or more may apply 34 SPREAD ACCOUNT ($) { One or more may apply RE CREDIT CARD DEALS 35 PORTFOLIO YIELD (%) 36 BASE RATE (%) |
37 NET LOSS (%) 38 EXCESS SPREAD (%) 39 PAYMENT RATIO (%) |
III. COMPLIANCE TESTS
ENTER (OR ENTER FORMULAS THAT POINT TO) THE ENTER FORMULAS NAMES/DESCRIPTIONS OF THE COMPLIANCE ENTER (OR POINT TO) ENTER "MIN" OR THAT POINT TO THE TESTS FOR THIS DEAL. LEAVE BLANKS IF THERE THE TEST LIMIT FOR "MAX" FOR EACH TEST RESULT IN THE ARE FEWER THAN TEN. EACH TEST. TEST. SELLER REPORT. --------------------------------------------- -------------------- -------------- ------------------ TEST DESCRIPTION TEST LIMIT TYPE (MIN/MAX) TEST RESULT --------------------------------------------- -------------------- -------------- ------------------ 1 Borrowing Base Test (%) 100.00% MIN 850.590% 2 Asset Coverage Test (%) 300.00% MIN 1530.170% 3 4 5 6 7 8 9 10 |
IV. OBLIGOR DATA
Enter FORMULAS that point to this data in the Seller Report worksheet
TEN LARGEST NORMAL OBLIGORS BALANCE ($) LIMIT ($) EXCESS ($) ------------------------------------------------ ------------------ -------------- ------------------ 1 Nextel Finance Company 47,993,010 48,465,859 2 Charter Communications Operating Llc 34,898,151 48,465,859 3 Safelite Glass Corp. 13,831,998 48,465,859 4 Mandalay Resort Group 13,534,829 48,465,859 5 Fitness Holdings Worldwide, Inc. 12,426,857 48,465,859 6 Dean Foods Company 12,370,277 48,465,859 7 Ford Motor Credit Company 12,036,408 48,465,859 8 Lamar Media Corporation 12,027,504 48,465,859 9 Metro-Goldwyn-Mayer Studios, Inc. 12,015,143 48,465,859 10 Riverwood International Corporation 11,985,936 48,465,859 11 SUM OF REMAINING NORMAL OBLIGORS ($) |
Enter FORMULAS that point to this data in the Seller Report worksheet.
ALL SPECIAL OBLIGORS BALANCE ($) LIMIT ($) EXCESS ($) ------------------------------------------------ ------------------ -------------- ------------------ 1 |
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 |
44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 |
Annex A to Schedule I
Investor Report Officer's Certificate
The undersigned, _______________, Authorized Signatory of ING Prime Rate Trust (the "Borrower") pursuant to that certain Revolving Credit and Security Agreement, dated as of July 16, 2003 among the Borrower, CRC Funding, LLC, and Citicorp North America, Inc., as agent (the "Agent"), as the same may be amended, modified or supplemented from time to time (the "Credit Agreement"), hereby certifies that:
1. The Investor Report furnished herewith to the Agent pursuant to
SECTION 5.01(e) of the Credit Agreement is true, accurate and complete as of
the date hereof.
2. Except as expressly disclosed in writing to the Agent, no event has occurred and is continuing which would constitute a Default or an Event of Default.
3. Except as expressly disclosed in writing to the Agent, as of the date hereof, the Borrower is in full compliance with the Borrowing Base Test and the Asset Coverage Test.
4. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such terms in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has duly signed on behalf of the Borrower as of the date set forth below.
SCHEDULE II
FORM OF WEEKLY PORTFOLIO REPORT
See Attached
BAM
PORTFOLIO DATA WORKSHEET
BAM VERSION 2.0 ------------------------------------- --------- CUSTOMER NO (#) 1 Obtain from Harrison (Madeleine Maclntyre). FACILITY NO (#) 1691 Obtain from Harrison (Madeleine Maclntyre). REPORT MONTH (#) 6 The formula should yield a number between 1 and 12. REPORT YEAR (#) 2003 The formula should yield a number like 1997, 1998, etc. "AS OF" DATE 6/27/2003 The "as of" date for the Outstanding Capital Balance, etc. SELLER REPORT/FILE VERSION NO 2.0 Used to verify what version of the file the customer is using. |
Dollar Amounts
/ / Thousands (x $1,000) /X/ Whole Dollars ($1) or Dollars and Cents ($1.00) / / Millions (x $1,000,000) |
All dollar amounts in this BAMI worksheet must be consistent. E.g., If the THOUSANDS option is selected above, all dollar amounts will be multiplied by 1,000 when they are transferred into the portfolio database.
ALL AMOUNTS IN THIS BAM WORKSHEET MUST BE EXPRESSED IN US$
For Non-US$ denominated Seller Reports use the Seller Report's exchange rate in the formulas entered below
I. AGINGS DATA
ENTER FORMULAS ENTER (OR POINT TO) THE AGINGS BUCKET THAT POINT TO THE DESCRIPTIONS USED IN THIS DEAL (E.G., DATA IN THE SELLER CURRENT, 1-30 DAYS PAST DUE, ETC.) REPORT. ----------------------------------------- ------------------ AGING BUCKET DESCRIPTION AGING AMOUNTS ----------------------------------------- ------------------ 1 2 3 4 5 6 7 8 9 10 |
II. REQUIRED DATA ELEMENTS
Enter FORMULAS to link to the data or calculation results in the Seller Report
worksheet.
If a line item does not apply to this deal, leave the cell blank.
DESCRIPTION VALUE ----------- ----- 1 COLLECTIONS - PRINCIPAL ($) Required for all deals. 2 COLLECTIONS - FINANCE CHARGES ($) Applicable only to interest-bearing receivables. 3 ASSET DILUTIONS ($) 4 ASSET GROSS WRITE OFFS ($) Required for all deals. 5 ASSET RECOVERIES ($) Required for all deals. 6 SALES ($) 7 AVERAGE MATURITY (DAYS) As used in the calculation of the squidation yield reserve. 8 BREAKAGE RESERVE ($) 9 CAPITAL COVERAGE (%) 1530.170% 10 COLLECTION AGENT FEE RESERVE ($) 11 DEFAULT RECEIVABLES ($) 12 DEFAULT RATIO (%) 13 DELINQUENT RECEIVABLES ($) 14 DELINQUENCY RATIO (%) 15 CURRENT LOSS-TO-LIQUIDATION RATIO (%) 16 ROLLING AVERAGE LTL RATIO (%) As defined in the transaction documentation. (3-month/6-month/12-month/etc.) 17 DILUTION RESERVE ($) 18 ELIGIBLE ASSET SHARE (%) 100.000% 19 LOSS PROTECTION (%) 1530.170% Required for all deals. 20 LOSS RECOURSE ($) { One or the other is required for all deals. 21 LOSS RESERVE ($) 1,196,561,978 { One or the other is required for all deals. 22 NET ASSET POOL BALANCE ($) 836,523,312 Required for all deals. 23 OTHER RECOURSE ($) { One or the other may apply, but not both 24 OTHER RESERVES ($) { One or the other may apply, but not both 25 TOTAL CAPITAL OUTSTANDING ($) 98,000,000 Required for all deals. 26 TOTAL NUMBER OF OBLIGORS (#) 27 YIELD RECOURSE ($) { One or the other may apply, but not both 28 YIELD RESERVE ($) { One or the other may apply, but not both 29 Reserved for Future Use 30 Reserved for Future Use OTHER FORMS OF LOSS PROTECTION 31 SUBORDINATED DEBT ($) { One or more may apply 32 LETTERS OF CREDIT ($) { One or more may apply 33 CASH COLLATERAL ($) { One or more may apply 34 SPREAD ACCOUNT ($) { One or more may apply RE CREDIT CARD DEALS 35 PORTFOLIO YIELD (%) 36 BASE RATE (%) |
37 NET LOSS (%) 38 EXCESS SPREAD (%) 39 PAYMENT RATIO (%) |
III. COMPLIANCE TESTS
ENTER (OR ENTER FORMULAS THAT POINT TO) THE ENTER FORMULAS NAMES/DESCRIPTIONS OF THE COMPLIANCE ENTER (OR POINT TO) ENTER "MIN" OR THAT POINT TO THE TESTS FOR THIS DEAL. LEAVE BLANKS IF THERE THE TEST LIMIT FOR "MAX" FOR EACH TEST RESULT IN THE ARE FEWER THAN TEN. EACH TEST. TEST. SELLER REPORT. --------------------------------------------- -------------------- -------------- ------------------ TEST DESCRIPTION TEST LIMIT TYPE (MIN/MAX) TEST RESULT --------------------------------------------- -------------------- -------------- ------------------ 1 Borrowing Base Test (%) 100.00% MIN 850.590% 2 Asset Coverage Test (%) 300.00% MIN 1530.170% 3 4 5 6 7 8 9 10 |
IV. OBLIGOR DATA
Enter FORMULAS that point to this data in the Seller Report worksheet.
TEN LARGEST NORMAL OBLIGORS BALANCE ($) LIMIT ($) EXCESS ($) ------------------------------------------------ ------------------ -------------- ------------------ 1 Nextel Finance Company 47,993,010 48,465,859 2 Charter Communications Operating Llc 34,898,151 48,465,859 3 Safelite Glass Corp. 13,831,998 48,465,859 4 Mandalay Resort Group 13,534,829 48,465,859 5 Fitness Holdings Worldwide, Inc. 12,426,857 48,465,859 6 Dean Foods Company 12,370,277 48,465,859 7 Ford Motor Credit Company 12,036,408 48,465,859 8 Lamar Media Corporation 12,027,504 48,465,859 9 Metro-Goldwyn-Mayer Studios, Inc. 12,015,143 48,465,859 10 Riverwood International Corporation 11,985,936 48,465,859 11 SUM OF REMAINING NORMAL OBLIGORS ($) |
Enter FORMULAS that point to this data in the Seller Report worksheet.
ALL SPECIAL OBLIGORS BALANCE ($) LIMIT ($) EXCESS ($) ------------------------------------------------ ------------------ -------------- ------------------ 1 |
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 |
44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 |
Annex A to Schedule II
Weekly Portfolio Report Officer's Certificate
The undersigned, _______________, Authorized Signatory of ING Prime Rate Trust (the "Borrower") pursuant to that certain Revolving Credit and Security Agreement, dated as of July 16, 2003 among the Borrower, CRC Funding, LLC and Citicorp North America, Inc., as agent (the "Agent"), as the same may be amended, modified or supplemented from time to time (the "Credit Agreement"), hereby certifies that:
1. The aggregate outstanding principal balance of Advances as of the date hereof is $___________.
2. The aggregate Asset Value of the Eligible Collateral as of the date hereof is $___________.
3. The Borrowing Base as of the date hereof is $_________.
4. Except as expressly disclosed in writing to the Agent, no event has occurred and is continuing which would constitute a Default or an Event of Default.
5. The Weekly Portfolio Report to which this certificate is attached is true, accurate and complete. (1)
6. Except as expressly disclosed in writing to the Agent, as of the date hereof, the Borrower is in compliance with the Borrowing Base Test and the Asset Coverage Test.
7. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such terms in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned has duly signed on behalf of the Borrower as of the date set forth below.
Title:
SCHEDULE III
SCOPE OF AUDIT PROCEDURES
See Attached
ING Prime Rate Trust (the "Fund")
Agreed Upon Procedures to be Performed Annually by the External Accountants
Select three Monthly Investor Reports (the "Investor Reports"), including the Monthly Investor Report corresponding to the Fund's year-end (the "Year-end Investor Report"). Perform the following procedures for each Investor Report, except as otherwise specified (captions refer to Investor Report sections):
I. Calculation of the Borrowing Base
1. Agree the aggregate Asset Value of Borrowing Base Eligible Assets on the Investor Reports to the Fund's supporting documentation. Agree the aggregate Asset Value of Borrowing Base Eligible Assets on the Year-end Investor Report to the total of the portfolio of investments included in the Fund's audited financial statements.
2. Agree the aggregate Adjusted Asset Value of Borrowing Base Eligible Assets.
3. Agree Aggregate Asset Value of Borrowing Base Eligible Assets to the total of Input Section II: System Download of the Investor Report.
4. Agree all Excess Concentrations (Obligor > 5%, Industry > 20%, Foreign OECD Loan Assets > 25%, Foreign OECD Assets - Single Country > 10%, Distressed Assets > 10%, Maturity Greater than 10 years > 10%, Unsecured Loan Assets > 10%, Participation Interests from a single Selling Institution > 10%, Credit Linked Notes > 10%, Class E or Class F Bond Assets > 20% and Fixed Rate Loan Assets > 10%) to the total of sections IV: Excess Obligor Concentrations, V: Excess Industry Concentrations and VI: Other Borrowing Base Excess Concentrations.
5. Recalculate the Borrowing Base.
II. Calculation of Credits Outstanding
1. Recalculate Credits Outstanding (sum of (i) Principal Balance of Advances - Capital Outstanding, (ii) Custodian Overdrafts Outstanding, and (iii) Accrued Interest for 60 Days at Assignee Rate).
III. Compliance Tests
1. Recalculate compliance for the Borrowing Base Test (Borrowing Base divided by Total Credits Outstanding) and Asset Coverage Test - 40 Act Test (Net Assets plus Accrued Interest plus Principal Outstanding divided by Accrued Interest plus Principal Outstanding).
2. Recalculate compliance of the Remedial Paydown Calculation if the Borrowing Base Test and Asset Coverage Test fail.
3. Recalculate the Credits Outstanding after Paydown (Pre-Paydown Credit Outstanding Less Actual Paydown).
IV. Excess Obligor Concentrations
1. Select ten obligors from this section and agree the obligor names and the Adjusted Asset Value to the Fund's supporting documentation.
2. For the selected obligors, recalculate the Obligor Excess Concentrations, if any.
3. For the selected obligors, verify that the obligor totals were properly aggregated by tracing the obligor names to Input Section II: System Download.
V. Excess Industry Concentration
1. Select ten industries from this section and agree the industry name and the Total Adjusted Asset Value per Industry to the Fund's supporting documentation.
2. For the selected industries, recalculate the Industry Excess Concentrations, Obligor/Industry Overlap and Net Industry Concentration, if any.
3. For the selected industries, verify that the industry totals were properly aggregated by tracing the industry names to Input Section II: System Download.
VI. Other Excess Concentrations
1. Agree the Total Adjusted Asset Value for Approved Foreign Assets, Foreign Assets relating to obligors in a single OECD country, Distressed Assets, Unsecured Loan Assets, Fixed Rate Loan Assets, Credit Linked Notes, Class E or Class F Bond Assets and Selling Institution Participations to the Fund's supporting documentation. Additionally, select ten Single OECD Countries and agree the Total Adjusted Asset Value to the Fund's supporting documentation. In addition, agree the maximum unused commitments to fund future advances to the Fund's supporting documentation.
2. Recalculate the Gross Excess Concentrations and Net (with Obligor) Excess Concentrations for Approved Foreign Assets and Distressed Assets. Additionally, recalculate the Excess Concentrations, Obligor/Industry Overlap, Obligor/Distressed Assets Overlap and Net Single Country Concentration for Single OECD Countries.
3. For the other concentrations, verify that the industry totals were
properly aggregated by tracing the concentration categories to Input Section II:
System Download.
VII. Input Section II: System Download
1. Select a sample of 25 assets from the file. Agree all information by obligor to the Fund's supporting documentation.
2. For the sample selected in step 1, test whether the assets satisfy the criteria for Borrowing Base Eligible Assets per the Program Documents.
For the sample selected in step 1, agree their market value to the independent market value pricing source used by the Fund.
SCHEDULE IV
INDUSTRY CLASSIFICATIONS
Aerospace and Defense
Automobile
Banking
Beverage, Food and Tobacco
Broadcasting
Buildings and Real Estate
Cargo Transport
Chemicals, Plastics, and Rubber
Containers, Packaging, and Glass
Diversified Natural Resources
Diversified/Cong Manufacturing
Diversified/Conglomerate Service
Ecological
Electronics
Farming and Agriculture
Finance
Grocery
Healthcare, Education, Childcare
Home and Office Furnishings
Hotels, Motels, and Gaming
Insurance
Leisure, Amusement, Entertainment
Machinery
Mining, Steel, and Nonprecious Metals
Oil and Gas
Personal Transportation
Personal, Food and Misc Services
Personal/Nondurable Consumer Prod
Printing, Publishing
Retail Stores
Telecommunications
Textiles and Leather
Utilities
EXHIBIT A
[FORM OF ADVANCE NOTE]
$__________ _________,______
FOR VALUE RECEIVED, on the Maturity Date (as defined in the Credit Agreement defined below) of each Advance made by the [Conduit Lender] [Secondary Lender] the undersigned (the "Borrower") pursuant to the Credit Agreement (defined below), the Borrower hereby promises to pay to the order of [INSERT NAME OF CONDUIT LENDER OR SECONDARY LENDER] (together with its successors and assigns the ["Conduit Lender"] ["Secondary Lender"]) the unpaid principal amount of each such Advance in immediately available funds and in lawful money of the United States of America, and to pay Yield on the unpaid balance of said principal Advance from the Borrowing Date thereof, until the principal amount thereof shall have been paid in full, in like funds and money as provided in said Credit Agreement for Advances made by the [Conduit Lender] [Secondary Lender] and at the maturity thereof. Capitalized terms used in this promissory note unless otherwise defined herein shall have the meaning assigned to such terms in the Credit Agreement.
This promissory note is an Advance Note referred to in the Revolving Credit and Security Agreement dated as of July 16, 2003 (as from time to time amended, modified, or supplemented, the "Credit Agreement") among the Borrower, CRC Funding, LLC, as the Conduit Lender, the financial institutions parties thereto, and Citicorp North America, Inc., as agent. The date and principal amount of each Advance made to the Borrower and of each repayment of principal thereon shall be recorded by the [Conduit Lender] [Secondary Lender] or its designee on Schedule I attached to this Advance Note, and the aggregate unpaid principal amount shown on such schedule shall be rebuttable presumptive evidence of the principal amount owing and unpaid on the Advances made by the |Conduit Lender] [Secondary Lender]. The failure to record or any error in recording any such amount on such schedule shall not, however, limit or otherwise affect the obligations of the Borrower hereunder or under the Credit Agreement to repay the principal amount of the Advances together with all Yield accrued thereon.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
ING PRIME RATE TRUST
Title:
SCHEDULE I
TO EXHIBIT A
This Advance Note evidences Advances made by [INSERT NAME OF CONDUIT LENDER OR SECONDARY LENDER], (the ["Conduit Lender"] ["'Secondary Lender"]) under the Revolving Credit and Security Agreement dated as of July 16, 2003 among ING Prime Rate Trust, as Borrower, CRC Funding, LLC, as the Conduit Lender, and Citicorp North America, Inc., as agent in the principal amounts and on the dates set forth below, subject to the payments and prepayments of principal set forth below:
PRINCIPAL PRINCIPAL PRINCIPAL AMOUNT AMOUNT PAID BALANCE NOTATION DATE ADVANCED OR PREPAID OUTSTANDING BY ---- --------- ----------- ----------- -------- |
EXHIBIT B
[FORM OF NOTICE OF BORROWING]
ING PRIME RATE TRUST
Two Renaissance Square
40 North Central Avenue Suite 1200
Phoenix, AZ 85004-4424
Citicorp North America, Inc.,
as Agent
Citicorp North America, Inc.
450 Mamaroneck Avenue
Harrison, New York 10528
NOTICE OF BORROWING
This Notice of Borrowing is made pursuant to SECTION 2.02 of that certain Revolving Credit and Security Agreement dated as of July 16, 2003 among ING Prime Rate Trust, CRC Funding, LLC, Citibank, N.A., and Citicorp North America, Inc., as Agent (as the same may from time to time be amended, supplemented, waived or modified, the "Credit Agreement"). Unless otherwise defined herein, capitalized terms used herein have the meanings assigned to those terms in the Credit Agreement.
1. The Borrower hereby requests that on ______________, _____ (the "Borrowing Date") it receive Advances under the Credit Agreement in an aggregate principal amount of ____________ Dollars ($ ______).
2. The Borrower hereby gives notice of its request for such Advances to the Agent pursuant to SECTION 2.02 of the Credit Agreement, and requests the Conduit Lender or the Secondary Lenders, as applicable, remit, or cause to be remitted, the proceeds thereof to [the Borrower's Account (as defined in the Credit Agreement)] [SPECIFY OTHER ACCOUNT, IF APPLICABLE].
3. The Borrower certifies that (i) the representations and warranties of the
Borrower contained or reaffirmed in SECTION 4.01 of the Credit Agreement
and to the best of the Borrower's knowledge, the representations and
warranties of the Custodian, the Adviser and the Administrator contained in
the Program Documents to which each such person is a party, are true and
correct on and as of the date hereof to the same extent as though made on
and as of the date hereof (except to the extent such representations and
warranties expressly relate to any earlier date, which representations and
warranties shall be true and correct as of such earlier date) and shall
continue to be true immediately after giving effect to such Advance; (ii)
no Default or Event of Default has occurred and is continuing under the
Credit Agreement or will result from the proposed borrowing; (iii) the
conditions precedent to the making of the proposed Advance set forth in
SECTION 3.02 of the Credit Agreement have been
fully satisfied; (iv) immediately after giving effect to such Advance, the Borrowing Base Test and the Asset Coverage Test will be complied with and not more than 20% of its Assets is represented by Margin Stock; and (v) immediately after the making of any such Advance, the aggregate outstanding principal amount of all Advances shall not exceed the Total Commitment for the Borrower.
IN WITNESS WHEREOF, the undersigned has caused this Notice of Borrowing to be duly executed on its behalf on this ________ day of ________, ____.
ING PRIME RATE TRUST
Title:
EXHIBIT C
[FORM OF ASSIGNMENT AND ACCEPTANCE]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Revolving Credit and Security Agreement dated as of July 16, 2003 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement") among CRC FUNDING, LLC, (together with its successors and assigns, the "Conduit Lender"), CITIBANK, N.A., as a secondary lender (together with the other banks and financial institutions from time to time parties to the Credit Agreement, the "Secondary Lenders"), CITICORP NORTH AMERICA, INC., as agent (in such capacity, together with its successors and assigns, the "Agent") and ING PRIME RATE TRUST (together with its permitted successors and assigns, the "Borrower"). Terms defined in the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as follows:
1. As of the Effective Date (as defined below), the Assignor hereby absolutely and unconditionally sells and assigns, without recourse, to the Assignee, and the Assignee hereby purchases and assumes, without recourse to or representation of any kind (except as set forth below) from Assignor, an interest in and to the Assignor's rights and obligations under the Credit Agreement and under the other Program Documents equal to the percentage interest specified on Schedule I hereto, including the Assignor's Secondary Lender Commitment and Percentage and the Assignor's portion of the outstanding principal amount of the Advances (such rights and obligations assigned hereby being the "Assigned Interests"). After giving effect to such sale, assignment and assumption, the Assignee's "Secondary Lender Commitment" and the Assignee's "Percentage" will be as set forth on Schedule I hereto.
2. The Assignor (i) represents and warrants that immediately prior to the Effective Date it is the legal and beneficial owner of the Assigned Interest free and clear of any Lien created by the Assignor; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Program Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security or ownership interest created or purported to be created under or in connection with, the Program Documents or any other instrument or document furnished pursuant thereto or the condition or value of the Assigned Interest, Pledged Collateral, or any interest therein; and (iii) makes no representation or warranty and assumes no responsibility with respect to the condition (financial or otherwise) of any of the Borrower, the Agent, the Custodian, the Adviser, the Administrator or any other Person, or the performance or observance by any Person of any of its obligations under any Program Document or any instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit Agreement and the other Program Documents, together with copies of any financial statements delivered pursuant to SECTION 5.01 of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor, the Conduit Lender or any other Secondary Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under or in connection with any of the Program Documents; (iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Program Documents as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Program Documents are required to be performed by it as a Secondary Lender; (vi) confirms that the assignment hereunder complies with any applicable legal requirements including the Securities Act of 1933, as amended; (vii) confirms that such Assignee is a United States Person (as defined in Section 7701 (a)(30) of the Internal Revenue Code) or that such Assignee shall have provided the Agent with two Internal Revenue Service forms W-8ECI (or a successor form) certifying that the income from the Assigned Interest is effectively connected with the conduct of such Person's trade or business in the United States; and (viii) confirms that such Assignee is not a partnership, grantor trust or S corporation (as such terms are defined in the Internal Revenue Code).
4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date for this Assignment and Acceptance (the "Effective Date") shall be the date of acceptance hereof by the Agent, unless a later effective date is specified on Schedule I hereto.
5. Upon such acceptance and recording by the Agent, as of the Effective Date,
(i) the Assignee shall be a party to and bound by the provisions of the
Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Secondary Lender
thereunder and under any other Program Document and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish
its rights and be released from its obligations under the Credit Agreement
and under any other Program Document.
6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments to be made by it under the Credit Agreement in respect of the Assigned Interest to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Assigned Interests for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of Schedule I to this Assignment and Acceptance by telecopier shall be effective as a delivery of a manually executed counterpart of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule I to this Assignment and Acceptance to be executed by their officers thereunto duly authorized as of the date specified thereon.
Schedule I to Assignment and ACCEPTANCE
Percentage interest
transferred by Assignor: ___%
Assignee's "Secondary Lender Commitment": $___
Assignee's "Percentage" ___% Assignor: [INSERT NAME OF ASSIGNOR], as Assignor, By: --------------------------- Authorized Signatory Assignee: [INSERT NAME OF ASSIGNEE], as Assignee By: --------------------------- Authorized Signatory Accepted, Consented to and Acknowledged this ____ day of _________________, ____ |
CITICORP NORTH AMERICA, INC., as Agent
[ING PRIME RATE TRUST
Exhibit 99.(k)(iii)(1) SIDLEY AUSTIN BROWN & WOOD LLP BEIJING BANK ONE PLAZA LOS ANGELES BRUSSELS 10 S. DEARBORN STREET NEW YORK CHICAGO CHICAGO, ILLINOIS 60603 SAN FRANCISCO DALLAS TELEPHONE 312 853 7000 SHANGHAI GENEVA FACSIMILE 312 853 7036 SINGAPORE HONG KONG www.sidley.com TOKYO LONDON FOUNDED 1866 WASHINGTON, D.C. WRITER'S DIRECT NUMBER WRITER'S E-MAIL ADDRESS (312) 853-4151 crissler@sidley.com |
February 3, 2004
BY FEDERAL EXPRESS
To the Parties Identified on the attached Schedule
Re: AMENDMENT NO. 1 TO THE REVOLVING CREDIT AND SECURITY AGREEMENT
Dear Ladies and Gentlemen:
Enclosed please find one set of the documents executed and/or obtained in connection with that certain Amendment No. 1 to the Revolving Credit and Security Agreement, dated as of February 2, 2004, by and among ING Prime Rate Trust (the "Borrower"), CRC Funding, LLC, as conduit lender (the "Conduit Lender"), Citibank, N.A., as secondary lender (the "Secondary Lender") and Citicorp North America, Inc., as agent (the "Agent") under that certain Revolving Credit and Security Agreement (the "Credit Agreement"), dated as of July 16, 2003 by and among the Borrower, the Conduit Lender, the Secondary Lender and the Agent.
If you have further need of assistance, please feel free to call me at
(312) 853-4151.
Sincerely,
/s/ Christina B. Rissler Christina B. Rissler Enclosures |
SIDLEY AUSTIN BROWN & WOOD LLP IS AN ILLINOIS LIMITED LIABILITY PARTNERSHIP PRACTICING IN AFFILIATION WITH OTHER SIDLEY AUSTIN BROWN & WOOD PARTNERSHIPS
Execution Copy
AMENDMENT NO. 1
to
REVOLVING CREDIT AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 TO REVOLVING CREDIT AND SECURITY AGREEMENT (the
"AMENDMENT") is made as of February 2, 2004 by and among ING PRIME RATE TRUST
(the "BORROWER"), CRC FUNDING, LLC, as Conduit Lender (the "LENDER"), CITIBANK,
N.A., as Secondary Lender (the "SECONDARY LENDER"), and CITICORP NORTH AMERICA,
INC., in its capacity as contractual representative (the "AGENT") under that
certain Revolving Credit and Security Agreement dated as of July 16, 2003 by and
among the Borrower, the Lender, the Secondary Lender and the Agent (as amended,
restated, supplemented or otherwise modified, the "CREDIT AGREEMENT"). Defined
terms used herein and not otherwise defined herein shall have the meaning given
to them in the Credit Agreement.
WITNESSETH
WHEREAS, the Borrower, the Lender, the Secondary Lender and the Agent are parties to the Credit Agreement; and
WHEREAS, the Borrower, the Lender, the Secondary Lender and the Agent have agreed to amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto have agreed to the following amendment to the Credit Agreement:
1. AMENDMENT TO THE CREDIT AGREEMENT. Effective as of February 2, 2004, 2003 (the "Effective Date") and subject to the satisfaction of the conditions precedent set forth in SECTION 2 below, the Credit Agreement is hereby amended as follows:
1.1. The definition of "TOTAL COMMITMENT" now appearing in SECTION 1.01 of the Credit Agreement is amended to delete the amount "$325,000,000" and to substitute therefor the amount "$435,000,000".
2. CONDITIONS OF EFFECTIVENESS. The effectiveness of this Amendment
is subject to the conditions precedent that the Agent shall have received duly
executed originals of (i) an opinion of Dechert LLP, counsel of the Borrower,
(ii) a letter substantially in the form of SCHEDULE I attached hereto from the
Advisor and the Administrator reaffirming their respective Letter Agreement and
acknowledged and agreed to by the Agent and (iii) this Amendment from each of
the Borrower, the Lender, the Secondary Lender and the Agent.
3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
3.1. The Borrower hereby represents and warrants that this Amendment and the Credit Agreement as previously executed and as amended hereby, constitute legal, valid
and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms (except as enforceability may be limited by bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally).
3.2. Upon the effectiveness of this Amendment and after giving effect hereto, the Borrower hereby (i) reaffirms all covenants, representations and warranties made in the Credit Agreement as amended hereby, and agrees that all such covenants, representations and warranties are true and correct in all material respects as of the effective date of this Amendment, except for changes in the Schedules to the Credit Agreement reflecting events, conditions or transactions permitted by or not in violation of the Credit Agreement (unless such representation and warranty is made as of a specific date, in which case such representation and warranty shall be true and correct in all material respects as of such date) and (ii) certifies that no Default or Event of Default has occurred and is continuing.
4. REFERENCE TO THE EFFECT ON THE CREDIT AGREEMENT.
4.1. Upon the effectiveness of SECTION 1 hereof, on and after the date hereof, each reference in the Credit Agreement (including any reference therein to "this Credit Agreement," "hereunder," "hereof," "herein" or words of like import referring thereto) or in any other Program Document shall mean and be a reference to the Credit Agreement as amended hereby.
4.2. Except as specifically amended above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed.
4.3. The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent, the Lender or the Secondary Lender, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.
5. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.
6. HEADINGS. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.
7. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.
ING PRIME RATE TRUST, as Borrower
By: /s/ Daniel A. Norman ----------------------- Name: Daniel A. Norman Title: Senior Vice President |
CRC FUNDING, LLC, as the Lender
Title:
CITIBANK, N.A., as Secondary Lender
Title:
CITICORP NORTH AMERICA, INC., as
Agent
Title:
SIGNATURE PAGE TO AMENDMENT NO. 1 TO REVOLVING CREDIT AND SECURITY AGREEMENT
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.
ING PRIME RATE TRUST, as Borrower
Title:
CRC FUNDING, LLC, as the Lender
By: /s/ Susan M. Olsen ----------------------- Name: SUSAN M. OLSEN Title: Vice President Securitization 388 Greenwich Street, 19th Floor 212-816-0777 |
CITIBANK, N.A., as Secondary Lender
By: /s/ Susan M. Olsen ----------------------- Name: SUSAN M. OLSEN Title: Vice President Securitization 388 Greenwich Street, 19th Floor 212-816-0777 |
CITICORP NORTH AMERICA, INC., as
Agent
By: /s/ Susan M. Olsen ----------------------- Name: SUSAN M. OLSEN Title: Vice President Securitization 388 Greenwich Street, 19th Floor 212-816-0777 |
SIGNATURE PAGE TO AMENDMENT NO. 1 TO REVOLVING CREDIT AND SECURITY AGREEMENT
SCHEDULE I
FORM OF REAFFIRMATION LETTER
Reference is hereby made to that certain Amendment No. 1 to Revolving Credit and Security Agreement (the "AMENDMENT") made as of February 2, 2004 by and among ING Prime Rate Trust (the "BORROWER"), CRC Funding, LLC, as Conduit Lender (the "LENDER"), Citibank, N.A., as Secondary Lender (the "SECONDARY LENDER"), and Citicorp North America, Inc., in its capacity as contractual representative (the "AGENT") under that certain Revolving Credit and Security Agreement, dated as of July 16, 2003, by and among the Borrower, the Lender, the Secondary Lender and the Agent (as amended, restated, supplemented or otherwise modified, the "CREDIT AGREEMENT"). Defined terms used herein and not otherwise defined herein shall have the meaning given to them in the Credit Agreement.
Each of the Advisor and the Agent hereby agrees to amend the last paragraph of the Letter Agreement to which both are parties by adding the following language thereto:
"Any such subcontract, delegation or assignment shall not affect the Advisor's liability for performance of its duties and obligations pursuant to the terms hereof. Without limiting the generality of the foregoing, any action taken or omitted to be taken by any Person that has entered into a subcontract with the Advisor or to whom the Advisor has delegated or assigned any of its duties shall be deemed to be an action or omission by the Advisor."
Each of the Advisor and the Administrator hereby acknowledges that all references to the Credit Agreement in the Letter Agreement to which it is a party shall mean and be references to such Credit Agreement as amended by the Amendment. Each of the Advisor and the Administrator hereby reaffirms all of its obligations under the Letter Agreement to which it is a party, which Letter Agreement remains in full force and effect before and after giving effect to the amendment described in the Amendment and the amendment described herein as so amended hereby, if applicable, and such Letter Agreement is hereby ratified and confirmed.
ING INVESTMENTS, LLC, as Advisor
Title:
ING FUNDS SERVICES, LLC, as the
Administrator
Title:
SIGNATURE PAGE TO REAFFIRMATION OF LETTER AGREEMENTS
Acknowledged and agreed to
this ___ day of February, 2004 by,
CITICORP NORTH AMERICA, INC., as Agent
SIGNATURE PAGE TO REAFFIRMATION OF LETTER AGREEMENTS
[ING FUNDS LOGO]
Reference is hereby made to that certain Amendment No. 1 to Revolving Credit and Security Agreement (the "AMENDMENT") made as of February 2, 2004 by and among ING Prime Rate Trust (the "BORROWER"), CRC Funding, LLC, as Conduit Lender (the "LENDER"). Citibank, N.A., as Secondary Lender (the "SECONDARY LENDER"), and Citicorp North America, Inc., in its capacity as contractual representative (the "AGENT") under that certain Revolving Credit and Security Agreement, dated as of July 16, 2003, by and among the Borrower, the Lender, the Secondary Lender and the Agent (as amended, restated, supplemented or otherwise modified, the "CREDIT AGREEMENT"). Defined terms used herein and not otherwise defined herein shall have the meaning given to them in the Credit Agreement.
Each of the Advisor and the Agent hereby agrees to amend the last paragraph of the Letter Agreement to which both are parties by adding the following language thereto:
"Any such subcontract, delegation or assignment shall not affect the Advisor's liability for performance of its duties and obligations pursuant to the terms hereof. Without limiting the generality of the foregoing, any action taken or omitted to be taken by any Person that has entered into a subcontract with the Advisor or to whom the Advisor has delegated or assigned any of its duties shall be deemed to be an action or omission by the Advisor."
Each of the Advisor and the Administrator hereby acknowledges that all references to the Credit Agreement in the Letter Agreement to which it is a party shall mean and be references to such Credit Agreement as amended by the Amendment. Each of the Advisor and the Administrator hereby reaffirms all of its obligations under the Letter Agreement to which it is a party, which Letter Agreement remains in full force and effect before and after giving effect to the amendment described in the Amendment and the amendment described herein as so amended hereby, if applicable, and such Letter Agreement is hereby ratified and confirmed.
ING INVESTMENTS, LLC, as the Advisor ING FUNDS SERVICES, LLC, as the Administrator By: /s/ Daniel A. Norman By: /s/ Rob Naka -------------------------------- ---------------------------- Name: Daniel A. Norman Name: Rob Naka Title: Senior Vice President Title: Senior Vice President 7337 East Doubletree Ranch Road Tel: 480.477.3000 Scottsdale, AZ 85258-2034 Fax: 480.477.2700 www.ingfunds.com |
Acknowledged and agreed to this 2nd day of February, 2004 by, CITICORP NORTH AMERICA, INC., as Agent By: /s/ Susan M. Olsen ---------------------------- Name: SUSAN M. OLSEN Title: Vice President Securitization 388 Greenwich Street, 19th Floor 212-816-0777 |
SIGNATURE PAGE TO REAFFIRMATION OF LETTER AGREEMENTS
[ING FUNDS LOGO]
SECRETARY'S CERTIFICATE
The undersigned hereby certifies that he is the duly elected and acting Vice President and Assistant Secretary of ING Investments, LLC, an Arizona limited liability company, and does further certify that:
1. ING Investments, LLC is the investment adviser for ING Prime Rate Trust, a Massachusetts business trust (the "Trust").
2. In connection with the execution of, and entering into, by the Trust of that certain Amendment No. 1 to the Revolving Credit and Security Agreement by and among the Trust, CRC Funding, LLC, Citibank, N.A., and Citicorp North America, Inc., ING Investments, LLC has executed that certain Reaffirmation Letter in the form set forth as Schedule I to said Amendment No. 1.
3. The execution of the Reaffirmation Letter by ING Investments, LLC has been duly authorized by all requisite limited liability company action of ING Investments, LLC, the officer who executed such Reaffirmation Letter is a duly elected and authorized officer of ING Investments, LLC, and, once executed by such officer, the provisions of the Reaffirmation Letter shall be binding and enforceable against ING Investments, LLC in accordance with its terms.
4. ING Investments, LLC has the requisite power and authority to execute, deliver and perform its obligations under the Reaffirmation Letter. Such execution, delivery and performance:
(i) have been duly authorized by all necessary and proper limited liability company action on the part of ING Investments, LLC;
(ii) do not violate any provision of the Certificate of Formation or the Operating Agreement of ING Investments, LLC;
(iii) will not violate any law or regulation of the State of Arizona or of the United States of America applicable to ING Investments, LLC;
(iv) will not violate any order of any court applicable to ING Investments, LLC; and
(v) will not violate, or require the termination of, or require the approval or consent of any Person under the terms of any indenture, mortgage, deed of
7337 East Doubletree Ranch Road Tel: 480.477.3000 ING Investments, LLC Scottsdale, AZ 85258-2034 Fax: 480.477.2700 www.ingfunds.com
trust, loan agreement or any other material agreement to which ING Investments, LLC is a party or by which ING Investments, LLC or any of its properties may be bound.
IN WITNESS WHEREOF, the undersigned has executed this Secretary's Certificate this 2nd day of February, 2004.
/s/ William H. Rivoir III ----------------------------------------- William H. Rivoir III Vice President and Assistant Secretary |
CERTIFICATE OF INCUMBENCY OF OFFICERS OF
ING FUNDS SERVICES, LLC
The undersigned, William H. Rivoir III, hereby certifies that (i) he is the duly elected, qualified and acting Senior Vice President and Secretary for ING Funds Services, LLC, and (ii) the person named below has been duly elected, has duly qualified, and this day is an officer of ING Funds Services, LLC, holding the office set opposite his name, the signature set opposite his name is his genuine signature, and he has the authority to execute documents on behalf of ING Funds Services, LLC.
NAME TITLE SIGNATURE ---- ----- --------- Rob Naka Senior Vice President /s/ Rob Naka ------------ |
IN WITNESS WHEREOF, the undersigned has executed this Certificate on the 30th day of January, 2004.
/s/ William H. Rivoir III ---------------------------------------- William H. Rivoir III Senior Vice President and Secretary |
[DECHERT LLP LOGO]
BOSTON
BRUSSELS
FRANKFURT
HARRISBURG
HARTFORD
LONDON
LUXEMBOURG
NEW YORK
NEWPORT BEACH
PALO ALTO
PARIS
PHILADELPHIA
PRINCETON
SAN FRANCISCO
WASHINGTON
February 2, 2004
CRC Funding, LLC
as Conduit Lender
Citibank, N.A.,
as Secondary Lender
Citicorp North America, INC.,
as Agent, and the
Persons who are from time to time
Lenders under the Revolving Credit and
Security Agreement
c/o Citicorp North America, INC.
450 Mamaraneck Avenue
Harrison, New York 10528
Re: ING Prime Rate Trust
Ladies and Gentlemen:
We have acted as special counsel to ING Prime Rate Trust, a
Massachusetts business trust, in connection with that certain Amendment No. 1
made as of February 2, 2004 to that certain Revolving Credit and Security
Agreement dated as of July 16, 2003 by and among ING Prime Rate Trust, CRC
Funding, LLC, as Conduit Lender, Citibank, N.A., as Secondary Lender, and
Citicorp North America, Inc., in its capacity as contractual representative (the
"Amendment"). Capitalized terms used herein, but not otherwise defined herein,
shall have the meanings ascribed to such terms in the Credit Agreement, as
amended. This opinion is delivered to you at our clients' request pursuant to
Section 2(i) of the Amendment.
In rendering the opinions set forth herein, we have examined:
1. the Borrower's Agreement and Declaration of Trust, Bylaws and certificates of good standing received from The Commonwealth of Massachusetts and the State of Arizona;
2. the Borrower's Prospectus and Statement of Additional Information;
3. resolutions of the Executive Committee of the Board of Trustees of the Borrower with respect to the transactions referred to herein; and
4. such other agreements, instruments and documents as we have deemed necessary or appropriate to enable us to render the opinions expressed below.
LAW OFFICES OF DECHERT LLP
30 ROCKEFELLER PLAZA - NEW YORK, NY 10112-2200 + TEL: 212.698.3500
- FAX: 212.698.3599 - www.dechert.com
Additionally, we have examined originals or copies, certified to our satisfaction, of such certificates of public officials and officers and representatives of the Borrower and we have made such inquiries of officers and representatives of the Borrower as we have deemed relevant or necessary, as the basis for the opinions set forth herein. A copy of the certificate received from the Borrower and relied upon for purposes of the determination of matters of fact for this opinion are attached hereto as EXHIBIT A.
In rendering the opinions expressed below, we have, with your consent, assumed that the signatures of Persons signing all documents in connection with which this opinion is rendered are genuine (other than Persons signing on behalf of the Borrower), all documents submitted to us as originals or duplicate originals are authentic and all documents submitted to us as copies, whether certified or not, conform to authentic original documents. Additionally, we have, with your consent, assumed and relied upon, the following:
a. the accuracy and completeness of all certificates and other statements, documents and records reviewed by us, and the accuracy and completeness of all representations, warranties, schedules and exhibits contained in the Credit Agreement and Amendment, with respect to the factual matters set forth therein;
b. all parties to the documents reviewed by us (other than the Borrower, with respect to whom we render our opinions herein) are duly organized, validly existing and in good standing under the laws of all jurisdictions where they are conducting their businesses or otherwise required to be so qualified, and have full power and authority to execute, deliver and perform their duties under such documents and all such documents have been duly authorized, executed and delivered by such parties and are enforceable against such parties in accordance with their respective terms;
Whenever our opinion with respect to the existence or absence of facts is indicated to be based on our knowledge or awareness, we are referring to the actual present knowledge of the particular Dechert LLP attorneys who have represented the Borrower in connection with the Amendment. Except as expressly set forth herein, we have not undertaken any independent investigation, examination or inquiry to determine the existence or absence of any facts (and have not caused the review of any court file or indices) and no inference as to our knowledge concerning any facts should be drawn as a result of the limited representation undertaken by us.
Based upon the foregoing and subject to the qualifications stated herein, we are of the opinion that:
1. Based on a certificate received from the Secretary of The Commonwealth of Massachusetts, the Borrower is a business trust duly authorized to exercise in The Commonwealth of Massachusetts all of the powers recited in Borrower's Declaration of Trust and to transact business in Massachusetts under the laws of The Commonwealth of Massachusetts. Based on a certificate received from the Secretary of the State of Arizona, the Borrower has the authority to transact business in the State of Arizona. Copies of the certificates referred to in this paragraph are attached here to as EXHIBIT B.
2. The Borrower has the requisite trust power and authority to own and encumber its properties and assets and to conduct its business as currently conducted.
3. The Borrower has all requisite trust power and authority to execute and deliver the Amendment and to perform its obligations under Credit Agreement, as amended by the Amendment. The Amendment has been duly authorized by the Borrower and has been duly executed and delivered by a duly authorized officer of the Borrower. The Amendment and the Credit Agreement as previously executed and as amended by the Amendment, constitute legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms.
The opinions as expressed herein are subject to the following qualifications:
A. The effect of applicable bankruptcy, reorganization, insolvency, moratorium, receivership, fraudulent conveyance and similar laws relating to or affecting the rights and remedies of creditors or secured parties.
B. To the extent the Credit Agreement and Amendment specify a governing law, we express no opinion as to whether this choice of law is enforceable.
C. Limitations which may arise under general principles of equity including concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding at law or in equity).
D. Limitations upon the availability of specific equitable remedies (such as injunctive relief and the remedy of specific performance) which may arise under general principles of equity.
E. Limitations on enforceability under certain circumstances of provisions indemnifying a party against liability for its own wrongful or negligent acts imposed by public policy relating thereto.
F. Limitations regarding enforceability of provisions for indemnification
where such indemnification would be violative of any law, rule or regulation
(including without limitation any federal or state securities law or regulation)
or would be contrary to public policy.
G. We express no opinion with respect to: (1) the enforceability of
provisions contained in the Credit Agreement or the Amendment relating to the
effect of laws which may be enacted in the future; (2) the enforceability of
provisions in the Credit Agreement or the Amendment purporting to waive the
effect of applicable laws to the extent such laws do not permit such waiver; or
(3) the effectiveness of any power-of-attorney given under the Credit Agreement,
as amended by the Amendment, which is intended to bind successors and assigns
which have not granted such powers by a power-of-attorney specifically executed
by them.
H. Without limiting the generality of the foregoing, we express no opinion with respect to (1) the accuracy or completeness of any property descriptions contained in
the Credit Agreement as amended by the Amendment, or (2) the right of the Agent or the Lenders to set-off against funds held in any account maintained with the Agent or the Lenders by the Borrower and which account is designated, or contains funds that the Agent or the Lenders is aware have been set aside for special purposes, such as payroll, trust and escrow accounts, or which funds are subject to special agreement between the Agent or the Lenders and the Borrower precluding or limiting rights to set-off funds.
I. Without limiting the generality of the foregoing, we express no opinion as to the legality, validity, binding nature or enforceability, of (1) any self-help provisions; (2) provisions that purport to establish evidentiary standards; (3) provisions that provide for the enforceability of the remaining terms and provisions of the Credit Agreement, as amended by the Amendment, in circumstances in which certain other terms and provisions of the such agreement are illegal or unenforceable; (4) provisions that provide that certain rights or obligations are absolute or unconditional; (5) provisions related to waivers of remedies (or the delay or omission of enforcement of remedies), disclaimers, liability limitations or limitations on the obligations of the Agent or the Lenders in circumstances in which a failure of condition or default by the Borrower is not material; (6) provisions related to releases or waivers of legal or equitable rights, discharges of defenses, or reimbursement or indemnification in circumstances in which the person seeking reimbursement or indemnification has breached its duties under the Credit Agreement, as amended by the Amendment, or otherwise, or itself has been negligent; (7) provisions which purport to restrict transfer of title to (or, except for Liens expressly permitted under the Credit Agreement, further liens on) any property covered by the Credit Agreement as amended by the Amendment; (8) provisions which restrict access to or waive legal or equitable remedies or access to courts; (9) provisions which affect or confer jurisdiction or venue; (10) provisions relating to the payment or collectibility of legal fees; or (11) provisions which permit any of the Agent or the Lenders to act in its sole discretion or to be exculpated from liability for its actions to the extent not permitted by law.
K. Except as set forth in the immediately following sentence, our opinion is limited solely to such matters of law under United States federal law, the laws of The Commonwealth of Massachusetts and the laws of the State of New York which in our experience would normally be applicable to the consummation of the transactions contemplated by the Amendment and the Credit Agreement as previously executed and as amended by the Amendment, as those laws are in effect as of the date hereof, and we express no opinion with respect to the laws of any other state or jurisdiction, including but not limited to, ordinances, regulations or practices of any county, city or other governmental agency or body within The Commonwealth of Massachusetts, the State of New York or any other state or jurisdiction.
Our opinions set forth in this letter are based upon the facts in existence and laws in effect on the date hereof and we expressly disclaim any obligation to update our opinions herein, regardless of whether changes in such facts or laws come to our attention after the delivery hereof.
This opinion is solely for the benefit of the addressees hereof in connection with the execution and delivery of the Amendment. Notwithstanding anything in this opinion to the contrary, you may disclose this opinion (i) to prospective successors and assigns of the addressees hereof as long as such parties agree to keep this opinion confidential, (ii) to regulatory authorities having jurisdiction over any of the addressees hereof or their successors and assigns, (iii) pursuant to valid legal process, and (iv) to any rating agency which is rating the commercial paper issued by the Conduit Lender, in each case without prior consent. Otherwise, this opinion may not be relied upon in any manner by any other person and may not be disclosed, quoted or otherwise referred to without our prior written consent.
Very truly yours,
Dechert LLP
EXHIBIT A
THE COMMONWEALTH OF MASSACHUSETTS
[LOGO] SECRETARY OF THE COMMONWEALTH
STATE HOUSE, BOSTON, MASSACHUSETTS 02133
WILLIAM FRANCIS GALVIN
SECRETARY OF THE
COMMONWEALTH JANUARY 28,2004
To Whom it May Concern:
I hereby certify that the trustees of
ING PRIME RATE TRUST
a voluntary association with transferable shares, filed a copy of its Declaration of Trust dated DECEMBER 2, 1987, in this Office on DECEMBER 4, 1987, pursuant to Chapter 182 of the General Laws of the Commonwealth of Massachusetts, and that said association has filed the necessary certificates required to be filed under said Chapter 182 and paid the necessary fees due thereon; and that said association is at the date of this certificate duly authorized to exercise in said Commonwealth of Massachusetts all of the powers recited in said Declaration of Trust, and to transact business in said Commonwealth of Massachusetts.
[SEAL] In testimony of which, I have hereunto affixed the Great Seal of the Commonwealth on the date first above written. /s/ William Francis Galvin Secretary of the Commonwealth |
STATE OF ARIZONA
[SEAL]
Office of the
CORPORATION COMMISSION
CERTIFICATE OF GOOD STANDING
TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING:
I, BRIAN C. McNEIL, EXECUTIVE SECRETARY OF THE ARIZONA CORPORATION
COMMISSION, DO HEREBY CERTIFY THAT
***ING PRIME RATE TRUST***
A FOREIGN BUSINESS TRUST ORGANIZED UNDER THE LAWS OF MASSACHUSETTS DID OBTAIN AUTHORITY TO TRANSACT BUSINESS IN THE STATE OF ARIZONA ON THE 5TH DAY OF FEBRUARY 1996.
I FURTHER CERTIFY THAT ACCORDING TO THE RECORDS OF THE ARIZONA CORPORATION COMMISSION, AS OF THE DATE SET FORTH HEREUNDER, THE SAID CORPORATION HAS NOT HAD ITS AUTHORITY REVOKED FOR FAILURE TO COMPLY WITH THE PROVISIONS OF THE ARIZONA BUSINESS CORPORATION ACT; THAT ITS MOST RECENT ANNUAL REPORT, SUBJECT TO THE PROVISIONS OF A.R.S. SECTIONS 10-122, 10-123, 10-125 & 10-1622, HAS BEEN DELIVERED TO THE ARIZONA CORPORATION COMMISSION FOR FILING; AND THAT THE SAID CORPORATION HAS NOT FILED AN APPLICATION FOR WITHDRAWAL AS OF THE DATE OF THIS CERTIFICATE.
THIS CERTIFICATE RELATES ONLY TO THE LEGAL AUTHORITY OF THE ABOVE NAMED ENTITY AS OF THE DATE ISSUED. THIS CERTIFICATE IS NOT TO BE CONSTRUED AS AN ENDORSEMENT, RECOMMENDATION, OR NOTICE OF APPROVAL OF THE ENTITY'S CONDITION OR BUSINESS ACTIVITIES AND PRACTICES.
[SEAL] IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HAND AND AFFIXED THE OFFICIAL SEAL OF THE ARIZONA CORPORATION COMMISSION. DONE AT PHOENIX, THE CAPITAL, THIS 22ND DAY OF JANUARY, 2004, A. D. /s/ Brian C. McNeil ---------------------------- Executive Secretary By /s/ Pam Bedard ------------------------- |
EXHIBIT B
OFFICER'S CLOSING CERTIFICATE OF BORROWER
In connection with the opinion of Dechert LLP ("Dechert") to be rendered on the date hereof (the "Opinion") in connection with that certain Amendment No. 1 made as of February 2, 2004 to that certain Revolving Credit and Security Agreement among ING Prime Rate Trust (the "Borrower"), CRC Funding, LLC, Citibank, N.A. and Citicorp North America, Inc., dated as of July 16, 2003 (the "Amendment"), I, William H. Rivoir III, the duly elected Senior Vice President and Assistant Secretary of the Borrower, hereby certify to Dechert as follows:
1. Terms herein with capitalized initial letters and not otherwise defined herein shall have the respective meanings ascribed to them in the Opinion.
2. I am the duly elected and acting Senior Vice President and Assistant Secretary of the Borrower.
3. The Borrower has the power and authority to own its property and to conduct the business in which it is currently engaged.
4. The Borrower is registered as a closed-end management investment company under the Investment Company Act of 1940. The Borrower's registration under the Investment Company Act of 1940 has not been withdrawn or suspended, and no proceedings have commenced in which withdrawal or suspension of such registration has been sought.
5. Attached hereto as EXHIBIT A is a true, correct and complete copy of resolutions adopted by the Executive Committee of the Board of Trustees of the Borrower as of January 20, 2004 that authorize the execution of the Amendment, and such resolutions have not since their adoption been in any way modified or rescinded, and are in full force and effect on the date hereof.
6. The execution, delivery, and performance of the Amendment and the Credit Agreement as previously executed and as amended by the Amendment, all as provided therein, will not violate, or constitute a default under, any requirement of law or contractual obligation of the Borrower.
7. There is no action, suit or proceeding, or any governmental investigation or any arbitration pending or threatened by or against the Borrower before any court or arbitrator or any governmental or administrative body, agency or official which challenges the validity, or seeks to enjoin the performance or consummation, of the Amendment or the Credit Agreement as previously executed and as amended by the Amendment.
IN WITNESS WHEREOF, I have signed and delivered this Officer's Certificate this 2nd day of February, 2004.
/s/ William H. Rivoir III ------------------------------- William H. Rivoir III |
EXHIBIT A
EXECUTIVE COMMITTEE RESOLUTIONS AUTHORIZING AMENDMENT
RESOLVED, that ING Prime Rate Trust (the "Trust") increase the amount that it may borrow for investment and other purposes, as permitted in the Trust's prospectus, under its existing credit facility with a commercial paper conduit sponsored by Citibank to a total of $435 million; and
FURTHER RESOLVED, that the officers of the Trust are authorized and directed to negotiate and enter into an amended credit facility agreement with such commercial paper conduit to implement such increase on substantially the terms and conditions presented to the Executive Committee at this meeting.
Exhibit 99.(k)(iv)
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 2, 1998
among
PILGRIM AMERICA PRIME RATE TRUST
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Syndication Agent,
STATE STREET BANK AND TRUST COMPANY,
as Administrative Agent,
DEUTSCHE BANK AG,
as Documentation Agent,
and
COMMERZBANK AG
as Co-Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged By
BANCAMERICA ROBERTSON STEPHENS
TABLE OF CONTENTS
PAGE ARTICLE I DEFINITIONS 2 1.1 Certain Defined Terms 2 1.2 Other Interpretive Provisions 19 1.3 Fiscal Periods 20 ARTICLE II THE CREDITS 21 2.1 Amounts and Terms of Commitments 21 2.2 Loan Accounts 21 2.3 Procedure for Committed Borrowing 22 2.4 Conversion and Continuation Elections for Committed Borrowings 23 2.5 Bid Borrowings 24 2.6 Procedure for Bid Borrowings 25 2.7 Voluntary Termination or Reduction of Commitments 28 2.8 Prepayments 29 2.9 Repayment 29 2.10 Interest 29 2.11 Fees 31 2.12 Computation of Fees and Interest 31 2.13 Payments by the Company 31 2.14 Payments by the Banks to the Administrative Agent 32 2.15 Sharing of Payments, Etc. 33 2.16 Subsequent Bank 34 2.17 Swing Loans 34 2.18 Extension of Revolving Termination Date 35 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 36 3.1 Taxes 36 3.2 Illegality 37 3.3 Increased Costs and Reduction of Return 38 3.4 Funding Losses 39 3.5 Inability to Determine Rates 40 3.6 Certificates of Banks 40 3.7 Survival 41 ARTICLE IV CONDITIONS PRECEDENT 41 4.1 Conditions of Initial Loans 41 4.2 Conditions to All Borrowings 43 4.3. Consequences of Effectiveness, etc. 43 |
PAGE 4.4. Reallocation of Loans 44 4.5. Amounts Outstanding Under the Original Agreement Deemed to Be Loans Under This Agreement 44 ARTICLE V REPRESENTATIONS AND WARRANTIES 44 5.1 Existence and Power 44 5.2 Registration of Company and Company's Shares 45 5.3 Authorization; No Contravention 45 5.4 Governmental Authorization 45 5.5 Binding Effect 45 5.6 Litigation 46 5.7 No Default 46 5.8 ERISA Compliance 46 5.9 Use of Proceeds 46 5.10 Financial Condition 46 5.11 Taxes 47 5.12 Environmental Matters 47 5.13 No Burdensome Restrictions 47 5.14 Subsidiaries 47 5.15 Full Disclosure 47 5.16 Regulations U and X 47 5.17 Investment Policies and Investment Restrictions 48 5.18 Advisory Contract 48 5.19 Compliance with Laws 48 5.20 Tax Status 48 5.21 Year 2000 Problem 48 ARTICLE VI AFFIRMATIVE COVENANTS 48 6.1 Financial Statements 49 6.2 Notices 50 6.3 Preservation of Existence, Etc. 51 6.4 Insurance 51 6.5 Payment of Obligations 52 6.6 Compliance with Laws 52 6.7 Inspection of Property and Books and Records 52 6.8 Environmental Laws 52 6.9 Investment Adviser 52 6.10 Regulated Investment Company 53 ARTICLE VII NEGATIVE COVENANTS 53 7.1 Limitation on Liens 53 |
PAGE 7.2 Consolidations and Mergers 53 7.3 Limitation on Indebtedness 54 7.4 Transactions with Affiliates 54 7.5 Contingent Obligations 54 7.6 Lease Obligations 54 7.7 Business Activities; Investment Policies 54 7.8 Accounting Changes 55 7.9 Financial Covenants 55 7.10 Change of Custodian or Auditor 55 7.11 Pension Plans 55 ARTICLE VIII EVENTS OF DEFAULT 55 8.1 Event of Default 55 8.2 Remedies 58 8.3 Rights Not Exclusive 58 ARTICLE IX THE AGENTS 59 9.1 Appointment and Authorization 59 9.2 Delegation of Duties 59 9.3 Liability of Agents 59 9.4 Reliance by Agents 60 9.5 Notice of Default 60 9.6 Credit Decision 60 9.7 Indemnification 61 9.8 Agent in Individual Capacity 61 9.9 Successor Agent 62 9.10 Withholding Tax 62 9.11 Other Agents 64 ARTICLE X MISCELLANEOUS 64 10.1 Amendments and Waivers 64 10.2 Notices 65 10.3 No Waiver; Cumulative Remedies 66 10.4 Costs and Expenses 66 10.5 Indemnity 67 10.6 Payments Set Aside 68 10.7 Successors and Assigns 68 10.8 Assignments, Participations, etc. 68 10.9 Set-off 71 10.10 Notification of Addresses, Lending Offices, Etc. 72 10.11 Counterparts 72 |
PAGE 10.12 Severability 72 10.13 No Third Parties Benefited 72 10.14 Governing Law and Jurisdiction 72 10.15 Waiver of Jury Trial 73 10.16 Entire Agreement 73 10.18 Continuing Effectiveness, etc. 73 10.19 Facsimile Execution 74 |
SCHEDULES
Schedule 2.1 Commitments and Pro Rata Shares Schedule 7.1 Permitted Liens Schedule 10.2 Lending Offices; Address for Notice |
EXHIBITS
Exhibit A Form of Notice of Borrowing Exhibit B Form of Notice of Conversion/Continuation Exhibit C Form of Borrowing Base Certificate Exhibit D Form of Legal Opinion of Company's Counsel Exhibit E Form of Assignment and Acceptance Exhibit F Form of Competitive Bid Request Exhibit G Form of Competitive Bid Exhibit H Form of Committed Loan Note Exhibit I Form of Bid Loan Note Exhibit J Form of Swing Loan Note Exhibit K Form of Subsequent Bank Supplement Exhibit L Form of Security Agreement |
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of September 2, 1998 by the parties hereto and amends and restates that certain Amended and Restated Credit Agreement dated as of June 26, 1997, among Pilgrim America Prime Rate Trust, a Massachusetts business trust (the "COMPANY"), the several financial institutions from time to time party to this Agreement (collectively, the "BANKS"; individually, a "BANK"), Bank of America National Trust and Savings Association, as co-administrative agent and syndication agent for the Banks and State Street Bank and Trust Company, as co-administrative and paying agent for the Banks, and Deutsche Bank AG, as co-agent.
WHEREAS, the Company, certain of the Banks, Bank of America National Trust and Savings Association, as co-administrative agent and syndication agent for the Banks, and State Street Bank and Trust Company, as co-administrative and paying agent for the Banks, have entered into an Amended and Restated Credit Agreement dated as of June 26, 1997 (the "ORIGINAL AGREEMENT"), which provided for the Banks to extend Loans to the Company from time to time; and
WHEREAS, the Company and the Banks desire to amend the Original Agreement
in certain respects, all as more fully hereinafter set forth (the
"REFINANCING");
NOW, THEREFORE, the parties hereto agree that the Credit Agreement shall be amended and restated, as of the Refinancing Date, upon satisfaction of the conditions set forth herein, to state in its entirety as follows:
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms have the following meanings:
"ABSOLUTE RATE" has the meaning specified in subsection 2.6(b)(ii)(D).
"ABSOLUTE RATE AUCTION" means a solicitation of Competitive Bids setting forth Absolute Rates pursuant to Section 2.6.
"ABSOLUTE RATE BID LOAN" means a Bid Loan that bears interest at a rate determined with reference to the Absolute Rate.
"ATTORNEY COSTS" means and includes all reasonable fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all reasonable disbursements of internal legal counsel.
"BANK" has the meaning specified in the introductory clause hereto.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101, ET SEQ.).
"BASE RATE" means, for any day, the higher of:
(a) the rate of interest in effect for such day as publicly announced from time to time by BofA in San Francisco, California, as its "reference rate." (The "reference rate" is a rate set by BofA based upon various factors including BofA's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate); or
(b) 0.50% per annum above the latest Federal Funds Rate.
Any change in the reference rate announced by BofA shall take effect at the opening of business on the day specified in the public announcement of such change.
"BID BORROWING" means a Borrowing hereunder consisting of one or more Bid Loans made to the Company on the same day by one or more Banks.
"BID LOAN" means a Loan by a Bank to the Company under Section 2.5, which may be a LIBOR Bid Loan or an Absolute Rate Bid Loan.
"BID LOAN LENDER" means, in respect of any Bid Loan, the Bank making such Bid Loan to the Company.
"BID LOAN NOTE" means a promissory note executed by the Company in favor of a Bank pursuant to subsection 2.2(b), in substantially the form of EXHIBIT I. For the avoidance of doubt, any reference in a Bid Loan Note to provisions of this Agreement shall be deemed to mean this Agreement as supplemented by the terms of the Competitive Bid accepted by the Company in respect of the relevant Bid Loan evidenced by such Bid Loan Note.
"BofA" means Bank of America National Trust and Savings Association, a national banking association.
"BORROWING" means a borrowing hereunder, other than Swing Loans, consisting of Loans made to the Company on the same day by the Banks under Article II, and may be a Committed Borrowing or a Bid Borrowing and, other than in the case of Federal Funds Rate Committed Loans, having the same Interest Period.
"BORROWING BASE" has the meaning set forth in subsection 6.1(d).
"BORROWING BASE CERTIFICATE" means a certificate as defined in subsection 6.1(d).
"BORROWING DATE" means any date on which a Borrowing occurs, which shall under no circumstances be prior to the Closing Date.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which commercial banks in Boston, New York or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.
"CASH EQUIVALENTS" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States Government;
(b) commercial paper, maturing not more than nine months from the date of issue, which is issued by
(i) a corporation (other than an Affiliate of the Company) organized under the laws of any state of the United States or of the District of Columbia and rated A-l by Standard & Poor's Ratings Group or P-l by Moody's Investors Service, Inc., or
(ii) any Bank (or its holding company);
(c) any certificate of deposit or bankers' acceptance, maturing not more than one year after such time, which is issued by either
(i) a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, PROVIDED that the deposits offered by such institution are rated at least A-l by Standard & Poor's Ratings Group or P-1 by Moody's Investors Service, Inc., or
(ii) any Bank, or
(d) any repurchase agreement entered into with any Bank (or other commercial banking institution of the stature referred to in CLAUSE (c)(i)) which
(i) is secured by a fully perfected security interest in any obligation of the type described in any of CLAUSES (a) through (c); and
(ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Bank (or other commercial banking institution) thereunder.
"CHANGE OF CONTROL" means a change of control of the Investment Adviser which would constitute an "assignment" within the meaning of the Act of the Investment Management Agreement or the Administrative Agreement referred to in Section 5.19.
"CLOSING DATE" means the date on which all conditions precedent set forth in Section 4.1 are satisfied or waived by all Banks (or, in the case of subsection 4.1(v), waived by the Person entitled to receive such payment).
"CODE" means the Internal Revenue Code of 1986, and regulations promulgated thereunder.
"COLLATERAL AGENT" shall have the meaning assigned to such term in ANNEX X to the GE Capital Facility.
"COMMITMENT", as to each Bank, has the meaning specified in
Section 2.1.
"COMMITTED BORROWING" means a Borrowing hereunder consisting of Committed Loans of the same Type made to the Company on the same day by the Banks ratably according to their respective Commitments and, in the case of Offshore Rate Committed Loans, having the same Interest Periods.
"COMMITTED LOAN" means a Loan by a Bank to the Company under Section 2.1, and may be an Offshore Rate Committed Loan or a Federal Funds Rate Committed Loan (each, a "TYPE" of Committed Loan).
"COMMITTED LOAN NOTE" means a promissory note executed by the Company in favor of a Bank pursuant to subsection 2.2(b), in substantially the form of EXHIBIT H.
"COMPANY" has the meaning specified in the introductory clause hereto.
"COMPETITIVE BID" means an offer by a Bank to make a Bid Loan in accordance with subsection 2.6(c).
"COMPETITIVE BID REQUEST" has the meaning specified in subsection 2.6 (a).
"CONTINGENT OBLIGATION" means, as to any Person, any direct or indirect liability of that Person, whether or not contingent, with or without recourse, (a) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof (each, a "GUARANTY OBLIGATION"); (b) with respect to any Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or other property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such services are ever performed or tendered; or (d) in respect of any Swap Contract. The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if such Guaranty Obligation is specifically limited in amount, the maximum liability in respect thereof, or if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof, and in the case of other Contingent Obligations, shall be equal to the maximum reasonably anticipated liability in respect thereof.
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound.
"CONVERSION/CONTINUATION DATE" means any date on which, under
Section 2.4, the Company (a) converts Committed Loans of one Type to
another Type, or (b) continues as Committed Loans of the same Type, but
with a new Interest Period, Committed Loans having Interest Periods
expiring on such date.
"CUSTODIAN" shall have the meaning assigned to such term in ANNEX X to the GE Capital Facility.
"CUSTODIAL AGENT" shall have the meaning assigned to such term in ANNEX X to the GE Capital Facility.
"DEFAULT" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default.
"DEPOSIT ACCOUNT" means account number 37926342 at State Street.
"DEUTSCHE" means Deutsche Bank AG.
"DOCUMENTATION AGENT" means Deutsche Bank AG in its capacity as documentation agent for the Banks hereunder, and any successor documentation agent arising under Section 9.9.
"DOLLARS", "DOLLARS" and "$" each mean lawful money of the United States.
"ELIGIBLE ASSIGNEE" means (i) a commercial bank organized or
licensed under the laws of the United States, or any state thereof, and
having a combined capital and surplus of at least $100,000,000; (ii) a
commercial bank organized under the laws of any other country which is a
member of the Organization for Economic Cooperation and Development (the
"OECD"), or a political subdivision of any such country, and having a
combined capital and surplus of at least $100,000,000, provided that such
bank is acting through a branch or agency located in the United States; and
(iii) a Person that is primarily engaged in the business of commercial
banking and that is (A) a Subsidiary of a Bank, (B) a Subsidiary of a
Person of which a Bank is a Subsidiary, or (C) a Person of which a Bank is
a Subsidiary; and (iv) any other financial institution (other than an
investment company) in good standing under the laws of any country which is
a member of the OECD and which has a combined capital and surplus of at
least $100,000,000.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder.
"EURODOLLAR RESERVE PERCENTAGE" has the meaning specified in the definition of "Offshore Rate".
"EVENT OF DEFAULT" means any of the events or circumstances specified in Section 8.1.
"EXCHANGE ACT" means the Securities and Exchange Act of 1934 and regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions.
"FEDERAL FUNDS RATE" means, for any day, the rate which appears on Telerate Page 5, as quoted by Garvin Guy Butler,
as of 12:00 noon (in the case of any calculation other than the interest rate for Swing Loans) or 9:30 a.m. (in the case of the calculation of the interest rate for Swing Loans) New York time as the "Federal Funds Offered Rate"; or, if any relevant day such rate is not so published, the rate for such day will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged prior to such time (Boston time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrative Agent.
"FEDERAL FUNDS RATE COMMITTED LOAN" means a Committed Loan that bears interest based on the Federal Funds Rate.
"FEE LETTERS" has the meaning specified in subsection 2.11(a).
"FRB" means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.
"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of the financial statements referred to in subsection 5.10(a) hereof.
"GE CAPITAL FACILITY" means the Revolving Loan Agreement dated as of July 16, 1998 among Pilgrim America Prime Rate Trust, Pilgrim America Investments, Inc., Edison Asset Securitization, L.L.C. and General Electric Capital Corporation.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative, functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.
"GUARANTY OBLIGATION" has the meaning specified in the definition of "Contingent Obligation."
"INDEBTEDNESS" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables entered into in the ordinary course of business on ordinary
terms); (c) all non-contingent reimbursement or payment obligations with
respect to Surety Instruments; (d) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets
or businesses; (e) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by the Person
(even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of
such property); (f) all obligations with respect to capital leases; (g) all
net obligations with respect to Swap Contracts; (h) all indebtedness
referred to in clauses (a) through (g) above secured by (or for which the
holder of such Indebtedness has an existing right), property (including
accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness; and (i) all Guaranty Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (a) through
(g) above.
"INDEMNIFIED LIABILITIES" has the meaning specified in Section 10.5.
"INDEMNIFIED PERSON" has the meaning specified in Section 10.5.
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.
"INTEREST PAYMENT DATE" means, as to any Offshore Rate Loan or Absolute Rate Bid Loan, the last day of each Interest Period applicable to such Loan; as to any Federal Funds Rate Committed Loan, the last Business Day of each calendar quarter; and as to any Committed Loan, each date such Committed Loan is converted into another Type of
Committed Loan; PROVIDED, HOWEVER, that (a) if any Interest Period for an Offshore Rate Loan exceeds three months, the date that falls three months after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date, and (b) as to any Bid Loan, such intervening dates, if any, prior to the maturity thereof as may be specified by the Company and agreed to by the applicable Bid Loan Lender in the applicable Competitive Bid shall also be Interest Payment Dates.
"INTEREST PERIOD" means, (a) as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan, or (in the case of
any Offshore Rate Committed Loan) on the Conversion/Continuation Date on
which the Loan is converted into or continued as an Offshore Rate Committed
Loan, and ending on the date one, two, three or six months thereafter as
selected by the Company in its Notice of Borrowing, Notice of
Conversion/Continuation or Competitive Bid Request, as the case may be; and
(b) as to any Absolute Rate Bid Loan, a period of not less than 30 days and
not more than 180 days as selected by the Company in the applicable
Competitive Bid Request;
PROVIDED that:
(i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period pertaining to an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend beyond the scheduled Maturity Date.
"INVESTMENT ADVISER" has the meaning specified in Section 6.9.
"INVESTMENT POLICIES" means the policies described in the most recent prospectus of the Company prior to the date hereof.
"INVESTMENT RESTRICTIONS" means the restrictions described in the most recent prospectus of the Company prior to the date hereof.
"IRS" means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions.
"LENDER AGENT" shall have the meaning assigned to such term in Annex X of the GE Capital Facility.
"LENDERS" shall have the meaning assigned to such term in ANNEX X to the GE Capital Facility.
"LENDING OFFICE" means, as to any Bank, the office or offices of such Bank specified as its "Lending Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case may be, on SCHEDULE 10.2, or such other office or offices as such Bank may from time to time notify the Company and the Administrative Agent.
"LIBO RATE" means, for any Interest Period with respect to a LIBOR Bid Loan or an Offshore Rate Committed Loan, the rate of interest per annum determined by the Administrative Agent to be the arithmetic mean (rounded upward, if necessary, to the nearest l/16th of 1%) of the rates of interest per annum notified to the Administrative Agent by State Street as the rate of interest at which dollar deposits in the approximate amount of, in the case of LIBOR Bid Loans, the LIBOR Bid Loans to be borrowed in such Bid Borrowing, and, in the case of Offshore Rate Committed Loans, the Offshore Rate Committed Loan to be made by State Street, and having a maturity comparable to such Interest Period, would be offered to State Street by major banks in the London interbank market at its request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.
"LIBOR AUCTION" means a solicitation of Competitive Bids setting forth a LIBOR Bid Margin pursuant to Section 2.6.
"LIBOR BID LOAN" means any Bid Loan that bears interest at a rate based upon the LIBO Rate.
"LIBOR BID MARGIN" has the meaning specified in subsection 2.6(b)(ii)(C).
"LIEN" means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, segregated asset arrangement established in connection with reverse repurchase transactions, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an operating lease.
"LOAN" means an extension of credit by a Bank to the Company under Article II, and may be a Committed Loan, a Bid Loan or a Swing Loan.
"LOAN DOCUMENTS" means this Agreement, any Notes, the Security Agreement, the Fee Letters and all other documents delivered to any Agent or any Bank in connection herewith and therewith.
"MAJORITY BANKS" means at any time (a) prior to the Revolving Termination Date, Banks then holding more than 50% of the then aggregate unpaid principal amount of the Committed Loans, and (b) after the Revolving Termination Date, Banks then holding more than 50% of the then aggregate unpaid principal amount of the Loans; PROVIDED, HOWEVER, that if at any time (i) prior to the Revolving Termination Date, no Committed Loans are outstanding, or (ii) after the Revolving Termination Date, no Loans are outstanding, Majority Banks shall mean Banks then holding more than 50% of the Commitments.
"MARGIN STOCK" means "margin stock" as such term is defined in Regulation T, U or X of the FRB.
"MASTER COLLATERAL AGENTS" shall have the meaning assigned to such term in ANNEX X to the GE Capital Facility.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or a material adverse effect upon, the business, properties, condition (financial or otherwise) or prospects of the Company; (b) a material impairment of the ability of the Company to perform under any Loan Document and to avoid any Event of Default; or (c) a material adverse effect upon
the legality, validity, binding effect or enforceability against the Company of any Loan Document.
"MATURITY DATE" means the earlier to occur of (a) the date three years after the Revolving Termination Date; and (b) the date on which all Loans become due and payable (by acceleration or otherwise).
"1933 ACT" means the Securities Act of 1933 and regulations promulgated thereunder.
"NOTES" means the Committed Loan Notes, the Bid Loan Notes and the Swing Loan Note.
"NOTICE OF BORROWING" means a notice in substantially the form of
EXHIBIT A.
"NOTICE OF CONVERSION/CONTINUATION" means a notice in substantially the form of EXHIBIT B.
"OBLIGATIONS" means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document, owing by the Company to any Bank, any Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising.
"OFFSHORE RATE" means, for any Interest Period with respect to Offshore Rate Committed Loans comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the nearest l/100th of 1%) determined by the Administrative Agent as follows:
Where,
"EURODOLLAR RESERVE PERCENTAGE" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the nearest l/100th of 1%) in effect on such day (whether or not applicable to any Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities") having a term comparable to such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate Committed Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage.
"OFFSHORE RATE COMMITTED LOAN" means any Committed Loan that bears interest based on the Offshore Rate.
"OFFSHORE RATE LOAN" means any LIBOR Bid Loan or any Offshore Rate Committed Loan.
"OPERATING AGENT" shall have the meaning assigned to such term in ANNEX X to the GE Capital Facility.
"ORGANIZATION DOCUMENTS" means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of designation or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation and, for any trust, its trust agreement, bylaws, any certificate of designation or instrument relating to the rights of preferred shareholders of such trust and all applicable resolutions of the board of trustees (or any committee thereof) of such trust.
"ORIGINAL AGREEMENT" is defined in the first recital to this Agreement.
"ORIGINATING BANK" has the meaning specified in subsection 10.8(d).
"OTHER TAXES" means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents.
"PARTICIPANT" has the meaning specified in subsection 10.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA.
"PENSION PLAN" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA, other than a Multiemployer Plan, with respect to which the Company or any ERISA Affiliate may have any liability.
"PERMITTED LIENS" has the meaning specified in Section 7.1.
"PERSON" means, an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority.
"PLAN" means any "pension plan" or "welfare benefit plan" as such terms are defined under ERISA.
"PRO RATA SHARE" means, as to any Bank at any time, the percentage equivalent (expressed as a decimal, rounded to the ninth decimal place) at such time of such Bank's Commitment divided by the combined Commitments of all Banks.
"REFINANCING" is defined in the second recital to this Agreement.
"REFINANCING DATE" means September 2, 1998.
"REPORTABLE EVENT" means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC.
"REQUIREMENT OF LAW" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject.
"RESPONSIBLE OFFICER" means the chief executive officer, the president, the secretary or the assistant secretary of the Company, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants, the chief financial officer, the treasurer, the secretary or the assistant secretary of the Company, or any other officer having substantially the same authority and responsibility.
"REVOLVING TERMINATION DATE" means the earlier to occur of:
(a) September 1, 1999, as such date may be extended pursuant to Section 2.18; and
(b) the date on which the Commitments terminate in accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
"SECURITY AGREEMENT" means a security agreement in the form attached
as EXHIBIT L.
"STATE STREET" means State Street Bank and Trust Company, a Massachusetts banking corporation.
"SUBSIDIARY" of a Person means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Company.
"SURETY INSTRUMENTS" means all letters of credit (including standby and commercial), bankers' acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments.
"SWAP CONTRACTS" means swap agreements (as such term is defined in
Section 101 of the Bankruptcy Code) and any other agreements or
arrangements designed to provide protection against fluctuations in
interest or currency exchange rates or commodity prices.
"SWING LOAN" means a Loan by Administrative Agent to the Company under Section 2.17.
"SWING LOAN NOTE" means a promissory note executed by the Company in favor of the Administrative Agent pursuant to subsection 2.2(b), in substantially the form of EXHIBIT J.
"SYNDICATION AGENT" means BofA in its capacity as syndication agent
for the Banks hereunder, and any successor syndication agent arising under
Section 9.9.
"TAXES" means any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto arising from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document.
"TOTAL ASSETS" means, an amount equal to the aggregate value of all items that would be set forth as assets on a balance sheet of such Company on such date, prepared in accordance with the Act and the rules and regulations under
the Act. The assets of the Company shall be valued in accordance with the Act, the rules and regulations under the Act, and the valuation procedures set forth in its most recent statement of additional information. Upon the written request of the Administrative Agent, the Company shall promptly furnish all such information as the Administrative Agent shall reasonably request relating to the value of any asset or the assignment of values thereto.
"TOTAL LIABILITIES" means as of any date, the aggregate amount of all items that would be set forth as liabilities on a balance sheet of the Company on such date in accordance with GAAP.
"TRUST AGREEMENT" means Agreement and Declaration of Trust of the Company dated December 2, 1987, as amended April 12, 1996.
"TYPE" has the meaning specified in the definition of Committed Loan.
"UNFUNDED PENSION LIABILITY" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.
"UNITED STATES" and "U.S." each means the United States of America.
"WHOLLY-OWNED SUBSIDIARY" means any corporation in which (other than directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by the Company, or by one or more of the other Wholly-Owned Subsidiaries, or both.
1.2 OTHER INTERPRETIVE PROVISIONS.
(a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.
(ii) The term "including" is not limiting and means "including without limitation."
(iii) In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement and any other Loan Document) and other contractual instruments shall be deemed to include all subsequent amendments, supplements, restatements and other modifications thereto, but only to the extent such amendments, supplements, restatements and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. Unless otherwise expressly provided herein, any reference to any action of any Agent, the Banks or the Majority Banks by way of consent, approval or waiver shall be deemed modified by the phrase "in its/their sole discretion."
(g) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Agents, the Company and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Banks or the Agents merely because of the Agents' or Banks' involvement in their preparation.
1.3 FISCAL PERIODS.
Unless the context otherwise clearly requires, all references herein to "fiscal year" and "fiscal quarter" shall refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.1 AMOUNTS AND TERMS OF COMMITMENTS.
Each Bank severally agrees, on the terms and conditions set forth
herein, to make loans to the Company from time to time on any Business Day
during the period from the Refinancing Date to the Revolving Termination Date,
in an aggregate amount not to exceed at any time outstanding the amount set
forth on SCHEDULE 2.1 (as such amount may be reduced under Section 2.7 or as a
result of one or more assignments under Section 10.8, each Bank's "COMMITMENT");
PROVIDED, HOWEVER, that, after giving effect to any Committed Borrowing, the
aggregate principal amount of all outstanding Loans shall not at any time exceed
the lesser of (i) the combined Commitments or (ii) the Borrowing Base. Within
the limits of each Bank's Commitment, and subject to the other terms and
conditions hereof, the Company may borrow under this Section 2.1, prepay under
Section 2.8 and reborrow under this Section 2.1; and PROVIDED FURTHER, that the
Company shall not have Federal Funds Rate Committed Loans outstanding for 30
consecutive days or longer.
2.2 LOAN ACCOUNTS.
(a) The Loans made by each Bank shall be evidenced by one or more loan accounts or records maintained by such Bank in the ordinary course of business. The loan accounts or records maintained by the Administrative Agent and each Bank shall be conclusive absent manifest error of the amount of the Loans made by the Banks to the Company and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Company hereunder to pay any amount owing with respect to the Loans.
(b) Upon the request of any Bank made through the Administrative Agent, the Loans made by such Bank may be evidenced by one or more Notes, instead of loan accounts. Each such Bank shall endorse on the schedules annexed to its Notes the date, amount and maturity of each Loan made by it and the amount of each payment of principal made by the Company with respect thereto. Each such Bank is irrevocably authorized by the Company to endorse its Notes and each Bank's record shall be conclusive absent manifest error; PROVIDED, HOWEVER, that the failure of a Bank to make, or an error in making, a notation thereon with respect to any Loan shall not limit or otherwise affect the obligations of the Company hereunder or under any such Note to such Bank. If Notes are delivered to a Bank, the Committed Loans made by such Bank would be evidenced by a Committed Loan Note,
the Bid Loans made by such Bank would be evidenced by a Bid Loan Note and, in the case of the Administrative Agent, the Swing Loans made by the Administrative Agent would be evidenced by a Swing Loan Note.
Promptly following the Refinancing Date, each Bank that is a party to the Original Agreement shall return to the Company for cancellation any promissory note issued to it by the Company under the Original Agreement and not theretofore cancelled.
2.3 PROCEDURE FOR COMMITTED BORROWING.
(a) Each Committed Borrowing shall be made upon the Company's irrevocable written notice delivered to the Administrative Agent in the form of a Notice of Borrowing (which notice must be received by the Administrative Agent prior to 12:00 noon (Boston time) (i) three Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Committed Loans; and (ii) on the requested Borrowing Date, in the case of Federal Funds Rate Committed Loans, specifying:
(A) the amount of the Committed Borrowing, which shall be in an aggregate minimum amount of $1,000,000 and multiples of $1,000,000;
(B) the requested Borrowing Date, which shall be a Business Day;
(C) the Type of Committed Loans comprising the Committed Borrowing; and
(D) the duration of the Interest Period applicable to any Offshore Rate Committed Loans included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Committed Borrowing comprised of Offshore Rate Committed Loans, such Interest Period shall be three months.
(b) The Administrative Agent will promptly notify each Bank of its receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that Committed Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each Committed Borrowing available to the Administrative Agent for the account of the Company at the Administrative Agent's Payment Office by 2:00 p.m. (Boston time) on the Borrowing Date requested by the Company in funds immediately available to the Administrative Agent. The proceeds of all such Committed Loans will then be made available to the Company by the
(C) the Type of Committed Loans resulting from the proposed conversion or continuation; and
(D) other than in the case of conversions into Federal Funds Rate Committed Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to Offshore Rate Committed Loans, the Company has failed to select timely a new Interest Period to be applicable to such Offshore Rate Committed Loans, or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such Offshore Rate Committed Loans into Federal Funds Rate Committed Loans effective as of the expiration date of such Interest Period.
(d) The Administrative Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the Administrative Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Committed Loans with respect to which the notice was given held by each Bank.
(e) Unless all the Banks otherwise agree, during the existence of a Default or Event of Default, the Company may not elect to have a Committed Loan converted into or continued as an Offshore Rate Committed Loan.
(f) After giving effect to any conversion or continuation of Committed Loans, there may not be more than ten different Interest Periods in effect in respect of all Offshore Rate Committed Loans and Bid Loans together then outstanding.
2.5 BID BORROWINGS. In addition to Committed Borrowings pursuant to
Section 2.3, each Bank severally agrees that the Company may, as set forth in
Section 2.6, from time to time request the Banks prior to the Revolving
Termination Date to submit offers to make Bid Loans to the Company; PROVIDED,
HOWEVER, that the Banks may, but shall have no obligation to, submit such offers
and the Company may, but shall have no obligation to, accept any such offers;
and PROVIDED, FURTHER, that at no time shall (a) the outstanding aggregate
principal amount of all Bid Loans made by all Banks, plus the outstanding
aggregate principal amount of all Committed Loans made by all Banks and Swing
Loans made by the Administrative Agent exceed the combined Commitments or the
Borrowing Base; (b) the outstanding aggregate principal amount of Bid Loans from
any one Bank exceed $100,000,000; (c) the outstanding aggregate principal amount
of Bid Loans made by all Banks exceed 60% of the combined
Commitments; or (d) the number of Interest Periods for Bid Loans then outstanding plus the number of Interest Periods for Offshore Rate Committed Loans then outstanding exceed ten.
2.6 PROCEDURE FOR BID BORROWINGS.
(a) When the Company wishes to request the Banks to submit offers to make Bid Loans hereunder, it shall transmit to the Banks by telephone call followed promptly by facsimile transmission a notice in substantially the form of EXHIBIT F (a "COMPETITIVE BID REQUEST") so as to be received no later than 12:00 noon (Boston time) (x) four Business Days prior to the date of a proposed Bid Borrowing in the case of a LIBOR Auction, or (y) two Business Days prior to the date of a proposed Bid Borrowing in the case of an Absolute Rate Auction, specifying:
(i) the date of such Bid Borrowing, which shall be a Business Day;
(ii) the aggregate amount of such Bid Borrowing, which shall be a minimum amount of $5,000,000 or in multiples of $1,000,000 in excess thereof;
(iii) whether the Competitive Bids requested are to be for LIBOR Bid Loans or Absolute Rate Bid Loans or both; and
(iv) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of "Interest Period" herein.
Subject to subsection 2.6(b), the Company may not request Competitive Bids for more than three Interest Periods in a single Competitive Bid Request and may not request Competitive Bids more than once in any period of five Business Days.
(b) (i) Each Bank may at its discretion submit a Competitive Bid
containing an offer or offers to make Bid Loans in response to any Competitive
Bid Request. Each Competitive Bid must comply with the requirements of this
subsection 2.6(b) and must be submitted to the Company by facsimile transmission
at the Company's office for notices set forth on SCHEDULE 10.2 not later than
(1) 9:30 a.m. (Boston time) three Business Days prior to the proposed Borrowing
Date, in the case of a LIBOR Auction or (2) 9:30 a.m. (Boston time) on the
proposed Borrowing Date, in the case of an Absolute Rate Auction.
(ii) Each Competitive Bid shall be in substantially the form of EXHIBIT G, specifying therein:
(A) the proposed Borrowing Date;
(B) the principal amount of each Bid Loan for which such Competitive Bid is being made, which principal amount (x) may be equal to, greater than or less than the Commitment of the quoting Bank, (y) must be $5,000,000 or in multiples of $1,000,000 in excess thereof, and (z) may not exceed the principal amount of Bid Loans for which Competitive Bids were requested;
(C) in case the Company elects a LIBOR Auction, the margin above or below the LIBO Rate (the "LIBOR BID MARGIN") offered for each such Bid Loan, expressed as a percentage (rounded to the nearest l/16th of 1%) to be added to or subtracted from the applicable LIBO Rate and the Interest Period applicable thereto;
(D) in case the Company elects an Absolute Rate Auction, the rate of interest per annum (rounded upward to the nearest l/100th of 1%) (the "ABSOLUTE RATE") offered for each such Bid Loan; and
(E) the identity of the quoting Bank.
A Competitive Bid may contain up to three separate offers by the quoting Bank with respect to each Interest Period specified in the related Competitive Bid Request.
(iii) Any Competitive Bill shall be disregarded if it:
(A) is not substantially in conformity with EXHIBIT G
or does not specify all of the information required by subsection
(b)(ii) of this Section;
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in the applicable Competitive Bid Request; or
(D) arrives after the time set forth in subsection
(b)(i) of this Section.
(iv) Notwithstanding anything to the contrary contained in this subsection 2.6(b), a Competitive Bid by any Bank may contain, and will not be disregarded if it does contain, a restriction on the use of proceeds thereof.
(c) Any subsequent Competitive Bid by a Bank that amends, modifies or is otherwise inconsistent with a previous
Competitive Bid shall be disregarded by the Company unless subsequent
Competitive Bid is submitted solely to correct a manifest error in such former
Competitive Bid and only if received within the times set forth in subsection
2.6(b). Subject only to the provisions of Sections 3.2, 3.5 and 4.2 hereof and
the provisions of this subsection (c), any Competitive Bid shall be irrevocable
except with the written consent of the Administrative Agent given on the written
instructions of the Company.
(d) Not later than 10:30 a.m. (Boston time) three Business Days
prior to the proposed Borrowing Date, in the case of a LIBOR Auction, or 10:30
a.m. (Boston time) on the proposed Borrowing Date, in the case of an Absolute
Rate Auction, the Company shall notify the Banks of its acceptance or non-
acceptance of the offers so notified to it pursuant to subsection 2.6(b). The
Company shall be under no obligation to accept any offer and may choose to
reject all offers. In the case of acceptance, such notice shall specify the
aggregate principal amount of offers for each Interest Period that is accepted.
The Company may accept any Competitive Bid in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Request;
(ii) the principal amount of each Bid Borrowing must be $5,000,000 or in any multiple of $1,000,000 in excess thereof;
(iii) acceptance of offers may only be made on the basis of ascending (i.e., from the lowest effective yield to the highest) LIBOR Bid Margins or Absolute Rates within each Interest Period, as the case may be; and
(iv) the Company may not accept any offer that is described in subsection 2.6(b)(iii) or that otherwise fails to comply with the requirements of this Agreement.
(e) If offers are made by two or more Banks with the same LIBOR Bid Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in such multiples, not less than $1,000,000, as the Company may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determination by the Company of the amounts of Bid Loans shall be conclusive in the absence of manifest error.
(f) (i) The Company will promptly notify each Bank having submitted a Competitive Bid if its offer has been accepted and, if its offer has been accepted, of the amount of the Bid Loan or Bid Loans to be made by it on the date of the Bid Borrowing. The Company shall also notify the Administrative Agent of the Bid Loan or Bid Loans to be made.
(ii) Each Bank, which has received notice pursuant to subsection 2.6(f)(i) that its Competitive Bid has been accepted, shall make the amounts of such Bid Loans available to the Administrative Agent for the account of the Company at the Administrative Agent's Payment Office, by 2:00 p.m. (Boston time) on such date of Bid Borrowing, in funds immediately available to the Administrative Agent for the account of the Company at the Administrative Agent's Payment Office.
(iii) Promptly following each Bid Borrowing, the Company shall notify each Bank of the ranges of bids submitted and the highest and lowest Bids accepted for each Interest Period requested by the Company and the aggregate amount borrowed pursuant to such Bid Borrowing.
(g) If, on or prior to the proposed Borrowing Date, the Commitments have not been terminated and if, on such proposed Borrowing Date all applicable conditions to funding referenced in Sections 3.2, 3.5 and 4.2 hereof are satisfied, the Bank or Banks whose offers the Company has accepted will fund each Bid Loan so accepted. Nothing in this Section 2.6 shall be construed as a right of first offer in favor of the Banks or to otherwise limit the ability of the Company to request and accept credit facilities from any Person (including any of the Banks), provided that no Default or Event of Default would otherwise arise or exist as a result of the Company executing, delivering or performing under such credit facilities.
2.7 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. The Company may, upon not less than five Business Days' prior notice to the Administrative Agent, terminate the Commitments, or permanently reduce the Commitments by an aggregate minimum amount of $5,000,000 or a multiple of $1,000,000 in excess thereof; UNLESS, after giving effect thereto and to any prepayments of Committed Loans made on the effective date thereof, the then outstanding principal amount of the Loans would exceed the amount of the combined Commitments then in effect. Once reduced in accordance with this Section, the Commitments may not be increased. Any reduction of the Commitments shall be applied to each Bank according to its Pro Rata Share. All accrued facility fees to, but not including the effective date of any reduction or termination of Commitments, shall be paid on the effective date of such reduction or termination.
2.8 PREPAYMENTS.
(a) If at any time the outstanding principal amount of the Loans plus other liabilities (as determined in the calculation of the Borrowing Base) shall exceed the then-current Borrowing Base, the Company shall immediately prepay the outstanding principal amount of such Loans or other liabilities in an amount equal to such excess, together with interest accrued thereon and amounts required under Section 3.4.
(b) Subject to Section 3.4, the Company may, at any time or from time to time, ratably prepay Committed Loans in whole or in part, in minimum amounts of $1,000,000 or multiple thereof upon irrevocable notice to the Administrative Agent not later than 12:00 noon (Boston time) on the date of a proposed prepayment of Federal Funds Rate Committed Loans and three Business Days prior to the date of a proposed prepayment of Offshore Rate Committed Loans. Such notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Committed Loans to be prepaid. The Administrative Agent will promptly notify each Bank of its receipt of any such notice, and of such Bank's Pro Rata Share of such prepayment. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.4.
(c) Bid Loans may not be voluntarily prepaid.
2.9 REPAYMENT.
(a) All Loans which are outstanding on the Revolving Termination Date shall be repaid in twelve substantially equal quarterly installments. Such installments shall be payable at quarterly intervals after the Revolving Termination Date, commencing on a date one quarter after the Revolving Termination Date and continuing until the Maturity Date; PROVIDED that, in any event, all Loans shall be due and payable in full on the Maturity Date.
(b) The Company shall repay each Bid Loan on the last day of the relevant Interest Period.
2.10 INTEREST.
(a) Each Committed Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Offshore Rate or the Federal Funds Rate, as the case may be (and subject to the Company's right to convert to other Types of Committed Loans
under Section 2.4), PLUS the Applicable Margin. Each Bid Loan shall bear interest on the outstanding principal amount thereof from the relevant Borrowing Date at a rate per annum equal to the LIBO Rate plus (or minus) the LIBOR Bid Margin, or at the Absolute Rate, as the case may be.
(b) Interest on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Committed Loans under Section 2.8 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Administrative Agent at the request or with the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any Event of Default exists or after acceleration, the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Loans, at a rate per annum equal to the Base Rate PLUS 2% plus the Applicable Margin per annum; PROVIDED, HOWEVER, that, until the expiration of any Interest Period applicable to any Offshore Rate Loan outstanding on the date of occurrence of such Event of Default or acceleration, the principal amount of such Loan shall, during the continuation of such Event of Default or after acceleration, bear interest at a rate per annum equal to the rate which would otherwise be applicable with respect to such Loans PLUS 2%.
(d) Anything herein to the contrary notwithstanding, the obligations of the Company to any Bank hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by such Bank would be contrary to the provisions of any law applicable to such Bank limiting the highest rate of interest that may be lawfully contracted for, charged or received by such Bank, and in such event the Company shall pay such Bank interest at the highest rate permitted by applicable law.
2.11 FEES.
(a) ARRANGEMENT AND AGENCY FEES. The Company shall pay (i) an agency fee to the Administrative Agent for its own account, as required by the letter agreement between the Company and the Administrative Agent dated September 2, 1998; and (ii) fees to the Arranger and the Syndication Agent for the Arranger's and the Syndication Agent's own account, as required by the letter agreement between the Company and the Arranger dated September 2, 1998. The letters referred to in this subsection 2.11(a) are hereinafter referred to as the "FEE LETTERS".
(b) FACILITY FEES. The Company shall pay to the Administrative Agent for the account of each Bank a facility fee on the average daily amount of such Bank's Commitment (whether or not used), computed on a quarterly basis in arrears on the last Business Day of each calendar quarter, equal to 0.10% per annum. Such facility fee shall accrue from the Closing Date to the Maturity Date and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December commencing on September 30, 1998, to the Maturity Date, with the final payment to be made on the Maturity Date; PROVIDED that, in connection with any reduction or termination of Commitments under Section 2.7, the accrued facility fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis of the period from such reduction or termination date to such quarterly payment date. The facility fees provided in this subsection shall accrue at all times after the above-mentioned commencement date, including at any time during which one or more conditions in Article IV are not met.
2.12 COMPUTATION OF FEES AND INTEREST.
(a) All computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed. Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Administrative Agent shall be conclusive and binding on the Company and the Banks in the absence of manifest error.
2.13 PAYMENTS BY THE COMPANY.
(a) All payments to be made by the Company shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Administrative Agent for the account of the
Banks at the Administrative Agent's Payment Office, and shall be made in dollars and in immediately available funds, no later than 2:00 p.m. (Boston time) on the date specified herein. The Administrative Agent will promptly distribute to each Bank its applicable share as provided herein of such payment in like funds as received. Any payment received by the Administrative Agent later than 2:00 p.m. (Boston time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.
(c) Unless the Administrative Agent receives notice from the Company prior to the date on which any payment is due to the Banks that the Company will not make such payment in full as and when required, the Administrative Agent may assume that the Company has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent the Company has not made such payment in full to the Administrative Agent, each Bank shall repay to the Administrative Agent on demand such amount distributed to such Bank, together with interest thereon at the Federal Funds Rate for each day from the date such amount is distributed to such Bank until the date repaid.
2.14 PAYMENTS BY THE BANKS TO THE ADMINISTRATIVE AGENT.
(a) Unless the Administrative Agent receives notice from a Bank on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one Business Day prior to the date of such Borrowing, that such Bank will not make available as and when required hereunder to the Administrative Agent for the account of the Company the amount of that Bank's Bid Loan or its Pro Rata Share of a Committed Borrowing, as the case may be, the Administrative Agent may assume that each Bank has made such amount available to the Administrative Agent in immediately available funds on the Borrowing Date and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to the extent any Bank shall not have made its full amount available to the Administrative Agent in immediately available funds and the Administrative Agent in such circumstances has made available to
the Company such amount, that Bank shall on the Business Day following such Borrowing Date make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate for each day during such period. A notice of the Administrative Agent submitted to any Bank with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Administrative Agent shall constitute such Bank's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Administrative Agent on the Business Day following the Borrowing Date, the Administrative Agent will notify the Company of such failure to fund and, upon demand by the Administrative Agent, the Company shall pay such amount to the Administrative Agent for the Administrative Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank on any Borrowing Date.
2.15 SHARING OF PAYMENTS, ETC. If, other than as expressly provided elsewhere herein, any Bank shall obtain on account of the Committed Loans made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) in excess of its Pro Rata Share, such Bank shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Banks such participations in the Committed Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment pro rata with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank's ratable share (according to the proportion of (i) the amount of such paying Bank's required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. The Company agrees that any Bank so purchasing a participation from another Bank may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off, but subject to Section 10.9) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error)
of participations purchased under this Section and will in each case notify the Banks following any such purchases or repayments.
2.16 SUBSEQUENT BANK. Upon the agreement of the Company and the Syndication Agent, one or more additional Banks ("SUBSEQUENT BANKS") may be added to this Agreement at any time pursuant to the terms of a Subsequent Bank Supplement substantially in the Form of EXHIBIT K hereto. Upon the addition of such Subsequent Bank(s), the aggregate of the Commitments shall be increased to up to $300,000,000 and each Bank's Pro Rata Share of the aggregate Commitments shall be amended accordingly. The Subsequent Banks shall purchase and the existing Banks shall sell such assignments of existing Loans as may be necessary to cause the outstanding Loans of each Borrowing to equal the appropriate Pro Rata Share.
The addition of such Subsequent Banks is further conditioned upon the payment by the Company of any amount sufficient to compensate the existing Banks for any cost related to breakage of existing Interest Periods or to compensate the Subsequent Banks for the cost of funding existing Loans for the remainder of the existing Interest Periods.
The Company agrees to deliver such Notes and other documentation as may be necessary to evidence its obligation to the Banks after the addition of the Subsequent Banks hereunder and under the other various Loan Documents.
2.17 SWING LOANS.
(a) MAKING OF SWING LOANS. The Administrative Agent may elect in its sole discretion to make loans of a Federal Funds Rate Loan Type (the "SWING LOAN(S)") to the Company solely for the Administrative Agent's own account from time to time on or after the Closing Date and prior to the Revolving Termination Date up to an aggregate principal amount at any one time outstanding not to exceed $50,000,000; PROVIDED, HOWEVER, that after giving effect to any Swing Loan, the aggregate principal amount of all outstanding Loans shall not exceed the lesser of (i) the combined Commitments or (ii) the Borrowing Base. The Administrative Agent may make Swing Loans (subject to the conditions precedent set forth in SECTION 4.2), PROVIDED that the Administrative Agent received notice no later than 2:00 p.m. (Boston time) either (i) by facsimile transmission of a Notice of borrowing in writing or (ii) by telephone notice from a Responsible Officer for funding of a Swing Loan on the Business Day on which such Swing Loan is requested to be made. The Administrative Agent shall not make any Swing Loan after the Administrative Agent becomes aware that one or more of the
conditions precedent contained in SECTION 4.2 is not satisfied until such conditions have been satisfied or waived.
(b) LOAN REQUESTS FOR SWING LOANS. If the Company shall request by telephone notice and obtain a Swing Loan, it shall deliver promptly by facsimile transmission to the Administrative Agent and the Administrative Agent a Notice of Borrowing signed by a Responsible Officer confirming such telephone notice for a Swing Loan. If the information contained in any such Notice of borrowing differs in any material respect from the action taken by the Administrative Agent, the records of the Administrative Agent shall govern, absent manifest error.
(c) REPAYMENT OF SWING LOANS. Each outstanding Swing Loan shall be payable on the Business Day next following the day the Swing Loan was made, with interest at the rate applicable to Federal Funds Rate Loans accrued thereon, and shall be subject to all the terms and conditions applicable to Loans, except that all interest thereon shall be payable to the Administrative Agent solely for its own account. On the due date for such Swing Loan, unless the Company delivers or has previously delivered to the Administrative Agent a notice of its intention to repay and does repay the Swing Loan prior to 12:00 noon (Boston time), such Swing Loan shall automatically convert to a Federal Funds Rate Loan under this Agreement, and each Bank (other than the Administrative Agent), shall, absent the gross negligence or willful misconduct of the Administrative Agent in making such Swing Loan, irrevocably and unconditionally purchase from the Administrative Agent, without recourse or warranty, an undivided interest and participation in such Swing Loan in an amount equal to such Bank's Pro Rata Share and promptly pay such amount to the Administrative Agent in immediately available funds (which payment shall be due by 2:00 p.m. (Boston time) on such day if the Administrative Agent requests payment therefor prior to 12:00 noon (Boston time) on such day; otherwise such payment shall be due by 2:00 p.m. (Boston time) on the first Business Day after the Administrative Agent requests the same). Such payment shall be made by the other Banks whether or not an Event of Default or a Default is then continuing or any other condition precedent set forth in SECTION 4.2 is then met and whether or not the Company has then requested a Loan in such amount. If such amount is not in fact paid to the Administrative Agent by any Bank, the Administrative Agent shall be entitled to recover such amount on demand from such Bank, together with accrued interest thereon from the due date therefor (if made prior to 2:00 p.m., Boston time) on any Business Day until the date such amount is paid to the Administrative Agent by such Bank, at the Federal Funds Rate. The failure of any Bank to pay such amount to the Administrative Agent shall not relieve any other Bank of its obligation to the Administrative Agent hereunder.
(c) If the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or Agent, then:
(i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Bank or Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and
(iv) the Company shall also pay to each Bank or any Agent for the account of such Bank, at the time interest is paid, all additional amounts which the respective Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the Company of Taxes or Other Taxes, the Company shall furnish the Administrative Agent the original or a certified copy of a receipt evidencing payment thereof, or other evidence of payment reasonably satisfactory to the Administrative Agent.
(e) If the Company is required to pay additional amounts to any Bank or Agent pursuant to subsection (c) of this Section, then such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by the Company which may thereafter accrue, if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank.
3.2 ILLEGALITY.
(a) If any Bank determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make Offshore Rate Loans, then, on notice thereof by the Bank to the Company through the Administrative Agent, any obligation of that Bank to make
Offshore Rate Loans (including in respect of any LIBOR Bid Loan as to which the Company has accepted such Bank's Competitive Bid, but as to which the Borrowing Date has not arrived) shall be suspended until the Bank notifies the Administrative Agent and the Company that the circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact and demand from such Bank (with a copy to the Administrative Agent), prepay in full such Offshore Rate Loans of that Bank then outstanding, together with interest accrued thereon and amounts required under Section 3.4, either on the last day of the Interest Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain such Offshore Rate Loan. If the Company is required to so prepay any Offshore Rate Committed Loan, then concurrently with such prepayment, the Company shall borrow from the affected Bank, in the amount of such repayment, a Federal Funds Rate Committed Loan.
(c) If the obligation of any Bank to make or maintain Offshore Rate Committed Loans has been so terminated or suspended, the Company may elect, by giving notice to the Bank through the Administrative Agent that all Loans which would otherwise be made by the Bank as Offshore Rate Committed Loans shall be instead Federal Funds Rate Committed Loans.
(d) Before giving any notice to the Administrative Agent under this Section, the affected Bank shall designate a different Lending Office with respect to its Offshore Rate Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank.
3.3 INCREASED COSTS AND REDUCTION OF RETURN.
(a) If any Bank determines that, due to either (i) the introduction of or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the Offshore Rate) in or in the interpretation of any law or regulation or (ii) the compliance by that Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Bank of agreeing to make or making, funding or maintaining any Offshore Rate Loans, then the Company shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to the Administrative Agent), pay to the Administrative Agent for
the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or its Lending Office) or any corporation controlling the Bank with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy and such Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, Loans, credits or obligations under this Agreement above what such Bank or corporation would have been required to maintain but for the occurrence of such circumstances, then, upon demand of such Bank to the Company through the Administrative Agent, the Company shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase.
(c) No Bank shall be entitled to compensation under this
Section 3.3 for any costs incurred or reduction suffered with respect to any
date that it has such costs unless it shall have notified the Company that it
will demand compensation for such costs or reductions under paragraph (a) or (b)
above, as applicable, not more than 120 days after the later of (i) such date
and (ii) the date on which it shall have become aware of such costs or
reductions; provided, however, that the Company shall not be responsible for any
amount in excess of its allocated share of such cost incurred or reductions
suffered by the Company.
3.4 FUNDING LOSSES. The Company shall reimburse each Bank and hold each Bank harmless from any loss or expense (other than lost profits) which the Bank may sustain or incur as a consequence of:
(a) the failure of the Company to make on a timely basis any payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow a Loan or continue or convert a Committed Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment of any Committed Loan in accordance with any notice delivered under Section 2.8;
(d) the prepayment (including pursuant to Section 2.8) or other payment (including after acceleration thereof) of any Offshore Rate Loan, or Absolute Rate Bid Loan on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any Offshore Rate Committed Loan to a Federal Funds Rate Committed Loan on a day that is not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by the Company to the Banks under this Section and under subsection 3.3(a), each Offshore Rate Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBO Rate used in determining the Offshore Rate for such Offshore Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Offshore Rate Loan is in fact so funded.
3.5 INABILITY TO DETERMINE RATES. If the Administrative Agent or the Majority Banks determine that for any reason adequate and reasonable means do not exist for determining the LIBO Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan, or that the LIBO Rate applicable pursuant to subsection 2.10 (a) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to the Banks of funding such Loan, the Administrative Agent will promptly so notify the Company and each Bank. Thereafter, the obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall be suspended until the Administrative Agent, upon the instruction of the Majority Banks, revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice, the Banks shall make, convert or continue the Committed Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Committed Loans shall be made, converted into or continued as Federal Funds Rate Committed Loans.
3.6 CERTIFICATES OF BANKS. Any Bank claiming reimbursement or compensation under this Article III shall deliver to the
Company (with a copy to the Administrative Agent) a certificate setting forth in reasonable detail the amount payable to the Bank hereunder and the Bank's calculations thereof and such certificate shall be conclusive and binding on the Company in the absence of manifest error.
3.7 SURVIVAL. The agreements and obligations of the Company in this Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 CONDITIONS OF INITIAL LOANS. This Agreement shall become effective on the Refinancing Date. The occurrence of the Refinancing shall be subject to the prior or concurrent satisfaction of each of the following conditions precedent:
(a) DOCUMENTATION. Receipt by the Administrative Agent on or before the Refinancing Date of (i) evidence, in form and substance satisfactory to the Administrative Agent, that the GE Capital Facility shall have closed and (ii) all of the following, in form and substance satisfactory to the Administrative Agent and each Bank, and in sufficient copies for the Administrative Agent and each Bank:
(i) CREDIT AGREEMENT. This Agreement executed by each party thereto;
(ii) RESOLUTIONS; INCUMBENCY.
(A) Copies of the resolutions of the board of trustees of the Company authorizing the transactions contemplated hereby, certified as of the Refinancing Date by the Secretary or an Assistant Secretary of the Company and
(B) A certificate of the Secretary or Assistant Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to execute, deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered by it hereunder;
(iii) ORGANIZATION DOCUMENTS; GOOD STANDING. Each of the following documents:
(A) to the extent not previously delivered to the Syndication Agent, any amendment to the Trust
Agreement, certified by the Secretary or Assistant Secretary of the Company as of the initial Borrowing Date; and
(B) a good standing certificate from the Company issued by the Secretary of State of the Commonwealth of Massachusetts.
(iv) SECURITY AGREEMENT. The Security Agreement duly executed by the parties thereto, together with evidence, satisfactory to the Administrative Agent, that all filings and other actions reasonably intended to perfect the Administrative Agent's Lien on any collateral granted under the Security Agreement have been duly made and done and are in full force and effect and together with certified copies of the Intercreditor Agreement and Custody Agreement referred to therein.
(v) LEGAL OPINION. An opinion of Dechert Price & Rhoads, counsel to the Company, addressed to the Agents and the Banks, substantially in the form of EXHIBIT D;
(vi) PAYMENT OF FEES. Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Refinancing Date, together with Attorney Costs of BofA to the extent invoiced prior to or on the Refinancing Date; including any such costs, fees and expenses arising under or referenced in Sections 2.11 and 10.4;
(vii) CERTIFICATE. A certificate signed by a Responsible Officer, dated as of the Refinancing Date, stating that:
(A) the representations and warranties contained in Article V are true and correct on and as of such date, as though made on and as of such date;
(B) no Default or Event of Default exists; and
(C) there has occurred since February 28, 1998, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; and
(viii) OTHER DOCUMENTS. Such other approvals, opinions, documents or materials as the Agent or any Bank may request.
4.2 CONDITIONS TO ALL BORROWINGS. The obligation of each Bank to make any Committed Loan to be made by it (other than the reimbursement of a Swing Loan pursuant to Section 2.17), or any Bid Loan as to which the Company has accepted the relevant Competitive Bid (including its initial Loan) or of State Street to make any Swing Loan, is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date:
(a) NOTICE OF BORROWING. As to any Committed Loan, the Administrative Agent shall have received (with a copy for each Bank) a Notice of Borrowing;
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The representations and warranties in Article V shall be true and correct on and as of such Borrowing Date with the same effect as if made on and as of such Borrowing Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date);
(c) NO EXISTING DEFAULT. No Default or Event of Default shall exist or shall result from such Borrowing; and
(d) BORROWING BASE CERTIFICATE. The Administrative Agent shall have received a Borrowing Base Certificate giving effect to the proposed Loan dated within two Business Days of such Loan.
Each Notice of Borrowing and Competitive Bid Request submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice or request and as of each Borrowing Date, that the conditions in Section 4.2 are satisfied.
SECTION 4.3. CONSEQUENCES OF EFFECTIVENESS, ETC. On the Refinancing Date the Original Agreement shall be automatically amended and restated to read as set forth herein. On and after the Refinancing Date the rights and obligations of the parties hereto shall be governed by this Agreement; PROVIDED that rights and obligations of the parties hereto with respect to the period prior to the Refinancing Date shall continue to be governed by the provisions of the Original Agreement. On the Refinancing Date, the Pro Rata Share of each Bank shall immediately become the percentage set forth opposite the name of such Bank on SCHEDULE 2.1. With effect from and including the Refinancing Date, each Person listed on the signature pages hereof that is not a party to the Original Agreement shall become a party to this Agreement. Any Bank that is a party to the Original Agreement whose Pro Rata Share becomes 0% on the occurrence of the Refinancing shall, upon the occurrence thereof and the reallocation of Loans pursuant to SECTION 4.4, cease to be a Bank
party to this Agreement, and all accrued fees and other amounts payable under the Original Agreement for the account of such Bank shall be due and payable on such date; PROVIDED that the provisions of SECTIONS 3.1, 3.3, 3.4, 10.4 and 10.5 shall continue to inure to the benefit of each such Bank.
SECTION 4.4. REALLOCATION OF LOANS. On the occurrence of the Refinancing,
(a) each Bank that, as a result of the adjustment of the Pro Rata Shares, is to
have a greater principal amount of Loans outstanding than such Bank had
outstanding immediately prior to the occurrence of the Refinancing shall, if
requested by the Administrative Agent, deliver to the Administrative Agent
immediately available funds to cover such Loans (and the Administrative Agent
shall, to the extent of the funds so received and the funds received from any
Banks that are not parties to the Original Agreement, disburse funds to each
Bank that, as a result of such adjustment of the Pro Rata Shares, is to have a
lesser principal amount outstanding than such Bank had outstanding under the
Original Agreement), and (b) immediately prior to the Refinancing each Bank that
is not a party to the Original Agreement shall deliver to the Administrative
Agent immediately available funds to cover its Loans that will equal such Bank's
Pro Rata Share of the aggregate principal amount outstanding under this
Agreement immediately after the occurrence of the Refinancing.
SECTION 4.5. AMOUNTS OUTSTANDING UNDER THE ORIGINAL AGREEMENT DEEMED TO BE LOANS UNDER THIS AGREEMENT. The principal amounts of Loans owing under the Original Agreement as at the Refinancing Date to each Bank that is a party thereto (as reallocated pursuant to this Agreement) shall be deemed to be Loans made by that Bank hereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Agent and each Bank that:
5.1 EXISTENCE AND POWER. The Company:
(a) is a business trust duly organized, validly existing and in good standing under the laws of Massachusetts;
(b) has the power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents;
(c) is duly qualified and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license; and
(d) is in compliance with all Requirements of Law; except, in each case referred to in clause (c) or clause (d), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.
5.2 REGISTRATION OF COMPANY AND COMPANY'S SHARES. The Company is a registered investment company under the Act and has registered the sale of its shares under the 1933 Act and the Act.
5.3 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by the Company of this Agreement and each other Loan Document to which the Company is party, have been duly authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Company's Organization Documents;
(b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which the Company is a party or any order, injunction, writ or decree of any Governmental Authority to which the Company or its property is subject;
(c) violate any Requirement of Law; or
(d) violate the Investment Policies or Investment Restrictions.
5.4 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company or any of its Subsidiaries of this Agreement or any other Loan Document.
5.5 BINDING EFFECT. This Agreement and each other Loan Document to which the Company is a party constitute the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability.
5.6 LITIGATION. There are no actions, suits, proceedings, labor controversies, claims or disputes pending, or to the best knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company or any of its properties which:
(a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or
(b) if determined adversely to the Company, would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided.
5.7 NO DEFAULT. No Default or Event of Default exists or would result from the incurring of any Obligations by the Company. As of the Closing Date, the Company is not in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect, or that would, if such default had occurred after the Closing Date, create an Event of Default under subsection 8.1(e).
5.8 ERISA COMPLIANCE.
The Company has not established or maintained, nor is it liable under any Plan.
5.9 USE OF PROCEEDS. The proceeds of the Loans are to be used to provide liquidity for one or more of the following: (i) periodic tender offers for the repurchase of the Company's shares, (ii) to fund general working capital needs and (iii) to fund obligations with respect to unfunded loans or revolving credit commitments. The Company may also use the proceeds of the Loans to leverage the Company's portfolio to enhance yield.
5.10 FINANCIAL CONDITION.
(a) The audited financial statements of the Company dated February 28, 1998, and the related statements of income or operations, equity and cash flows for the period ended on such date:
(i) were prepared in conformity with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein;
(ii) fairly present the financial condition of the Company as of the date thereof and results of operations for the period covered thereby; and
(iii) show all material indebtedness and other liabilities, direct or contingent of the Company as of the date thereof, including liabilities for taxes, material commitments and Contingent Obligations.
(b) Since February 28, 1998, there has been no Material Adverse Effect.
5.11 TAXES. The Company has filed all Federal and other material tax returns and reports required to be filed, and has paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon it or its properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Company that would, if made, have a Material Adverse Effect.
5.12 ENVIRONMENTAL MATTERS. Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
5.13 NO BURDENSOME RESTRICTIONS. The Company is not a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which could reasonably be expected to have a Material Adverse Effect.
5.14 SUBSIDIARIES. The Company has no Subsidiaries.
5.15 FULL DISCLOSURE. None of the representations or warranties made by the Company in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Company in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Company to the Banks prior to the Closing Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.
5.16 REGULATIONS U AND X. The Company is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used
by the Company for a purpose which violates, or would be inconsistent with, FRB Regulation U or X. Terms for which meanings are provided in F.R.S. Board Regulation U or X or any regulations substituted therefore, as from time to time in effect, are used in this Section with such meanings.
5.17 INVESTMENT POLICIES AND INVESTMENT RESTRICTIONS. The Company is in compliance with all of the Investment Policies and Investment Restrictions.
5.18 ADVISORY CONTRACT. The Company's Amended and Restated Investment Management Agreement with the Investment Adviser dated April 7, 1997, as further amended August 7, 1998 and Administrative Agreement with Pilgrim America Group, Inc., dated April 7, 1997, are in the form delivered to the Agents and the Banks.
5.19 COMPLIANCE WITH LAWS. The Company is in compliance with all applicable laws and regulations (including the Act and all regulations thereunder), and all applicable ordinances, decrees, requirements, orders and judgments of, and all of the material terms of any applicable licenses and permits issued by, any governmental body, agency or official to the extent that non-compliance would be reasonably likely to have a Material Adverse Effect. The Company has received no notice of any action to be taken by the SEC with respect to the Company that would be materially adverse to the Company's financial condition or operations. The SEC has not made any request for any information from the Company since April 1995 other than information that is routine and/or periodic in nature.
5.20 TAX STATUS. The Company has taken all steps reasonably necessary to maintain its status as a regulated investment company under the Code.
5.21 YEAR 2000 PROBLEM. The Company has reviewed the areas within its business and operations which could be adversely affected by, and has developed or is developing a program to address on a timely basis, the "Year 2000 Problem" (that is, the risk that computer applications used by the Company may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based on such review and program, the Company reasonably believes that the "Year 2000 Problem" will not have a Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing:
6.1 FINANCIAL STATEMENTS. The Company shall deliver to each Bank and each Agent:
(a) As soon as available and in any event within 60 days after each
of its Fiscal Years, a copy of its annual audited Statement of Assets and
Liabilities, including a statement of investments, prepared in conformity
with GAAP and certified by an independent certified public accountant who,
in the commercially reasonable judgment of the Majority Banks, shall be
satisfactory to the Majority Banks, together with a certificate from such
accountant (i) acknowledging to the Banks such accountant's understanding
that the Banks are relying on such Statement of Assets and Liabilities,
(ii) containing a computation of, and showing compliance with, the
financial ratios contained in SECTION 7.9 and (iii) to the effect that, in
making the examination necessary for the signing of such Statement of
Assets and Liabilities, such accountant has not become aware of any Event
of Default or Default that has occurred and is continuing, or if such
accountant has become aware of any such event, describing it and the steps,
if any, being taken to cure it;
(b) Within 60 days after the end of the first six months of its Fiscal Year, a copy of its published semi annual report and asset statement, prepared in conformity with GAAP;
(c) (i) Within 15 days following the filing thereof, (i) any preliminary proxy materials filed with the SEC, (ii) at least annually within 60 days after the end of each fiscal year of the Company, copies of its current annual report, except that if its Investment Policies are changed materially (including any change in its ability to borrow hereunder), copies of any revised prospectus (or a prospectus supplement) marked to show changes from the prospectus (or prospectus supplement) and statement of additional information most recently delivered to the Banks reflecting any such changes shall be provided to the Banks within 15 days after the same become available, and (iii) within 15 days of the filing thereof, any registration statement filed with the SEC;
(d) Within 5 days after the end of each month, (i) a certificate substantially in the form of EXHIBIT C ("BORROWING BASE CERTIFICATE") setting forth its (A) borrowing base (as calculated in the manner contemplated by
the form of Borrowing Base Certificate) ("BORROWING BASE") and (B) Asset Coverage as of the last day of such month and (ii) a certificate signed by a Responsible Officer certifying that, to the best of such Person's knowledge, no Event of Default has occurred and is continuing or, if an Event of Default has occurred and is continuing, the steps being taken to remedy the same;
(e) Within 15 days after the last day of each fiscal quarter, a list of assets held by the Company as of such day and, within 60 days after the last day of each fiscal quarter, an opinion Meenan, McDevitt & Company or such other Person as shall be reasonably acceptable to the Majority Banks as to the fairness of the values assigned by the Company to the assets held by the Company as of such day; and
(f) Promptly, such additional information regarding the business, financial or corporate affairs of the Company as the Syndication Agent, at the request of any Bank, may from time to time request.
6.2 NOTICES. The Company shall promptly notify each Agent and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default;
(b) of any matter that has resulted or may reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Company; (ii) any dispute, litigation, investigation, proceeding or suspension between the Company and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Company; including pursuant to any applicable Environmental Laws;
(c) the scheduling of consideration by the board of trustees of the Company of a change in the Investment Adviser, administrator, custodian or independent accountant, or the appointment of any sub-adviser of any Person acting in a similar capacity to the Investment Adviser; PROVIDED that a mailing to shareholders with respect to any of the foregoing shall not be deemed to be sufficient notice hereunder;
(d) of any material change in accounting policies or financial reporting practices by the Company; and
(e) of any change in the name of the Company.
Without limiting any of the foregoing provisions of this Section 6.2, the Company will promptly notify the Administrative Agent and each Bank of (and, to the extent possible, give the Administrative Agent and each Bank at least ten days' prior written notice of) any contribution failure sufficient to give rise to a Lien under Section 302(f) of ERISA.
Each notice under this Section shall, be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action the Company proposes to take with respect thereto and at what time. Each notice under this subsection 6.2(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been (or foreseeably will be) breached or violated.
6.3 PRESERVATION OF EXISTENCE, ETC. The Company shall:
(a) preserve and maintain in full force and effect its existence and good standing under the laws of its state of organization;
(b) preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business;
(c) use reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.
6.4 INSURANCE. The Company will maintain or cause to be maintained with responsible insurance companies insurance with respect to its properties and business to the extent required under applicable law, including such fidelity bond coverage as shall be required by Rule 17g-l promulgated under the Act or any successor provision, (b) errors and omissions, and director and officer liability insurance, and (c) other insurance against such casualties and contingencies, and, with respect to CLAUSES (b) and (c) hereof, of such types and in such amounts as are substantially similar to the coverages maintained by the Company as of the date of this Agreement, and the Company will, upon request of the Administrative Agent, furnish to each Bank at reasonable intervals a certificate of a Responsible Officer
setting forth the nature and extent of all insurance maintained by Company in accordance with this Section.
6.5 PAYMENT OF OBLIGATIONS. The Company shall pay and discharge as the same shall become due and payable, all its obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company;
(b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and
(c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness.
6.6 COMPLIANCE WITH LAWS. The Company shall comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business, such compliance to include compliance in all material respects with the Act, the 1933 Act and the Exchange Act.
6.7 INSPECTION OF PROPERTY AND BOOKS AND RECORDS. The Company shall maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company. The Company shall permit representatives and independent contractors of any Agent or Bank to visit and inspect any of its properties, to examine its organizational, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the expense of the Company and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; PROVIDED, HOWEVER, when an Event of Default exists any Agent or Bank may do any of the foregoing at the expense of the Company at any time during normal business hours and without advance notice.
6.8 ENVIRONMENTAL LAWS. The Company shall comply with all Environmental Laws.
6.9 INVESTMENT ADVISER. The Company, to the extent permitted by applicable law, (a) shall at all times maintain Pilgrim America Investments, Inc. as its investment adviser (the "INVESTMENT ADVISER"), or (b) if the contract by which such
Investment Adviser is retained by the Company is terminated pursuant to or by reason of the operation of the Act, the Company's trustees or shareholders or any action taken by the SEC, the Investment Adviser shall continue to serve as the Company's investment adviser, with or without a fee, and a successor investment adviser shall thereafter be approved, within 120 days of such termination, in the manner provided by the Act and with the consent of the Majority Banks.
6.10 REGULATED INVESTMENT COMPANY. The Company will at all times maintain its status as a "regulated investment company" under the Code and a "registered investment company" under the Act.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks waive compliance in writing:
7.1 LIMITATION ON LIENS. The Company shall not directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following ("PERMITTED LIENS"):
(a) any Lien existing on property of the Company on the Closing Date and set forth in SCHEDULE 7.1 securing Indebtedness outstanding on such date or otherwise described in SCHEDULE 7.1;
(b) any Lien deemed to have been created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, provided that no notice of lien has been filed or recorded under the Code;
(d) Liens consisting of judgment or judicial attachment liens, provided that the enforcement of such Liens is effectively stayed and all such Liens in the aggregate at any time outstanding for the Company do not exceed $1,000,000.
7.2 CONSOLIDATIONS AND MERGERS. The Company shall not merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person.
7.3 LIMITATION ON INDEBTEDNESS. The Company shall not create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness or any preferred shares, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness incurred pursuant to the GE Capital Facility;
(c) Indebtedness consisting of Contingent Obligations permitted pursuant to Section 7.5;
(d) Deferred taxes; and
(e) Obligations to Persons who provide services to the Company in the ordinary course of business as an investment company and similar trade obligations incurred in the ordinary course of business.
7.4 TRANSACTIONS WITH AFFILIATES. Except for fees payable to the
Investment Adviser, the Company shall not, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate of the Company or such Subsidiary;
PROVIDED that any such transaction must be made in substantial compliance with
Section 17 of the Act or an exemption therefrom.
7.5 CONTINGENT OBLIGATIONS. The Company shall not create, incur, assume or suffer to exist any Contingent Obligations except endorsements for collection or deposit in the ordinary course of business.
7.6 LEASE OBLIGATIONS. The Company shall not create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease.
7.7 BUSINESS ACTIVITIES; INVESTMENT POLICIES. The Company shall not engage in any business activity, except as a diversified closed-end management investment company and such activities as may be incidental or related thereto. In addition to, and not in limitation of the foregoing, the Company will not become an open-end management investment company under the Act without the prior written consent of the Banks. The Company will not violate any of the Investment Policies or Investment Restrictions. The Company will not amend, rescind, modify or otherwise change any of the Investment Policies or Investment Restrictions without written notice to the Banks and a written determination by the Majority Banks, that such change will not
result in a fundamental change in the credit quality of the Company.
7.8 ACCOUNTING CHANGES. The Company shall not make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Company.
7.9 FINANCIAL COVENANTS. The Company shall not permit:
(a) its Asset Coverage to be less than 300% at any time;
(b) the five largest investments of the Company (including as one investment multiple investments in one Person or one Person and its Subsidiaries and Affiliates) to exceed 25% of the Total Assets of the Company; or
(c) the sum at any time of the unused portion of Commitments plus Cash Equivalent Investments to be an amount less than the sum of unfunded Indebtedness of the Company.
7.10 CHANGE OF CUSTODIAN OR AUDITOR. The Company shall promptly provide written notice to the Banks of any change in its custodian or auditor.
7.11 PENSION PLANS. The Company shall not enter into, or incur any liability relating to, any Plan.
ARTICLE VIII
EVENTS OF DEFAULT
8.1 EVENT OF DEFAULT. Any of the following shall constitute an "EVENT OF DEFAULT":
(a) NON-PAYMENT. The Company fails to pay, (i) when and as required to be paid herein, any amount of principal of any Loan (ii) within two days after the same becomes due, any amount of interest on any Bid Loan, or (iii) within five days after the same becomes due, any other interest, fee or any other amount payable hereunder or under any other Loan Document; or
(b) REPRESENTATION OR WARRANTY. Any representation or warranty by the Company made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by the Company or any Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan Document, is incorrect in any material respect on or as of the date made or deemed made; or
(c) SPECIFIC DEFAULTS. The Company fails to perform or observe any term, covenant or agreement contained in Article VII; or
(d) OTHER DEFAULTS. The Company fails to perform or observe any other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of 20 days after the date upon which written notice thereof is given to the Company by any Agent or Bank; or
(e) CROSS-DEFAULT. (A) A default or breach shall occur under the GE Capital Facility, and such default or breach (i) involves the failure to make any payment when due in respect of the GE Capital Facility or (ii) causes, or permits the Lender Agent, the Operating Agent, the Collateral Agent or any Lender to cause, Debt, under or with respect to the GE Capital Facility, to become due prior to its stated maturity or prior to its regularly scheduled dates of payment, regardless of whether such right is exercised or (B) the Company (i) fails to make any payment in respect of any Indebtedness or Contingent Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $1,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or
(f) INSOLVENCY; VOLUNTARY PROCEEDINGS. The Company (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or
(g) INVOLUNTARY PROCEEDINGS. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of the Company's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or
(h) MONETARY JUDGMENTS. One or more non-interlocutory judgments, non-interlocutory orders, decrees or arbitration awards is entered against the Company involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $1,000,000 or more, and the same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of 10 days after the entry thereof; or
(i) NON-MONETARY JUDGMENTS. Any non-monetary judgment, order or decree is entered against the Company which does or would reasonably be expected to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or
(j) CHANGE OF CONTROL. There occurs any Change of Control; or
(k) INVESTMENT POLICIES. The Company shall violate or take any action that would result in a violation of any of its Investment Policies or Investment Restrictions, except for violations or the taking of such actions that would not in the determination of the Majority Banks result in a fundamental change in the credit quality of the Company; or
(l) INVESTMENT ADVISER. Pilgrim America Investments, Inc. shall no longer be the Investment Adviser; or
(m) SECURITY AGREEMENT. The Security Agreement or any provision thereof shall cease to be in full force and effect, or shall cease to give the Collateral Agent the Liens, rights,
powers and privileges purported to be created thereby, or the Company shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Security Agreement; or
(n) CHANGE IN CUSTODIAN OR AUDITOR. The Company shall change its custodian or auditor, and the Majority Banks determine in writing such change has resulted in a fundamental change in the credit quality of the Company.
(o) MATERIAL ADVERSE EFFECT. A Material Adverse Effect shall have occurred and be continuing.
8.2 REMEDIES. If any Event of Default occurs, the Administrative Agent shall, at the request of, or may, with the consent of, the Majority Banks:
(a) declare the Commitment of each Bank to make Committed Loans to be terminated, whereupon such Commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all rights and remedies available to it and the Banks under the Loan Documents or applicable law;
PROVIDED, HOWEVER, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 8.1 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans shall automatically terminate and the unpaid principal amount of
all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Administrative
Agent or any Bank.
8.3 RIGHTS NOT EXCLUSIVE. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising.
ARTICLE IX
THE AGENTS
9.1 APPOINTMENT AND AUTHORIZATION. Each Bank hereby appoints, designates and authorizes each Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, none of the Agents shall have any duties or responsibilities, except those expressly set forth herein or in each other Loan Document, nor shall any of the Agents have or be deemed to have any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any of the Agents.
9.2 DELEGATION OF DUTIES. The Agents may execute any of their duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agents shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.
9.3 LIABILITY OF AGENTS. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Banks for any recital, statement, representation or warranty made by the Company or any Affiliate of the Company, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by any Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Company or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Company or any of the Company's Subsidiaries or Affiliates.
9.4 RELIANCE BY AGENTS. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Company), independent accountants and other experts selected by such Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Banks as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Majority Banks and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Banks.
9.5 NOTICE OF DEFAULT. None of the Agents shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to such Agent for the account of the Banks, unless such Agent shall have received written notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." Each Agent will notify the Banks as soon as is reasonably practicable of its receipt of any such notice. The Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Banks in accordance with Article VIII; PROVIDED, HOWEVER, that unless and until the Administrative Agent has received any such request, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Banks.
9.6 CREDIT DECISION. Each Bank acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by any Agent hereinafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Bank. Each Bank represents to the Agents that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Company, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company hereunder. Each Bank also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company. Except for notices, reports and other documents expressly herein required to be furnished to the Banks by the Agent, such Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Company which may come into the possession of any of the Agent-Related Persons.
9.7 INDEMNIFICATION. Whether or not the transactions contemplated hereby are consummated, the Banks shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Company and without limiting the obligation of the Company to do so), pro rata, from and against any and all Indemnified Liabilities; PROVIDED, HOWEVER, that no Bank shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Bank shall reimburse each Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs but without duplication of internal and external counsel) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document (excluding the Fee Letters only to the extent the terms and conditions of such Fee Letters are not otherwise set forth or addressed herein or in any other Loan Document), or any document contemplated by or referred to herein, to the extent that the such Agent is not reimbursed for such expenses by or on behalf of the Company. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent.
9.8 AGENT IN INDIVIDUAL CAPACITY. BofA, State Street, Deutsche and their respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with the Company and its Affiliates as though BofA, State Street and Deutsche were not Agents hereunder and without notice to or consent of the Banks. The Banks acknowledge that, pursuant to such activities, BofA, State Street, Deutsche or their respective Affiliates may receive information regarding the Company or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Company) and acknowledge that the Agents shall be under no obligation to provide such information to them. With respect to its Loans, BofA, State Street and Deutsche shall have the same rights and powers under this Agreement as any other Bank and may exercise the same as though it were not an Agent, and the terms "Bank" and "Banks" include BofA, State Street and Deutsche in their individual capacity.
9.9 SUCCESSOR AGENT. Either the Administrative Agent or the Syndication Agent may, and at the request of the Majority Banks shall, resign as such Agent upon 30 days' notice to the Banks. If such Agent resigns under this Agreement, the Majority Banks shall appoint from among the Banks a successor agent for the Banks which successor agent shall be approved by the Company, which approval shall not be unreasonably withheld. If no successor agent is appointed prior to the effective date of the resignation of such Agent, such Agent may appoint, after consulting with the Banks and the Company, a successor agent from among the Banks. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of such retiring Agent and the term "Administrative Agent" or "Syndication Agent", as applicable, shall mean such successor agent and such retiring Agent's appointment, powers and duties as such Agent shall be terminated. After any such retiring Agent's resignation hereunder as such Agent, the provisions of this Article IX and Sections 10.4 and 10.5 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was such Agent under this Agreement. If no successor agent has accepted appointment as such Agent by the date which is 30 days following a retiring Agent's notice of resignation, such retiring Agent's resignation shall nevertheless thereupon become effective and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided for above.
9.10 WITHHOLDING TAX.
(a) If any Bank is a "foreign corporation, partnership or trust" within the meaning of the Code and such Bank claims exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees with and in
favor of the Company and the Administrative Agent, to deliver to the Company and the Administrative Agent:
(i) if such Bank claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8 (or any successor form) before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Bank, two properly completed and executed copies of IRS Form 4224 (or any successor form) before the payment of any interest is due in the first taxable year of such Bank and in each succeeding taxable year of such Bank during which interest may be paid under this Agreement, and IRS Form W-9 (or any successor form); and
(iii) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Company and the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form 1001 (or any successor form) and such Bank sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Bank, such Bank agrees to promptly notify the Company and the Administrative Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of the Company to such Bank. To the extent of such percentage amount, the Company and the Administrative Agent will treat such Bank's IRS Form 1001 (or any successor form) as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax by filing IRS Form 4224 (or any successor form) with the Company and the Administrative Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of the Company to such Bank, such Bank agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank realizes a reduction in the applicable withholding tax, the Company and the Administrative Agent may withhold from any interest payment to such Bank an amount equivalent to the applicable withholding tax after taking into account such reduction. If the forms or other documentation required by subsection (a) of this Section are not delivered to the Company and the Administrative Agent, then the Company and the Administrative Agent may withhold from any interest payment to such Bank not providing such forms or other documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Company and the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered, was not properly executed, or because such Bank failed to notify the Company and the Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify the Company and the Administrative Agent fully for all amounts paid, directly or indirectly, by the Company and the Administrative Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to the Company and the Administrative Agent under this Section, together with all costs and expenses (including Attorney Costs but without duplication for internal and external counsel). The obligation of the Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of the Administrative Agent.
9.11 OTHER AGENTS. None of the Banks identified on the facing page or signature pages of this Agreement as a "Co-Agent", "Documentation Agent" or "Co-Administrative Agent" shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Banks as such. Without limiting the foregoing, none of the Banks so identified as "Co-Agent", "Documentation Agent" or "Co-Administrative Agent" shall have or be deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges that it has not relied, and will not rely, on any of the Banks so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.
ARTICLE X
MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by the Company therefrom, shall be effective unless the same shall be in writing and signed by the Majority Banks (or by the Syndication Agent at the written request of the Majority Banks) and the Company and acknowledged by the Agents, and then any such waiver and consent shall be effective only in the specific instance and for the specific purpose for which given; PROVIDED, HOWEVER, that no such waiver, amendment, or consent shall, unless in writing and signed by all the Banks and the Company and acknowledged by the Syndication Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to subsection 8.2(a)) except as provided in
Section 2.16, unless such Bank has consented thereto in writing;
(b) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Banks (or any of them) hereunder or under any other Loan Document including, without limitation, any date fixed for a mandatory prepayment or a mandatory reduction in the aggregate Commitments;
(c) reduce the principal of, or the rate of interest specified herein on any Loan, or (subject to clause (ii) below) any fees or other amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which is required for the Banks or any of them to take any action hereunder;
(e) release all or substantially all the collateral securing the Obligations; or
(f) amend this Section, or Sections 2.15, 6.9, 10.7, or any provision herein providing for consent or other action by all Banks;
and, PROVIDED FURTHER, that (i) no amendment, waiver or consent shall, unless in writing and signed by an Agent in addition to the Majority Banks or all the Banks, as the case may be, and the Company, affect the rights or duties of such Agent under this Agreement or any other Loan Document, and (ii) the Fee Letters may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto.
10.2 NOTICES.
(a) All notices, requests and other communications shall be in writing (including, unless the context expressly
otherwise provides, by facsimile transmission, provided that any matter
transmitted by the Company by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on SCHEDULE 10.2, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number specified for
notices on SCHEDULE 10.2; or, as directed to the Company or the applicable
Agent, to such other address as shall be designated by such party in a written
notice to the other parties, and as directed to any other party, at such other
address as shall be designated by such party in a written notice to the Company
and such Agent.
(b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Article II or IX shall not be effective until actually received by the Administrative Agent.
(c) Any agreement of the Agents and the Banks herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Agents and the Banks shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Agents and the Banks shall not have any liability to the Company or other Person on account of any action taken or not taken by the Agents or the Banks in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Agents and the Banks to receive written confirmation of any telephonic or facsimile notice or the receipt by the Agents and the Banks of a confirmation which is at variance with the terms understood by the Agents and the Banks to be contained in the telephonic or facsimile notice.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of any Agent or Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
10.4 COSTS AND EXPENSES. The Company shall:
(a) whether or not the transactions contemplated hereby are consummated, pay or reimburse BofA and State Street (including in its capacity as an Agent) within five Business Days
after demand for all costs and expenses incurred by BofA and State Street (including in its capacity as an Agent) in connection with the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, including reasonable Attorney Costs (but without duplication for internal and external counsel) incurred by BofA and State Street (including in its capacity as an Agent) with respect thereto; and
(b) pay or reimburse each Agent, the Arranger and each Bank within five Business Days after demand (subject to subsection 4.1(a)(v)) for all costs and expenses (including Attorney Costs but without duplication for internal and external counsel) incurred by them in connection with the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding).
10.5 INDEMNITY. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold the Agent-Related Persons, and each Bank and each of its respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "INDEMNIFIED PERSON") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs but without duplication for internal and external counsel) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans and the termination, resignation or replacement of any Agent or replacement of any Bank) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement, any other Loan Document or any other document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or any other Loan Document or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"); PROVIDED, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting solely from the bad faith, gross negligence or willful misconduct of such Indemnified Person
or the reckless disregard by such Indemnified Person of his duties under this Agreement. The agreements in this Section shall survive payment of all other Obligations. A Person seeking indemnification from the Company pursuant to this Agreement shall give prompt notice to the Company of any claim in respect of which indemnification may be sought and shall provide to the Company a written affirmation of entitlement to indemnification.
10.6 PAYMENTS SET ASIDE. To the extent that the Company makes a payment to an Agent or the Banks, or an Agent or the Banks exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by an Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Bank severally agrees to pay to such Agent upon demand its pro rata or other applicable share of any amount so recovered from or repaid by such Agent.
10.7 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Syndication Agent and each Bank.
10.8 ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) Any Bank may, with the written consent of the Company at all times other than during the existence of an Event of Default and the Syndication Agent, which consents shall not be unreasonably withheld, at any time assign and delegate to one or more Eligible Assignees (provided that no written consent of the Company or the Syndication Agent shall be required in connection with any assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an "ASSIGNEE") all, or any ratable part of all, of the Loans, the Commitment and the other rights and obligations of such Bank hereunder, in a minimum amount of $5,000,000; PROVIDED, HOWEVER, that the Company and the Agents may continue to deal solely and directly with such Bank in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company and the Agents by such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered to the Company and the Syndication
Agent an Assignment and Acceptance in the form of EXHIBIT E ("ASSIGNMENT AND ACCEPTANCE") and (iii) the assignor Bank or Assignee has paid to the Syndication Agent and the Administrative Agent a processing fee of $1,500 each except where the Assignee is an affiliate of the assigning Bank.
(b) From and after the date that the Syndication Agent notifies the assignor Bank that it has received (and provided its consent with respect to) an executed Assignment and Acceptance and payment of the above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall have the rights and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by the Syndication Agent that it has received an executed Assignment and Acceptance and payment of the processing fee, (and provided that it consents to such assignment in accordance with subsection 10.8(a)), the Company shall execute and deliver to the Syndication Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and, if the assignor Bank has retained a portion of its Loans and its Commitment, replacement Notes in the principal amount of the Loans retained by the assignor Bank (such Notes to be in exchange for, but not in payment of, the Notes held by such Bank). Immediately upon each Assignee's making its processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Bank by the amount the Commitment assigned.
(d) Any Bank may at any time sell to one or more commercial banks or other Persons not Affiliates of the Company (a "PARTICIPANT") (other than investment companies) participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank (the "Originating Bank") hereunder and under the other Loan Documents; PROVIDED, HOWEVER, that (i) the originating Bank's obligations under this Agreement shall remain unchanged, (ii) the originating Bank shall remain solely responsible for the performance of such obligations, (iii) the Company and the Agents shall continue to deal solely and directly with the originating Bank in connection with the originating Bank's rights and obligations under this Agreement and the other
Loan Documents, and (iv) no Bank shall transfer or grant any participating
interest under which the Participant has rights to approve any amendment to, or
any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment, consent or waiver would require
unanimous consent of the Banks as described in the first proviso to Section
10.1. In the case of any such participation, the Participant shall be entitled
to the benefit of Sections 3.1, 3.3 and 10.5 as though it were also a Bank
hereunder, but shall not have any rights under this Agreement, or any of the
other Loan Documents, and all amounts payable by the Company hereunder shall be
determined as if such Bank had not sold such participation; except that, if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Bank under this Agreement.
(e) Each Bank agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by the Company and provided to it by the Company, or by an Agent on the Company's behalf, under this Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by the Bank, or (ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company known to the Bank; PROVIDED, HOWEVER, that any Bank may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which the Bank is subject or in connection with an examination of such Bank by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which any Agent, any Bank or their respective Affiliates may be party; (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Bank's independent auditors and other professional advisors; (G) to any Affiliate of such Bank, or to any Participant or Assignee, actual or potential, provided that such Affiliate, Participant or Assignee agrees to keep such information confidential to the same extent required of the Banks hereunder, and (H) as to any Bank, as expressly permitted under
the terms of any other document or agreement regarding confidentiality to which the Company is party or is deemed party with such Bank.
(f) Notwithstanding any other provision in this Agreement, any Bank may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement and any Note held by it in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.
(g) Any Bank may transfer and carry all or A portion of its Commitment and the Loans at the time held by it at, to or for the account of any domestic or foreign branch office of such Bank, and such transfer shall not be deemed an assignment or participation pursuant to this Section 10.8; provided, however, that such Bank shall not be entitled to receive any amount payable pursuant to Section 3.3 hereof to the extent that such amount would not have been payable but for the transfer referred to above; provided, further, that such Bank shall have delivered to the Syndication Agent revised information with respect to it as set forth in Section 10.2.
10.9 SET-OFF. In addition to any rights and remedies of the Banks provided by law, if an Event of Default exists or the Loans have been accelerated, each Bank is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, such Bank to or for the credit or the account of the Company against any and all Obligations owing to such Bank, now or hereafter existing, irrespective of whether or not any Agent or such Bank shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. Each Bank agrees promptly to notify the Company and the Agents after any such set-off and application made by such Bank; PROVIDED, HOWEVER, that the failure to give such notice shall not affect the validity of such set-off and application.
Without limiting the foregoing, upon the occurrence and during the continuance of any Event of Default, the Administrative Agent shall have a right of set-off with respect to the Deposit Account. To the extent the available cash in the Deposit Account is insufficient to repay Loans due the Banks, the Company authorizes the Administrative Agent in its capacity as custodian to dispose of the Company's assets as selected by the Investment Adviser to the extent necessary to repay all amounts
due to the Banks. All payments so received by the Administrative Agent with respect to the Loans shall be applied first to interest and then to principal.
10.10 NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Bank shall notify the Agents in writing of any changes in the address to which notices to the Bank should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information as the Agents shall reasonably request.
10.11 COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument.
10.12 SEVERABILITY. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder.
10.13 NO THIRD PARTIES BENEFITED. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Banks, the Agents and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents.
10.14 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE AGENTS AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENTS AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENTS AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT. THE COMPANY, THE AGENTS AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
10.15 WAIVER OF JURY TRIAL. THE COMPANY, THE BANKS AND THE AGENTS EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS AND THE AGENTS EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.16 ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company, the Banks and the Agents, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof.
SECTION 10.17 OFFICERS, TRUSTEES AND SHAREHOLDERS OF THE COMPANY NOT BOUND. Each Bank and Agent agrees that this Agreement has been executed by an officer of the Company on behalf of the Company and not individually. Each Bank and Agent agrees that the Obligations of the Company hereunder are not binding on the officers, trustees or shareholders of the Company, but are only binding upon the Company and its assets and property. The liability of the officers, trustees and shareholders of the Company is limited by the Trust Agreement, which is on file with the Secretary of State of The Commonwealth of Massachusetts.
SECTION 10.18 CONTINUING EFFECTIVENESS, ETC. After the Refinancing Date, all references in the Loan Documents or other similar documents to "Credit Agreement" or words of like import shall refer to this Agreement. The execution, delivery and effectiveness of this Agreement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Banks under any of the other Loan Documents, nor constitute a waiver of any provision of the Loan Documents.
SECTION 10.19 FACSIMILE EXECUTION. One or more executed counterparts of this Agreement or any document or instrument related hereto may be delivered by facsimile, with the intention that such counterparts have the same effect as an original executed counterpart hereof or thereof. Any party hereto delivering an executed counterpart of this Agreement or any related document or instrument by facsimile, shall promptly provide an original of such executed counterpart to the Syndication Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their proper and duly authorized officers as of the day and year first above written.
PILGRIM AMERICA PRIME RATE TRUST
By: /s/ Daniel A. Norman ----------------------------- Title: DANIEL A. NORMAN -------------------------- SENIOR VICE PRESIDENT |
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Syndication Agent
By: /s/ John G. Hayes ----------------------------- Title: JOHN G. HAYES -------------------------- VICE PRESIDENT |
STATE STREET BANK AND TRUST COMPANY
as Administrative Agent
By: /s/ [ILLEGIBLE] ----------------------------- Title: Vice President -------------------------- |
DEUTSCHE BANK A.G., New York
branch, as Documentation Agent
By: /s/ Peter L. Bassler ----------------------------- Title: Peter L. Bassler -------------------------- Vice President By: /s/ Eckhard Osenberg ----------------------------- Title: Eckhard Osenberg -------------------------- Vice President |
COMMERZBANK A.G., Los Angeles Branch, as Co-Agent and as a Bank
By: /s/ Christian Jagenberg ----------------------------- Title: Christian Jagenberg -------------------------- SVP and Manager By: /s/ Steven F. Larsen ----------------------------- Title: Steven F. Larsen -------------------------- Vice President |
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By: /s/ John G. Hayes ----------------------------- Title: JOHN G. HAYES -------------------------- VICE PRESIDENT |
STATE STREET BANK AND TRUST
COMPANY, as a Bank
By: /s/ [ILLEGIBLE] ----------------------------- Title: Vice President -------------------------- |
DEUTSCHE BANK A.G., New York and/or Cayman Islands branches, as a Bank
By: /s/ Peter L. Bassler ----------------------------- Title: Peter L. Bassler -------------------------- Vice President By: /s/ Eckhard Osenberg ----------------------------- Title: Eckhard Osenberg -------------------------- Vice President |
THE DAI-ICHI KANGYO BANK, LTD.,
Chicago Branch, as a Bank
By: /s/ Nobuyasu Fukatsu -------------------------------- Title: Vice President ----------------------------- Name: Nobuyasu Fukatsu ----------------------------- |
BANK HAPOALIM B.M., as a Bank
By: /s/ [ILLEGIBLE] ----------------------------- Title: Vice President -------------------------- By: /s/ [ILLEGIBLE] ----------------------------- Title: Vice President and [ILLEGIBLE] -------------------------------- |
FIRST UNION NATIONAL BANK,
as a Bank
By: /s/ [ILLEGIBLE] ----------------------------- Title: SVP -------------------------- |
BANQUE NATIONALE DE PARIS, as a
Bank
By: /s/ William Shaheen ----------------------------- Title: WILLIAM SHAHEEN -------------------------- Vice President /s/ Laurent Vanderzyppe ----------------------- LAURENT VANDERZYPPE Vice President |
SCHEDULE 2.1
COMMITMENTS
AND PRO RATA SHARES
PRO RATA BANK COMMITMENT SHARE ---- ---------- -------- Bank of America National $ 40,000,000 20% Trust and Savings Association State Street Bank and Trust Company $ 40,000,000 20% Deutsche Bank AG $ 25,000,000 12.5% Commerzbank AG $ 25,000,000 12.5% Bank Hapoalim B.M. $ 20,000,000 10% Banque Nationale de Paris $ 20,000,000 10% The Dai-Ichi Kangyo Bank, Ltd. $ 20,000,000 10% First Union National Bank $ 10,000,000 5% TOTAL $ 200,000,000 100% |
SCHEDULE 7.1
PERMITTED LIENS
1. Liens in favor of a Custodian pursuant to a Custody Agreement.
2. Lien arising from the GE Capital Facility.
SCHEDULE 10.2
OFFSHORE AND DOMESTIC LENDING OFFICES
AND ADDRESSES FOR NOTICES
PILGRIM AMERICA PRIME RATE TRUST
Address: Two Renaissance Square 40 North Central Avenue Suite 1200 Phoenix, AZ 85004-4424 Attention: Dan Norman, Senior Vice President Telephone: (602) 417-8112 Facsimile: (602) 417-8327 |
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Syndication Agent
Bank of America National Trust
and Savings Association
Address: 231 South LaSalle Street Chicago, IL 60697 Attention: Dawn Lenza Telephone: (312) 828-4184 Facsimile: (312) 974-9524 |
STATE STREET BANK AND TRUST COMPANY,
as Administrative Agent
State Street Bank and Trust Company
Address: 225 Franklin Street Mail Code A4N Boston, MA 02110 Attention: David Cox Telephone: (617) 985-0973 Facsimile: (617) 537-5194 |
DEUTSCHE BANK AG,
New York and/or
Cayman Islands Branches,
as Documentation Agent
Deutsche Bank AG
Address: 31 West 52nd Street New York, New York 10019 Attention: Lynn Sweeney Telephone: (212) 474-8613 Facsimile: (212) 474-7879 |
Exhibit 99.(k)(v)
AUCTION AGENCY AGREEMENT
This Auction Agency Agreement (this "Agreement"), dated as of November 16, 2000, is between Pilgrim Prime Rate Trust (the "Trust") and Bankers Trust Company, a New York banking corporation.
The Trust proposes to issue two series of preferred shares of beneficial interest (3,600 shares of Series T and 3,600 shares of Series Th), par value $.01 per share, liquidation preference $25,000 per share, designated as Series T and Th Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate (as defined below).
The Trust desires that Bankers Trust Company perform certain duties as agent in connection with each Auction of Preferred Shares (in such capacity, the "Auction Agent"), and as the transfer agent, registrar, dividend paying agent and redemption agent with respect to the Preferred Shares (in such capacity, the "Paying Agent"), upon the terms and conditions of this Agreement, and the Trust hereby appoints Bankers Trust Company as said Auction Agent and Paying Agent in accordance with those terms and conditions (hereinafter generally referred to as the "Auction Agent," except in Sections 3 and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Trust and the Auction Agent agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Agent Member" of any Person shall mean such Person's agent member of the Securities Depository that will act on behalf of a Bidder.
(b) "Auction" shall have the meaning specified in Section 2.1 hereof.
(c) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(d) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes hereof in a written communication from the Auction Agent to the Trust.
PILGRIM PRIME RATE TRUST
AUCTION AGENCY AGREEMENT
(e) "Broker-Dealer Agreement" shall mean each agreement between the Auction Agent and a Broker-Dealer substantially in the form attached hereto as Exhibit A.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
(g) "Holder" shall be a holder of record of one or more Preferred Shares, listed as such in the share register maintained by the Paying Agent pursuant to Section 4.6 hereof.
(h) "Interest Equivalent" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest-bearing security.
(i) "Trust Officer" shall mean the Chairman, the President, each Vice President (whether or not designated by a number or word or words added before or after the title "Vice President"), the Secretary, the Treasurer, each Assistant Secretary and each Assistant Treasurer of the Trust and every other officer or employee of the Trust designated as a "Trust Officer" for purposes hereof in a notice from the Trust to the Auction Agent.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. THE AUCTION.
2.1. PURPOSE; INCORPORATION BY REFERENCE OF AUCTION PROCEDURES.
(a) The Certificate provides that the Applicable Rate on shares of each series of Preferred Shares, as the case may be, for each Dividend Period therefor after the initial Dividend Period shall be the rate per annum that a commercial bank, trust company or other financial institution appointed by the Trust advises results from the implementation of the Auction Procedures. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures. The Auction
Agent hereby accepts such appointment and agrees that, on each Auction Date, it shall follow the procedures set forth in this Section 2 and the Auction Procedures for the purpose of determining the Applicable Rate for the Preferred Shares for the next Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part hereof to the same extent as if such provisions were set forth fully herein.
2.2. PREPARATION FOR EACH AUCTION: MAINTENANCE OF REGISTRY OF EXISTING HOLDERS.
(a) As of the date hereof, the Trust shall provide the Auction Agent with a list of the Broker-Dealers previously approved by the Auction Agent and shall cause to be delivered to the Auction Agent for execution by the Auction Agent a Broker-Dealer Agreement signed by each such Broker-Dealer. The Auction Agent shall keep such list current and accurate and shall indicate thereon, or on a separate list, the identity of each Existing Holder, if any, whose most recent Order was submitted by a Broker-Dealer on such list and resulted in such Existing Holder continuing to hold or purchase Preferred Shares. Not later than five Business Days prior to any Auction Date for which any change in such list of Broker-Dealers is to be effective, the Trust shall notify the Auction Agent in writing of such change and, if any such change is the addition of a Broker-Dealer to such list, the Trust shall cause to be delivered to the Auction Agent for execution by the Auction Agent a Broker-Dealer Agreement signed by such Broker-Dealer. The Auction Agent shall have entered into a Broker-Dealer Agreement with each Broker-Dealer prior to the participation of any such Broker-Dealer in any Auction.
(b) In the event that the Auction Date for any Auction shall be changed after the Auction Agent shall have given the notice, the Auction Agent, by such means as the Auction Agent deems practicable, shall give notice of such change to the Broker-Dealers not later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date.
(c) The provisions contained in Section 4 of Part I of the Certificate concerning Special Rate Periods and the notification of a Special Rate Period will be followed by the Trust and, to the extent applicable, the Auction Agent, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(d) (i) On each Auction Date, the Auction Agent shall determine the initial dividend rate and the Maximum Rate. If the initial dividend rate is not quoted on an interest basis but is quoted on a discount basis, the Auction Agent shall convert the quoted rate to an Interest Equivalent; or, if the rate obtained by the Auction Agent is not quoted on an interest or discount basis, the Auction Agent shall convert the quoted rate to an interest rate after consultation with the Trust as to the method of such conversion. Not later than 9:30 A.M. on each Auction Date, the Auction Agent shall notify the Trust and the Broker-Dealers of the initial dividend rate so determined and of the Maximum Rate.
(ii) If the initial dividend rate is the applicable "AA" Financial Composite Commercial Paper Rate and such rate is to be based on rates supplied by Commercial
Paper Dealers and one or more of the Commercial Paper Dealers shall not provide a quotation for the determination of the applicable "AA" Financial Composite Commercial Paper Rate, the Auction Agent immediately shall notify the Trust so that the Trust can determine whether to select a substitute Commercial Paper Dealer or substitute Commercial Paper Dealers to provide the quotation or quotations not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers. The Trust promptly shall advise the Auction Agent of any such selection. If the Trust does not select any such substitute Commercial Paper Dealer or substitute Commercial Paper Dealers, then the rates shall be supplied by the remaining Commercial Paper Dealer or Commercial Paper Dealers.
(e) (i) The Auction Agent shall maintain a current registry of the Existing Holders of the Preferred Shares for purposes of each individual Auction. The Trust shall use commercially reasonable efforts to provide or cause to be provided to the Auction Agent within ten Business Days following the date of the Closing a list of the initial Existing Holders of Preferred Shares, and the Broker-Dealer of each such Existing Holder through which such Existing Holder purchased such shares. The Auction Agent may rely upon, as evidence of the identities of the Existing Holders, such list, the results of each Auction and notices from any Existing Holder, the Agent Member of any Existing Holder or the Broker-Dealer of any Existing Holder with respect to such Existing or Holder's transfer of any Preferred Shares to another Person.
(ii) In the event of any partial redemption of Preferred Shares, upon notice by the Trust to the Auction Agent of such partial redemption, the Auction Agent promptly shall request the Securities Depository to notify the Auction Agent of the identities of the Agent Members (and the respective numbers of shares) from the accounts of which shares have been called for redemption and the person or department at such Agent Member to contact regarding such redemption. At least two Business Days prior to the Auction preceding the date of redemption, the Auction Agent shall request each Agent Member so identified to disclose to the Auction Agent (upon selection by such Agent Member of the Existing Holders whose shares are to be redeemed) the number of Preferred Shares of each such Existing Holder, if any, to be redeemed by the Trust, provided that the Auction Agent has been furnished with the name and telephone number of a person or department at such Agent Member from which it is to request such information. In the absence of receiving any such information with respect to an Existing Holder, from such Existing Holder's Agent Member or otherwise, the Auction Agent may continue to treat such Existing Holder as having ownership of the number of Preferred Shares shown in the Auction Agent's registry of Existing Holders.
(iii) The Auction Agent shall register a transfer of the ownership of Preferred Shares from an Existing Holder to another Existing Holder, or to another Person if permitted by the Trust, only if (A) such transfer is made pursuant to an Auction or (B) if such transfer is made other than pursuant to an Auction, the Auction Agent has been notified of such transfer in writing, in a notice substantially in the form of Exhibit B to the Broker-Dealer Agreements, by such Existing Holder or by the Agent Member of such Existing Holder. The Auction Agent is not required to accept any notice of transfer delivered for an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next preceding the applicable Auction Date. The Auction Agent shall rescind a transfer made on the registry of the
Existing Holders of any Preferred Shares if the Auction Agent has been notified in writing, in a notice substantially in the form of Exhibit C to the Broker-Dealer Agreement, by the Agent Member or the Broker-Dealer of any Person that (i) purchased any Preferred Shares and the seller failed to deliver such shares or (ii) sold any Preferred Shares and the purchaser failed to make payment to such Person upon delivery to the purchaser of such shares.
(f) The Auction Agent may request that the Broker Dealers, as set forth in Section 3.2(b) of the Broker-Dealer Agreements, provide the Auction Agent with a list of their respective customers that such Broker-Dealers believe are Beneficial Owners of Preferred Shares. The Auction Agent shall keep confidential any such information and shall not disclose any such information so provided to any Person other than the relevant Broker-Dealer and the Trust, provided that the Auction Agent reserves the right to disclose any such information if it is advised by its counsel that its failure to do so would be unlawful.
2.3. AUCTION SCHEDULE.
The Auction Agent shall conduct Auctions every Tuesday and Thursday in accordance with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent of the Trust, which consent shall not be withheld unreasonably. The Auction Agent shall give notice of any such change to each Broker-Dealer. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the initial dividend rate and the Maximum Rate as set forth in Section 2.2(e)(i) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 3(a) of Part II of the Certificate. Submission deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 2.4 hereof. |
2.4. NOTICE OF AUCTION RESULTS.
On each Auction Date, the Auction Agent shall notify Broker-Dealers of the results of the Auction held on such date by telephone or through the Auction Agent's Auction Processing System.
2.5. BROKER-DEALERS.
(a) Not later than 12:00 noon on each Auction Date, the Trust shall pay to the Auction Agent in Federal Funds or similar same-day funds an amount in cash equal to (i) in the case of any Auction Date immediately preceding a 7-day Dividend Period, the product of (A) a fraction the numerator of which is the number of days in such Dividend Period (calculated by counting the first day of such Dividend Period but excluding the last day thereof) and the denominator of which is 360, times (B) 1/4 of 1%, times (C) $25,000 times (D) the sum of the aggregate number of outstanding Preferred Shares for which the Auction is conducted and (ii) in the case of any Special Rate Period, the amount determined by mutual consent of the Trust and the Broker-Dealers pursuant to Section 3.5 of the Broker-Dealer Agreements. The Auction Agent shall apply such moneys as set forth in Section 3.5 of the Broker-Dealer Agreements and shall thereafter remit to the Trust any remaining funds paid to the Auction Agent pursuant to this Section 2.5(a).
(b) The Trust shall not designate any Person to act as a Broker-Dealer, or permit an Existing Holder or a Potential Beneficial Owner to participate in Auctions through any Person other than a Broker-Dealer, without the prior written approval of the Auction Agent, which approval shall not be withheld unreasonably. The Trust may designate an Affiliate or Salomon Smith Barney Inc. to act as a Broker-Dealer.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as set forth therein if so directed by the Trust.
(d) Subject to Section 2.5(b) hereof, the Auction Agent from time to time shall enter into such Broker-Dealer Agreements as the Trust shall request.
(e) The Auction Agent shall maintain a list of Broker-Dealers.
2.6. OWNERSHIP OF PREFERRED SHARES AND SUBMISSION OF BIDS BY THE TRUST AND ITS AFFILIATES.
Neither the Trust nor any Affiliate of the Trust may submit any Sell Order or Bid, directly or indirectly, in any Auction, except that an Affiliate of the Trust that is a Broker-Dealer may submit a Sell Order or Bid on behalf of a Beneficial Owner or a Potential Beneficial Owner. The Trust shall notify the Auction Agent if the Trust or, to the best of the Trust's knowledge, any Affiliate of the Trust becomes a Beneficial Owner of any Preferred Shares. Any Preferred Shares redeemed, purchased or otherwise acquired (i) by the Trust shall not be reissued, except in accordance with the requirements of the Securities Act of 1933, as amended, or (ii) by its Affiliates shall not be transferred (other than to the Trust). The Auction Agent shall have no duty or liability with respect to enforcement of this Section 2.6.
2.7. ACCESS TO AND MAINTENANCE OF AUCTION RECORDS.
The Auction Agent shall afford to the Trust, its agents, independent public accountants and counsel, access at reasonable times during normal business hours to review and make extracts or copies (at the Trust's sole cost and expense) of all books, records, documents
and other information concerning the conduct and results of Auctions, provided
that any such agent, accountant or counsel shall furnish the Auction Agent with
a letter from the Trust requesting that the Auction Agent afford such person
access. The Auction Agent shall maintain records relating to any Auction for a
period of at least two years after such Auction (unless requested by the Trust
to maintain such records for such longer period not in excess of four years,
then for such longer period), and such records, in reasonable detail, shall
accurately and fairly reflect the actions taken by the Auction Agent hereunder.
The Trust agrees to keep confidential any information regarding the customers of
any Broker-Dealer received from the Auction Agent in connection with this
Agreement or any Auction, and shall not disclose such information or permit the
disclosure of such information without the prior written consent of the
applicable Broker-Dealer to anyone except such agent, accountant or counsel
engaged to audit or review the results of Auctions as permitted by this Section
2.7. The Trust reserves the right to disclose any such information if it is
advised by its counsel that its failure to do so would (i) be unlawful or (ii)
expose it to liability, unless the Broker-Dealer shall have offered
indemnification satisfactory to the Trust. Any such agent, accountant or
counsel, before having access to such information, shall agree to keep such
information confidential and not to disclose such information or permit
disclosure of such information without the prior written consent of the
applicable Broker-Dealer, provided that such agent, accountant or counsel may
reserve the right to disclose any such information if it is advised by its
counsel that its failure to do so would (i) be unlawful or (ii) expose it to
liability, unless the Broker-Dealer shall have offered indemnification
satisfactory to such agent, accountant or counsel.
III. THE AUCTION AGENT AS PAYING AGENT.
3.1. THE PAYING AGENT.
The Board of Trustees of the Trust has adopted another resolution appointing Bankers Trust Company as auction agent, transfer agent, dividend paying agent and registrar for the Trust in connection with any Preferred Shares (in such capacity, the "Paying Agent"). The Paying Agent hereby accepts such appointment and agrees to act in accordance with its standard procedures and the provisions of the Certificate which are specified herein with respect to the Preferred Shares and as set forth in this Section 3.
3.2. THE TRUST'S NOTICES TO THE PAYING AGENT.
Whenever any Preferred Shares are to be redeemed, the Trust promptly shall deliver to the Paying Agent a Notice of Redemption, which will be mailed by the Paying Agent to each Holder at least five Business Days prior to the date such Notice of Redemption is required to be mailed pursuant to the Certificate. The Paying Agent shall have no responsibility to confirm or verify the accuracy of any such Notice.
3.3. THE TRUST TO PROVIDE FUNDS FOR DIVIDENDS AND REDEMPTIONS.
(a) Not later than noon on each Dividend Payment Date, the Trust shall deposit with the Paying Agent an aggregate amount of Federal Funds or similar same-day funds equal to the declared dividends to be paid to Holders on such Dividend Payment Date, and shall
give the Paying Agent irrevocable instructions to apply such funds to the payment of such dividends on such Dividend Payment Date.
(b) If the Trust shall give a Notice of Redemption, then by noon of the date fixed for redemption, the Trust shall deposit in trust with the Paying Agent an aggregate amount of Federal Funds or similar same-day funds sufficient to redeem such Preferred Shares called for redemption and shall give the Paying Agent irrevocable instructions and authority to pay the redemption price to the Holders of Preferred Shares called for redemption upon surrender of the certificate or certificates therefor.
3.4. DISBURSING DIVIDENDS AND REDEMPTION PRICE.
After receipt of the Federal Funds or similar same-day funds and instructions from the Trust described in Section 3.3 above, the Paying Agent shall pay to the Holders (or former Holders) entitled thereto (i) on each corresponding Dividend Payment Date, dividends on the Preferred Shares, and (ii) on any date fixed for redemption, the redemption price of any Preferred Shares called for redemption. The amount of dividends for any Dividend Period to be paid by the Paying Agent to Holders will be determined by the Trust as set forth in Section 2 of Part I of the Certificate. The redemption price to be paid by the Paying Agent to the Holders of any Preferred Shares called for redemption will be determined as set forth in Section 3 of Part I of the Certificate. The Paying Agent shall have no duty to determine the redemption price and may rely on the amount thereof set forth in a Notice of Redemption.
IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.
4.1. ORIGINAL ISSUE OF STOCK CERTIFICATES.
On the Date of Original Issue for any share of Preferred Shares, one certificate for each series of Preferred Shares shall be issued by the Trust and registered in the name of Cede & Co., as nominee of the Securities Depository, and countersigned by the Paying Agent.
4.2. REGISTRATION OF TRANSFER OR EXCHANGE OF SHARES.
Except as provided in this Section 4.2, the shares of each series of Preferred Shares shall be registered solely in the name of the Securities Depository or its nominee. If the Securities Depository shall give notice of its intention to resign as such, and if the Trust shall not have selected a substitute Securities Depository acceptable to the Paying Agent prior to such resignation, then upon such resignation the shares of each Series of Preferred Shares, at the Trust's request, may be registered for transfer or exchange, and new certificates thereupon shall be issued in the name of the designated transferee or transferees, upon surrender of the old certificate in form deemed by the Paying Agent to be properly endorsed for transfer with (a) all necessary endorsers' signatures guaranteed in such manner and form and by such guarantor as the Paying Agent may reasonably require, (b) such assurances as the Paying Agent shall deem necessary or appropriate to evidence the genuineness and effectiveness of each necessary endorsement and (c) satisfactory evidence of compliance with all applicable laws relating to the collection of taxes in connection with any registration of transfer or exchange or funds necessary for the payment of such taxes. If the certificate or certificates for Preferred Shares are not held by
the Securities Depository or its nominee, payments upon transfer of shares in an Auction shall be made in Federal Funds or similar same-day funds to the Auction Agent against delivery of certificates therefor.
4.3. REMOVAL OF LEGEND.
Any request for removal of a legend indicating a restriction on transfer from a certificate evidencing Preferred Shares shall be accompanied by an opinion of counsel stating that such legend may be removed and such shares may be transferred free of the restriction described in such legend, said opinion to be delivered under cover of a letter from a Trust Officer authorizing the Paying Agent to remove the legend on the basis of said opinion.
4.4. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES.
The Paying Agent shall issue and register replacement certificates for certificates represented to have been lost, stolen or destroyed, upon the fulfillment of such requirements as shall be deemed appropriate by the Trust and by the Paying Agent, subject at all times to provisions of law, the Certificate governing such matters and resolutions adopted by the Trust with respect to lost, stolen or destroyed securities. The Paying Agent may issue new certificates in exchange for and upon the cancellation of mutilated certificates. Any request by the Trust to the Paying Agent to issue a replacement or new certificate pursuant to this Section 4.4 shall be deemed to be a representation and warranty by the Trust to the Paying Agent that such issuance will comply with provisions of applicable law and the Certificate and resolutions of the Trust.
4.5. DISPOSITION OF CANCELED CERTIFICATES; RECORD RETENTION.
The Paying Agent shall retain stock certificates which have been canceled in transfer or in exchange and accompanying documentation in accordance with applicable rules and regulations of the Securities and Exchange Commission (the "SEC") for at least two calendar years from the date of such cancellation. The Paying Agent, upon written request by the Trust, shall afford to the Trust, its agents and counsel access at reasonable times during normal business hours to review and make extracts or copies (at the Trust's sole cost and expense) of such certificates and accompanying documentation. Upon request by the Trust at any time after the expiration of this two-year period, the Paying Agent shall deliver to the Trust the canceled certificates and accompanying documentation. The Trust, at its expense, shall retain such records for a minimum additional period of at least four calendar years from the date of delivery of the records to the Trust and shall make such records available during this period at any time, or from time to time, for reasonable periodic, special, or other examinations by representatives of the SEC. The Trust also shall undertake to furnish to the SEC, upon demand, either at its principal office or at any regional office, complete, correct and current hard copies of any and all such records. Thereafter, such records shall not be destroyed by the Trust without the approval of the Paying Agent, which approval shall not be withheld unreasonably, but will be safely stored for possible future reference.
4.6. STOCK REGISTER.
The Paying Agent shall maintain the stock register, which shall contain a list of the Holders, the number of shares held by each Holder and the address of each Holder. The Paying Agent shall record in the stock register any change of address of a Holder upon notice by such Holder. In case of any written request or demand for the inspection of the stock register or any other books of the Trust in the possession of the Paying Agent, the Paying Agent will notify the Trust and secure instructions as to permitting or refusing such inspection. The Paying Agent reserves the right, however, to exhibit the stock register or other records to any person in case it is advised by its counsel that its failure to do so would (i) be unlawful or (ii) expose it to liability, unless the Trust shall have offered indemnification satisfactory to the Paying Agent.
4.7. RETURN OF FUNDS.
Any funds deposited with the Paying Agent by the Trust for any reason under this Agreement, including for the payment of dividends or the redemption of Preferred Shares, that remain with the Paying Agent after 12 months shall be repaid to the Trust upon written request by the Trust.
V. REPRESENTATIONS AND WARRANTIES.
5.1. REPRESENTATIONS AND WARRANTIES OF THE TRUST.
The Trust represents and warrants to the Auction Agent that:
(i) the Trust is duly organized and is validly existing as a business trust under the laws of the Commonwealth of Massachusetts, and has full power to execute and deliver this Agreement and to authorize, create and issue the Preferred Shares;
(ii) the Trust is registered with the SEC under the Investment Company Act of 1940, as amended, as a closed-end, diversified, management investment company;
(iii) this Agreement has been duly and validly authorized, executed and delivered by the Trust and constitutes the legal, valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject as to such enforceability to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equitable principles;
(iv) the form of the certificates evidencing the Preferred Shares comply with all applicable laws of the Commonwealth of Massachusetts;
(v) the Preferred Shares have been duly and validly authorized by the Trust and, upon completion of the initial sale of the Preferred Shares and receipt of payment therefor, will be validly issued by the Trust, fully paid and nonassessable;
(vi) at the time of the offering of the Preferred Shares, the shares offered will be registered under the Securities Act of 1933, as amended, and no further action by
or before any governmental body or authority of the United States or of any state thereof is required in connection with the execution and delivery of this Agreement or will be required in connection with the issuance of the Preferred Shares, except such action as required by applicable state securities laws;
(vii) the execution and delivery of this Agreement and the issuance and delivery of the Preferred Shares do not and will not conflict with, violate, or result in a breach of the terms, conditions or provisions of, or constitute a default under, the Trust's Declaration of Trust, as amended, or the Certificate, any order or decree of any court or public authority having jurisdiction over the Trust, or any mortgage, indenture, contract, agreement or undertaking to which the Trust is a party or by which it is bound; and
(viii) no taxes are payable upon or in respect of the execution of this Agreement or will be payable upon or in respect of the issuance of the Preferred Shares.
5.2. REPRESENTATIONS AND WARRANTIES OF THE AUCTION AGENT.
The Auction Agent represents and warrants to the Trust that:
(i) the Auction Agent is duly organized and is validly existing as a banking corporation in good standing under the laws of the State of New York, and has the corporate power to enter into and perform its obligations under this Agreement; and
(ii) this Agreement has been duly and validly authorized, executed and delivered by the Auction Agent and constitutes the legal, valid and binding obligation of the Auction Agent, enforceable against the Auction Agent in accordance with its terms, subject as to such enforceability to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equitable principles.
VI. THE AUCTION AGENT.
6.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any Person except as provided by this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or omitted by it or for any error of judgment made by it in the performance of its duties under this Agreement.
6.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized hereby and any written instruction,
notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized hereby which the Auction Agent reasonably believes in good faith to have been given by the Trust or by a Broker-Dealer. The Auction Agent may record telephone communications with the Trust or with the Broker-Dealers or with both.
(b) The Auction Agent may consult with counsel of its choice, and the written advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reasonable reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder. The Auction Agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Trust.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
6.3. COMPENSATION, EXPENSES AND INDEMNIFICATION.
(a) The Trust shall pay to the Auction Agent from time to time reasonable compensation for all services rendered by it under this Agreement and under the Broker-Dealer Agreements as shall be set forth in a separate writing signed by the Trust and the Auction Agent, subject to adjustments if the Preferred Shares no longer are held of record by the Securities Depository or its nominee or if there shall be such other change as shall increase or decrease materially the Auction Agent's obligations hereunder or under the Broker-Dealer Agreements.
(b) The Trust shall reimburse the Auction Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Auction Agent in accordance with any provision of this Agreement and of the Broker-Dealer Agreements (including the reasonable compensation, expenses and disbursements of its agents and counsel), except any expense, disbursement or advance attributable to its negligence or bad faith.
(c) The Trust shall indemnify the Auction Agent for, and hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Auction Agent arising out of or in connection with its agency under this Agreement and under the Broker-Dealer Agreements, including the costs and expenses of defending itself against any claim of liability in connection with its exercise or performance of any of its duties hereunder and thereunder, except such as may result from its negligence or bad faith.
VII. MISCELLANEOUS.
7.1. TERM OF AGREEMENT.
(a) The term of this Agreement is unlimited unless it shall be terminated as provided in this Section 7.1. The Trust may terminate this Agreement at any time by so notifying
the Auction Agent, provided that, if any Preferred Shares remain outstanding, the Trust shall have entered into an agreement with a successor auction agent. The Auction Agent may terminate this Agreement upon prior notice to the Trust on the date specified in such notice, which date shall be no earlier than 60 days after delivery of such notice. If the Auction Agent terminates this Agreement while any Preferred Shares remain outstanding, the Trust shall use commercially reasonable efforts to enter into an agreement with a successor auction agent.
(b) Except as otherwise provided in this Section 7.1(b), the respective rights and duties of the Trust and the Auction Agent under this Agreement shall cease upon termination of this Agreement. The Trust's representations, warranties, covenants and obligations to the Auction Agent under Sections 5 and 6.3 hereof shall survive the termination hereof. Upon termination of this Agreement, the Auction Agent shall (i) resign as Auction Agent under the Broker-Dealer Agreements, (ii) at the Trust's request, deliver promptly to the Trust copies of all books and records maintained by it in connection with its duties hereunder, and (iii) at the request of the Trust, transfer promptly to the Trust or to any successor auction agent any funds deposited by the Trust with the Auction Agent (whether in its capacity as Auction Agent or as Paying Agent) pursuant to this Agreement which have not been distributed previously by the Auction Agent in accordance with this Agreement.
7.2. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Trust, Pilgrim Prime Rate Trust addressed to: 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 Attention: Daniel A. Norman Telecopier No.: (480) 477-2708 Telephone No.: (480) 477-2112 If to the Auction Agent, Bankers Trust Company addressed to: Corporate Trust and Agency Group 4 Albany Street New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of the Trust by a Trust Officer and on behalf of the Auction Agent by an Authorized Officer.
7.3. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof, except for agreements relating to the compensation of the Auction Agent.
7.4. BENEFITS.
Nothing herein, express or implied, shall give to any Person, other than the Trust, the Auction Agent and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim hereunder.
7.5. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. The Trust shall notify the Auction Agent of any change in the Certificate prior to the effective date of any such change. If any such change in the Certificate materially increases the Auction Agent's obligations hereunder, the Trust shall obtain the written consent of the Auction Agent prior to the effective date of such change.
(b) Failure of either party hereto to exercise any right or remedy hereunder in the event of a breach hereof by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
7.6. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of the Trust and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party, which consent shall not be withheld unreasonably.
7.7. SEVERABILITY.
If any clause, provision or section hereof shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections hereof.
7.8. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
7.9. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
7.10. LIMITATION OF LIABILITY.
The name Pilgrim Prime Rate Trust refers to the Trust and the Trustees of the Trust, as trustees but not individually or personally, acting from time to time under the Trust's Agreement and Declaration of Trust dated December 2, 1987, as amended, which is hereby referred to and a copy of which is on file at the office of the Secretary of the Commonwealth of Massachusetts and the principal office of the Trust. The obligations of the Trust entered into in the name or on behalf thereof by any of the Trustees, representatives or agents of the Trust are made not individually, but in such capacities, and are not binding upon any of the Trustees, officers, holders of shares of beneficial interest of the Trust or representatives of the Trustees personally, but bind only the Trust assets, and all persons dealing with the Trust must look solely to the Trust property for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
PILGRIM PRIME RATE TRUST
/s/ Daniel A. Norman -------------------------------- By: Daniel A. Norman Title: Senior Vice President |
BANKERS TRUST COMPANY
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
PILGRIM PRIME RATE TRUST
BANKERS TRUST COMPANY
/s/ Jody Sanchez -------------------------------- By: Jody Sanchez Title: Associate |
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 16, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 16, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and ____________________ (together with its successors and assigns, "BD").
The Trust proposes to issue two series of preferred shares of beneficial interest (3,600 shares of Series T and 3,600 shares of Series Th), par value $.01 per share, liquidation preference $25,000 per share, designated Series T and Th Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the Preferred Shares, for each Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar final
maturity or variable rate dividend period, at the commencement of such Special
Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent,
addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, addressed to: ____________________ ____________________ ____________________ Attention: ___________________ Telecopier No.: (212) ___-____ Telephone No.: (212) ___-____ |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
Title:
Title:
EXHIBIT A
BANKERS TRUST COMPANY
AUCTION BID FORM
SUBMIT TO: ISSUE: --------- ----- Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder: ___________________
BENEFICIAL OWNER
Shares of Series ____ now held HOLD __________________________ BID at rate of ________________ SELL __________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series ___
BID at rate of ____________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional
Auction Bid Forms.
(2) If one or more Bids covering in the aggregate more than the
number of outstanding shares held by any Beneficial Owner are
submitted, such bid shall be considered valid in the order of
priority set forth in the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner
covering a number of shares not greater than the number of
shares currently held.
(4) Potential Beneficial Owners may make only Bids, each of which
must specify a rate. If more than one Bid is submitted on behalf
of any Potential Beneficial Owner, each Bid submitted shall be
a separate Bid with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series ____ Preferred Shares to ________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for ___________________ (the "Purchaser"), which purchased _______________ shares of Series ___ Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on ________________ from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Title:
Exhibit 99.(k)(v)(1)
AUCTION AGENCY AGREEMENT
This Auction Agency Agreement (this "Agreement"), dated as of November 2, 2000, is between Pilgrim Prime Rate Trust (the "Trust") and Bankers Trust Company, a New York banking corporation.
The Trust proposes to issue three series of preferred shares of beneficial interest (3,600 shares of Series M, 3,600 shares of Series W and 3,600 shares of Series F), par value $.01 per share, liquidation preference $25,000 per share, designated as Series M, W and F Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate (as defined below).
The Trust desires that Bankers Trust Company perform certain duties as agent in connection with each Auction of Preferred Shares (in such capacity, the "Auction Agent"), and as the transfer agent, registrar, dividend paying agent and redemption agent with respect to the Preferred Shares (in such capacity, the "Paying Agent"), upon the terms and conditions of this Agreement, and the Trust hereby appoints Bankers Trust Company as said Auction Agent and Paying Agent in accordance with those terms and conditions (hereinafter generally referred to as the "Auction Agent," except in Sections 3 and 4 below).
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Trust and the Auction Agent agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Agent Member" of any Person shall mean such Person's agent member of the Securities Depository that will act on behalf of a Bidder.
(b) "Auction" shall have the meaning specified in Section 2.1 hereof.
(c) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(d) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes hereof in a written communication from the Auction Agent to the Trust.
PILGRIM PRIME RATE TRUST
AUCTION AGENCY AGREEMENT
(e) "Broker-Dealer Agreement" shall mean each agreement between the Auction Agent and a Broker-Dealer substantially in the form attached hereto as Exhibit A.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
(g) "Holder" shall be a holder of record of one or more Preferred Shares, listed as such in the share register maintained by the Paying Agent pursuant to Section 4.6 hereof.
(h) "Interest Equivalent" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest-bearing security.
(i) "Trust Officer" shall mean the Chairman, the President, each Vice President (whether or not designated by a number or word or words added before or after the title "Vice President"), the Secretary, the Treasurer, each Assistant Secretary and each Assistant Treasurer of the Trust and every other officer or employee of the Trust designated as a "Trust Officer" for purposes hereof in a notice from the Trust to the Auction Agent.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. THE AUCTION.
2.1. PURPOSE; INCORPORATION BY REFERENCE OF AUCTION PROCEDURES.
(a) The Certificate provides that the Applicable Rate on shares of each series of Preferred Shares, as the case may be, for each Dividend Period therefor after the initial Dividend Period shall be the rate per annum that a commercial bank, trust company or other financial institution appointed by the Trust advises results from the implementation of the Auction Procedures. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures. The Auction
Agent hereby accepts such appointment and agrees that, on each Auction Date, it shall follow the procedures set forth in this Section 2 and the Auction Procedures for the purpose of determining the Applicable Rate for the Preferred Shares for the next Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part hereof to the same extent as if such provisions were set forth fully herein.
2.2. PREPARATION FOR EACH AUCTION; MAINTENANCE OF REGISTRY OF EXISTING HOLDERS.
(a) As of the date hereof, the Trust shall provide the Auction Agent with a list of the Broker-Dealers previously approved by the Auction Agent and shall cause to be delivered to the Auction Agent for execution by the Auction Agent a Broker-Dealer Agreement signed by each such Broker-Dealer. The Auction Agent shall keep such list current and accurate and shall indicate thereon, or on a separate list, the identity of each Existing Holder, if any, whose most recent Order was submitted by a Broker-Dealer on such list and resulted in such Existing Holder continuing to hold or purchase Preferred Shares. Not later than five Business Days prior to any Auction Date for which any change in such list of Broker-Dealers is to be effective, the Trust shall notify the Auction Agent in writing of such change and, if any such change is the addition of a Broker-Dealer to such list, the Trust shall cause to be delivered to the Auction Agent for execution by the Auction Agent a Broker-Dealer Agreement signed by such Broker-Dealer. The Auction Agent shall have entered into a Broker-Dealer Agreement with each Broker-Dealer prior to the participation of any such Broker-Dealer in any Auction.
(b) In the event that the Auction Date for any Auction shall be changed after the Auction Agent shall have given the notice, the Auction Agent, by such means as the Auction Agent deems practicable, shall give notice of such change to the Broker-Dealers not later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date.
(c) The provisions contained in Section 4 of Part I of the Certificate concerning Special Rate Periods and the notification of a Special Rate Period will be followed by the Trust and, to the extent applicable, the Auction Agent, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(d) (i) On each Auction Date, the Auction Agent shall determine the initial dividend rate and the Maximum Rate. If the initial dividend rate is not quoted on an interest basis but is quoted on a discount basis, the Auction Agent shall convert the quoted rate to an Interest Equivalent; or, if the rate obtained by the Auction Agent is not quoted on an interest or discount basis, the Auction Agent shall convert the quoted rate to an interest rate after consultation with the Trust as to the method of such conversion. Not later than 9:30 A.M. on each Auction Date, the Auction Agent shall notify the Trust and the Broker-Dealers of the initial dividend rate so determined and of the Maximum Rate.
(ii) If the initial dividend rate is the applicable "AA" Financial Composite Commercial Paper Rate and such rate is to be based on rates supplied by Commercial
Paper Dealers and one or more of the Commercial Paper Dealers shall not provide a quotation for the determination of the applicable "AA" Financial Composite Commercial Paper Rate, the Auction Agent immediately shall notify the Trust so that the Trust can determine whether to select a substitute Commercial Paper Dealer or substitute Commercial Paper Dealers to provide the quotation or quotations not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers. The Trust promptly shall advise the Auction Agent of any such selection. If the Trust does not select any such substitute Commercial Paper Dealer or substitute Commercial Paper Dealers, then the rates shall be supplied by the remaining Commercial Paper Dealer or Commercial Paper Dealers.
(e) (i) The Auction Agent shall maintain a current registry of the Existing Holders of the Preferred Shares for purposes of each individual Auction. The Trust shall use commercially reasonable efforts to provide or cause to be provided to the Auction Agent within ten Business Days following the date of the Closing a list of the initial Existing Holders of Preferred Shares, and the Broker-Dealer of each such Existing Holder through which such Existing Holder purchased such shares. The Auction Agent may rely upon, as evidence of the identities of the Existing Holders, such list, the results of each Auction and notices from any Existing Holder, the Agent Member of any Existing Holder or the Broker-Dealer of any Existing Holder with respect to such Existing or Holder's transfer of any Preferred Shares to another Person.
(ii) In the event of any partial redemption of Preferred Shares, upon notice by the Trust to the Auction Agent of such partial redemption, the Auction Agent promptly shall request the Securities Depository to notify the Auction Agent of the identities of the Agent Members (and the respective numbers of shares) from the accounts of which shares have been called for redemption and the person or department at such Agent Member to contact regarding such redemption. At least two Business Days prior to the Auction preceding the date of redemption, the Auction Agent shall request each Agent Member so identified to disclose to the Auction Agent (upon selection by such Agent Member of the Existing Holders whose shares are to be redeemed) the number of Preferred Shares of each such Existing Holder, if any, to be redeemed by the Trust, provided that the Auction Agent has been furnished with the name and telephone number of a person or department at such Agent Member from which it is to request such information. In the absence of receiving any such information with respect to an Existing Holder, from such Existing Holder's Agent Member or otherwise, the Auction Agent may continue to treat such Existing Holder as having ownership of the number of Preferred Shares shown in the Auction Agent's registry of Existing Holders.
(iii) The Auction Agent shall register a transfer of the ownership of Preferred Shares from an Existing Holder to another Existing Holder, or to another Person if permitted by the Trust, only if (A) such transfer is made pursuant to an Auction or (B) if such transfer is made other than pursuant to an Auction, the Auction Agent has been notified of such transfer in writing, in a notice substantially in the form of Exhibit B to the Broker-Dealer Agreements, by such Existing Holder or by the Agent Member of such Existing Holder. The Auction Agent is not required to accept any notice of transfer delivered for an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next preceding the applicable Auction Date. The Auction Agent shall rescind a transfer made on the registry of the
Existing Holders of any Preferred Shares if the Auction Agent has been notified in writing, in a notice substantially in the form of Exhibit C to the Broker-Dealer Agreement, by the Agent Member or the Broker-Dealer of any Person that (i) purchased any Preferred Shares and the seller failed to deliver such shares or (ii) sold any Preferred Shares and the purchaser failed to make payment to such Person upon delivery to the purchaser of such shares.
(f) The Auction Agent may request that the Broker Dealers, as set forth in Section 3.2(b) of the Broker-Dealer Agreements, provide the Auction Agent with a list of their respective customers that such Broker-Dealers believe are Beneficial Owners of Preferred Shares. The Auction Agent shall keep confidential any such information and shall not disclose any such information so provided to any Person other than the relevant Broker-Dealer and the Trust, provided that the Auction Agent reserves the right to disclose any such information if it is advised by its counsel that its failure to do so would be unlawful.
2.3. AUCTION SCHEDULE.
The Auction Agent shall conduct Auctions every Monday, Wednesday, and Friday in accordance with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent of the Trust, which consent shall not be withheld unreasonably. The Auction Agent shall give notice of any such change to each Broker-Dealer. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the initial dividend rate and the Maximum Rate as set forth in Section 2.2(e)(i) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 3(a) of Part II of the Certificate. Submission deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 2.4 hereof. |
2.4. NOTICE OF AUCTION RESULTS.
On each Auction Date, the Auction Agent shall notify Broker-Dealers of the results of the Auction held on such date by telephone or through the Auction Agent's Auction Processing System.
2.5. BROKER-DEALERS.
(a) Not later than 12:00 noon on each Auction Date, the Trust shall pay to the Auction Agent in Federal Funds or similar same-day funds an amount in cash equal to (i) in the case of any Auction Date immediately preceding a 7-day Dividend Period, the product of (A) a fraction the numerator of which is the number of days in such Dividend Period (calculated by counting the first day of such Dividend Period but excluding the last day thereof) and the denominator of which is 360, times (B) 1/4 of 1%, times (C) $25,000 times (D) the sum of the aggregate number of outstanding Preferred Shares for which the Auction is conducted and (ii) in the case of any Special Rate Period, the amount determined by mutual consent of the Trust and the Broker-Dealers pursuant to Section 3.5 of the Broker-Dealer Agreements. The Auction Agent shall apply such moneys as set forth in Section 3.5 of the Broker-Dealer Agreements and shall thereafter remit to the Trust any remaining funds paid to the Auction Agent pursuant to this Section 2.5(a).
(b) The Trust shall not designate any Person to act as a Broker-Dealer, or permit an Existing Holder or a Potential Beneficial Owner to participate in Auctions through any Person other than a Broker-Dealer, without the prior written approval of the Auction Agent, which approval shall not be withheld unreasonably. The Trust may designate an Affiliate or Salomon Smith Barney Inc. to act as a Broker-Dealer.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as set forth therein if so directed by the Trust.
(d) Subject to Section 2.5(b) hereof, the Auction Agent from time to time shall enter into such Broker-Dealer Agreements as the Trust shall request.
(e) The Auction Agent shall maintain a list of Broker-Dealers.
2.6. OWNERSHIP OF PREFERRED SHARES AND SUBMISSION OF BIDS BY THE TRUST AND ITS AFFILIATES.
Neither the Trust nor any Affiliate of the Trust may submit any Sell Order or Bid, directly or indirectly, in any Auction, except that an Affiliate of the Trust that is a Broker-Dealer may submit a Sell Order or Bid on behalf of a Beneficial Owner or a Potential Beneficial Owner. The Trust shall notify the Auction Agent if the Trust or, to the best of the Trust's knowledge, any Affiliate of the Trust becomes a Beneficial Owner of any Preferred Shares. Any Preferred Shares redeemed, purchased or otherwise acquired (i) by the Trust shall not be reissued, except in accordance with the requirements of the Securities Act of 1933, as amended, or (ii) by its Affiliates shall not be transferred (other than to the Trust). The Auction Agent shall have no duty or liability with respect to enforcement of this Section 2.6.
2.7. ACCESS TO AND MAINTENANCE OF AUCTION RECORDS.
The Auction Agent shall afford to the Trust, its agents, independent public accountants and counsel, access at reasonable times during normal business hours to review and make extracts or copies (at the Trust's sole cost and expense) of all books, records, documents
and other information concerning the conduct and results of Auctions, provided
that any such agent, accountant or counsel shall furnish the Auction Agent with
a letter from the Trust requesting that the Auction Agent afford such person
access. The Auction Agent shall maintain records relating to any Auction for a
period of at least two years after such Auction (unless requested by the Trust
to maintain such records for such longer period not in excess of four years,
then for such longer period), and such records, in reasonable detail, shall
accurately and fairly reflect the actions taken by the Auction Agent hereunder.
The Trust agrees to keep confidential any information regarding the customers of
any Broker-Dealer received from the Auction Agent in connection with this
Agreement or any Auction, and shall not disclose such information or permit the
disclosure of such information without the prior written consent of the
applicable Broker-Dealer to anyone except such agent, accountant or counsel
engaged to audit or review the results of Auctions as permitted by this Section
2.7. The Trust reserves the right to disclose any such information if it is
advised by its counsel that its failure to do so would (i) be unlawful or (ii)
expose it to liability, unless the Broker-Dealer shall have offered
indemnification satisfactory to the Trust. Any such agent, accountant or
counsel, before having access to such information, shall agree to keep such
information confidential and not to disclose such information or permit
disclosure of such information without the prior written consent of the
applicable Broker-Dealer, provided that such agent, accountant or counsel may
reserve the right to disclose any such information if it is advised by its
counsel that its failure to do so would (i) be unlawful or (ii) expose it to
liability, unless the Broker-Dealer shall have offered indemnification
satisfactory to such agent, accountant or counsel.
III. THE AUCTION AGENT AS PAYING AGENT.
3.1. THE PAYING AGENT.
The Board of Trustees of the Trust has adopted another resolution appointing Bankers Trust Company as auction agent, transfer agent, dividend paying agent and registrar for the Trust in connection with any Preferred Shares (in such capacity, the "Paying Agent"). The Paying Agent hereby accepts such appointment and agrees to act in accordance with its standard procedures and the provisions of the Certificate which are specified herein with respect to the Preferred Shares and as set forth in this Section 3.
3.2. THE TRUST'S NOTICES TO THE PAYING AGENT.
Whenever any Preferred Shares are to be redeemed, the Trust promptly shall deliver to the Paying Agent a Notice of Redemption, which will be mailed by the Paying Agent to each Holder at least five Business Days prior to the date such Notice of Redemption is required to be mailed pursuant to the Certificate. The Paying Agent shall have no responsibility to confirm or verify the accuracy of any such Notice.
3.3. THE TRUST TO PROVIDE FUNDS FOR DIVIDENDS AND REDEMPTIONS.
(a) Not later than noon on each Dividend Payment Date, the Trust shall deposit with the Paying Agent an aggregate amount of Federal Funds or similar same-day funds equal to the declared dividends to be paid to Holders on such Dividend Payment Date, and shall
give the Paying Agent irrevocable instructions to apply such funds to the payment of such dividends on such Dividend Payment Date.
(b) If the Trust shall give a Notice of Redemption, then by noon of the date fixed for redemption, the Trust shall deposit in trust with the Paying Agent an aggregate amount of Federal Funds or similar same-day funds sufficient to redeem such Preferred Shares called for redemption and shall give the Paying Agent irrevocable instructions and authority to pay the redemption price to the Holders of Preferred Shares called for redemption upon surrender of the certificate or certificates therefor.
3.4. DISBURSING DIVIDENDS AND REDEMPTION PRICE.
After receipt of the Federal Funds or similar same-day funds and instructions from the Trust described in Section 3.3 above, the Paying Agent shall pay to the Holders (or former Holders) entitled thereto (i) on each corresponding Dividend Payment Date, dividends on the Preferred Shares, and (ii) on any date fixed for redemption, the redemption price of any Preferred Shares called for redemption. The amount of dividends for any Dividend Period to be paid by the Paying Agent to Holders will be determined by the Trust as set forth in Section 2 of Part I of the Certificate. The redemption price to be paid by the Paying Agent to the Holders of any Preferred Shares called for redemption will be determined as set forth in Section 3 of Part I of the Certificate. The Paying Agent shall have no duty to determine the redemption price and may rely on the amount thereof set forth in a Notice of Redemption.
IV. THE PAYING AGENT AS TRANSFER AGENT AND REGISTRAR.
4.1. ORIGINAL ISSUE OF STOCK CERTIFICATES.
On the Date of Original Issue for any share of Preferred Shares, one certificate for each series of Preferred Shares shall be issued by the Trust and registered in the name of Cede & Co., as nominee of the Securities Depository, and countersigned by the Paying Agent.
4.2. REGISTRATION OF TRANSFER OR EXCHANGE OF SHARES.
Except as provided in this Section 4.2, the shares of each series of Preferred Shares shall be registered solely in the name of the Securities Depository or its nominee. If the Securities Depository shall give notice of its intention to resign as such, and if the Trust shall not have selected a substitute Securities Depository acceptable to the Paying Agent prior to such resignation, then upon such resignation the shares of each Series of Preferred Shares, at the Trust's request, may be registered for transfer or exchange, and new certificates thereupon shall be issued in the name of the designated transferee or transferees, upon surrender of the old certificate in form deemed by the Paying Agent to be properly endorsed for transfer with (a) all necessary endorsers' signatures guaranteed in such manner and form and by such guarantor as the Paying Agent may reasonably require, (b) such assurances as the Paying Agent shall deem necessary or appropriate to evidence the genuineness and effectiveness of each necessary endorsement and (c) satisfactory evidence of compliance with all applicable laws relating to the collection of taxes in connection with any registration of transfer or exchange or funds necessary for the payment of such taxes. If the certificate or certificates for Preferred Shares are not held by
the Securities Depository or its nominee, payments upon transfer of shares in an Auction shall be made in Federal Funds or similar same-day funds to the Auction Agent against delivery of certificates therefor.
4.3. REMOVAL OF LEGEND.
Any request for removal of a legend indicating a restriction on transfer from a certificate evidencing Preferred Shares shall be accompanied by an opinion of counsel stating that such legend may be removed and such shares may be transferred free of the restriction described in such legend, said opinion to be delivered under cover of a letter from a Trust Officer authorizing the Paying Agent to remove the legend on the basis of said opinion.
4.4. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES.
The Paying Agent shall issue and register replacement certificates for certificates represented to have been lost, stolen or destroyed, upon the fulfillment of such requirements as shall be deemed appropriate by the Trust and by the Paying Agent, subject at all times to provisions of law, the Certificate governing such matters and resolutions adopted by the Trust with respect to lost, stolen or destroyed securities. The Paying Agent may issue new certificates in exchange for and upon the cancellation of mutilated certificates. Any request by the Trust to the Paying Agent to issue a replacement or new certificate pursuant to this Section 4.4 shall be deemed to be a representation and warranty by the Trust to the Paying Agent that such issuance will comply with provisions of applicable law and the Certificate and resolutions of the Trust.
4.5. DISPOSITION OF CANCELED CERTIFICATES; RECORD RETENTION.
The Paying Agent shall retain stock certificates which have been canceled in transfer or in exchange and accompanying documentation in accordance with applicable rules and regulations of the Securities and Exchange Commission (the "SEC") for at least two calendar years from the date of such cancellation. The Paying Agent, upon written request by the Trust, shall afford to the Trust, its agents and counsel access at reasonable times during normal business hours to review and make extracts or copies (at the Trust's sole cost and expense) of such certificates and accompanying documentation. Upon request by the Trust at any time after the expiration of this two-year period, the Paying Agent shall deliver to the Trust the canceled certificates and accompanying documentation. The Trust, at its expense, shall retain such records for a minimum additional period of at least four calendar years from the date of delivery of the records to the Trust and shall make such records available during this period at any time, or from time to time, for reasonable periodic, special, or other examinations by representatives of the SEC. The Trust also shall undertake to furnish to the SEC, upon demand, either at its principal office or at any regional office, complete, correct and current hard copies of any and all such records. Thereafter, such records shall not be destroyed by the Trust without the approval of the Paying Agent, which approval shall not be withheld unreasonably, but will be safely stored for possible future reference.
4.6. STOCK REGISTER.
The Paying Agent shall maintain the stock register, which shall contain a list of the Holders, the number of shares held by each Holder and the address of each Holder. The Paying Agent shall record in the stock register any change of address of a Holder upon notice by such Holder. In case of any written request or demand for the inspection of the stock register or any other books of the Trust in the possession of the Paying Agent, the Paying Agent will notify the Trust and secure instructions as to permitting or refusing such inspection. The Paying Agent reserves the right, however, to exhibit the stock register or other records to any person in case it is advised by its counsel that its failure to do so would (i) be unlawful or (ii) expose it to liability, unless the Trust shall have offered indemnification satisfactory to the Paying Agent.
4.7. RETURN OF FUNDS.
Any funds deposited with the Paying Agent by the Trust for any reason under this Agreement, including for the payment of dividends or the redemption of Preferred Shares, that remain with the Paying Agent after 12 months shall be repaid to the Trust upon written request by the Trust.
V. REPRESENTATIONS AND WARRANTIES.
5.1. REPRESENTATIONS AND WARRANTIES OF THE TRUST.
The Trust represents and warrants to the Auction Agent that:
(i) the Trust is duly organized and is validly existing as a business trust under the laws of the Commonwealth of Massachusetts, and has full power to execute and deliver this Agreement and to authorize, create and issue the Preferred Shares;
(ii) the Trust is registered with the SEC under the Investment Company Act of 1940, as amended, as a closed-end, diversified, management investment company;
(iii) this Agreement has been duly and validly authorized, executed and delivered by the Trust and constitutes the legal, valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, subject as to such enforceability to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equitable principles;
(iv) the form of the certificates evidencing the Preferred Shares comply with all applicable laws of the Commonwealth of Massachusetts;
(v) the Preferred Shares have been duly and validly authorized by the Trust and, upon completion of the initial sale of the Preferred Shares and receipt of payment therefor, will be validly issued by the Trust, fully paid and nonassessable;
(vi) at the time of the offering of the Preferred Shares, the shares offered will be registered under the Securities Act of 1933, as amended, and no further action by
or before any governmental body or authority of the United States or of any state thereof is required in connection with the execution and delivery of this Agreement or will be required in connection with the issuance of the Preferred Shares, except such action as required by applicable state securities laws;
(vii) the execution and delivery of this Agreement and the issuance and delivery of the Preferred Shares do not and will not conflict with, violate, or result in a breach of the terms, conditions or provisions of, or constitute a default under, the Trust's Declaration of Trust, as amended, or the Certificate, any order or decree of any court or public authority having jurisdiction over the Trust, or any mortgage, indenture, contract, agreement or undertaking to which the Trust is a party or by which it is bound; and
(viii) no taxes are payable upon or in respect of the execution of this Agreement or will be payable upon or in respect of the issuance of the Preferred Shares.
5.2. REPRESENTATIONS AND WARRANTIES OF THE AUCTION AGENT.
The Auction Agent represents and warrants to the Trust that:
(i) the Auction Agent is duly organized and is validly existing as a banking corporation in good standing under the laws of the State of New York, and has the corporate power to enter into and perform its obligations under this Agreement; and
(ii) this Agreement has been duly and validly authorized, executed and delivered by the Auction Agent and constitutes the legal, valid and binding obligation of the Auction Agent, enforceable against the Auction Agent in accordance with its terms, subject as to such enforceability to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equitable principles.
VI. THE AUCTION AGENT.
6.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any Person except as provided by this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or omitted by it or for any error of judgment made by it in the performance of its duties under this Agreement.
6.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized hereby and any written instruction,
notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized hereby which the Auction Agent reasonably believes in good faith to have been given by the Trust or by a Broker-Dealer. The Auction Agent may record telephone communications with the Trust or with the Broker-Dealers or with both.
(b) The Auction Agent may consult with counsel of its choice, and the written advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reasonable reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder. The Auction Agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Trust.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
6.3. COMPENSATION. EXPENSES AND INDEMNIFICATION.
(a) The Trust shall pay to the Auction Agent from time to time reasonable compensation for all services rendered by it under this Agreement and under the Broker-Dealer Agreements as shall be set forth in a separate writing signed by the Trust and the Auction Agent, subject to adjustments if the Preferred Shares no longer are held of record by the Securities Depository or its nominee or if there shall be such other change as shall increase or decrease materially the Auction Agent's obligations hereunder or under the Broker-Dealer Agreements.
(b) The Trust shall reimburse the Auction Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Auction Agent in accordance with any provision of this Agreement and of the Broker-Dealer Agreements (including the reasonable compensation, expenses and disbursements of its agents and counsel), except any expense, disbursement or advance attributable to its negligence or bad faith.
(c) The Trust shall indemnify the Auction Agent for, and hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Auction Agent arising out of or in connection with its agency under this Agreement and under the Broker-Dealer Agreements, including the costs and expenses of defending itself against any claim of liability in connection with its exercise or performance of any of its duties hereunder and thereunder, except such as may result from its negligence or bad faith.
VII. MISCELLANEOUS.
7.1. TERM OF AGREEMENT.
(a) The term of this Agreement is unlimited unless it shall be terminated as provided in this Section 7.1. The Trust may terminate this Agreement at any time by so notifying
the Auction Agent, provided that, if any Preferred Shares remain outstanding, the Trust shall have entered into an agreement with a successor auction agent. The Auction Agent may terminate this Agreement upon prior notice to the Trust on the date specified in such notice, which date shall be no earlier than 60 days after delivery of such notice. If the Auction Agent terminates this Agreement while any Preferred Shares remain outstanding, the Trust shall use commercially reasonable efforts to enter into an agreement with a successor auction agent.
(b) Except as otherwise provided in this Section 7.1(b), the respective rights and duties of the Trust and the Auction Agent under this Agreement shall cease upon termination of this Agreement. The Trust's representations, warranties, covenants and obligations to the Auction Agent under Sections 5 and 6.3 hereof shall survive the termination hereof. Upon termination of this Agreement, the Auction Agent shall (i) resign as Auction Agent under the Broker-Dealer Agreements, (ii) at the Trust's request, deliver promptly to the Trust copies of all books and records maintained by it in connection with its duties hereunder, and (iii) at the request of the Trust, transfer promptly to the Trust or to any successor auction agent any funds deposited by the Trust with the Auction Agent (whether in its capacity as Auction Agent or as Paying Agent) pursuant to this Agreement which have not been distributed previously by the Auction Agent in accordance with this Agreement.
7.2. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Trust, Pilgrim Prime Rate Trust addressed to: 7337 E. Doubletree Ranch Road Scottsdale, Arizona 85258 Attention: Daniel A. Norman Telecopier No.: (480) 477-2708 Telephone No.: (480) 477-2112 If to the Auction Agent, Bankers Trust Company addressed to: Corporate Trust and Agency Group 4 Albany Street New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of the Trust by a Trust Officer and on behalf of the Auction Agent by an Authorized Officer.
7.3. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof, except for agreements relating to the compensation of the Auction Agent.
7.4. BENEFITS.
Nothing herein, express or implied, shall give to any Person, other than the Trust, the Auction Agent and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim hereunder.
7.5. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. The Trust shall notify the Auction Agent of any change in the Certificate prior to the effective date of any such change. If any such change in the Certificate materially increases the Auction Agent's obligations hereunder, the Trust shall obtain the written consent of the Auction Agent prior to the effective date of such change.
(b) Failure of either party hereto to exercise any right or remedy hereunder in the event of a breach hereof by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
7.6. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of the Trust and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party, which consent shall not be withheld unreasonably.
7.7. SEVERABILITY.
If any clause, provision or section hereof shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections hereof.
7.8. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
7.9. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
7.10. LIMITATION OF LIABILITY.
The name Pilgrim Prime Rate Trust refers to the Trust and the Trustees of the Trust, as trustees but not individually or personally, acting from time to time under the Trust's Agreement and Declaration of Trust dated December 2, 1987, as amended, which is hereby referred to and a copy of which is on file at the office of the Secretary of the Commonwealth of Massachusetts and the principal office of the Trust. The obligations of the Trust entered into in the name or on behalf thereof by any of the Trustees, representatives or agents of the Trust are made not individually, but in such capacities, and are not binding upon any of the Trustees, officers, holders of shares of beneficial interest of the Trust or representatives of the Trustees personally, but bind only the Trust assets, and all persons dealing with the Trust must look solely to the Trust property for the enforcement of any claims against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
PILGRIM PRIME RATE TRUST
/s/ Daniel A. Norman ------------------------------ By: Daniel. A. Norman Title: Senior Vice President |
BANKERS TRUST COMPANY
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
PILGRIM PRIME RATE TRUST
BANKERS TRUST COMPANY
/s/ Jody Sanchez ------------------------------ By: Jody Sanchez Title: Associate |
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 2, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 2, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and ________________________ (together with its successors and assigns, "BD").
The Trust proposes to issue three series of preferred shares of beneficial interest (3,600 shares of Series M, 3,600 shares of Series W and 3,600 shares of Series F), par value $.01 per share, liquidation preference $25,000 per share, designated Series M, W and F Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the Preferred Shares, for each Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar final
maturity or variable rate dividend period, at the commencement of such Special
Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent,
addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, addressed to: _________________ _________________ _________________ Attention:___________________ Telecopier No.: (212)___-____ Telephone No.: (212)___-____ |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
Title:
Title:
EXHIBIT A BANKERS TRUST COMPANY AUCTION BID FORM SUBMIT TO: ISSUE: Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder: ___________________
BENEFICIAL OWNER
Shares of Series ___ now held HOLD ____________________________ BID at rate of _________________ SELL ____________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series ___
BID at rate of __________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional
Auction Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number
of outstanding shares held by any Beneficial Owner are submitted,
such bid shall be considered valid in the order of priority set
forth in the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner
covering a number of shares not greater than the number of shares
currently held.
(4) Potential Beneficial Owners may make only Bids, each of which must
specify a rate. If more than one Bid is submitted on behalf of any
Potential Beneficial Owner, each Bid submitted shall be a separate
Bid with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series _______ Preferred Shares to _________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for ________________ (the "Purchaser"), which purchased ___________ shares of Series ___ Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on _________________ from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Title:
Exhibit 99.(k)(vi)
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 16, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 16, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and UBS Warburg LLC (together with its successors and assigns, "BD").
The Trust proposes to issue two series of preferred shares of beneficial interest (3,600 shares of Series T and 3,600 shares of Series Th), par value $.01 per share, liquidation preference $25,000 per share, designated Series T and Th Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the
Preferred Shares, for each Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld
unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or nondelivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of
fixed or variable rate preferred shares with a similar final maturity or variable rate dividend period, at the commencement of such Special Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent,
addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, addressed to: UBS Warburg LLC 1285 Avenue of the Americas New York, NY 10019 Attention: Todd A. Reit Telecopier No.: (212) 713-4205 Telephone No.: (212) 713-4908 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
/s/ Jody Sanchez ------------------------ By: Jody Sanchez Title: Associate |
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
Title:
/s/ Todd A. Reit -------------------------- By: Todd A. Reit Title: Executive Director |
EXHIBIT A BANKERS TRUST COMPANY AUCTION BID FORM SUBMIT TO: ISSUE: Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder: _________________________
BENEFICIAL OWNER
Shares of Series ______ now held HOLD _____________________________ BID at rate of ___________________ SELL _____________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series ___
BID at rate of ____________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such
bid shall be considered valid in the order of priority set forth in
the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering
a number of shares not greater than the number of shares currently
held.
(4) Potential Beneficial Owners may make only Bids, each of which must
specify a rate. If more than one Bid is submitted on behalf of any
Potential Beneficial Owner, each Bid submitted shall be a separate Bid
with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series ____ Preferred Shares to ____________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for _______________________ (the "Purchaser"), which purchased _________ shares of Series ____ Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on _______________ from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Title:
Exhibit 99.(k)(vi)(1)
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 16, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 16, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and Salomon Smith Barney (together with its successors and assigns, "BD").
The Trust proposes to issue two series of preferred shares of beneficial interest (3,600 shares of Series T and 3,600 shares of Series Th), par value $.01 per share, liquidation preference $25,000 per share, designated Series T and Th Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
This Broker-Dealer Agreement dated as of November 16, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 16, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and SALOMON SMITH BARNEY (together with its successors and assigns, "BD").
The Trust proposes to issue two series of preferred shares of beneficial interest (3,600 shares of Series T and 3,600 shares of Series Th), par value $.01 per share, liquidation preference $25,000 per share, designated Series T and Th Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the
Preferred Shares, for each Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld
unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of
fixed or variable rate preferred shares with a similar final maturity or variable rate dividend period, at the commencement of such Special Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent,
addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, addressed to: Salomon Smith Barney 390 Greenwich Street, 5th floor New York, NY 10013 Attention: Short-Term Trading Desk Telecopier No.: (212) 723-7082 Telephone No.: (212) 723-8809 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
/s/ Jody Sanchez --------------------- By: Jody Sanchez Title: Associate |
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
Title:
/s/ William B. Ogden ------------------------ By: WILLIAM B. OGDEN Title: MANAGING DIRECTOR |
EXHIBIT A
BANKERS TRUST COMPANY
AUCTION BID FORM
SUBMIT TO: ISSUE: --------- ----- Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder: _____________________
BENEFICIAL OWNER
Shares of Series _______ now held HOLD _________________________ BID at rate of _______________ SELL _________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series ____
BID at rate of__________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such
bid shall be considered valid in the order of priority set forth in
the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering
a number of shares not greater than the number of shares currently
held.
(4) Potential Beneficial Owners may make only Bids, each of which must
specify a rate. If more than one Bid is submitted on behalf of any
Potential Beneficial Owner, each Bid submitted shall be a separate Bid
with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series ____ Preferred Shares to___________________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for __________________________ (the "Purchaser"), which purchased _______ shares of Series ____ Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on ______________________________ from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Title:
Exhibit 99.(k)(vi)(2)
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 16, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 16, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and Lehman Brothers (together with its successors and assigns, "BD").
The Trust proposes to issue two series of preferred shares of beneficial interest (3,600 shares of Series T and 3,600 shares of Series Th), par value $.01 per share, liquidation preference $25,000 per share, designated Series T and Th Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the
Preferred Shares, for each Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld
unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of
fixed or variable rate preferred shares with a similar final maturity or variable rate dividend period, at the commencement of such Special Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent, addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, addressed to: Lehman Brothers 3 World Financial Center, 9th Floor New York, NY 10285 Attention: Gia Rys Telecopier No.: (212)526-1491 Telephone No.: (212)526-8390 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT: WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
/s/ Jody Sanchez ---------------------------- By: Jody Sanchez Title: Associate |
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
/s/ Gia Rys ---------------------------- By: Title: /s/ Gia Rys ---------------------------- Lehman Brothers ---------------------------- By: GIA RYS Title: Vice President |
EXHIBIT A BANKERS TRUST COMPANY AUCTION BID FORM SUBMIT TO: ISSUE: Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder:_______________________
BENEFICIAL OWNER
Shares of Series ________ now held HOLD__________________________________ BID at rate of_______________________ SELL__________________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series.______
BID at rate of____________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such
bid shall be considered valid in the order of priority set forth in
the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering
a number of shares not greater than the number of shares currently
held.
(4) Potential Beneficial Owners may make only Bids, each of which must
specify a rate. If more than one Bid is submitted on behalf of any
Potential Beneficial Owner, each Bid submitted shall be a separate Bid
with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER.______________________________
Authorized Signature________________________________
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series ______ Preferred Shares to ____________________________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for ___________________________ (the "Purchaser"), which purchased____________ shares of Series _______ Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on ______________________ from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Title:
Exhibit 99.(k)(vi)(3)
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 16, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 16, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and Gruntal & Co., L.L.C. (together with its successors and assigns, "BD").
The Trust proposes to issue two series of preferred shares of beneficial interest (3,600 shares of Series T and 3,600 shares of Series Th), par value $.01 per share, liquidation preference $25,000 per share, designated Series T and Th Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the
Preferred Shares, for each Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld
unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of
fixed or variable rate preferred shares with a similar final maturity or variable rate dividend period, at the commencement of such Special Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent,
addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, addressed to: Gruntal & Co., L.L.C. One Liberty Plaza New York, NY 10006 Attention: Michael McGrath Telecopier No.: (212) 820-3613 Telephone No.: (212) 820-3699 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
/s/ Jody Sanchez -------------------------- By: Jody Sanchez Title: Associate |
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
Title:
/s/ Michael McGrath ------------------------------ Gruntal & Co LLC ------------------------------ By: Michael McGrath Title: Managing Director |
EXHIBIT A
BANKERS TRUST COMPANY
AUCTION BID FORM
SUBMIT TO: ISSUE: --------- ----- Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder: ______________________
BENEFICIAL OWNER
Shares of Series____ now held HOLD ________________________________ BID at rate of ______________________ SELL ________________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series _____
BID at rate of ______________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such
bid shall be considered valid in the order of priority set forth in
the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering
a number of shares not greater than the number of shares currently
held.
(4) Potential Beneficial Owners may make only Bids, each of which must
specify a rate. If more than one Bid is submitted on behalf of any
Potential Beneficial Owner, each Bid submitted shall be a separate Bid
with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER _______________________________
Authorized Signature ________________________________
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series _______ Preferred Shares to _______________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for _________________________ (the "Purchaser"), which purchased _____________ shares of Series _____ Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on_____________________ from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Title:
Exhibit 99.(k)(vi)(4)
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 2, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 2, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and PaineWebber Incorporated (together with its successors and assigns, "BD").
The Trust proposes to issue three series of preferred shares of beneficial interest (3,600 shares of Series M, 3,600 shares of Series W and 3,600 shares of Series F), par value $.01 per share, liquidation preference $25,000 per share, designated Series M, W and F Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the Preferred Shares, for each Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar final
maturity or variable rate dividend period, at the commencement of such Special
Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent,
addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, PAINEWEBBER INCORPORATED addressed to: 1285 Avenue of the Americas New York, NY 10019 Attention: Todd A. Reit Telecopier No.: (212)713 - 4205 Telephone No.: (212)713 - 4908 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
/s/ Melissa M. Reynolds ---------------------- BY: MELISSA M. REYNOLDS TITLE: VICE PRESIDENT |
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
Title:
/s/ Todd A. Reit ---------------------------- By: Todd A. Reit Title: Director |
EXHIBIT A BANKERS TRUST COMPANY AUCTION BID FORM SUBMIT TO: ISSUE: Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder: ______________________
BENEFICIAL OWNER
Shares of Series ____ now held HOLD ________________________________ BID at rate of _____________________ SELL ________________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series ____
BID at rate of _________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such
bid shall be considered valid in the order of priority set forth in
the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering
a number of shares not greater than the number of shares currently
held.
(4) Potential Beneficial Owners may make only Bids, each of which must
specify a rate. If more than one Bid is submitted on behalf of any
Potential Beneficial Owner, each Bid submitted shall be a separate Bid
with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
NAME OF BROKER-DEALER ____________________________
Authorized Signature _____________________________
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series ________ Preferred Shares to _____________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for _____________________________ (the "Purchaser"), which purchased ____________ shares of Series ______ Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on ________________________ from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Name:__________________________
(Name of Broker-Dealer)
By:____________________________
Printed Name:
Title:
Exhibit 99.(k)(vi)(5)
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 2, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 2, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and Gruntal & Co., L.L.C. (together with its successors and assigns, "BD").
The Trust proposes to issue three series of preferred shares of beneficial interest (3,600 shares of Series M, 3,600 shares of Series W and 3,600 shares of Series F), par value $.01 per share, liquidation preference $25,000 per share, designated Series M, W and F Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the Preferred Shares, for each Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar final
maturity or variable rate dividend period, at the commencement of such Special
Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent,
addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, addressed to: Gruntal & Co 1 Liberty Plaza Ny Ny 10006 Attention: Mike McGrath Telecopier No.: (212) 820-3613 Telephone No.: (212) 820-3699 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
/s/ Melissa M. Reynolds ---------------------- By: MELISSA M. REYNOLDS Title: VICE PRESIDENT |
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
Title:
/s/ Michael McGrath ----------------------------- Gruntal & Co LLC ----------------------------- By: Michael McGrath Title: Managing Director |
EXHIBIT A BANKERS TRUST COMPANY AUCTION BID FORM SUBMIT TO: ISSUE: Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder: _______________________
BENEFICIAL OWNER
Shares of Series ______ now held HOLD ________________________________ BID at rate of ______________________ SELL ________________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series _____
BID at rate of ___________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such
bid shall be considered valid in the order of priority set forth in
the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering
a number of shares not greater than the number of shares currently
held.
(4) Potential Beneficial Owners may make only Bids, each of which must
specify a rate. If more than one Bid is submitted on behalf of any
Potential Beneficial Owner, each Bid submitted shall be a separate Bid
with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series ____ Preferred Shares to _______________________________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for ___________________ (the "Purchaser"), which purchased _________ shares of Series _______ Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on _______________________________ from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Title:
Exhibit 99.(k)(vi)(6)
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of November 2, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of November 2, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and Salomon Smith Barney Inc. (together with its successors and assigns, "BD").
The Trust proposes to issue three series of preferred shares of beneficial interest (3,600 shares of Series M, 3,600 shares of Series W and 3,600 shares of Series F), par value $.01 per share, liquidation preference $25,000 per share, designated Series M, W and F Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the Preferred Shares, for each Dividend Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION.
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar final
maturity or variable rate dividend period, at the commencement of such Special
Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent, addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, addressed to: Salomon Smith Barney 390 Greenwich St, 5th Floor New York, NY 10013 Attention: Short-Term Trading Desk Telecopier No.: (212) 723-7082 Telephone No.: (212) 723-8809 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
/s/ Melissa M. Reynolds ------------------------ By: MELISSA M. REYNOLDS Title: VICE PRESIDENT |
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
Title:
/s/ Robert F. Bush ----------------------------- By: Robert F. Bush, Jr. Title: Director |
EXHIBIT A BANKERS TRUST COMPANY AUCTION BID FORM SUBMIT TO: ISSUE: Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder:__________________________
BENEFICIAL OWNER
Shares of Series_____now held HOLD_________________________________ BID at rate of______________________ SELL_________________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series___
BID at rate of___________Notes:
(1) If submitting more than one Bid for one Bidder, use additional Auction
Bid Forms.
(2) If one or more Bids covering in the aggregate more than the number of
outstanding shares held by any Beneficial Owner are submitted, such
bid shall be considered valid in the order of priority set forth in
the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner covering
a number of shares not greater than the number of shares currently
held.
(4) Potential Beneficial Owners may make only Bids, each of which must
specify a rate. If more than one Bid is submitted on behalf of any
Potential Beneficial Owner, each Bid submitted shall be a separate Bid
with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder; or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series___ Preferred Shares to__________________________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for____________________________________(the "Purchaser"), which purchased____________shares of Series________Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on_______________________________from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Title:
Exhibit 99.(k)(vi)(7)
BROKER-DEALER AGREEMENT
This Broker-Dealer Agreement dated as of October 31, 2000, is between Bankers Trust Company, a New York banking corporation (the "Auction Agent") (not in its individual capacity, but solely as agent of Pilgrim Prime Rate Trust (the "Trust"), pursuant to authority granted to it in the Auction Agency Agreement dated as of October 31, 2000, between the Trust and the Auction Agent (the "Auction Agency Agreement")) and Lehman Brothers (together with its successors and assigns, "BD").
The Trust proposes to issue three series of preferred shares of beneficial interest (3,600 shares of Series M, 3,600 shares of Series W and 3,600 shares of Series F), par value $.01 per share, liquidation preference $25,000 per share, designated Series M, W and F Auction Rate Cumulative Preferred Shares (cumulatively, the "Preferred Shares"), pursuant to the Trust's Certificate of Designation for Preferred Shares (as defined below).
The Trust's Certificate provides that the Applicable Rate on shares of each series of Preferred Shares for each Dividend Period after the initial Dividend Period shall be equal to the rate per annum that results from an Auction for Outstanding shares of each Series on the respective Auction Date therefor next preceding the period from and after the Date of Original Issue to and including the last day of the initial Dividend Period. The Board of Trustees of the Trust has adopted a resolution appointing Bankers Trust Company as Auction Agent for purposes of the Auction Procedures, and pursuant to Section 2.5 of the Auction Agency Agreement, the Trust has requested and directed the Auction Agent to execute and deliver this Agreement.
The Auction Procedures require the participation of one or more Broker-Dealers.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the Auction Agent and BD agree as follows:
I. DEFINITIONS AND RULES OF CONSTRUCTION.
1.1. TERMS DEFINED BY REFERENCE TO THE CERTIFICATE.
Capitalized terms not defined herein shall have the respective meanings specified in the Certificate.
1.2. TERMS DEFINED HEREIN.
As used herein, the following terms shall have the following meanings, unless the context otherwise requires:
(a) "Auction" shall have the meaning specified in Section 2.1 of the Auction Agency Agreement.
(b) "Auction Procedures" shall mean the Auction Procedures that are set forth in Part II of the Certificate.
(c) "Authorized Officer" shall mean each Managing Director, Director, Vice President, Assistant Vice President and Associate of the Auction Agent and every other officer
PILGRIM PRIME RATE TRUST
BROKER-DEALER AGREEMENT
or employee of its Corporate Trust and Agency Group designated as an "Authorized Officer" for purposes of this Agreement in a communication to BD.
(d) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of this Agreement in a communication to the Auction Agent.
(e) "Broker-Dealer Agreement" shall mean this Agreement and any substantially similar agreement between the Auction Agent and a Broker-Dealer.
(f) "Certificate" shall mean the Certificate of Designation for Preferred Shares of the Trust dated October 20, 2000 specifying the powers, preferences and rights of the Preferred Shares.
1.3. RULES OF CONSTRUCTION.
Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number and vice versa.
(b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York City time.
II. NOTIFICATION OF DIVIDEND.
The provisions contained in Section 4 of Part I of the Certificate concerning the notification of a Special Rate Period will be followed by the Auction Agent and BD, and the provisions contained therein are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
III. THE AUCTION.
3.1 Purpose; Incorporation by Reference of Auction Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be followed by the Auction Agent for the purpose of determining the Applicable Rate for the Preferred Shares, for each Dividend Period. Each periodic operation of such procedures hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part of this Agreement to the same extent as if such provisions were set forth fully herein.
(c) BD agrees to act as, and assumes the obligations of and limitations and restrictions placed upon, a Broker-Dealer under this Agreement. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in Section 19 of Part I of the Certificate may execute a Broker-Dealer Agreement and participate as Broker-Dealers in Auctions.
(d) BD and other Broker-Dealers may participate in Auctions for their own accounts. However, the Trust, by notice to BD and all other Broker Dealers, may prohibit all Broker-Dealers from submitting Bids in Auctions for their own accounts, provided that Broker-Dealers may continue to submit Hold Orders and Sell Orders.
3.2. PREPARATION FOR EACH AUCTION
(a) Not later than 9:30 A.M. on each Auction Date for the Preferred Shares, the Auction Agent shall advise BD by telephone of the Reference Rate and the Maximum Rate in effect on such Auction Date.
(b) The Auction Agent from time to time may request BD to provide it with a list of the respective customers BD believes are Beneficial Owners of Preferred Shares. BD shall comply with any such request, and the Auction Agent shall keep confidential any such information, including information received as to the identity of Bidders in any Auction, and shall not disclose any such information so provided to any Person other than the Trust; and such information shall not be used by the Auction Agent or its officers, employees, agents or representatives for any purpose other than such purposes as are described herein. The Auction Agent shall transmit any list of customers BD believes are Beneficial Owners of Preferred Shares and information related thereto only to its officers, employees, agents or representatives who need to know such information for the purposes of acting in accordance with this Agreement, and the Auction Agent shall prevent the transmission of such information to others and shall cause its officers, employees, agents and representatives to abide by the foregoing confidentiality restrictions; provided, however, that the Auction Agent shall have no responsibility or liability for the actions of any of its officers, employees, agents or representatives after they have left the employ of the Auction Agent.
3.3. AUCTION SCHEDULE; METHOD OF SUBMISSION OF ORDERS.
(a) The Trust and the Auction Agent shall conduct Auctions for Preferred Shares in accordance with the schedule set forth below. Such schedule may be changed at any time by the Auction Agent with the consent of the Trust, which consent shall not be withheld unreasonably. The Auction Agent shall give notice of any such change to BD. Such notice shall be received prior to the first Auction Date on which any such change shall be effective.
TIME EVENT ---- ----- By 9:30 A.M. Auction Agent shall advise the Trust and the Broker-Dealers of the Reference Rate and the Maximum Rate as set forth in Section 3.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent shall assemble information communicated to it by Broker-Dealers as provided in Section 2(a) of Part II of the Certificate. Submission Deadline is 1:00 P.M. Not earlier than 1:30 P.M. Auction Agent shall make determinations pursuant to Section 4(a) of Part II of the Certificate. By approximately 3:00 P.M. Auction Agent shall advise the Trust of the results of the Auction as provided in Section 4(b) of Part II of the Certificate. Submitted Bids and Submitted Sell Orders will be accepted and rejected in whole or in part and Preferred Shares will be allocated as provided in Section 5 of Part II of the Certificate. Auction Agent shall give notice of the Auction results as set forth in Section 3.4(a) hereof. |
(b) BD agrees to maintain a list of Potential Beneficial Owners and to contact the Potential Beneficial Owners on such list on or prior to each Auction Date for the purposes set forth in Section 2 of Part II of the Certificate.
(c) BD shall submit Orders to the Auction Agent in writing in substantially the form attached hereto as Exhibit A. BD shall submit separate Orders to the Auction Agent for each Potential Beneficial Owner or Beneficial Owner on whose behalf BD is submitting an Order and shall not net or aggregate the Orders of Potential Beneficial Owners or Beneficial Owners on whose behalf BD is submitting Orders.
(d) BD shall deliver to the Auction Agent (i) a written notice, substantially in the form attached hereto as Exhibit B, of transfers of Preferred Shares, made through BD by an Existing Holder to another Person other than pursuant to an Auction, and (ii) a written notice, substantially in the form attached hereto as Exhibit C, of the failure of Preferred Shares to be transferred to or by any Person that purchased or sold Preferred Shares through BD pursuant to an Auction. The Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day next succeeding the applicable Auction Date.
3.4. NOTICE OF AUCTION RESULTS.
(a) On each Auction Date, the Auction Agent shall notify BD by telephone. On the Business Day next succeeding such Auction Date, the Auction Agent shall notify BD in writing of the disposition of all Orders submitted by BD in the Auction held on such Auction Date.
(b) BD shall notify each Beneficial Owner, Potential Beneficial Owner, Existing Holder or Potential Holder on whose behalf BD has submitted an Order, and take such other action as is required of BD.
If any Beneficial Owner or Existing Holder selling Preferred Shares in an Auction fails to deliver such shares, the Broker-Dealer of any Person that was to have purchased Preferred Shares in such Auction may deliver to such Person a number of whole shares of Preferred Shares that is less than the number of shares that otherwise was to be purchased by such Person. In such event, the number of Preferred Shares to be so delivered shall be determined by such Broker-Dealer. Delivery of such lesser number of shares shall constitute good delivery. Upon the occurrence of any such failure to deliver shares, such Broker-Dealer shall deliver to the Auction Agent the notice required by Section 3.3(d)(ii) hereof. Notwithstanding the foregoing terms of this Section 3.4(b), any delivery or non-delivery of Preferred Shares which represents any departure from the results of an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such delivery or non-delivery in accordance with the terms of Section 3.3(d) hereof. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 3.4(b).
3.5. SERVICE CHARGE TO BE PAID TO BD.
On the Business Day next succeeding each Auction Date, the Auction Agent
shall pay to BD from moneys received from the Trust an amount equal to: (a) in
the case of any Auction Date immediately preceding a Dividend Period of less
than one year, the product of (i) a fraction the numerator of which is the
number of days in such Dividend Period (calculated by counting the first day of
such Dividend Period but excluding the last day thereof) and the denominator of
which is 360, times (ii) 1/4 of 1%, times (iii) $25,000, times (iv) the sum of
(A) the aggregate number of Preferred Shares placed by BD in the applicable
Auction that were (x) the subject of a Submitted Bid of a Beneficial Owner
submitted by BD and continued to be held as a result of such submission and (y)
the subject of a Submitted Bid of a Potential Beneficial Owner submitted by BD
and were purchased as a result of such submission plus (B) the aggregate number
of Preferred Shares subject to valid Hold Orders (determined in accordance with
Section 2 of Part II of the Certificate) submitted to the Auction Agent by BD
plus (C) the number of Preferred Shares deemed to be subject to Hold Orders by
Beneficial Owners pursuant to Section 2 of Part II of the Certificate that were
acquired by BD for its own account or were acquired by such Beneficial Owners
through BD; and (b) in the case of any Auction Date immediately preceding a
Special Rate Period of one year or longer, that amount as mutually agreed upon
by the Trust and BD, based on the selling concession that would be applicable to
an underwriting of fixed or variable rate preferred shares with a similar final
maturity or variable rate dividend period, at the commencement of such Special
Rate Period.
For purposes of subclause (a)(iv)(C) of the foregoing sentence, if any Beneficial Owner who acquired Preferred Shares through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD, provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-Dealer shall be the Broker-Dealer for such shares.
IV. THE AUCTION AGENT.
4.1. DUTIES AND RESPONSIBILITIES.
(a) The Auction Agent is acting solely as agent for the Trust hereunder and owes no fiduciary duties to any other Person by reason of this Agreement.
(b) The Auction Agent undertakes to perform such duties and only such duties as are set forth specifically in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered or, omitted by it, or for any error of judgment made by it in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts.
4.2. RIGHTS OF THE AUCTION AGENT.
(a) The Auction Agent may rely upon, and shall be protected in acting or refraining from acting upon, any communication authorized by this Agreement and any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized by this Agreement which the Auction Agent reasonably believes in good faith to have been given by the Trust or by BD. The Auction Agent may record telephone communications with BD.
(b) The Auction Agent may consult with counsel of its own choice, and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys.
4.3. AUCTION AGENT'S DISCLAIMER.
The Auction Agent makes no representation as to the validity or adequacy of this Agreement or the Preferred Shares.
V. MISCELLANEOUS.
5.1. TERMINATION.
Any party may terminate this Agreement at any time upon five days' prior written notice to the other party; provided, however, that if the Broker-Dealer is Salomon Smith Barney Inc. neither Salomon Smith Barney Inc. nor the Auction Agent may terminate this Agreement without first obtaining the prior written consent of the Trust to such termination, which consent shall not be withheld unreasonably.
5.2. PARTICIPANT IN SECURITIES DEPOSITORY; PAYMENT OF DIVIDENDS IN SAME-DAY FUNDS.
(a) BD is, and shall remain for the term of this Agreement, a member of, or a participant in, the Securities Depository (or an affiliate of such a member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the Preferred Shares available in same-day funds on each Dividend Payment Date to customers that use BD (or its affiliate) as Agent Member.
5.3. AGENT MEMBER.
At the date hereof, BD is a participant of the Securities Depository.
5.4. COMMUNICATIONS.
Except for (i) communications authorized to be made by telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection with the Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party at its address or telecopier number set forth below:
If to the Auction Agent,
addressed to: Bankers Trust Company Corporate Trust and Agency Group Four Albany Street New, York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 7 |
If to the BD, addressed to: 3 World Financial Center 9th New York, NY 10285 Attention: Gia Rys Telecopier No.: (212) 526-1491 Telephone No.: (212) 526-8390 |
or such other address or telecopier number as such party hereafter may specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of the Auction Agent by an Authorized Officer. BD may record telephone communications with the Auction Agent.
5.5. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the parties relating to the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof.
5.6. BENEFITS.
Nothing in this Agreement, express or implied, shall give to any person, other than the Trust, the Auction Agent and BD and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.7. AMENDMENT; WAIVER.
(a) This Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged.
(b) Failure of either party to this Agreement to exercise any right or remedy hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach.
5.8. SUCCESSORS AND ASSIGNS.
(a) This Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and permitted assigns of each of BD and the Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written consent of the other party; provided, however, that this Agreement may be assigned by the Auction Agent to a successor Auction Agent selected by the Trust without the consent of BD.
5.9. SEVERABILITY.
If any clause, provision or section of this Agreement shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any remaining clause, provision or section hereof.
5.10. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
5.11. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said state.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS TRUST COMPANY
/s/ Melissa M. Reynolds --------------------------- By: MELISSA M. REYNOLDS Title: VICE PRESIDENT |
Title:
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.
BANKERS-TRUST COMPANY
/s/ Gia Rys -------------------------- By: Title: /s/ Gia Rys -------------------------- Lehman Brothers -------------------------- By: Gia Rys Title: Vice President |
EXHIBIT A
BANKERS TRUST COMPANY
AUCTION BID FORM
SUBMIT TO: ISSUE: Bankers Trust Company Pilgrim Prime Rate Trust Corporate Trust and Agency Group Auction Rate Cumulative Preferred Shares Four Albany Street ("Preferred Shares") New York, NY 10006 Attention: Auction Rate Securities Telecopier No.: (212) 250-6688 Telephone No.: (212) 250-6850 |
The undersigned Broker-Dealer submits the following Order on behalf of the Bidder listed below:
Name of Bidder:____________________________
BENEFICIAL OWNER
Shares of Series_____now held HOLD_______________________________ BID at rate of_____________________ SELL_______________________________ |
POTENTIAL BENEFICIAL OWNER
# of shares of Series___
BID at rate of__________ Notes:
(1) If submitting more than one Bid for one Bidder, use additional
Auction Bid Forms.
(2) If one or more Bids covering in the aggregate more than the
number of outstanding shares held by any Beneficial Owner are
submitted, such bid shall be considered valid in the order of
priority set forth in the Auction Procedures on the above issue.
(3) A Hold or Sell Order may be placed only by a Beneficial Owner
covering a number of shares not greater than the number of
shares currently held.
(4) Potential Beneficial Owners may make only Bids, each of which
must specify a rate. If more than one Bid is submitted on behalf
of any Potential Beneficial Owner, each Bid submitted shall be a
separate Bid with the rate specified.
(5) Bids may contain no more than three figures to the right of the
decimal point (.001 of 1%). Fractions will not be accepted.
EXHIBIT B
(Note: To be used only for transfers made other than pursuant to an Auction)
TRANSFER FORM
Re: Pilgrim Prime Rate Trust
Auction Rate Cumulative Preferred Shares ("Preferred Shares")
We are (check one):
/ / the Existing Holder named below;
/ / the Broker-Dealer for such Existing Holder, or
/ / the Agent Member for such Existing Holder.
We hereby notify you that such Beneficial Owner has transferred shares of Series_____Preferred Shares to_________________________________________________.
Title:
EXHIBIT C
(Note: To be used only for failures to deliver or to pay for Preferred Shares sold pursuant to an Auction)
NOTICE OF A FAILURE TO DELIVER
We are a Broker-Dealer for____________________________________(the "Purchaser"), which purchased________shares of Series_______Preferred Shares of Pilgrim Prime Rate Trust in the Auction held on_______________________________ from the seller of such shares.
We hereby notify you that (check one):
/ / the Seller failed to deliver such shares to the Purchaser.
/ / the Purchaser failed to make payment to the Seller upon delivery of such shares.
Title:
Exhibit 99.(k)(vii)
[LOGO]
BOOK-ENTRY-ONLY AUCTION-RATE/MONEY MARKET PREFERRED
AND REMARKETED PREFERRED SECURITIES
LETTER OF REPRESENTATIONS
[To be Completed by Issuer and Trust Company]
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street 49th Floor
New York, NY 10041-0099
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the Securities. Trust Company shall act as transfer agent,
registrar, dividend disbursing agent, redemption agent or other such agent with
respect to the Securities. The Securities have been issued pursuant to a
prospectus, private placement memorandum, or other such document authorizing the
issuance of the Securities dated November 13, 2000 (the "Document").
Salomon Smith Barney, Inc. is distributing the Securities through the
["Underwriter/Placement Agent"]
Depository Trust
Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with its Rules with respect to the Securities, Issuer and Trust Company make the following representations to DTC:
1. Prior to closing on the Securities on November 16, 2000 there shall be deposited with DTC one or more Security certificates registered in the name of DTC's nominee, Cede & Co., which represents 100% of the offering value of the Securities. Said certificate(s) shall remain in DTC's custody as provided in the Document. If, however, the aggregate principal amount of the Securities exceeds $400 million, one certificate shall be issued with respect to each $400 million of principal amount and an additional certificate shall be issued with respect to any remaining principal amount. Each Security certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
2. Issuer: (a) understands that DTC has no obligation to, and will not, communicate to its participants ("Participants") or to any person having an interest in the Securities any information contained in the Security certificate(s); and (b) acknowledges that neither DTC's Participants nor any person having an interest in the Securities shall be deemed to have notice of the provisions of the Security certificate(s) by virtue of submission of such certificate(s) to DTC.
3. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record date for such purposes (with
no provision for revocation of consents or votes by subsequent holders) and
shall send notice of such record date to DTC no fewer than 15 calendar days in
advance of such record date. Notices to DTC pursuant to this Paragraph by
telecopy shall be directed to DTC's Reorganization Department, Proxy Unit at
(212) 855-5181 or (212) 855-5182. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (212) 855-5202. Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:
Supervisor, Proxy Unit Reorganization Department The Depository Trust Company 55 Water Street 50th Floor New York, NY 10041-0099
4. In the event of a full or partial redemption of the Securities, Issuer or Trust Company shall send a notice to DTC specifying: (a) the number of Securities to be redeemed; and (b) the date such notice is to be distributed to Security holders (the "Publication Date"). Such notice shall be sent to DTC by a secure means (E.G., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before or, if possible, two business days before the Publication Date. Issuer or Trust Company shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be no fewer than 30 days nor more man 60 days prior to the redemption date. Notices to DTC pursuant to this Paragraph by telecopy shall be directed to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph, by mail or by any other means, shall be sent to:
Manager, Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
5. In the event of an invitation to tender the Securities (including mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust Company to Security holders specifying the terms of the tender and the Publication Date of such notice shall be sent to DTC by a secure means in the manner set forth in the preceding Paragraph. Notices to DTC pursuant to this Paragraph and notices of other corporate actions by telecopy shall be directed to DTC's Reorganization Department at (212) 855-5488. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (212) 855-5290. Notices to DTC pursuant to this Paragraph, by mail or by any other means, shall be sent to:
Manager, Reorganization Department
Reorganization Window
The Depository Trust Company
55 Water Street 50th Floor
New York, NY 10041-0099
6. All notices and payment advices sent to DTC shall contain the CUSIP number of the Securities.
7. The Document indicates that the dividend rate for the Securities may vary from time to time. Absent other existing arrangements with DTC, Issuer or Trust Company shall give DTC notice of each such change in the dividend rate, on the same day that the new rate is determined, by telephoning DTC's Dividend Announcement Section at (212) 855-4550, or by telecopy sent to (212) 855-4555. Such verbal or telecopy notice shall be followed by prompt written confirmation sent by
a secure means (E.G., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before or, if possible, two business days before the Publication Date. Issuer or Agent shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use and timeliness of such notice.) Notices to DTC pursuant to this Paragraph, by mail or by any other means, shall be sent to:
Manager, Announcements
Dividend Department
The Depository Trust Company
55 Water Street 25th Floor
New York, NY 10041-0099
8. The Document indicates that each purchaser of Securities must sign a purchaser's letter which contains provisions restricting transfer of the Securities purchased. Issuer and Trust Company acknowledge that as long as Cede & Co. is the sole record owner of the Securities, Cede & Co. shall be entitled to all voting rights applicable to the Securities and to receive the full amount of all dividends, liquidation proceeds, and redemption proceeds payable with respect to the Securities, even if the credits of Securities to the DTC accounts of any DTC Participant result from transfers or failures to transfer in violation of the provisions of the purchaser's letter. Issuer and Trust Company acknowledge that DTC shall treat any Participant having Securities credited to its DTC accounts as entitled to the full benefits of ownership of such Securities. Without limiting the generality of the preceding sentence, Issuer and Trust Company acknowledge that DTC shall treat any Participant having Securities credited to its DTC accounts as entitled to receive dividends, distributions, and voting rights, if any, in respect of Securities and, subject to Paragraphs 12 and 13, to receive certificates evidencing Securities if such certificates are to be issued in accordance with Issuer's certificate of incorporation. (The treatment by DTC of the effects of the crediting by it of Securities to the accounts of Participants described in the preceding two sentences shall not affect the rights of Issuer, participants in auctions relating to the Securities, purchasers, sellers, or holders of Securities against any Participant.) DTC shall not have any responsibility to ascertain whether any transfer of Securities is made in accordance with the provisions of the purchaser's letter.
9. Issuer or Trust Company shall provide a written notice of dividend
payment and distribution information to DTC as soon as the information is
available. Issuer or Trust Company shall provide this information to DTC
electronically, as previously arranged by Issuer or Trust Company and DTC, as
soon as the information is available. If electronic transmission has not been
arranged, absent any other arrangements between Issuer or Trust Company and DTC,
such information shall be sent by telecopy to DTC's Dividend Department at
(212) 855-4555 or (212) 855-4556, and receipt of such notices shall be confirmed
by telephoning (212) 855-4550. Notices to DTC pursuant to this Paragraph, by
mail or by any other means, shall be addressed as indicated in Paragraph 7.
10. Dividend payments and distributions shall be received by Cede & Co.,
as nominee of DTC, or its registered assigns, in same-day funds no later than
2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m.
(Eastern Time) on the payment date, dividend and distribution payments due Trust
Company, or at such earlier time as may be required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Absent any other arrangements between
Issuer or Trust Company and DTC, such funds shall be wired to the Dividend
Deposit Account number that will be stamped on the signature page hereof at the
time DTC executes this Letter of Representations.
11. Issuer or Trust Company shall provide DTC, no later than 12:00 noon (Eastern Time) on each payment date, automated notification of CUSIP-level detail. If the circumstances prevent the funds paid to DTC from equaling the dollar amount associated with the detail payments by 12:00 noon (Eastern Time), Issuer or Trust Company must provide CUSIP-level reconciliation to DTC no later than 2:30 p.m. (Eastern Time). Reconciliation must be provided by either automated means or written format. Such reconciliation notice, if sent by telecopy, shall be directed to DTC's Dividend Department at (212) 855-4633, and receipt of such reconciliation notice shall be confirmed by telephoning (212) 855-4430.
12. Redemption payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment date all such redemption payments due Trust Company, or at such earlier time as required by Trust Company to guarantee that DTC shall receive payment in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other arrangements between Issuer or Trust Company and DTC, such funds shall be wired to the Redemption Deposit Account number that will be stamped on the signature page hereof at the time DTC executes this Letter of Representations.
13. Reorganization payments and CUSIP-level detail resulting from corporate actions (such as tender offers, remarketings, or mergers) shall be received by Cede & Co., as nominee of DTC, or its registered assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment date all such reorganization payments due Trust Company, or at such earlier time as required by Trust Company to guarantee that DTC shall receive payment in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other arrangements between Issuer or Trust Company and DTC, such funds shall be wired to the Reorganization Deposit Account number that will be stamped on the signature page hereof at the time DTC executes this Letter of Representations.
14. DTC may direct Issuer or Trust Company to use any other number or address as the number or address to which notices or payments may be sent.
15. In the event of a redemption acceleration, or any similar transaction (E.G., tender made and accepted in response to Issuer's or Trust Company's invitation) necessitating a reduction in the number of Securities outstanding, or an advance refunding of part of the Securities outstanding DTC, in its discretion: (a) may request Issuer or Trust Company to issue and authenticate a new Security certificate; or (b) may make an appropriate notation on the Security certificate indicating the date and amount of such reduction in the number of Securities outstanding, except in the case of final
redemption, in which case the certificate will be presented to Issuer or Trust Company prior to payment, if required.
16. In the event that Issuer determines that beneficial owners of Securities shall be able to obtain certificated Securities, Issuer or Trust Company shall notify DTC of the availability of certificates. In such event, Issuer or Trust Company shall issue, transfer, and exchange certificates in appropriate amounts, as required by DTC and others.
17. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Trust Company (at which time DTC will confirm with Issuer or Trust Company the aggregate principal amount of Securities outstanding). Under such circumstances, at DTC's request, Issuer and Trust Company shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Securities to any DTC Participant having Securities credited to its DTC accounts.
18. Issuer hereby authorizes DTC to provide to Trust Company listings of Participants' holdings, known as Security Position Listings ("SPLs") with respect to the Securities from time to time at the request of Trust Company. Issuer also authorizes DTC, in the event of a partial redemption of Securities, to provide Trust Company, upon request, with the names of those Participants whose positions in Securities have been selected for redemption by DTC. DTC will use its best efforts to notify Trust Company of those Participants whose positions in Securities have been selected for redemption by DTC. Issuer authorizes and instructs Trust Company to provide DTC with such signatures, examples of signatures, and authorizations to act as may be deemed necessary or appropriate by DTC to permit DTC to discharge its obligations to its Participants and appropriate regulatory authorities. DTC charges a customary fee for such SPLs. This authorization, unless revoked by Issuer, shall continue with respect to the Securities while any Securities are on deposit at DTC, until and unless Trust Company shall no longer be acting. In such event, Issuer shall provide DTC with similar evidence, satisfactory to DTC, of the authorization of any successor thereto so to act. Requests for SPLs shall be directed to the Proxy Unit of DTC's Reorganization Department at (212) 855-5181 or (212) 855-5182. Receipt of such requests shall be confirmed by telephoning (212) 855-5202. Delivery by mail or by any other means, with respect to such SPL request, shall be directed to the address indicated in Paragraph 3.
19. Nothing herein shall be deemed to require Trust Company to advance funds on behalf of Issuer.
20. This Letter of Representations may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts together shall constitute but one and the same instrument.
21. This Letter of Representations shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to principles of conflicts of law.
22. The sender of each notice delivered to DTC pursuant to this Letter of Representations is responsible for confirming that such notice was properly received by DTC.
23. Issuer recognizes that DTC does not in any way undertake to, and shall
not have any responsibility to, monitor or ascertain the compliance of any
transactions in the Securities with the following, as amended from time to time:
(a) any exemptions from registration under the Securities Act of 1933; (b) the
Investment Company Act of 1940; (c) the Employee Retirement Income Security Act
of 1974; (d) the Internal Revenue Code of 1986; (e) any rules of any
self-regulatory organizations (as defined under the Securities Exchange Act of
1934); or (f) any other local, state, or federal laws or regulations thereunder.
24. Issuer and Trust Company shall comply with the applicable requirements stated in DTC's Operational Arrangements, as they may be amended from time to time. DTC's Operational Arrangements are posted on DTC's website at "www.DTC.org."
25. The following rider(s), attached hereto, are hereby incorporated into this Letter of Representations:
NOTES:
A. IF THERE IS A TRUST COMPANY (AS
DEFINED IN THIS LETTER OF
REPRESENTATIONS), TRUST COMPANY, AS
WELL AS ISSUER, MUST SIGN THIS LETTER. IF
THERE IS NO TRUST COMPANY, IN SIGNING
THIS LETTER ISSUER ITSELF UNDERTAKES
TO PERFORM ALL OF THE OBLIGATIONS SET
FORTH HEREIN.
B. SCHEDULE B CONTAINS STATEMENTS THAT
DTC BELIEVES ACCURATELY DESCRIBE DTC,
THE METHOD OF EFFECTING BOOK-ENTRY
TRANSFERS OF SECURITIES DISTRIBUTED
THROUGH DTC, AND CERTAIN RELATED
MATTERS.
Very truly yours,
By: /s/ James Hennessy ------------------------------- [Authorized Officer's Signature] Sr. Executive Vice President |
By: /s/ Mellisa M. Reynolds ----------------------------------- [Authorized Officer's Signature] MELLISA M. REYNOLDS VICE PRESIDENT |
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By: /s/ [ILLEGIBLE] ----------------------- Funds should be wired to: |
The Chase Manhattan Bank
ABA#021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
[SELECT APPROPRIATE ACCOUNT.]
Dividend Deposit Account # 066-026776
Redemption Deposit Account # 066-027306
Reorganization Deposit Account # 066-027608
cc: Underwriter
Underwriter's Counsel
SCHEDULE A
Pilgrim Prime Rate Trust Auction Race
Cumulative Preferred Shares (Series T and Th)
[Describe Issue]
CUSIP NUMBER SHARE TOTAL VALUE ($AMOUNT) ------------ ----------- --------------- 72146W509 3,600 $ 90,000,000 72146W608 3,600 $ 90,000,000 |
SCHEDULE B
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC-bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. (If, however, the aggregate principal amount of [any] issue exceeds $400 million, one certificate will be issued with respect to each $400 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.]
2. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Direct Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Direct and Indirect Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities: DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the security documents. Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners, or in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.]
[6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.]
7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from Issuer or Agent on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividends to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to [Tender/Remarketing] Agent,
and shall effect delivery of such Securities by causing the Direct Participant
to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender/Remarketing] Agent. The requirement for physical delivery of Securities
in connection with an optional tender or a mandatory purchase will be deemed
satisfied when the ownership rights in the Securities are transferred by Direct
Participants on DTC's records and followed by a book-entry credit of tendered
Securities to [Tender/Remarketing] Agent's DTC account.]
10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered.
11. Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
Exhibit 99.(k)(vii)(1)
[LOGO]
BOOK-ENTRY-ONLY AUCTION-RATE/MONEY MARKET PREFERRED,
AND REMARKETED PREFERRED SECURITIES
LETTER OF REPRESENTATIONS
[To be Completed by Issuer and Trust Company]
Attention: General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street 49th Floor
New York, NY 10041-0099
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the Securities. Trust Company shall act as transfer agent,
registrar, dividend disbursing agent, redemption agent or other such agent with
respect to the Securities. The Securities have been issued pursuant to a
prospectus, private placement memorandum, or other such document authorizing the
issuance of the Securities dated October 30, 2000 (the "Document").
Salomon Smith Barney, Inc. is distributing the Securities through the
["Underwriter/Placement Agent"]
Depository Trust
Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with its Rules with respect to the Securities, Issuer and Trust Company make the following representations to DTC:
1. Prior to closing on the Securities on November 2, 2000 there shall be deposited with DTC one or more Security certificates registered in the name of DTC's nominee, Cede & Co., which represents 100% of the offering value of the Securities. Said certificate(s) shall remain in DTC's custody as provided in the Document. If, however, the aggregate principal amount of the Securities exceeds $400 million, one certificate shall be issued with respect to each $400 million of principal amount and an additional certificate shall be issued with respect to any remaining principal amount. Each Security certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.
2. Issuer: (a) understands that DTC has no obligation to, and will not, communicate to its participants ("Participants") or to any person having an interest in the Securities any information contained in the Security certificate(s); and (b) acknowledges that neither DTC's Participants nor any person having an interest in the Securities shall be deemed to have notice of the provisions of the Security certificate(s) by virtue of submission of such certificate(s) to DTC.
3. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record date for such purposes (with
no provision for revocation of consents or votes by subsequent holders) and
shall send notice of such record date to DTC no fewer than 15 calendar days in
advance of such record date. Notices to DTC pursuant to this Paragraph by
telecopy shall be directed to DTC's Reorganization Department, Proxy Unit at
(212) 855-5181 or (212) 855-5182. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (212) 855-5202. Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:
Supervisor, Proxy Unit Reorganization Department The Depository Trust Company 55 Water Street 50th Floor New York, NY 10041-0099
4. In the event of a full or partial redemption of the Securities, Issuer or Trust Company shall send a notice to DTC specifying: (a) the number of Securities to be redeemed; and (b) the date such notice is to be distributed to Security holders (the "Publication Date"). Such notice shall be sent to DTC by a secure means (E.G., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before or, if possible, two business days before the Publication Date. Issuer or Trust Company shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be no fewer than 30 days nor more than 60 days prior to the redemption date. Notices to DTC pursuant to this Paragraph by telecopy shall be directed to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph, by mail or by any other means, shall be sent to:
Manager, Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, NY 11530-4719
5. In the event of an invitation to tender the Securities (including mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust Company to Security holders specifying the terms of the tender and the Publication Date of such notice shall be sent to DTC by a secure means in the manner set forth in the preceding Paragraph. Notices to DTC pursuant to this Paragraph and notices of other corporate actions by telecopy shall be directed to DTC's Reorganization Department at (212) 855-5488. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (212) 855-5290. Notices to DTC pursuant to this Paragraph, by mail or by any other means, shall be sent to:
Manager, Reorganization Department Reorganization Window The Depository Trust Company 55 Water Street 50th Floor New York, NY 10041-0099
6. All notices and payment advices sent to DTC shall contain the CUSIP number of the Securities.
7. The Document indicates that the dividend rate for the Securities may vary from time to time. Absent other existing arrangements with DTC, Issuer or Trust Company shall give DTC notice of each such change in the dividend rate, on the same day that the new rate is determined, by telephoning DTC's Dividend Announcement Section at (212) 855-4550, or by telecopy sent to (212) 855-4555. Such verbal or telecopy notice shall be followed by prompt written confirmation sent by
a secure means (E.G., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before or, if possible, two business days before the Publication Date. Issuer or Agent shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use and timeliness of such notice.) Notices to DTC pursuant to this Paragraph, by mail or by any other means, shall be sent to:
Manager, Announcements Dividend Department The Depository Trust Company 55 Water Street 25th Floor New York, NY 10041-0099
8. The Document indicates that each purchaser of Securities must sign a purchaser's letter which contains provisions restricting transfer of the Securities purchased. Issuer and Trust Company acknowledge that as long as Cede & Co. is the sole record owner of the Securities, Cede & Co. shall be entitled to all voting rights applicable to the Securities and to receive the full amount of all dividends, liquidation proceeds, and redemption proceeds payable with respect to the Securities, even if the credits of Securities to the DTC accounts of any DTC Participant result from transfers or failures to transfer in violation of the provisions of the purchaser's letter. Issuer and Trust Company acknowledge that DTC shall treat any Participant having Securities credited to its DTC accounts as entitled to the full benefits of ownership of such Securities. Without limiting the generality of the preceding sentence, Issuer and Trust Company acknowledge that DTC shall treat any Participant having Securities credited to its DTC accounts as entitled to receive dividends, distributions, and voting rights, if any, in respect of Securities and, subject to Paragraphs 12 and 13, to receive certificates evidencing Securities if such certificates are to be issued in accordance with Issuer's certificate of incorporation. (The treatment by DTC of the effects of the crediting by it of Securities to the accounts of Participants described in the preceding two sentences shall not affect the rights of Issuer, participants in auctions relating to the Securities, purchasers, sellers, or holders of Securities against any Participant.) DTC shall not have any responsibility to ascertain whether any transfer of Securities is made in accordance with the provisions of the purchaser's letter.
9. Issuer or Trust Company shall provide a written notice of dividend payment and distribution information to DTC as soon as the information is available. Issuer or Trust Company shall provide this information to DTC electronically, as previously arranged by Issuer or Trust Company and DTC, as soon as the information is available. If electronic transmission has not been arranged, absent any other arrangements between Issuer or Trust Company and DTC, such information shall be sent by telecopy to DTC's Dividend Department at (212) 855-4555 or (212) 855-4556, and receipt of such notices shall be confirmed by telephoning (212) 855-4550. Notices to DTC pursuant to this Paragraph, by mail or by any other means, shall be addressed as indicated in Paragraph 7.
10. Dividend payments and distributions shall be received by Cede & Co.,
as nominee of DTC, or its registered assigns, in same-day funds no later than
2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m.
(Eastern Time) on the payment date, dividend and distribution payments due Trust
Company, or at such earlier time as may be required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than 2:30
p.m. (Eastern Time) on the payment date. Absent any other arrangements between
Issuer or Trust Company and DTC, such funds shall be wired to the Dividend
Deposit Account number that will be stamped on the signature page hereof at the
time DTC executes this Letter of Representations.
11. Issuer or Trust Company shall provide DTC, no later than 12:00 noon (Eastern Time) on each payment date, automated notification of CUSIP-level detail. If the circumstances prevent the funds paid to DTC from equaling the dollar amount associated with the detail payments by 12:00 noon (Eastern Time), Issuer or Trust Company must provide CUSIP-level reconciliation to DTC no later than 2:30 p.m. (Eastern Time). Reconciliation must be provided by either automated means or written format. Such reconciliation notice, if sent by telecopy, shall be directed to DTC's Dividend Department at (212) 855-4633, and receipt of such reconciliation notice shall be confirmed by telephoning (212) 855-4430.
12. Redemption payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment date all such redemption payments due Trust Company, or at such earlier time as required by Trust Company to guarantee that DTC shall receive payment in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other arrangements between Issuer or Trust Company and DTC, such funds shall be wired to the Redemption Deposit Account number that will be stamped on the signature page hereof at the time DTC executes this Letter of Representations.
13. Reorganization payments and CUSIP-level detail resulting from corporate actions (such as tender offers, remarketings, or mergers) shall be received by Cede & Co., as nominee of DTC, or its registered assigns, in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment date all such reorganization payments due Trust Company, or at such earlier time as required by Trust Company to guarantee that DTC shall receive payment in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other arrangements between Issuer or Trust Company and DTC, such funds shall be wired to the Reorganization Deposit Account number that will be stamped on the signature page hereof at the time DTC executes this Letter of Representations.
14. DTC may direct Issuer or Trust Company to use any other number or address as the number or address to which notices or payments may be sent.
15. In the event of a redemption acceleration, or any similar transaction (E.G., tender made and accepted in response to Issuer's or Trust Company's invitation) necessitating a reduction in the number of Securities outstanding, or an advance refunding of part of the Securities outstanding DTC, in its discretion: (a) may request Issuer or Trust Company to issue and authenticate a new Security certificate; or (b) may make an appropriate notation on the Security certificate indicating the date and amount of such reduction in the number of Securities outstanding, except in the case of final
redemption, in which case the certificate will be presented to Issuer or Trust Company prior to payment, if required.
16. In the event that Issuer determines that beneficial owners of Securities shall be able to obtain certificated Securities, Issuer or Trust Company shall notify DTC of the availability of certificates. In such event, Issuer or Trust Company shall issue, transfer, and exchange certificates in appropriate amounts, as required by DTC and others.
17. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Trust Company (at which time DTC will confirm with Issuer or Trust Company the aggregate principal amount of Securities outstanding). Under such circumstances, at DTC's request, Issuer and Trust Company shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Securities to any DTC Participant having Securities credited to its DTC accounts.
18. Issuer hereby authorizes DTC to provide to Trust Company listings of Participants' holdings, known as Security Position Listings ("SPLs") with respect to the Securities from time to time at the request of Trust Company. Issuer also authorizes DTC, in the event of a partial redemption of Securities, to provide Trust Company, upon request, with the names of those Participants whose positions in Securities have been selected for redemption by DTC. DTC will use its best efforts to notify Trust Company of those Participants whose positions in Securities have been selected for redemption by DTC. Issuer authorizes and instructs Trust Company to provide DTC with such signatures, examples of signatures, and authorizations to act as may be deemed necessary or appropriate by DTC to permit DTC to discharge its obligations to its Participants and appropriate regulatory authorities. DTC charges a customary fee for such SPLs. This authorization, unless revoked by Issuer, shall continue with respect to the Securities while any Securities are on deposit at DTC, until and unless Trust Company shall no longer be acting. In such event, Issuer shall provide DTC with similar evidence, satisfactory to DTC, of the authorization of any successor thereto so to act. Requests for SPLs shall be directed to the Proxy Unit of DTC's Reorganization Department at (212) 855-5181 or (212) 855-5182. Receipt of such requests shall be confirmed by telephoning (212) 855-5202. Delivery by mail or by any other means, with respect to such SPL request, shall be directed to the address indicated in Paragraph 3.
19. Nothing herein shall be deemed to require Trust Company to advance funds on behalf of Issuer.
20. This Letter of Representations may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts together shall constitute but one and the same instrument.
21. This Letter of Representations shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to principles of conflicts of law.
22. The sender of each notice delivered to DTC pursuant to this Letter of Representations is responsible for confirming that such notice was properly received by DTC.
23. Issuer recognizes that DTC does not in any way undertake to, and shall
not have any responsibility to, monitor or ascertain the compliance of any
transactions in the Securities with the following, as amended from time to time:
(a) any exemptions from registration under the Securities Act of 1933; (b) the
Investment Company Act of 1940; (c) the Employee Retirement Income Security Act
of 1974; (d) the Internal Revenue Code of 1986; (e) any rules of any
self-regulatory organizations (as defined under the Securities Exchange Act of
1934); or (f) any other local, state, or federal laws or regulations thereunder.
24. Issuer and Trust Company shall comply with the applicable requirements stated in DTC's Operational Arrangements, as they may be amended from time to time. DTC's Operational Arrangements are posted on DTC's website at "www.DTC.org."
25. The following rider(s), attached hereto, are hereby incorporated into this Letter of Representations:
NOTES:
A. IF THERE IS A TRUST COMPANY (AS
DEFINED IN THIS LETTER OF
REPRESENTATIONS), TRUST COMPANY, AS
WELL AS ISSUER, MUST SIGN THIS LETTER.
IF THERE IS NO TRUST COMPANY, IN
SIGNING THIS LETTER ISSUER ITSELF
UNDERTAKES TO PERFORM ALL OF THE
OBLIGATIONS SET FORTH HEREIN.
B. SCHEDULE B CONTAINS STATEMENTS THAT
DTC BELIEVES ACCURATELY DESCRIBE DTC,
THE METHOD OF EFFECTING BOOK-ENTRY
TRANSFERS OF SECURITIES DISTRIBUTED
THROUGH DTC, AND CERTAIN RELATED
MATTERS.
Very truly yours,
By: /s/ James M. Hennessy -------------------------------- [Authorized Officer's Signature] Sr. Executive vice President |
By: /s/ Melissa M. Reynolds --------------------------------- [Authorized Officer's Signature] |
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
BY: /s/ [ILLEGIBLE] -------------------------- Funds should be wired to: |
The Chase Manhattan Bank
ABA #021 000 02l
For credit to a/c Cede & Co.
c/o The Depository Trust Company
[SELECT APPROPRIATE ACCOUNT.]
Dividend Deposit Account # 066-026776
Redemption Deposit Account # 066-027306
Reorganization Deposit Account # 066-027608
cc: Underwriter
Underwriter's Counsel
SCHEDULE A
Pilgrim Prime Rate Trust Auction Rate
Cumulative Preferred Shares (Series M, W and F)
[Describe Issue]
CUSIP NUMBER SHARE TOTAL VALUE ($Amount) ------------ ----------- -------------- 72146W202 3,600 $ 90,000,000 72146W301 3,600 $ 90,000,000 72146W400 3,600 $ 90,000,000 |
SCHEDULE B
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC-bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $400 million, one certificate will be issued with respect to each $400 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.]
2. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also facilitates the settlement among Direct Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Direct Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Direct and Indirect Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [Beneficial Owners of Securities may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the security documents. Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners, or in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.]
[6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.]
7. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from Issuer or Agent on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividends to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to [Tender/Remarketing] Agent,
and shall effect delivery of such Securities by causing the Direct Participant
to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender/Remarketing] Agent. The requirement for physical delivery of Securities
in connection with an optional tender or a mandatory purchase will be deemed
satisfied when the ownership rights in the Securities are transferred by Direct
Participants on DTC's records and followed by a book-entry credit of tendered
Securities to [Tender/Remarketing] Agent's DTC account.]
10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered.
11. Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
Exhibit (n)(i) June 23, 2004
ING Prime Rate Trust
7337 East Doubletree Ranch Road
Scottsdale, Arizona 85258-2034
Dear Ladies and Gentlemen:
We hereby consent to all references to our firm in Post-Effective Amendment No. 12 to the Registration Statement of ING Prime Rate Trust. In giving such consent, however, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended, and the rules and regulations thereunder.
Very truly yours,
/s/ Dechert LLP |
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees of ING Prime Rate Trust:
We consent to the use of our report dated April 19, 2004, incorporated herein by reference and to the reference to our firm under the heading "Financial Highlights" in the prospectuses and "Independent Auditors" in the statement of additional information.
/s/ KPMG LLP Los Angeles, California June 25, 2004 |
Exhibit 99.(r)(i)
CODE OF ETHICS
I. STATEMENT OF GENERAL PRINCIPLES 1 II. DEFINITIONS 2 III. GOVERNING LAWS, REGULATIONS AND PROCEDURES 6 IV. CONFIDENTIALITY OF TRANSACTIONS 7 V. ETHICAL STANDARDS 7 A. Investment Activities Related to the Funds or Managed Accounts 7 B. Conflicts 8 C. Obligation to Comply with Laws and Regulations 8 D. Selection of Broker-Dealers 8 E. Supervisory Responsibility 8 F. Accountability 9 VI. EXEMPTED TRANSACTIONS 9 VII. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES 9 A. General 9 B. Pre-clearance 10 C. Restrictions on Purchase of Initial Public Offerings 11 D. Restrictions on Purchase of Limited Offerings 11 E. Blackout Periods 12 F. Ban on Short-Term Trading Profits 12 G. Violations of this policy will be subject to Automatic Disgorgement 12 H. Gifts 12 I. Services as a Director 12 J. Naked Options 12 K. Short Sales 13 L. Permitted Exception 13 VIII. COMPLIANCE PROCEDURES 13 A. Disclosure of Personal Holdings 13 B. Duplicate Trade Confirmation Statements and Account Statements 13 C. Quarterly Reporting 13 1) Access Persons and Advisory Representatives 14 2) Exclusions 14 |
3) Disinterested Directors 15 4) All Directors 15 D. Certification of Compliance with Code of Ethics 15 IX. TRANSACTIONS IN ING FUND SHARES 15 A. Applicability of Article IX 15 B. Compliance with Prospectus 16 C. Transactions required to be through an Approved Plan or Contract 16 D. 30-Day Holding Period for ING Fund Shares. 16 E. Pre-clearance of Transactions in ING Fund Shares. 17 F. Reporting of Transactions in ING Fund Shares 18 G. Disinterested Directors /Trustees/Consultants 18 H. Questions to Chief Compliance Officer 18 I. Review by Chief Compliance Officer 18 J. Minimum Sanctions 18 X. SANCTIONS 18 A. Generally 18 B. Procedures 19 XI. MISCELLANEOUS PROVISIONS 19 A. Records 19 B. Confidentiality 20 C. Interpretation of Provisions 21 D. Effect of Violation of this Code 21 XII. EXHIBITS 22 EXHIBIT A 22 Procedures to Control the Flow and Use of Material Non-Public Information in Connection With Securities Activities 22 Reporting Material Non-Public Information To Chief Compliance Officer 23 EXHIBIT B 24 Designated Persons of ING Investments able to provide pre-clearance 24 EXHIBIT C-1 25 SAMPLE LETTER TO BROKERAGE FIRM 25 TO ESTABLISH DUPLICATE CONFIRMS AND PERIODIC STATEMENTS 25 EXHIBIT C-2 26 |
SAMPLE LETTER TO BROKERAGE FIRM TO ESTABLISH DUPLICATE CONFIRMS AND PERIODIC STATEMENTS 26 EXHIBIT D 27 Annual Certification of Code of Ethics Compliance by all Access Persons, Employees and Directors} 27 EXHIBIT E 28 CERTIFICATION REGARDING EXEMPTION FROM CERTAIN REPORTING REQUIREMENTS OF THE ING CODE OF ETHICS 28 EXHIBIT F 30 INITIAL CERTIFICATION OF CODE OF ETHICS 30 |
Code of Ethics Effective June 1, 2004
I. STATEMENT OF GENERAL PRINCIPLES
Each of (i) the ING Funds (sometimes referred to as "Funds"), (ii) ING Investments, LLC ("ING Investments"), a registered investment adviser under the Investment Advisers Act of 1940, as amended ("Advisers Act"), which serves as the investment adviser for the Funds and Managed Accounts, and (vi) ING Funds Distributor, LLC. ("IFD"), a registered broker-dealer under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which serves as the principal underwriter for the ING Funds (hereinafter, ING Investments, and IFD, collectively "Fund Affiliates") hereby adopt this Code of Ethics (hereinafter, "Code"), pursuant to Section 17(j) of the Investment Company Act of 1940, as amended (the "1940 Act") and Rule 17j-1 promulgated thereunder by the Securities and Exchange Commission ("SEC").
In general, Rule 17j-1 imposes an obligation on registered investment companies, investment advisers and principal underwriters to adopt written codes of ethics covering the securities activities of certain directors, trustees, officers, and employees. This Code is designed to ensure that: (i) those individuals who have access to information regarding the portfolio securities activities of registered investment company clients and other advisory clients, do not intentionally use information concerning such clients' portfolio securities activities for his or her personal benefit and to the detriment of such clients and (ii) Access Persons and Employees of the ING Funds and the Fund Affiliates do not engage in improper trading of shares of the ING Funds (ING Fund Shares"). A sub-adviser of any Fund (and the sub-adviser's Access Persons and Employees) shall be subject to this Code unless the boards of directors/trustees of the Funds ("Boards") have approved a separate code of ethics for that sub-adviser (a "Sub-Adviser Code"). In reviewing and approving a Sub-Adviser Code, the Boards shall, in addition to making the findings required by Rule 17j-1, consider whether the Sub-Adviser Code has provisions reasonably designed to detect and deter improper trading by Sub-Adviser Employees in shares of the portfolio of the Fund sub-advised by it. It is not the intention of this Code to prohibit personal securities activities by Access Persons and Employees, but rather to prescribe rules designed to prevent actual and apparent conflicts of interest. While it is not possible to define and prescribe all-inclusive rules addressing all possible situations in which conflicts may arise, this Code sets forth the policies of the Funds and Fund Affiliates regarding conduct in those situations in which conflicts are most likely to develop.
RULE 17j-1(b)(1)-(4) SPECIFICALLY STATES:
It is unlawful for any affiliated person of or principal underwriter for a Fund, or any affiliated person of an investment adviser of or principal underwriter for a Fund, in connection with the purchase or sale, directly or indirectly, by the person of a Security Held or to be Acquired by the Fund:
(1) To employ any device, scheme or artifice to defraud the Fund;
(2) To make any untrue statement of a material fact to the Fund or omit to state a material fact necessary in order to make the statements made to the Fund, in light of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
In discharging his or her obligations under the Code, every Access Person and Employee should adhere to the following general fiduciary principles governing personal investment activities:
A. Every Access Person or Employee should at all times scrupulously place the interests of the Funds' shareholders and advisory clients ahead of his or her own interests with respect to any decision relating to personal investments.
B. No Access Person or Employee should take inappropriate advantage of his or her position with a Fund, or with the Fund Affiliates as the case may be, by using knowledge of any Fund's or Managed Account's transactions to his or her personal profit or advantage.
C. Every Access Person and Employee should at all times conform to the "POLICIES AND PROCEDURES TO CONTROL THE FLOW AND USE OF MATERIAL NON-PUBLIC INFORMATION IN CONNECTION WITH SECURITIES ACTIVITIES", a copy of which is attached as EXHIBIT A and is incorporated by reference into this Code.
II. DEFINITIONS
This Code defines directors, officers and employees of the Funds and Fund Affiliates into several categories, and imposes varying requirements by category appropriate to the sensitivity of the positions included in the category. As used herein and unless otherwise indicated, the following terms shall have the meanings set forth below.
"ACCESS PERSONS": includes:
(i) any director, trustee, officer, general partner or Advisory Person of the Funds or the Advisers; and
(ii) any director or officer of IIL who, in the ordinary course of business, makes, participates in or obtains information regarding the purchase or sale of Securities by the Funds or Managed Accounts, or whose functions or duties in the ordinary course of business relate to the making of any recommendation to the Funds or Managed Accounts regarding the purchase or sale of Securities.
This definition includes, but is not limited to, the following individuals:
Portfolio Managers, Investment Personnel, certain Employees in Operations,
all Employees in Marketing, the Finance department, Information Systems,
Accounting/Compliance Department, Legal Counsel, Legal Administration and
Executive Management and their support staff members, as such individuals
are defined by the Company's Human Resource Department.
"ADVISERS": "ING Investments", a registered adviser under the Investment Advisers Act of 1940, as amended ("Advisers Act"), which serves as the investment adviser for the Funds and Managed Accounts and sub-advisers subject to this Code.
"ADVISORY PERSON": includes any Employee of the Funds or the Advisers (or of any company in a control relationship to the Fund or the Advisers) who, in connection with his or her regular functions or duties, makes, participates in or obtains information regarding the purchase or sale of Securities by the Funds or Managed Accounts, or whose functions relate to the making of any recommendations with respect to such purchases or sales. This term also includes any natural persons in a control relationship with the Fund or investment adviser who obtains information concerning recommendations made to the Fund regarding the purchase or sale of Securities. This definition also includes Shared Employees.
"ADVISORY REPRESENTATIVES": means any officer or director of the Advisers; or any Employee of the Advisers who makes any recommendation, who participates in the determination of which recommendation should be made or whose functions or duties relate to the determination of which recommendation shall be made.
"AUTOMATIC DISGORGEMENT": Where a violation results from a transaction which can be reversed prior to settlement such transaction should be reversed, with the cost of the reversal being borne by the Covered Person; or if reversal is impractical or impossible, then any profit realized on such short-term investment, net of brokerage commissions but before tax effect, shall be disgorged to the appropriate Fund, or if no Fund is involved then to a charity designated by the relevant Advisers.
"BEING CONSIDERED FOR PURCHASE OR SALE": means, with respect to any security, that a recommendation to purchase or sell such security has been made and communicated or, with respect to the person making the recommendation, such person seriously considers making such recommendation.
"BENEFICIAL OWNERSHIP": generally has the same meaning as under Section 16 of the Exchange Act and Rule 16a-1(a)(2) under the Act, as having or sharing, directly or indirectly, through any contract arrangement, understanding, relationship, or otherwise, a direct or indirect "pecuniary interest" in the security.
i) "Pecuniary interest" means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in securities.
ii) "Indirect pecuniary interest" includes, but is not limited to:
(a) a general partner's proportionate interest in portfolio
securities held by a general or limited partnership; (b) a
person's right to dividends that is separated or separable from
the underlying securities (otherwise, a right to dividends alone
will not constitute a pecuniary interest in securities); (c) a
person's interest in securities held by a trust; (d) a person's
right to acquire securities through the exercise or conversion of
any derivative security, whether or not presently exercisable;
and (e) a performance-related fee, other than an asset based fee,
received by any broker, dealer, bank, insurance company,
investment company, investment manager, trustee, or person or entity performing a similar function, with certain exceptions.
iii) A person's Beneficial Ownership interest ordinarily extends to securities held in the name or for the benefit of (a) a spouse, minor children, or significant other, (b) another relative resident in the Employee or Access Person's home, or (c) an unrelated person in circumstances that suggest a sharing of financial interests, such as when the Access Person or Employee makes a significant contribution to the financial support of the unrelated person (or vice versa) or they share in the profits of each other's securities transactions. "Significant others" are two people who share the same primary residence, share living expenses, and are in a committed relationship in which they intend to remain indefinitely. For interpretive purposes, a person who resides with the Access Person or Employee and is referred to as the "boyfriend" or "girlfriend" of the Access Person or Employee would be presumed to be a significant other, while a person referred to as the Access Person or Employee's "roommate" would not, absent a demonstration to the contrary. Any questions about whether a particular person is covered in the definition of beneficial ownership should be directed to the Chief Compliance Officer.
IMPORTANT NOTE: Employees and Access Persons are reminded that all information about the Funds and the Fund Affiliates which they acquire in their capacity as Employees or Access Persons is proprietary and confidential to the Funds and the Fund affiliates, and communication of this information to friends, family, or any other individual is strictly prohibited, regardless of any determination of beneficial ownership under this provision.
"CONTROL": shall have the same meaning as that set forth in Section 2(a)(9) of the 1940 Act.
"COVERED PERSON": means any person subject to the Code, including any Access Person, Employee or their Related Persons.
"DESIGNATED PERSON": means, the Chief Compliance Officer or a member of the Chief Compliance Officer's staff appointed as such.
"DISINTERESTED DIRECTOR": means a director/trustee of the Funds who is not an "interested person" of the Funds within the meaning of Section 2(a)(19) of the 1940 Act.
"EMPLOYEE": means any employee of any ING Fund or Fund Affiliate.
"FUNDS" OR "FUND": means investment companies registered under the 1940 Act for which ING Investments serves as the investment adviser. This includes both the ING retail funds and the ING variable portfolios.
."ING FUNDS": means investment companies registered under the 1940 Act for which certain ING entities serve as the investment adviser. This includes funds for which ING Investments, LLC., ING Life Insurance Company and Annuity Company and Directed Services, Inc serve as the investment adviser. It encompasses both the ING retail funds and the ING variable portfolios.
"ING INSURANCE COMPANY": means insurance companies that are part of ING Groep N.V.
"INVESTMENT PERSONNEL": includes any Advisory Person who makes, participates in or obtains information concerning recommendations regarding the purchase or sale of Securities by the Funds or Managed Accounts or any natural person in a control relationship to the Fund or Advisers who obtains information regarding the purchase or sale of Securities by the Funds or Managed Accounts and includes the following individuals: all Portfolio Managers of the Funds and Managed Accounts, the Portfolio support staff and traders who provide information and advice to any such Portfolio Managers or who assist in the execution of such Portfolio Managers' decisions and all Finance Department staff of the Advisers.
"MANAGED ACCOUNTS": means any account other than registered investment companies.
"PERSONAL SECURITIES HOLDINGS" OR "PERSONAL SECURITIES TRANSACTIONS":
means, with respect to any person, any Security Beneficially Owned, or any
Security purchased or otherwise acquired, or sold or otherwise disposed of
by such person, including any Security in which such person has, or by
reason of such transaction acquires or disposes of, any direct or indirect
Beneficial Ownership in such Security, and any account over which such
person has discretion; provided, however, that such terms shall not include
any holding or transaction in a Security held in or effectuated for an
account over which such person does not have any direct or indirect
influence and has certified these facts to the Chief Compliance Officer, in
a manner satisfactory to the Chief Compliance Officer, and updates this
certification, attached as EXHIBIT E, annually and as long as all holdings
and transactions in the account are reported in accordance with the
provisions of ARTICLE VIII.A. (Disclosure of Personal Holdings) and Article
VIII.B. (Duplicate Trade Confirmation Statements and Account Statements).
Personal Securities Transactions shall include all Securities or commodity
interests regardless of the dollar amount of the transaction or whether the
sale is in response to a tender offer.
"PORTFOLIO MANAGER": means any Employee of a Fund or the Advisers who is entrusted with the direct responsibility and authority to make investment decisions affecting a Fund or Managed Account, and who, therefore, may be best informed about such Fund's or account's investment plans and interests.
"RELATED PERSONS": persons in whose holdings or transactions an Access Person or Employee has a beneficial ownership interest.
"SECURITY": includes any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, any put, call, straddle, option, or privilege on any security (including a certificate of deposit) or on any group or index of securities, or any put, call, straddle, option or privilege entered into on a national securities exchange relating to foreign currency. Securities also includes shares of closed-end investment companies, various derivative instruments such as ELKs, LEAPs and PERCs, exchange traded funds such as SPDR's, CUBE's, WEB's, HOLDR's, iShare's, Viper's and
Diamonds, limited partnership interests and private placement common or preferred stocks or debt instruments. Commodity interests, which includes futures contracts, and options on futures, or any other type of commodity interest which trades on any exchange, shall also be included in this Code's definition of Security. Commodity interests in agricultural or industrial commodities, such as agricultural products or precious metals, are not covered under this Code. Security includes any certificate or interest, participation in, temporary or interim certificate for, receipt for, guarantee of or warrant or right to subscribe to or purchase, or of the foregoing.
Security does not include shares of registered open-end investment companies, securities issued by the government of the United States and any options or futures thereon, bankers' acceptances, bank certificates of deposit and time deposits, commercial paper, repurchase agreements, and such other money market instruments as designated by the board of directors/trustees of such Fund, Please note that while shares of the ING Funds that are open-end funds are not defined as "Securities" under the Code, transactions in shares of these Funds are governed by Article IX of the Code.
"SECURITY HELD OR TO BE ACQUIRED" by a Fund or for a Managed Account means:
1. any Security which, within the most recent fifteen (15) days,
a. is or has been held by such Fund or Managed Account, or
b. is being or has been considered by such Fund or Managed Account for purchase for such Fund or Managed Account.
2. any option to purchase or sell, and any security convertible into or exchangeable for a Security described in paragraph (a) above.
"SHARED EMPLOYEE": means any Employee who is a Shared Employee by virtue of a Shared Employee arrangement or other writing.
III. GOVERNING LAWS, REGULATIONS AND PROCEDURES
Each Employee shall comply with all laws and regulations relating to the use of material non-public information. Trading on "inside information" of any sort, whether obtained in the course of research activities, through a client relationship or otherwise, is strictly prohibited. All Employees shall comply strictly with procedures established by the Funds and the Advisers to ensure compliance with applicable federal and state laws and regulations of governmental agencies and self-regulatory organizations. Employees shall not knowingly participate in, assist, or condone any acts in violation of any statute or regulation governing securities matters, nor any act, which would violate any provision of this Code or any rules adopted thereunder.
Each Employee having supervisory responsibility shall exercise reasonable supervision over Employees subject to his or her control with a view to preventing any violation by such of the provisions of the Code.
Any Employee encountering evidence that acts in violation of applicable statutes or regulations or provisions of the Code of Ethics have occurred shall report such evidence to a Designated Person or the Board of each fund.
Employees must inform the Chief Compliance Officer if they ever become the subject of external investigations.
IV. CONFIDENTIALITY OF TRANSACTIONS
All information relating to any Fund or Managed Account portfolio or pertaining to any studies or research activity is confidential until publicly available. Whenever statistical information or research is supplied to or requested by the Funds or Managed Accounts, such information must not be disclosed to any persons other than persons designated by the Designated Person or the Board of the Fund or the Advisers. If a Fund or Managed Account is considering a particular purchase or sale of a security, this must not be disclosed except to such duly authorized persons.
Any Employee authorized to place orders for the purchase or sale of Securities on behalf of a Fund or Managed Account shall take all steps reasonably necessary to provide that all brokerage orders for the purchase and sale of Securities for the account of the Fund or Managed Account, will be so executed as to ensure that the nature of the transactions shall be kept confidential until the information is reported to the SEC or each Fund's shareholders or the Managed Account holders in the normal course of business.
If any Employee or Access Person should obtain information concerning the Fund's or Managed Account's portfolio (including consideration of acquiring or recommending any security for such portfolios), whether in the course of such person's duties or otherwise, such person shall respect the confidential nature of this information and shall not divulge it to anyone unless it is properly part of such person's services to the Fund or Managed Account to do so or such person is specifically authorized to do so by the Designated Person of the Fund or Managed Account. No Access Person or Employee shall disclose any non-public information relating to a client's portfolio or transactions or to the investment recommendations of the Advisers, nor shall any Access Person or Employee disclose any non-public information relating to the business or operations of the Funds, Fund Affiliates or Managed Accounts unless properly authorized to do so.
V. ETHICAL STANDARDS
A. INVESTMENT ACTIVITIES RELATED TO THE FUNDS OR MANAGED ACCOUNTS
All Access Persons, in making any investment recommendations or in taking any investment action, shall exercise diligence and thoroughness, and shall have a reasonable and adequate basis for any such recommendations or actions.
B. CONFLICTS
All Access Persons and Employees shall conduct themselves in a manner consistent with the highest ethical standards. They shall avoid any action, whether for personal profit or otherwise, that results in an actual or potential conflict of interest, with a
Fund or Managed Account, or which may otherwise be detrimental to the interest of a Fund or Managed Account. Therefore, no Access Person or Employee shall undertake independent practice for compensation in competition with the Funds or Managed Accounts.
Every Employee or Access Person of the Funds or Managed Accounts who owns beneficially, directly or indirectly, 1/2 of 1% or more of the stock of any corporation is required to report such holdings to the President of the Funds and the Chief Compliance Officer.
C. OBLIGATION TO COMPLY WITH LAWS AND REGULATIONS
Every Access Person and Employee shall acquire and maintain knowledge of, and shall comply strictly with, all applicable federal and state laws and all rules and regulations of any governmental agency or self-regulatory organization governing such Access Person's activities. In addition, every Access Person shall comply strictly with all procedures established by the Funds or Fund Affiliates to ensure compliance with such laws and regulations. Access Persons shall not knowingly participate in, assist or condone any acts in violation of any law or regulation governing Securities transactions, nor any act that would violate any provision of this Code.
D. SELECTION OF BROKER-DEALERS
Any Employee or Access person having discretion as to the selection of broker-dealers to execute transactions in Securities for the Funds shall select broker-dealers solely on the basis of the services provided directly or indirectly by such broker-dealers as provided in the registration statements for the relevant Funds. An Employee or Access Person shall not directly or indirectly, receive a fee or commission from any source in connection with the sale or purchase of any security for a Fund or Managed Account.
In addition, Employees and Access Persons shall take all actions reasonably calculated to ensure that they engage broker-dealers to transact business with each Fund or Managed Account whose partners, officers and Employees, and their respective affiliates, will conduct themselves in a manner consistent with the provisions of Article V.
E. SUPERVISORY RESPONSIBILITY
Every Access Person or Employee having supervisory responsibility shall exercise reasonable supervision over employees subject to his or her control in order to prevent any violation by such persons of applicable laws and regulations, procedures established by the Funds or Fund Affiliates, as the case may be, or the provisions of this Code.
F. ACCOUNTABILITY
Reports of Possible Violations - Any Access Person or Employee encountering evidence of any action in violation of the provisions of this Code shall report such
evidence to the Chief Compliance Officer. The Chief Compliance Officer may assign a Designated Person to investigate matters brought to his or her attention. The Chief Compliance Officer, using his or her discretion, may report such matters to the Funds' Disinterested Directors. If, as a result of fiduciary obligations to other persons or entities, an Access Person believes that he or she is unable to comply with certain provisions of this Code, such Access Person shall so advise the Designated Person of any Fund or the Advisers, for which such person is an Access Person in writing and shall set forth with reasonably specificity the nature of his or her fiduciary obligations and the reasons why such Access Person believes that he or she cannot comply with the provisions of the Code.
VI. EXEMPTED TRANSACTIONS
The provisions of Article VII of this Code shall not apply as follows:
1. To purchases or sales effected in any account over which a Covered Person has no direct or indirect influence or control;
2. To purchases or sales which are non-volitional on the part of either the Covered Person or a Fund or Managed Account;
3. To purchases which are part of an automatic dividend reinvestment plan or employee stock purchase plan;
4. To purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired;
5. The provisions of Article VII of this Code (other than Article VII.A) shall not apply (i) to a Disinterested Director.
6. The provisions of Article VII and Article VIII.B of this Code shall not apply to Access Persons who are Shared Employees so long as he or she is subject to substantially similar provisions through his/her other employer, as determined by the Chief Compliance Officer.
7. The exemptions provided in this Article VI do not apply to Article IX.
VII. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES
A. GENERAL
No Covered Person shall purchase or sell, directly or indirectly or for any account over which a Covered Person has discretion, any Security (including both publicly traded and private placement Securities), in which he or she has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership and which he or she knows or should have known at the time of such purchase or sale (i) is being
considered for purchase or sale by a Fund or Managed Account; or (ii) is being purchased or sold by a Fund or Managed Account.
B. PRE-CLEARANCE
Every Covered Person must pre-clear all Personal Securities Transactions with the Compliance Department. In order to receive pre-clearance for Personal Securities Transactions, the Covered Person must complete and submit a Personal Trading Approval form (which can be found at P:/everyone/compliance) to a Designated Person for authorization. The current list of Designated Persons of the Advisers who are authorized to provide pre-clearance trade approval is attached as EXHIBIT B. Questions regarding pre-clearance procedures should be directed to the Compliance Department. A member of the Compliance Department is available each business day to respond to pre-clearance requests. Covered Persons are directed to identify:
1. the subject of the transaction and the number of shares and principal amount of each security involved,
2. the date on which the Covered Person desires to engage in the subject transaction;
3. the nature of the transaction (i.e., purchase, sale, private placement, or any other type of acquisition or disposition);
4. the approximate price at which the transaction will be effected; and
5. the name of the broker, dealer, or bank with or through whom the transaction will be effected.
When granted, clearance authorizations will be identified by authorization number and will be effective until the end of that calendar day (or in the case of a private placement purchase, the closing of the private placement transaction).
In determining whether to grant approval of Personal Securities Transactions of Investment Personnel who desire to purchase or otherwise acquire Securities in private placement transactions conducted pursuant to Section 4(2) of the Securities Act, the appropriate Designated Person will consider, among other factors, whether the investment opportunity presented by such private placement offering should be reserved for an investment company and its shareholders, or a Managed Account and its shareholders, and whether the opportunity is being offered to an individual by virtue of his position with the Fund or Managed Account. In the event that Investment Personnel who have been authorized to acquire Securities in a private placement transaction later have any role in a Fund's or Managed Account's subsequent consideration of an investment in the issuer of the Securities acquired in such prior private placement transaction, such Investment Personnel must provide written notification of such prior authorization and investment to the Compliance Department, immediately upon learning of such Fund's or Managed Account's subsequent consideration. In such circumstances, the Fund's or Managed Account's
decision to purchase Securities of such issuer will be subject to an independent review
COMPLIANCE OF TRANSACTIONS WITH THIS CODE BY COVERED PERSONS MAY DEPEND ON THE SUBSEQUENT INVESTMENT ACTIVITIES OF THE FUNDS OR MANAGED ACCOUNTS. THEREFORE, PRE-CLEARANCE APPROVAL OF A TRANSACTION BY THE DESIGNATED PERSON DOES NOT NECESSARILY MEAN THE TRANSACTION COMPLIES WITH THE CODE.
C. RESTRICTIONS ON PURCHASE OF INITIAL PUBLIC OFFERINGS
1. No Investment Personnel (or Employee who is a Registered Representative) may directly or indirectly acquire Beneficial Ownership in any securities in an initial public offering without first obtaining prior written approval from the Chief Compliance Officer. For the purpose of this provision, "initial public offering" means an offering of securities registered under the Securities Act, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act.
2. The Chief Compliance Officer shall not grant approval for any Investment Personnel (or Employee who is a Registered Representative) to acquire Beneficial Ownership in any securities in an initial public offering, except as permitted by NASD Rule 2790. Among other transactions, Rule 2790 permits the purchase of securities in an initial public offering that qualifies as an "issuer-directed" offering either (i) to a specific list of purchasers, or (ii) as part of a spin-off or conversion offering, all in accordance with the provisions of Rule 2790.
D. RESTRICTIONS ON PURCHASE OF LIMITED OFFERINGS
No Investment Personnel may directly or indirectly acquire Beneficial Ownership in any securities in a "limited offering" (sometimes referred to as a "private placement") except after receiving prior written approval from the Chief Compliance Officer. In all such instances, the Investment Personnel shall provide the Chief Compliance Officer with the full details of the proposed transaction (including written certification that the investment opportunity did not arise by virtue of the Investment Personnel's activities on behalf of advisory clients). Any Investment Personnel who has obtained prior approval and made an investment in a limited offering must disclose in writing to the Chief Compliance Officer immediately upon learning of such Fund's or Managed Account's subsequent consideration of an investment in the issuer by a Fund. If the Investment Personnel plays a part in any subsequent consideration of an investment in the issuer by a Fund, the Fund's decision to purchase securities of the limited offering issuer will be subject to an independent review by Investment Personnel with no investment in the issuer. For this purpose, a "limited offering" means an offering that is exempt from registration under the Securities Act pursuant to Section 4(2) or 4(6) thereof, or pursuant to Regulation D thereunder.
E. BLACKOUT PERIODS
1. No Access Person or Employee may execute any Personal Securities Transaction on a day during which any Fund or Managed Account has a pending "buy" or "sell" order in that same security until such order is executed or withdrawn.
2. Any purchase or sale of any Personal Security Holding by a Portfolio Manager which occurs within seven (7) calendar days (exclusive of the day of the relevant trade) from the day a Fund or Managed Account he or she manages trades in such security will be subject to Automatic Disgorgement. This seven-day blackout period also applies to any portfolio support staff member who recommends the purchase or sale of the particular security to a Fund's or Managed Account's Portfolio Manager.
F. BAN ON SHORT-TERM TRADING PROFITS
Investment Personnel may not profit from the purchase and sale, or sale and purchase, of the same (or equivalent) Personal Securities Holding within sixty (60) calendar days, unless such Investment Personnel have requested and obtained an exemption from this provision from the Compliance Department with respect to a particular transaction.
G. VIOLATIONS OF THIS POLICY WILL BE SUBJECT TO AUTOMATIC DISGORGEMENT
This prohibition shall not apply to any transaction in index futures, index options, including WEB's, SPDR's or similar baskets of portfolio securities. Nor shall it apply to the exercise of vested options in ING stock.
H. GIFTS
Investment Personnel may not receive any fee, commission, gift or other thing, or services, having a value of more than $100.00 each year from any person or entity that does business with or on behalf of the Funds or a Managed Account.
I. SERVICES AS A DIRECTOR
Investment Personnel may not serve on the boards of directors of publicly traded companies, unless
1. the individual serving as a director has received prior authorization from the appropriate Designated Person based upon a determination that the board service would be consistent with the interests of the Managed Accounts, the Funds and their shareholders and
2. policies and procedures have been developed and maintained by the Boards that are designed to isolate the individual from those making investment decisions (an "Ethical Wall").
J. NAKED OPTIONS
Investment Personnel are prohibited from engaging in naked options transactions. Transactions under any incentive plan sponsored by the Fund Affiliates or their affiliates are exempt from this restriction.
K. SHORT SALES
Short sales of Securities by Investment Personnel are prohibited.
L. PERMITTED EXCEPTION
Purchases and sales of the following securities are exempt from the restrictions set forth in paragraphs A, D, and E above if such purchases and sales comply with the pre-clearance requirements of paragraph B above and are:
1. Equity Securities of a company with a market capitalization in excess of $10 billion, when transactions are for 3000 shares or less, or
2. $10,000 or less per calendar month, whichever is lesser.
VIII. COMPLIANCE PROCEDURES
Any person filing a required holdings or transaction report under this Article VIII may include a statement that the report will not be construed as an admission that such person has any direct or indirect beneficial ownership of any securities covered by the report. Each report shall be submitted to the Chief Compliance Officer. The Compliance Officer shall review each report received and report to the Board as required in Section X.
A. DISCLOSURE OF PERSONAL HOLDINGS
All Access Persons (other than Disinterested Directors) must disclose all Personal Securities Holdings upon commencement of employment and thereafter on an annual basis. Initial reports shall be made within 10 days of hire or within 10 days of becoming an Access Person. Annual disclosure shall be made by January 30th of each year. The initial and annual reports are required to include the TITLE, NUMBER OF SHARES AND PRINCIPAL AMOUNT OF EACH SECURITY, THE EXCHANGE TICKER SYMBOL OR CUSIP NUMBER, THE DATE OF REPORT SUBMISSION, the name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities (not limited to Securities as defined by this Code) were held for the direct or indirect benefit of the Access Person.
B. DUPLICATE TRADE CONFIRMATION STATEMENTS AND ACCOUNT STATEMENTS
All Access Persons (other than Disinterested Directors) must cause duplicate trading confirmations for all Personal Securities Transactions and copies of periodic statements for all Securities accounts to be sent to the Compliance Department. A form letter that may be used to direct brokerage firms maintaining such accounts to send duplicate trade confirmations to the Compliance Department is attached as EXHIBIT C-1 and EXHIBIT C-2.
C. QUARTERLY REPORTING
All Access Persons (except as provided below) must prepare (and report as required below) a quarterly report identifying any new accounts that were opened or any
existing accounts that have been closed. This report shall contain the following information:
1. The name of the broker, dealer or bank with or through whom the new account was opened and the date on which the account was opened.
2. The name of the broker, dealer or bank with or through whom the account was closed, the account number of the closed account and the date on which the account was closed.
In addition, Quarterly Transaction Reports are required as described below:
1) ACCESS PERSONS AND ADVISORY REPRESENTATIVES
Except as provided below, all Access Persons and Advisory Representatives must prepare a quarterly report of all Personal Securities Transactions in Securities no later than 10 days following the end of each quarter in which such Personal Securities Transactions were effected. Rule 17j-1(d)(1) under the 1940 Act requires such reports from Access Persons and Rule 204-2 under the Advisers Act requires such reports from "advisory representatives" (as defined in Rule 204-2(a)(12) and (13)). Compliance by Access Persons and Advisory Representatives with the reporting requirements set forth herein will constitute compliance with the reporting requirements of both the 1940 Act and the Advisers Act. An Access Person who is also an Advisory Representative may satisfy this reporting requirement by providing the report to the compliance department of the Advisers. The Quarterly Transaction Reports must state:
i) the title, exchange ticker symbol or CUSIP number , the number of shares and principal amount of each Security (as well as the interest rate and maturity date, if applicable) involved;
ii) the trade date and nature of the transactions (i.e., purchase, sale, private placement, or other acquisition or disposition);
iii) the price of the Security at which each transaction was effected; and
iv) the name of the broker, dealer or bank with or through which each transaction was effected; and
v) the date the report is submitted.
2) EXCLUSIONS
Quarterly Transaction reports are not required to include any Personal Securities Transaction effected in any account over which the Access Person or Advisory Representative has no direct or indirect influence or control and has certified these facts to the Chief Compliance Officer, in a manner satisfactory to the Chief Compliance Officer, and updates this certification annually and as long as all holdings and transactions in the account are reported in accordance with the
provisions of Article VIII.A. (Disclosure of Personal Holdings) and Article VIII.B. (Duplicate Trade Confirmation Statements and Account Statements) In addition the report is not required to include shares of registered open-end investment companies (except for ING Fund Shares as provided in Article IX), securities issued by the Government of the United States, bankers' acceptances, bank certificates of deposit, commercial paper, and high quality short-term debt instruments, including repurchase agreements.
3) DISINTERESTED DIRECTORS
Disinterested Directors do not have to provide a quarterly report identifying any new accounts that were opened or any existing accounts that have been closed. However, Disinterested Directors must submit a quarterly report containing the information set forth in subsection (1) above only with respect to those transactions for which such person knew or, in the ordinary course of fulfilling his or her official duties as a Fund director/trustee, should have known that during the 15-day period immediately before or after the director/trustee's transaction in Securities that are otherwise subject to Access Person reporting requirements, a Fund or a Managed Account had purchased or sold such Securities or was actively considering the purchase or sale of such Securities. Disinterested Directors are not required to submit a report containing the information set forth in subsection (1) above with respect to purchases or sales that are non-volitional on the part of such persons, such as transactions in an account over which such person has delegated discretionary trading authority to another person.
4) ALL DIRECTORS
In addition, solely to facilitate compliance with timely Form 4 filing requirements, all Directors or Trustees must submit a report of any transaction involving a Fund that is a closed-end investment company (such as the ING Prime Rate Trust or ING Senior Income Funds) on the trade date of such transaction.
D. CERTIFICATION OF COMPLIANCE WITH CODE OF ETHICS
All Access Persons and Employees will be provided with a copy of this Code upon beginning his or her appointment or employment with a Fund or Fund Affiliate, as the case may be, and any amendments thereto and must certify, attached as EXHIBIT F, within 10 days that they have read and understand this Code, and that they recognize that they are subject to the terms and provisions hereof. Further, all Employees and Access Persons including all Directors must certify, attached as EXHIBIT D, by January 30th of each year that they have complied with the requirements of this Code for the prior calendar year.
IX. TRANSACTIONS IN ING FUND SHARES
A. APPLICABILITY OF ARTICLE IX
The following restrictions and requirements apply to all purchases and sales of shares of any ING Fund, regardless of whether such fund is available for purchase directly or
through one or more variable insurance products, other than exchange traded closed-end funds ("ING Fund Shares") and all holdings of ING Fund Shares by Covered Persons or in which they have a beneficial ownership interest ("Covered Transactions" or "Covered Holdings"), except as provided below. Covered Transactions and Covered Holdings include transactions and holdings by any person in whose transactions or holdings the Access Person or Employee has a Beneficial Ownership interest (as defined in Article II of the Code) ("Related Persons").
1. These restrictions and requirements (except for the reporting requirements of Paragraph F) do not apply to purchases of ING Fund Shares through (1) an automatic dividend reinvestment plan or (2) through any other automatic investment plan, automatic payroll deduction plan WHERE THE ALLOCATION HAS BEEN IN EFFECT FOR 30 DAYS, or other automatic plan approved by the Chief Compliance Officer.
2. Access Persons and Employees must provide the Chief Compliance Officer with a list of his or her Related Persons (and the name and location of the relevant account or variable insurance contract or policy) who hold ING Fund Shares. The list shall be updated to reflect changes on a quarterly basis.
B. COMPLIANCE WITH PROSPECTUS
All Covered Transactions in ING Fund Shares must be in accordance with the policies and procedures set forth in the Prospectus and Statement of Additional Information for the relevant Fund, including but not limited to the Fund's policies and procedures relating to short term trading and forward pricing of securities.
C. TRANSACTIONS REQUIRED TO BE THROUGH AN APPROVED PLAN OR CONTRACT
1. Exchanges among ING Funds acquired prior to June 1, 2004 and held in retirement, pension, deferred compensation and similar accounts that are required to be maintained by third party administrators ("Outside Plans"), are permitted, provided that the Covered Person informs the Chief Compliance Officer of these holdings of ING Fund Shares in the Outside Plan and cooperates with the Chief Compliance Officer in requiring the administrator for the Outside Plan to provide the Chief Compliance Officer with duplicate account statements reflecting all transactions in ING Fund Shares effected in the Plan (an Outside Plan as to which such arrangements have been made is referred to as an "Approved Outside Plan.").
2. Exchanges among ING Funds portfolios that are part of an insurance contract ("Insurance Contracts"), provided that the Covered Person informs the Chief Compliance Officer of these holdings in the Insurance Contract and cooperates with the Chief Compliance Officer in requiring the insurance company for the Insurance Contract to provide the Chief Compliance Officer with duplicate account statements reflecting all transactions in ING Fund portfolios effected in the Insurance Contract (an Insurance Contract as to which such arrangements have been made is referred to as an "Approved Insurance Contract.").
D. 30-DAY HOLDING PERIOD FOR ING FUND SHARES.
1. ALL COVERED PERSONS MUST HOLD ANY INVESTMENT IN ING FUND SHARES FOR A MINIMUM OF 30 CALENDAR DAYS. This provision does not apply to shares of money market funds or other funds designed to permit short term trading, but does apply to movement between these funds and all other funds.. The 30-day holding period is measured from the time of the most recent purchase of shares of the relevant ING Fund by the Covered Person.
2. The Chief Compliance Officer may grant exceptions to the 30-day holding period. Such exceptions will only include redemptions following death or permanent disability if made within one year of death or the initial determination of permanent disability, mandatory distributions from a tax-deferred retirement plan or IRA or for redemptions pursuant to an approved withdrawal plan.
3. Exceptions to the 30-day holding period granted to Investment Personnel must be reported by the Chief Compliance Officer to the relevant Fund Board on a quarterly basis.
4. Exceptions to the 30-day holding period will not relieve any sale of ING Fund Shares from the application of any redemption fee that would apply to any other investor redeeming ING Fund Shares in similar circumstances.
E. PRE-CLEARANCE OF TRANSACTIONS IN ING FUND SHARES.
1. All purchases and sales of ING Fund Shares by Covered Persons must be pre-cleared by the Chief Compliance Officer, in accordance with the procedures set forth in Article VII.B of the Code. When granted, clearance authorizations will be effective only for that day.
2. Pre-clearance requests must be accompanied by
a) a representation of all transactions in ING Fund Shares of the applicable Fund which is the subject of the pre-clearance by the Covered Person in the previous 30 days which includes the dates for all transactions. This requirement is not necessary for ING employees if your holdings in the applicable fund are ONLY held at DST or the ING 401k Plan.
b) a certification by the Covered Person that he or she is not in possession of nonpublic information THAT, IF PUBLICLY KNOWN, WOULD LIKELY HAVE A MATERIAL EFFECT ON THE NET ASSET VALUE PER SHARE OF THE RELEVANT FUND AT THE TIME OF THE TRADE (MATERIAL FOR THIS PURPOSE MEANS ONE CENT OR MORE PER SHARE). Any questions the Covered Person may have regarding materiality should be directed to in-house legal counsel.
3. In determining whether to grant the pre-clearance request, the Chief Compliance Officer should review the proposed trade to determine whether the trade is conformity with the Fund's policies and procedures as disclosed in the prospectus and with the restrictions of the Code, including the restrictions imposed by this Article IX.
F. REPORTING OF TRANSACTIONS IN ING FUND SHARES
1. Access Persons must report all their holdings of ING Fund Shares. Access Persons and Employees must report all their Covered Transactions in ING Fund Shares in accordance with the procedures set forth in Article VIII of the Code, provided that Access Persons and Employees are excused from the quarterly reporting requirements of Article VIII.C as to transactions in:
a. any ING Fund Shares held by DST, the ING 401(k) Plan, an ING Insurance Company or an Approved Outside Plan or Approved Insurance Contract in the name of the Covered Person,
b. any ING Fund Shares held in any other account for which duplicate trading confirmations and copies of periodic statements reflecting holdings of any transactions of ING Fund Shares are received by the Compliance Department within 10 days following the end of each quarter.
2. For ING Fund Shares held in Approved Outside Plans or Insurance Contracts, the Chief Compliance Officer may extend the time periods for reporting upon a showing that the information is not available on the same schedule.
G. DISINTERESTED DIRECTORS /TRUSTEES/CONSULTANTS
The requirements of subsections C, D. E and F of this Section IX shall not apply to Disinterested Directors/Trustees/Consultants, except that such persons may be asked periodically to sign the certification attached as Exhibit D to certify that they have complied with this Code.
H. QUESTIONS TO CHIEF COMPLIANCE OFFICER
Covered Persons should direct any questions or doubt about how the Code of Ethics applies to a particular transaction in ING Fund Shares to the Chief Compliance Officer.
I. REVIEW BY CHIEF COMPLIANCE OFFICER
The Chief Compliance Officer or a member of his or her staff will review compliance with this Article IX and will report violations, together with the sanction imposed, to the relevant Board at its next quarterly meeting.
J. MINIMUM SANCTIONS
The minimum sanction for a violation of the provisions of this Article IX shall be disgorgement of any profit made in connection with the violation.
X. SANCTIONS
A. GENERALLY
The Code is designed to assure compliance with applicable law and to maintain shareholder confidence in the Funds, the Advisers, and IFD. In adopting this Code, it
is the intention of the Boards, the Advisers, and IFD to attempt to achieve 100% compliance with all requirements of the Code, but it is recognized that this may not be possible. Incidental failures to comply with the Code are not necessarily a violation of the law.
The Designated Person shall investigate and report all apparent violations of the Code to the Chief Compliance Officer. If the Compliance Officer, in consultation with the appropriate parties, determines that an Covered Person has violated any provision of this Code, he or she may impose such sanctions as he or she deems appropriate, including, without limitation, one or more of the following: warnings, periods of "probation" during which all personal investment activities (except for specifically approved liquidations of current positions), a letter of censure, suspension with or without pay, termination of employment, or Automatic Disgorgement of any profits realized on transactions in violation of this Code. Any profits realized on transactions in violation of Sections D and E of Article VII of this Code shall be subject to Automatic Disgorgement.
B. PROCEDURES
Upon discovering that a Covered Person has violated any provision of this Code, the Chief Compliance Officer shall report the violation, the corrective action taken, and any sanctions imposed to the relevant entity's board of directors/trustees. If a transaction in Securities of a Designated Person is under consideration, a senior officer of the relevant Fund or Fund Affiliate, as the case may be, shall act in all respects in the manner prescribed herein for a Designated Person.
XI. MISCELLANEOUS PROVISIONS
A. RECORDS
The Funds, IFD and the Advisers shall maintain records at the principal place of business of IIL and shall make these records available to the Securities and Exchange Commission or any representative of the Commission to the extent set forth below, and may maintain such records under the conditions described in Rule 31a-2(f)(1) under the 1940 Act:
i) a copy of this Code and any other code of ethics which is, or at any time within the past five (5) years has been, in effect; shall be preserved in an easily accessible place;
ii) a record of any violation of this Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five (5) years following the end of the fiscal year in which the violation occurs;
iii) a copy of reports made by Covered Persons pursuant to this Code, including reports of, or information provided in lieu of these reports, and reports of transactions in ING Fund Shares that were held during the relevant period, shall
be preserved for a period of not less than five (5) years from the end of the fiscal year in which the statement is provided, the first two years in an easily accessible place;
iv) a copy of each report disclosing Personal Securities Holdings and
holdings of ING Fund Shares of Access Persons, made pursuant to
this Code, shall be preserved for a period of not less than five
(5) years from the end of the fiscal year in which the report is
made;
v) a list of all persons who are, or within the past five (5) years have been, required to pre-clear Personal Securities Transactions or transactions in ING Fund Shares or make reports disclosing Personal Securities Holdings pursuant to this Code, or who are or were responsible for reviewing these reports, and each list of Related Persons provided to the Chief Compliance Officer pursuant to Article IX.A.B and must be maintained in an easily accessible place;
vi) a record of all written acknowledgements of the receipt of the Code and any amendments for each person who is currently, or within the past five years was, a supervised person of the Advisers. Supervised persons are the Adviser's partners, officers, directors, Employees as well as other persons who provide advice on behalf of the Adviser and are subject to the Adviser's supervision and control - Section 202(a)(25).
vii) a record of any decision, and the reasons supporting the decision, to approve the acquisition of securities in an IPO or Limited Offering for at least 5 years after the end of the fiscal year in which the approval was granted.
viii) a copy of each report required by paragraph (c)(2)(ii) of Rule 17j-1. Paragraph (c)(2)(ii) of Rule 17j-1 requires that a written report to be provided to the board of directors, no less than annually, that describes any issues arising under this Code or procedures since the last report to the board of directors, including, but not limited to, information about material violations of the Code or procedures and sanctions imposed in response to the material violations. Such a report must also certify that the Funds and the Advisers, as applicable, have adopted procedures reasonably necessary to prevent Covered Persons from violating the Code. A copy of such a report must be maintained for a period not less than five (5) yeas after the end of the fiscal year in which it is made, the first two years in an easily accessible place.
B. CONFIDENTIALITY
All pre-clearance requests pertaining to Personal Securities Transactions, reports disclosing Personal Securities Holdings, and any other information filed pursuant to this Code shall be treated as confidential, but are subject to review as provided in the Code, review by the Securities and Exchange Commission and other regulators and self-regulatory organizations, and such internal review as may be requested by the Board of the relevant Fund.
C. INTERPRETATION OF PROVISIONS
Each Fund's or Adviser's board of directors/trustees may from time to time adopt such interpretation of this Code as such board deems appropriate.
D. EFFECT OF VIOLATION OF THIS CODE
In adopting Rule 17j-1, the SEC specifically noted, in Investment Company Act Release No. IC-11421, that a violation of any provision of a particular code of ethics, such as this Code, would not be considered a per se unlawful act prohibited by the general anti-fraud provisions of this Rule. In adopting this Code, it is not intended that a violation of this Code necessarily is or should be considered to be a violation of Rule 17j-1.
XII. EXHIBITS
EXHIBIT A
PROCEDURES TO CONTROL THE FLOW AND USE OF MATERIAL NON-PUBLIC INFORMATION IN
CONNECTION WITH SECURITIES ACTIVITIES
The reputation for integrity and high ethical standards in the conduct of its affairs of the ING Investments, LLC and ING Funds Distributor, LLC ("ING") is of paramount importance to all of us. To preserve this reputation, it is essential that all transactions in securities are effected in conformity with securities laws and in a manner, which avoids the appearance of impropriety. In particular, it is a long-standing policy of ING that if an employee of ING or any of its subsidiaries or affiliated investment companies possesses material non-public information about a public company, the employee may not trade in or recommend trading in the securities of that company nor disclose such information to another person, whether within or outside the ING organization, except in fulfillment of a legitimate business objective of ING. Violations of this policy may result in severe civil and criminal penalties under the Federal securities laws, as well as disciplinary action by ING. Employees should refer to ING's Code of Conduct for a complete statement of these policies.
Material non-public information is information not known to the public that: (1) might reasonably be expected to affect the market value of securities and (2) influence investor decisions to buy, sell or hold securities. It is not possible to define with precision what constitutes "material" information. However, advance information about the following:
- a merger, acquisition or joint venture;
- a stock split or stock dividend;
- earnings or dividends of an unusual nature;
- the acquisition or loss of a significant contract;
- a significant new product or discovery;
- a change in control or a significant change in management;
- a call of securities for redemption;
- the public or private sale of a significant amount of additional securities;
- the purchase or sale of a significant asset;
- a significant labor dispute;
- establishment of a program to make purchases of the issuer's own shares;
- a tender offer for another issuer's securities; and
- an event requiring the filing of a current report under the federal securities laws.
REPORTING MATERIAL NON-PUBLIC INFORMATION TO CHIEF COMPLIANCE OFFICER
From time-to-time, a director, officer or employee of The Firm, may come into possession of material non-public information (of the type described above) about a company. If such information is obtained in connection with the performance of such person's responsibilities as a director, officer or employee of The Firm, then he or she must immediately report the information as follows:
1) A director, officer or employee, must report such information immediately to the Chief Compliance Officer, who is responsible for taking appropriate action, which may include restricting trading in the affected securities. Depending on the nature of such information, such director, officer or employee may have an ongoing duty to inform the Chief Compliance Officer of material changes in the information or the status of the transaction to which it relates to allow the Chief Compliance Officer to take appropriate action, including restricting or terminating restrictions on trading in the affected securities.
2) Such information need not be reported if, after reasonable inquiry, the director, officer or employee is satisfied that the Chief Compliance Officer has already received such information.
EXHIBIT B
DESIGNATED PERSONS OF ING INVESTMENTS ABLE TO PROVIDE PRE-CLEARANCE
Lauren Bensinger - Primary AZ
Rhonda Ervin
Kathy Hinck
Meryl Brown
Maryann White
EXHIBIT C-1
SAMPLE LETTER TO BROKERAGE FIRM TO ESTABLISH DUPLICATE
CONFIRMS AND PERIODIC STATEMENTS
January 2, 1996
Merrill Lynch, Pierce, Fenner & Smith, Inc.
111 W. Ocean Blvd., 24th Floor
Long Beach, CA 90802
RE: The Brokerage Account of ACCOUNT REGISTRATION
Account No. YOUR ACCOUNT NUMBER
AE NAME OF YOUR REGISTERED REPRESENTATIVE
Dear Ladies/Gentlemen:
In accordance with the policies of ING Funds Services, LLC, a financial services firm with which I have become associated, effective immediately, please forward duplicate trade confirmations and periodic statements on the above-captioned accounts as follows:
ING Funds Services, LLC
ATTN: LAUREN D. BENSINGER
VP & CHIEF COMPLIANCE OFFICER
7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258
Sincerely,
Your Name
EXHIBIT C-2
SAMPLE LETTER TO BROKERAGE FIRM TO ESTABLISH DUPLICATE
CONFIRMS AND PERIODIC STATEMENTS
Today's Date
BROKERAGE
ADDRESS
CITY, STATE ZIP
RE: The Brokerage Account of
ACCOUNT REGISTRATION
Account No. YOUR ACCOUNT NUMBER
AE NAME OF YOUR REGISTERED REPRESENTATIVE
Dear Ladies/Gentlemen:
In accordance with the policies of ING Funds Distributor, LLC. ("IFD"), an NASD member firm with which I have become associated, effective immediately, please forward duplicate trade confirmations and periodic statements on the above-captioned accounts as follows:
ING Funds Distributor, LLC.
ATTN: LAUREN D. BENSINGER, CHIEF COMPLIANCE OFFICER
7337 E. Doubletree Ranch Road
Scottsdale, AZ 85258
IFD's Chief Compliance Officer has also signed below indicating her approval of my opening a cash or margin account with your firm. (407 Letter)
Sincerely,
EXHIBIT D
[ANNUAL CERTIFICATION OF CODE OF ETHICS COMPLIANCE BY ALL ACCESS PERSONS,
EMPLOYEES AND DIRECTORS]
EXHIBIT E
CERTIFICATION REGARDING EXEMPTION FROM CERTAIN REPORTING
REQUIREMENTS OF THE ING CODE OF ETHICS
Article VI.1. of the ING Code of Ethics exempts transactions in "any account over which an Access Person has no direct or indirect influence or control" from the provisions regarding Restrictions on Personal Investing Activities in Article VII of the Code. Article VIII.C.. provides an exemption from quarterly transaction reporting requirements for such accounts.
To take advantage of the exemptions provided above, I hereby certify as follows:
1. I have no direct or indirect influence or control over any transaction effected in the following account(s):
BROKER, DEALER OR BANK WHO HOLDS DISCRETION. ACCOUNT NUMBER -------------------------------------------- -------------- |
2. I have attached accurate, full, and complete copies of all documents establishing the account(s) listed above, including any instructions or investment guidelines.
3. I will not communicate directly or indirectly with anyone who exercises discretion to effect transactions in the account(s), other than (a) the receipt of quarterly and annual account statements, (b) amendments to the account documentation, including to the investment guidelines (which amendments will promptly be provided to the Chief Compliance Officer), or (c) communications relating to ministerial non-investment-related matters.
4. I understand that in order to take advantage of these exemptions, I am still required to comply with the provisions of Article VIII.A. (Disclosure of Personal Holdings) and Article VIII.B. (Duplicate Trade Confirmation Statements and Account Statements) with respect to all holdings and transactions in these accounts.
5. I will provide such additional documents or information, as the Chief Compliance Officer shall request.
EXHIBIT F
INITIAL CERTIFICATION OF CODE OF ETHICS
I am fully familiar with the effective code of ethics as adopted by each of the ING Funds, ING Investments, LLC, and ING Funds Distributor, LLC and will comply with such code at all times during the forthcoming calendar year.