PILGRIM AMERICA PRIME RATE TRUST
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
______________, 1998
Pilgrim America Securities, Inc.
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Re: Distribution Agreement
Gentlemen:
Pilgrim America Prime Rate Trust is a Massachusetts business trust
operating as a closed-end management investment company (hereinafter referred to
as the "Trust"). The Trust has filed a registration statement on Form N-2 (File
Nos. 333-29803 and 811-5410) (the "Registration Statement") under the Investment
Company Act of 1940, as amended (the "1940 Act") and the Securities Act of 1933,
as amended (the "1933 Act") to register shares of the Trust which may be issued
and sold in connection with certain optional cash investments made pursuant to a
Request for Waiver under the Trust's Shareholder Investment Program (the "Cash
Purchase Program") or pursuant to privately negotiated transactions.
You have informed us that your company, Pilgrim America Securities, Inc.
("PASI"), is registered as a broker-dealer under the provisions of the
Securities Exchange Act of 1934 and that XXXX is a member in good standing of
the National Association of Securities Dealers, Inc. You have indicated your
desire to act as the selling agent and underwriter for certain of the shares of
the Trust issued in connection with the Cash Purchase Program or pursuant to
privately negotiated transactions. We have been authorized by the Trust to
execute and deliver this Agreement to you by a resolution of our Board of
Trustees (the "Trustees") adopted at a meeting of the Trustees, at which a
majority of Trustees, including a majority of our Trustees who are not otherwise
interested persons of our investment manager or its related organizations, were
present and voted in favor of the said resolution approving this Agreement.
1. Appointment of Distributor. Upon the execution of this Agreement
and in consideration of the agreements on your part herein expressed and upon
the terms and conditions set forth herein, we hereby appoint you as the sales
agent for distribution of shares of the Trust in connection with certain
optional cash investments made pursuant to a Request for Waiver under the Cash
Purchase Program or pursuant to privately negotiated transactions. You agree to
use reasonable best efforts to promote the sale of the shares, but you are not
obligated to sell any specific number of the shares.
2. Sub-Agents. You may appoint sub-agents or distribute the shares
through broker-dealers (or otherwise) as you may determine necessary or
desirable from time to time. This Agreement shall not, however, be construed as
authorizing any dealer or other person to accept orders for sale on our behalf
or to otherwise act as our agent for any purpose.
3. Offering Price. (a) Shares of the Trust offered pursuant to a
Request for Waiver under the Cash Purchase Program shall be offered at a price
equal to the greater of (i) the Net Asset Value per share of the Trust's shares
or (ii) a discount (ranging from 0% to 5%) of the average daily 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) of the shares over a five day pricing period. The discount will be
established each month and may vary each month.
(b) Shares of the Trust offered pursuant to privately negotiated
transactions between the Trust and specific investors shall be offered at a
price equal to the greater of (i) the Net Asset Value per share of the Trust's
shares or (ii) a discount ranging from 0% to 5% of the average daily market
price of the Trust's shares at the close of business on the two business days
preceding the date upon which the shares are sold. The discount to apply to such
privately negotiated transactions will be determined by the Trust with respect
to each specific transaction.
Requests to purchase shares offered in connection with the Request for
Waiver and privately negotiated transactions may be accepted only if approved by
the Trust or in accordance with instructions provided by the Trust.
4. Sales Commission. (a) You shall be entitled to receive a sales
commission from the Trust of up to 1.00% of the amount of an investment pursuant
to a Request for Waiver, or up to 3.00% of the amount of an investment pursuant
to a privately negotiated transaction. To the extent permitted under applicable
law, you may waive receipt of a sales commission at your discretion.
(b) You may allow appointed sub-agents or dealers such commissions or
discounts (not exceeding the total sales commission) as you shall deem
advisable, which shall be payable from the commissions payable to you under
Section 4(a) above.
5. Furnishing of Information. We will furnish you with copies of the
Registration Statement, and we warrant 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.
6. Other Activities. Your services pursuant to this Agreement shall
not be deemed to be exclusive, and you may render similar services and act as an
underwriter, distributor or dealer for other investment companies in the
offering of their shares.
7. Termination. This Agreement: (i) may be terminated by the Trust at
any time without the payment of any penalty, and (ii) may be terminated by you
at any time without the payment of any penalty. This Agreement shall remain in
full force and effect unless terminated pursuant to this provision or by the
mutual agreement of the parties.
8. Miscellaneous. This Agreement shall be subject to the laws of the
State of Arizona and shall be interpreted and construed to further and promote
the operation of the Trust as a closed-end investment company.
9. Liability. Nothing contained herein shall be deemed to protect you
against any liability to us or to our shareholders to which you would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
If the foregoing meets with your approval, please acknowledge your
acceptance by signing each of the enclosed counterparts hereof and returning
such counterparts to us, whereupon this shall constitute a binding agreement as
of the date first above written.
Very truly yours,
PILGRIM AMERICA PRIME RATE TRUST
By: _______________________________
Agreed to and Accepted:
PILGRIM AMERICA SECURITIES, INC.
By: ______________________________
