exhibit h.5
ADDITIONAL COMPENSATION AGREEMENT
February , 2005
--
PA Fund Management LLC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated February , 2005
--
(the "Underwriting Agreement"), by and among NFJ Dividend, Interest & Premium
Strategy Fund, a closed-end management investment company (the "Fund"), PA Fund
Management LLC ("PAFM" or the "Manager"), NFJ Investment Group, L.P.,
Xxxxxxxx-Xxxxxxxxx Capital Management LLC and PEA Capital LLC and each of the
underwriters named therein, with respect to the issue and sale of the Fund's
common shares, par value $0.00001 per share (the "Common Shares"), as described
therein. Reference is also made to (i) the Investment Management Agreement,
dated , 2005 (the "Investment Management Agreement") between PAFM
----------- --
and the Fund, (ii) the subadvisory agreements by and between PAFM and each of
NFJ Investment Group, L.P., Xxxxxxxx Xxxxxxxxx Management LLC and PEA Capital
LLC and (iii) the registration statement on Form N-2 regarding the Common Shares
of the Fund (the "Registration Statement"). Capitalized terms used herein and
not otherwise defined shall have the meanings given to them in the Underwriting
Agreement.
PAFM hereby confirms its agreement with UBS Securities LLC with respect to
the additional compensation referred to in the "Underwriting" section of the
Registration Statement, payable by PAFM to UBS Securities LLC. PAFM agrees to
pay UBS Securities LLC additional compensation (the "Additional Compensation")
as provided for in Section 2 hereof; provided that such Additional Compensation
shall be an amount equal to 0.15% of the Fund's average daily total managed
assets (i.e., total assets of the Fund (including any assets attributable to any
Preferred Shares and borrowings that may be outstanding) minus accrued
liabilities (other than liabilities representing borrowings) (the "Total Managed
Assets") attributable to the Common Shares sold by UBS Securities LLC in the
offering; and provided, further, that such payments shall not exceed the
"Maximum Additional Compensation Amount" (as defined in Section 3 hereof). The
Additional Compensation shall, (i) of be payable as set forth in Section 2
hereof.
SECTION 1. UBS Securities LLC.
(a) Within 60 days following the Closing Date, UBS Securities LLC shall
prepare or cause to be prepared and provide to PAFM the aggregate purchase price
to the public of the Common Shares sold by UBS Securities LLC, which shall be
appended as Schedule A to this Additional Compensation Agreement. Such Schedule
A shall be prepared in good faith by UBS Securities LLC and subject to
verification by PAFM.
(b) PAFM hereby employs UBS Securities LLC, for the period and on the terms
and conditions set forth herein, to provide the following services at the
reasonable request of PAFM:
(i) after-market support services designed to maintain the visibility
of the Fund on an ongoing basis;
(ii) relevant information, studies or reports regarding general trends
in the closed-end investment company and asset management industries, if
reasonably obtainable, and consult with representatives of PAFM in connection
therewith; and
(iii) the provision of information to and consultation with PAFM with
respect to applicable strategies designed to address market value discounts, if
any, with respect to the Fund.
SECTION 2. Payment of Additional Compensation.
(a) PAFM shall pay the Additional Compensation, quarterly in arrears, to
UBS Securities LLC in an amount equal to the amount attributable to the Common
Shares sold by UBS Securities LLC in the offering multiplied by 0.0375% of the
average weekly Total Managed Assets of the Fund for such quarter.
(b) All fees payable hereunder shall be paid to UBS Securities LLC by wire
transfer of immediately available funds within 15 days following the end of each
calendar quarter to a bank account designated by UBS Securities LLC. At the time
of each payment of Additional Compensation hereunder, PAFM shall deliver to UBS
Securities LLC a statement indicating the amount of the average weekly Total
Managed Assets of the Fund for such quarter on which such payment was based.
(c) The initial payment of Additional Compensation hereunder shall be paid
with respect to the calendar quarter ending March 31, 2005. The initial payment
for the calendar quarter ending March 31, 2005 shall be pro rated for the period
February , 2005 through March 31, 2005. In the event that this Additional
--
Compensation Agreement terminates prior to the end of a calendar quarter, the
Additional Compensation required to be paid hereunder shall be due and payable
within 15 days following the termination hereof and shall be pro-rated in
respect of the period prior to such termination. Notwithstanding the foregoing,
if any payment hereunder would otherwise fall on a day which is not a business
day, it shall be due on the next day which is a business day. All fees payable
hereunder shall be in addition to any fees paid by the Manager pursuant to the
Purchase Agreement.
SECTION 3. Maximum Additional Compensation Amount. The "Maximum Additional
Compensation Amount" payable by PAFM to UBS Securities LLC hereunder shall be
% of the aggregate offering price of the Common Shares. Xxxxxxx Xxxxx,
-----
Xxxxxx, Xxxxxx & Xxxxx Incorporated ("Xxxxxxx Xxxxx") will receive additional
compensation which will not exceed % of the aggregate initial offering
-----
price of the Common Shares.
SECTION 4. Term. This Additional Compensation Agreement shall continue
coterminously with and so long as the Investment Management Agreement remains in
effect between the Fund and PAFM, or any similar investment management agreement
with a successor in interest or affiliate of PAFM remains in effect, as and to
the extent that such investment management agreement is renewed periodically in
accordance with the Investment Company Act of 1940, as amended. This Additional
Compensation Agreement shall terminate on the earliest to occur of (a) with
respect to UBS Securities LLC, the payment by PAFM to UBS Securities LLC of the
Maximum Additional Compensation Amount, (b) with respect to the Fund, the
dissolution and winding up of the Fund and (c) with respect to PAFM, the date on
which the Investment Management Agreement or other investment management
agreement between the Fund and PAFM or any successor in interest to PAFM,
including but not limited to an affiliate of PAFM, shall terminate.
SECTION 5. Except to the extent legally required (after consultation with,
and approval as to form and substance by, UBS Securities LLC and its counsel),
none of (i) the name of UBS Securities LLC, (ii) any advice rendered by UBS
Securities LLC to PAFM, or (iii) or any communication from UBS
2
Securities LLC in connection with the services performed by UBS Securities LLC
pursuant to this Agreement will be quoted or referred to orally or in writing,
or in the case of (ii) and (iii), reproduced or disseminated, by PAFM or any of
its affiliates or any of their agents, without UBS Securities LLC's prior
written consent. UBS hereby agrees to the use of its name in the Registration
Statement on Form N-2 (File No. 333-108137) of the Fund.
SECTION 6. PAFM will furnish UBS Securities LLC with such information as
UBS Securities LLC believes appropriate to its assignment (all such information
so furnished being the "Information"). PAFM recognizes and confirms that UBS
Securities LLC (a) will use and rely primarily on the Information and on
information available from generally recognized public sources in performing the
services contemplated by this Agreement without having assumed responsibility
for independently verifying the same, (b) does not assume responsibility for the
accuracy, completeness or reasonableness of the Information and such other
information and (c) will not make an appraisal of any assets or liabilities
(contingent or otherwise) of the Fund. PAFM represents that at any time UBS
Securities LLC is undertaking after market support services, the publicly
available information with respect to the Fund made public by or at the
direction of PAFM or the Fund will not contain an untrue statement of a material
fact or omit to state a material fact necessary to make the statements contained
therein not misleading.
SECTION 7. Not an Investment Adviser. PAFM acknowledges that UBS Securities
LLC is not providing any advice hereunder as to the value of securities or
regarding the advisability of purchasing or selling any securities for the Fund.
No provision of this Additional Compensation Agreement shall be considered as
creating, nor shall any provision create, any obligation on the part of any
Underwriter, and the Underwriters are not hereby agreeing, to: (i) furnish any
advice or make any recommendations regarding the purchase or sale of portfolio
securities or (ii) render any opinions, valuations or recommendations of any
kind or to perform any such similar services. PAFM acknowledges and agrees that
UBS Securities LLC has been retained solely to provide the services specified
herein to PAFM, and not to act as an advisor to any other person, and PAFM's
engagement of UBS Securities LLC is not intended to confer rights upon any
person (including the Fund or shareholders, employees or creditors of PAFM of
the Fund) not a party hereto as against UBS Securities LLC or its affiliates, or
its directors, officers, employees or agents, successors, or assigns. UBS
Securities LLC shall act as an independent contractor under this Agreement, and
not in any other capacity including as a fiduciary, and any duties arising out
of its engagement shall be owed solely to PAFM.
SECTION 8. Not Exclusive. Nothing herein shall be construed as prohibiting
any Underwriter or its respective affiliates from acting as such for any other
clients (including other registered investment companies or other investment
advisers).
SECTION 9. Liability and Indemnification. PAFM and UBS Securities each
agree to the indemnification and other agreements set forth in the
Indemnification Agreement attached hereto, the provisions of which are
incorporated herein by reference and shall survive the termination, expiration
or supersession of this Agreement.
SECTION 10. Assignment. This Additional Compensation Agreement may not be
assigned by any party without the prior written consent of each other party.
SECTION 11. Amendment; Waiver. No provision of this Additional Compensation
Agreement may be amended or waived except by an instrument in writing signed by
the parties hereto.
SECTION 12. Governing Law. This Additional Compensation Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. No claim, counterclaim or dispute of any kind or nature whatsoever arising
out of or in any way relating to this Agreement ("Claim")
3
may be commenced, prosecuted or continued in any court other than the courts of
the State of New York located in the City and County of New York or in the
United States District Court for the Southern District of New York, which courts
shall have exclusive jurisdiction over the adjudication of such matters, and
PAFM and UBS Securities LLC consent to the jurisdiction of such courts and
personal service with respect thereto. PAFM and UBS Securities LLC each waive
all rights to trial by jury in any proceeding (whether based upon contract, tort
or otherwise) in any way arising out of or relating to this Agreement.
SECTION 13. Counterparts. This Additional Compensation Agreement may be
executed in any number of counterparts, each of which shall be an original, and
all of which, when taken together, shall constitute one agreement. Delivery of
an executed signature page of this Additional Compensation Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.
4
exhibit h.5
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among PAFM and UBS
Securities LLC in accordance with its terms.
Very truly yours,
UBS SECURITIES LLC
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
PA FUND MANAGEMENT LLC
By:
------------------------------------
Name:
Title:
SCHEDULE A
----------------------------------------------------------
Aggregate
Name of Qualifying Purchase Price to Public Pro Rata
Underwriter of Common Shares Sold Percentage
----------------------------------------------------------
UBS Securities LLC $ %
------------ ------
----------------------------------------------------------
6
UBS Securities LLC Indemnification Agreement
February , 2005
--
UBS Securities LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
In connection with the engagement of UBS Securities LLC ("UBS Securities") to
provide services to the undersigned (the "Company") as set forth in the
Agreement dated February , 2005 between the Company and UBS Securities (the
--
"Agreement"), in the event that UBS Securities becomes involved in any capacity
in any claim, suit, action, proceeding, investigation or inquiry (including,
without limitation, any shareholder or derivative action or arbitration
proceeding) (collectively, a "Proceeding") (i) in connection with or arising out
of any untrue statement or alleged untrue statement of a material fact contained
in information with respect to the Fund made pubic by or at the direction of the
Fund or any omission or alleged omission to state therein a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (ii) otherwise in connection with any
matter in any way relating to or referred to in the Agreement or arising out of
the matters contemplated by the Agreement, including, without limitation,
related services and activities prior to the date of the Agreement, the Company
agrees to indemnify, defend and hold UBS Securities harmless to the fullest
extent permitted by law, from and against any losses, claims, damages,
liabilities and expenses in connection with any matter in any way relating to or
referred to in the Agreement or arising out of the matters contemplated by the
Agreement, including, without limitation, related services and activities prior
to the date of the Agreement, except, (a) in the case of clause (i) only, to the
extent it shall be determined by a court of competent jurisdiction that such
losses claims, damages, liabilities and expenses resulted from UBS Securities
using, in a manner constituting gross negligence or willful misconduct of UBS
Securities, an outdated report or information instead of a recent report or
information made available to UBS Securities that replaced the outdated report
or information or (b) in the case of clause (ii) only, to the extent it shall be
determined by a court of competent jurisdiction that such losses, claims,
damages, liabilities and expenses resulted from the gross negligence or willful
misconduct of UBS Securities. In addition, in the event that UBS Securities
becomes involved in any capacity in any Proceeding in connection with any matter
in any way relating to or referred to in the Agreement or arising out of the
matters contemplated by the Agreement, including, without limitation, related
services and activities prior to the date of the Agreement, the Company will
reimburse UBS Securities for its reasonable legal and other expenses (including
the cost of any investigation and preparation) as such expenses are incurred by
UBS Securities in connection therewith. If such indemnification were not to be
available for any reason, the Company agrees to contribute to the losses,
claims, damages, liabilities and expenses involved (i) in the proportion
appropriate to reflect the relative benefits received or sought to be received
by the Company, on the one hand, and UBS Securities, on the other hand, in the
matters contemplated by the Agreement or (ii) if (but only if and to the extent)
the allocation provided for in clause (i) is for any reason held unenforceable,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative fault of the Company, on the one
hand, and the party entitled to contribution, on the other hand, as well as any
other relevant equitable considerations. The Company agrees that for the
purposes of this paragraph the relative benefits received, or sought to be
received, by the Company, on the one hand, and the party entitled to
contribution, on the other hand, of a transaction as contemplated shall be
deemed to be in the same proportion that the total value received or paid or
contemplated to be received or paid by the Company, as the case may be, as a
result of or in connection with the transaction (whether or not consummated) for
which UBS Securities has been retained to perform services bears to the fees
paid to UBS Securities under the Agreement; provided, that in no event shall the
Company contribute less than the amount necessary to assure that UBS Securities
is not liable
7
for losses, claims, damages, liabilities and expenses in excess of the amount of
fees actually received by UBS Securities pursuant to the Agreement. Relative
fault shall be determined by reference to, among other things, whether any
alleged untrue statement or omission or any other alleged conduct relates to
information provided by the Company or other conduct by the Company (or its
employees or other agents), on the one hand, or by UBS Securities, on the other
hand. Promptly after UBS Securities receives actual notice of the commencement
of any Proceeding in respect of which indemnification or reimbursement may be
sought hereunder, UBS Securities will notify the Company thereof; but the
omission so to notify the Company shall not relieve the Company from any
obligation hereunder unless, and only to the extent that, such omission results
in the Company's forfeiture of substantive rights or defenses. If any such
action or other proceeding shall be brought against UBS Securities, the Company
shall, upon written notice given reasonably promptly following UBS Securities'
notice to the Company of such Proceeding, be entitled to assume the defense
thereof at the Company's expense with counsel chosen by the Company and
reasonably satisfactory to UBS Securities; provided, however, that UBS
Securities may retain separate counsel to participate in such defense but the
fees and expenses of such counsel shall be at the expense of UBS Securities
unless the employment of such counsel shall have been authorized in writing by
the Company in connection with the defense of such Proceeding or the Company
shall not have, within a reasonable period of time in light of the
circumstances, employed counsel reasonably satisfactory to UBS Securities to
have charge of the defense of such Proceeding or UBS Securities shall have
reasonably concluded that there may be defenses available to it which are
different from, additional to or in conflict with those available to the Company
(in which case the Company shall not have the right to direct the defense of
such Proceeding on behalf of UBS Securities), in any of which events such fees
and expenses shall be borne by the Company and paid as incurred (it being
understood, however, that the Company shall not be liable for the expenses of
more than one separate counsel (in addition to any local counsel) in any one
Proceeding or series of related Proceedings in the same jurisdiction). The
Company agrees that it will not, without the prior written consent of UBS
Securities, settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened Proceeding in respect of which
indemnification could be sought under this Indemnification Agreement (whether or
not UBS Securities is an actual or potential party thereto), unless such
settlement, compromise or consent includes an unconditional release of UBS
Securities from all liability arising out of such Proceeding and does not
include a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of UBS Securities. For purposes of this Indemnification
Agreement, UBS Securities shall include UBS Securities LLC, any of its
affiliates, each other person, if any, controlling UBS Securities or any of its
affiliates, their respective officers current and former directors, employees
and agents, and the successors and assigns of all of the foregoing persons. The
foregoing indemnity and contribution agreement shall be in addition to any
rights that any indemnified party may have at common law or otherwise.
The Company agrees that neither UBS Securities nor any of its affiliates,
directors, agents, employees or controlling persons shall have any liability to
the Company or any person asserting claims on behalf of or in right of the
Company in connection with or as a result of either UBS Securities' engagement
under the Agreement or any matter referred to in the Agreement, including,
without limitation, related services and activities prior to the date of the
Agreement, except to the extent that any such losses, claims, damages,
liabilities or expenses incurred by the Company resulted solely from the gross
negligence or willful misconduct of UBS Securities in performing the services
that are the subject of the Agreement.
Notwithstanding the foregoing or anything to the contrary in this
Agreement, the Company's indemnification obligations under this Agreement shall
not apply to any losses, claims, damages, liabilities, fines or expenses arising
out of or relating to the characterization of the compensation payable by the
Company to UBS Securities under the Agreement, including with respect to the
characterization of such compensation under applicable rules of the NASD, Inc.
8
For the avoidance of doubt, UBS Securities' underwriting activities on
behalf of the Company or its clients, including the Fund referred to in the
Agreement, shall not constitute a matter in any way relating to or referred to
in the Agreement or be deemed to arise out of matters contemplated by the
Agreement, and the Company's indemnification obligations hereunder shall not
apply to any Proceeding arising out of or relating to such underwriting
activities.
THIS INDEMNIFICATION AGREEMENT AND ANY CLAIM, COUNTERCLAIM OR DISPUTE OF
ANY KIND OR NATURE WHATSOEVER ARISING OUT OF OR IN ANY WAY RELATING TO THIS
AGREEMENT ("CLAIM"), DIRECTLY OR INDIRECTLY, SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS SET FORTH BELOW,
NO CLAIM MAY BE COMMENCED, PROSECUTED OR CONTINUED IN ANY COURT OTHER THAN THE
COURTS OF THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK OR IN
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WHICH
COURTS SHALL HAVE EXCLUSIVE JURISDICTION OVER THE ADJUDICATION OF SUCH MATTERS,
AND THE COMPANY AND UBS SECURITIES CONSENT TO THE JURISDICTION OF SUCH COURTS
AND PERSONAL SERVICE WITH RESPECT THERETO. THE COMPANY HEREBY CONSENTS TO
PERSONAL JURISDICTION, SERVICE AND VENUE IN ANY COURT IN WHICH ANY CLAIM ARISING
OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT IS BROUGHT BY AND THIRD PARTY
AGAINST UBS SECURITIES OR ANY INDEMNIFIED PARTY. EACH OF UBS SECURITIES AND THE
COMPANY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING OR CLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR IN ANY WAY RELATING TO
THIS AGREEMENT. THE COMPANY AGREES THAT A FINAL JUDGMENT IN ANY PROCEEDING OR
CLAIM ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT BROUGHT IN ANY
SUCH COURT SHALL BE CONCLUSIVE AND BINDING UPON THE COMPANY AND MAY BE ENFORCED
IN ANY OTHER COURTS TO THE JURISDICTION OF WHICH THE COMPANY IS OR MAY BE
SUBJECT, BY SUIT UPON SUCH JUDGMENT.
9
The foregoing Indemnification Agreement shall remain in full force and
effect notwithstanding any termination of UBS Securities' engagement. This
Indemnification Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same agreement.
Very truly yours,
PA FUND MANAGEMENT LLC
By:
------------------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written:
UBS SECURITIES LLC
By:
------------------------------------
By:
Title:
By:
------------------------------------
By:
Title:
10
