INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made as of the 29 day of October,
1999, by and between PILGRIM PRIME RATE TRUST, a Massachusetts Business Trust
(hereinafter called the "Trust"), and PILGRIM INVESTMENTS, INC., a corporation
organized and existing under the laws of the State of Delaware (hereinafter
called the "Manager").
W I T N E S S 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 Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, and is engaged in the business of supplying
investment advice and investment management services, as an independent
contractor; and
WHEREAS, the Trust desires to retain the Manager to render investment
advice and investment management services to the Trust pursuant to the terms and
provisions of this Agreement, and the Manager is interested in furnishing said
advice and 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 Manager and the Manager hereby accepts
such employment, to render investment advice and investment management
services with respect to the assets of the Trust, subject to the
supervision and direction of the Trust's Board of Trustees. The Manager
shall, as part of its duties hereunder (i) furnish the Trust with advice
and recommendations with respect to the investment of the Trust's assets
and the purchase and sale of its portfolio securities, including the taking
of such other steps as may be necessary to implement such advice and
recommendations, (ii) furnish the Trust with reports, statements and other
data on securities, economic conditions and other pertinent subjects which
the Trust's Board of Trustees may request, (iii) permit its officers and
employees to serve without compensation as Trustees of the Trust if elected
to such positions and (iv) in general superintend and manage the investment
of the Trust, subject to the ultimate supervision and direction to the
Trust's Board of Trustees.
2. The Manager shall use its best judgment and efforts in rendering
the advice and services to the Trust as contemplated by this Agreement.
3. The Manager 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 Manager to the Trust
under the provisions of this Agreement are not to be deemed exclusive, and
the Manager 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.
4. The Manager agrees to use its best efforts in the furnishing of
such advice and recommendations to the Trust, in the preparation of reports
and information, and in the management of the Trust's assets, all pursuant
to this Agreement, and for this purpose the Manager 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.
Without limiting the generality of the foregoing, the staff and personnel
of the Manager shall be deemed to include persons employed or retained by
the Manager to furnish statistical, research, and other factual
information, advice regarding economic factors and trends, information with
respect to technical and scientific developments, and such other
information, advice and assistance as the Manager may desire and request.
5. The Trust will from time to time furnish to the Manager detailed
statements of the investments and assets of the Trust and information as to
its investment objectives and needs, and will make available to the Manager
such financial reports, proxy statements, legal and other information
relating to its investments as may be in the possession of the Trust or
available to it and such information as the Manager may reasonably request.
6. Whenever the Manager has determined that the Trust should tender
securities pursuant to a "tender offer solicitation" the Manager shall
designate an affiliate as the "tendering dealer" so long as it is legally
permitted to act in such capacity under the Federal securities laws and
rules thereunder and the rules of any securities exchange or association of
which such affiliate may be a member. Such affiliated dealer shall not be
obligated to make any additional commitments of capital, expenses or
personnel beyond that already committed (other than normal periodic fees or
payments necessary to maintain its corporate existence and membership in
the National Associations of Securities Dealers, Inc.) as of the date of
this Agreement. This Agreement shall not obligate the Manager or such
affiliate (i) to act pursuant to the foregoing requirement under any
circumstances in which they might reasonably believe that liability might
be imposed upon them as a result of so acting, or (ii) to institute legal
or other proceedings to collect fees which may be considered to be due from
others to it as a result of such a tender, unless the Trust shall enter
into an Agreement with such affiliate to reimburse it for all expenses
connected with attempting to collect such fees, including legal fees and
expenses and that portion of the compensation due to their employees which
is attributable to the time involved in attempting to collect such fees.
7. The Manager shall bear and pay the costs of rendering the services
to be performed by it under this Agreement. The Trust shall be responsible
for all other expenses of its operation, including, but not limited to,
expenses incurred in connection with the sale, issuance, registration, and
transfer of its shares; fees of its custodian, transfer and shareholder
servicing agent; 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 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 accounts fees; the fees of any trade associations of which the
Trust is a member; fees and expenses of registering and maintaining
registration of its shares for sale under Federal and applicable State
securities laws; and all other charges and costs of its operation plus any
extraordinary and non-recurring expenses, except as herein otherwise
prescribed. To the extent the Manager incurs any costs or performs any
services which are an obligation of the Trust, as set forth herein, the
Trust shall promptly reimburse the Manager for such costs and expenses. To
the extent the services for which the Trust is obligated to pay are
performed by the Manager, the Manager 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 Manager, and the Manager agrees
to accept, as full compensation for all administrative and investment
management services furnished or provided to the Trust and as full
reimbursement for all expenses assumed by the Manager, a management fee
computed at an annual percentage rate of .80% of the average daily net
assets of the Trust, plus the proceeds of any outstanding borrowings.
(b) The management fee shall be accrued daily by the Trust and paid to
the Manager at the end of each calendar month.
(c) If, for any fiscal year, the expenses borne by the Trust,
including the investment advisory fee, but excluding brokerage commissions
and fees, taxes, interest and to the extent permitted, any extraordinary
expenses such as litigation and non-recurring expenses, would exceed the
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expense limitations applicable to the Trust imposed by the securities laws
or regulations thereunder of any state in which the Trust's shares are
qualified for sale, the Manager agrees to reduce its fee or reimburse the
Trust for all such excess expenses exceeding such limitation no later than
the last day of the first month of the next succeeding fiscal year. For the
purposes of this paragraph, the term "fiscal year" shall exclude the
portion of the current fiscal year which shall have elapsed prior to the
date hereof and shall include the portion of the then current fiscal year
which shall have elapsed at the date of termination of this Agreement.
(d) The management fee payable by the Trust hereunder shall be reduced
to the extent that an affiliate of the Manager has actually received cash
payments of tender offer solicitation fees less certain costs and expenses
incurred in connection therewith, as referred to in Paragraph 6 herein.
9. The Manager 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 Manager 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 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 Manager, the Manager 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
investment by the Trust.
(b) Notwithstanding the foregoing, the Manager 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 proxy statements, 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 Manager or any of its shareholders where the action or
inaction necessitating such expenditures (i) is directly or indirectly
related to any transaction or proposed transaction in the shares or control
of the Manager or its affiliates (or litigation related 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 Manager or any of its
affiliates or any of their officers, directors, employees or shareholders.
The Manager 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 Manager or any of its affiliates
from the sale of his shares of the Manager, or similar matters. So long as
this Agreement is in effect, the Manager shall pay to the Trust the amount
due for expenses subject to this Subparagraph 11(b) within thirty (30) days
after a xxxx 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 Manager or others or costs, expenses, or
damages heretofore incurred by the Trust for costs, expenses, or damages
the Trust may hereinafter 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 Manager, from liability in
violation of Section 17(h) and (i) of the Investment Company Act of 1940,
as amended.
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12. This Agreement shall become effective on the date first written
above, subject to the condition that the Trust's Board of Trustees,
including a majority of those Trustees who are not interested persons (as
such term is defined in the Investment Company Act of 1940) of the Manager,
and the shareholders of the Trust, shall have approved this Agreement.
Unless terminated as provided herein, the Agreement shall continue in full
force and effect for two (2) years from the effective date of this
Agreement, 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 or by the vote of a majority of the
outstanding voting securities 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.
13. This Agreement may be terminated at any time, without payment of
any penalty, by the Board of Trustees of the Trust or by vote of a majority
of the outstanding voting securities of the Trust, upon sixty (60) days
written notice to the Manager, and by the Manager upon sixty (60) days
written notice to the Trust.
14. This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the Investment Company Act of
1940, as amended.
15. 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.
16. The term "majority of the outstanding voting securities" of the
Trust shall have the meaning as set forth in the Investment Company Act of
1940, as amended.
17. In consideration of the execution of this Agreement the Manager,
on behalf of its sole shareholder, Pilgrim Group, Inc. hereby grants to the
Trust the right to use the name "Pilgrim" as part of its name. The Manager,
on behalf of its sole shareholder, Pilgrim Group, Inc. reserves the right
to grant to others the right to use the name "Pilgrim" including to any
other investment company. The Trust agrees that in the event this Agreement
is terminated, the Trust shall immediately take such steps as are necessary
to amend its name and remove the reference to "Pilgrim."
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers on the day and year first above written.
PILGRIM PRIME RATE TRUST
By: /s/ Xxxxxxx X. Xxxxxx
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Title: Chief Financial Officer
PILGRIM INVESTMENTS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
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Title: Executive Vice President
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