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EXHIBIT (h(1))
OFFERING AGREEMENT
OFFERING AGREEMENT dated February 17, 1993 by and between VAN XXXXXX
XXXXXXX PRIME RATE INCOME TRUST (the "Fund"), a Massachusetts business trust,
and VAN XXXXXX XXXXXXX INC., a Delaware corporation (the "Principal
Underwriter").
1. Appointment of Principal Underwriter. The Fund appoints the
Principal Underwriter as a principal underwriter and exclusive distributor of
shares of the Fund (the "Shares"), effective as of the date upon which the
continuous public offering of the Fund's Shares, as described in the Fund's
then current Prospectus, shall commence. The Fund reserves the right, however,
to refuse at any time or times to sell Shares hereunder for any reason deemed
adequate by the Board of Trustees of the Fund.
The Principal Underwriter will use its best efforts to sell through its
organization and through other dealers and agents the Shares which the
Principal Underwriter has the right to purchase under Section 2 hereof, but the
Principal Underwriter does not undertake to sell any specific number of Shares.
The Principal Underwriter agrees that it will not take any long or
short positions in the Shares, except for long positions in those Shares
purchased by the Principal Underwriter in accordance with any systematic sales
plan described in the then current Prospectus of the Fund and except as
permitted by Section 2 hereof, and that so far as it can control the situation,
it will prevent any of its trustees, officers or shareholders from taking any
long or short positions in the Shares, except for legitimate investment
purposes.
2. Sale of Shares to Principal Underwriter; Early Withdrawal Charge.
The Fund hereby grants to the Principal Underwriter the exclusive right, except
as herein otherwise provided, to purchase Shares upon the terms herein set
forth. Such exclusive right hereby granted shall not apply to Shares issued or
transferred or sold as net asset value: (a) in connection with the merger or
consolidation of the Fund with any other investment company or the acquisition
by the Fund of all or substantially all of the assets or of the outstanding
Shares of any investment company; (b) in connection with a pro rata
distribution directly to the holders of Fund Shares in the nature of a stock
dividend or stock split or in connection with any other recapitalization
approved by the Board of Trustees; (c) upon the exercise of purchase or
subscription rights granted to the holders of Fund Shares on a pro rata basis;
or (d) in connection with the automatic reinvestment of dividends and
distributions from the Fund.
The Principal Underwriter shall have the right to buy from the Fund the
Shares needed, but not more than the Shares needed (except for reasonable
allowances for clerical errors, delays and errors of transmission and
cancellation of orders) to fill unconditional orders for Shares received by the
Principal Underwriter from dealers, agents and investors during each period
when a particular net asset value and public offering price are in effect as
provided in Section 3 hereof; and the price which the Principal Underwriter
shall pay for the Shares so purchased shall be the net asset value used in
determining the public offering price on which such orders were based. The
Principal Underwriter shall notify the Fund at the end of each such period, or
as soon thereafter on that business day as the orders received in such period
have been complied, of the number of Shares which the Principal Underwriter
elects to purchase hereunder.
The Fund shall impose an early withdrawal charge, payable to the
Principal Underwriter, on most shares accepted for tender by the Fund which
have been held for less than five years, as set forth in the current Fund
Prospectus.
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3. Public Offering Price. The public offering price per Share shall
be determined in accordance with the then current Prospectus of the Fund. In no
event shall the public offering price exceed the net asset value per Share. The
net asset value per Share shall be determined in the manner provided in the
Declaration of Trust and By-Laws of the Fund as then amended and in accordance
with the then current Prospectus of the Fund. The Fund will cause immediate
notice to be given to the Principal Underwriter of each change in net asset
value as soon as it is determined. Compensation from the Principal Underwriter
to dealers purchasing Shares from the Principal Underwriter for resale and to
brokers and other eligible agents making sales to investors shall be set the
forms of agreement between the Principal Underwriter and such dealers or
agents, respectively, as from time to time amended, and, if such compensation
from the Principal Underwriter is described in the then current Prospectus for
the Fund, shall be as so set forth.
4. Compliance with NASD Rules, etc. In selling Fund Shares, the
Principal Underwriter will in all respects duly conform with all state and
Federal laws relating to the sale of such securities and with all applicable
rules and regulations of all regulatory bodies, including without limitation,
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. and all applicable rules and regulations of the Securities and Exchange
Commission under the 1940 Act, and will indemnify and save the Fund harmless
from any damage or expense on account of any unlawful act by the Principal
Underwriter or its agents or employees. The Principal Underwriter is not,
however, to be responsible for the acts of other dealers or agents except as and
to the extent that they shall be acting for the Principal Underwriter or under
its direction or authority. None of the Principal Underwriter, any dealer, any
agent or any other person is authorized by the Fund to give any information or
to make any representations, other than those contained in the Registration
Statement or Prospectus heretofore or hereafter filed with the Securities and
Exchange Commission under the Securities Act of 1933 (the "1933 Act"), as
amended (as any such Registration Statement and Prospectus may have been or may
be amended from time to time), covering the Shares, and in any supplemental
information to any such Prospectus approved by the Fund in connections with the
offer or sale of Shares. None of the Principal Underwriter, any dealer, any
broker or any other person is authorized to act as agent for the Fund in
connection with the offering or sale of Shares to the public or otherwise. All
such sales shall be made by the Principal Underwriter as principal for its own
account.
5. Expenses.
(a) The Fund will pay or cause to be paid:
(i) all expenses in connection with the registration of Fund
Shares under the Federal securities laws, and the Fund will
exercise its best efforts to obtain said registration and
qualifications;
(ii) all expenses in connection with the printing of any
notices of shareholders' meetings, proxy and proxy statements and
enclosures therewith, as well as any other notice or communication
sent to shareholders in connection with any meeting of the
shareholders or otherwise, any annual, semi-annual or other report
or communications sent to the shareholders, and the expense of
sending prospectuses relating to the Shares to existing
shareholders;
(iii) all expenses of any Federal or state original issue tax
or transfer tax payable upon the issuance, transfer or delivery of
Shares from the Fund to the Principal Underwriter; and
(iv) the cost of preparing and issuing any Share certificates
which may be issued to represent Shares.
(b) The Principal Underwriter will pay the costs and expenses of
qualifying and maintaining qualification of the Shares for sale under the
securities laws of the various states. The Principal Underwriter will also
permit its officers and employees to serve without compensation as trustees and
officers of the Fund if duly elected to such positions.
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6. No Secondary Market Activity. It is understood that Shares of the
Fund will not be repurchased by either the Fund or the Principal Underwriter,
and that no secondary market for the Fund shares exists currently, or is
expected to develop. While the Board of Trustees of the Fund intends to consider
tendering for all or a portion of the Fund's shares on a quarterly basis, there
is no assurance that the Fund will tender for shares at any time or, following
such a tender offer, that shares so tendered will be repurchased by the Fund.
Accordingly investment in the Fund's shares would be considered illiquid.
ANY REPRESENTATION AS TO A TENDER OFFER BY THE FUND, OTHER THAN THAT
WHICH IS SET FORTH IN THE FUND'S THEN CURRENT PROSPECTUS IS EXPRESSLY
PROHIBITED.
The Principal Underwriter hereby covenants that it (i) will not make a
secondary market in any shares of the Fund, (ii) will not purchase or hold such
shares in inventory for the purpose of resale in the open market, (iii) will
not repurchase shares in the open market, and (iv) will require every bank,
broker or dealer participating in the continuous offering of the shares to make
the covenants contained in clauses (i), (ii) and (iii) of this Section 6 as a
condition precedent to their participation in such offering.
7. Indemnification. The Fund agrees to indemnify and hold harmless the
Principal Underwriter and each of its trustees and officers and each person,
if any, who controls the Principal Underwriter within the meaning of Section 15
of the 1933 Act against any loss, liability, claim, damages or expenses
(including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damages, or expense and reasonable counsel fees incurred in
connection therewith), arising by reason of any person acquiring any Shares,
based upon the ground that the registration statement, Prospectus, shareholder
reports or other information filed or made public by the Fund (as from time to
time amended), included an untrue statement of a material fact or omitted to
state a material fact required to be stated or necessary in order to make the
statements not misleading under the 1933 Act, or any other statute or the common
law. However, the Fund does not agree to indemnify the Principal Underwriter or
hold it harmless to the extent that the statement or omission was made in
reliance upon, and in conformity with, information furnished by the Fund by or
on behalf of the Principal Underwriter. In no case (i) is the indemnity of the
Fund in favor of the Principal Underwriter or any person indemnified to be
deemed to protect the Principal Underwriter or any person against any liability
to the Fund or its security holders to which the Principal Underwriter or such
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement, or (ii) is the
Fund to be liable under its indemnity agreement contained in this section with
respect to any claim made against the Principal Underwriter or any other person
shall have notified the Fund in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Principal Underwriter or
any person (or after the Principal Underwriter or the person shall have
received notice of service on any designated agent). However, failure to notify
the Fund of any claim shall not relieve the Fund from any liability which it
may have to the Principal Underwriter or any person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund shall be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any such brought to
enforce any claims, but if the Fund elects to assume the defense, the defense
shall be conducted by counsel chosen by it and satisfactory to the Principal
Underwriter or officers or trustees or controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense
of any suit and retain counsel, the Principal Underwriter, officers or trustees
or controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional counsel retained by them. If the
Fund does not elect to assume the defense of any suit, it will reimburse the
Principal Underwriter, officers or trustees or controlling person or persons,
defendant or defendants in the suit, for the reasonable fees and expenses of
any counsel retained by them. The Fund agrees to notify the Principal
Underwriter promptly of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with the issuance
or sale of any of the Shares.
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The Principal Underwriter also covenants and agrees that it will
indemnify and hold harmless the Fund and each of its trustees and officers and
each person, if any, who controls the Fund within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense (including
the reasonable cost of investigating or defending any alleged loss, liability,
damages, claim or expense and reasonable counsel fees incurred in connection
therewith) arising by reason of any person acquiring any Shares, based upon the
1933 Act or any other statute or common law, alleging any wrongful act of the
Principal Underwriter or any of its employees or alleging that the registration
statement, Prospectus, shareholder reports or other information filed or made
public by the Fund (as from time to time amended), included an untrue
statement of a material fact or omitted to state a material fact required to be
stated or necessary in order to make the statements not misleading, insofar as
the statement or omission was made in reliance upon, and in conformity with
information furnished to the Fund by or on behalf of the Principal Underwriter.
In no case (i) is the indemnity of the Principal Underwriter in favor of the
Fund or any person indemnified to be deemed to protect the Fund or any person
against any liability to which the Fund or such person would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement, or (ii) is the Principal
Underwriter to be liable under its indemnity agreement contained in this
paragraph with respect to any claim made against the Fund or any person
indemnified unless the Fund or person, as the case may be, shall have notified
the Principal Underwriter in writing of the claim within a reasonable time
after the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Fund or person (or after
the Fund or such person shall have received notice of service on any designated
agent). However, failure to notify the Principal Underwriter of any claim shall
not relieve the Principal Underwriter from any liability which it may have to
the Fund or any person against whom the action is brought otherwise than on
account of its indemnity agreement contained in this paragraph. In the case of
any notice to the Principal Underwriter, it shall be entitled to participate,
at its own expense, in the defense or, if it so elects, to assume the defense
of any suit brought to enforce the claim, but if the Principal Underwriter
elects to assume the defense the defense shall be conducted by counsel chosen
by it and satisfactory to the Fund, to its officers and trustees and to any
controlling person or persons, defendant or defendants in the suit. In the
event that the Principal Underwriter elects to assume the defense of any suit
and retain counsel, the Fund or controlling persons, defendants in the suit,
shall bear the fees and expenses of any additional counsel retained by them. If
the Principal Underwriter does not elect to assume the defense of any suit, it
will reimburse the Fund, officers and trustees or controlling person or
persons, defendant or defendants in the suit, for the reasonable fees and
expenses of any counsel retained by them. The Principal Underwriter agrees to
notify the Fund promptly of the commencement of any litigation or proceedings
against it in connection with the issue and sale of any of the Shares.
8. Continuation, Amendment or Termination of the Agreement. This
Agreement shall become effective on the Effective Date and thereafter shall
continue in full force and effect from year to year so long as such continuance
is approved at least annually (i) by the Board of Trustees of the Fund or by a
vote of a majority of the outstanding voting securities of the Fund, and (ii)
by vote of a majority of the Trustees who are not parties to this Agreement or
interested persons in any such party (the "Disinterested Trustees") cast in
person at a meeting called for the purpose of voting on such approval,
provided, however, that (a) this Agreement may at any time be terminated
without the payment of any penalty either by vote of a majority of the
Disinterested Trustees, or by vote of a majority of the outstanding voting
securities of the Fund, on written notice to the Principal Underwriter; (b)
this Agreement shall immediately terminate in the event of its assignment; and
(c) this Agreement may be terminated by the Principal Underwriter on ninety
(90) days' written notice to the Fund. Upon termination of this Agreement, the
obligations of the parties hereunder shall cease and terminate as of the date
of such termination, except for any obligation to respond for a breach of this
Agreement committed prior to such termination and except with respect to any
rights and obligations of indemnification arising out of any action or inaction
occurring prior to such termination.
This Agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Fund shall have been
approved (i) by the Board of Trustees of the Fund, or by a vote of the majority
of the outstanding voting securities of the Fund, and (ii) by vote of a
majority of the Disinterested Trustees cast in person at a meeting called for
the purpose of voting on such amendment.
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For purposes of this section, the terms "vote of a majority of the
outstanding voting securities", "interested persons" and "assignment" shall
have the meanings defined in the 1940 Act, as amended.
9. Disclaimer Liability. Notwithstanding anything to the contrary
contained in this Agreement, you acknowledge and agree that, as provided by
Section 5.5 of the Declaration of Trust of the Fund, the shareholders,
trustees, officers, employees and other agents of the Fund shall not personally
be bound by or liable hereunder, nor shall any resort to their personal
property be had for the satisfaction of any obligation or claim hereunder.
10. Notice. Any notice given under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid, to the other party at any
office of such party or at such other address as such party shall have
designated in writing.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be executed on their behalf on the day and year first above written.
VAN XXXXXX XXXXXXX PRIME
RATE INCOME TRUST
By /s/ Xxxxxx X. XxXxxxxxx
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President
VAN XXXXXX XXXXXXX INC.
By Xxxxxxx X. Xxxxxxxx
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President
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