PILGRIM AMERICA PRIME RATE TRUST
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
June ___, 1997
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- ________ 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 Dividend Reinvestment and
Cash Purchase Plan (the "Cash Purchase Plan") 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 Plan 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 Plan 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 Plan 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 Waiver Discount ranging from 0% to 5% of the market price (the
weighted average sales price, per share, as reported on the New York Stock
Exchange Composite Transaction Tape, as shown daily on Bloomberg screen ___) of
the Trust's shares. The Waiver 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 market price
of the Trust's shares. 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 of up to 1.00% of the amount of an investment pursuant to a
Request for Waiver or 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: ______________________________
