Exhibit (k)(5)
FORM OF
ADDITIONAL COMPENSATION AGREEMENT
May , 2003
Xxxxx Xxxxx Management
000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated the date
hereof (the "Underwriting Agreement"), by and among Xxxxx Xxxxx Limited Duration
Income Fund, a closed-end management investment company (the "Fund"), Xxxxx
Xxxxx Management ("Xxxxx Xxxxx" or the "Investment Adviser") and each of the
respective Underwriters named therein, with respect to the issue and sale of the
Fund's common shares of beneficial interest, par value $0.01 per share (the
"Common Shares"), as described therein. Reference is also made to (i) the
Investment Advisory Agreement (the "Investment Advisory Agreement") entered into
between the Investment Adviser and the Fund and (ii) 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.
The Investment Adviser hereby confirms its agreement with each
Qualifying Underwriter (as defined in Section 1 hereof) with respect to the
additional compensation referred to in the "Underwriting" section of the
Registration Statement, payable by the Investment Adviser to each of the
Qualifying Underwriters. The Investment Adviser agrees to pay to each Qualifying
Underwriter additional compensation (collectively, the "Additional
Compensation") as provided for in Section 3 hereof; provided, however, that such
Additional Compensation shall not exceed an amount equal to 0.15% per annum of
the aggregate average weekly gross assets of the Fund (including assets
attributable to any preferred shares of the Fund that may be outstanding); and
provided, further, that such payments shall not, in the aggregate, exceed the
"Maximum Additional Compensation Amount" (as defined in Section 4 hereof). The
Additional Compensation shall be payable as set forth in Section 3 hereof.
SECTION 1. Qualifying Underwriters. For the purposes of this
Additional Compensation Agreement, each Underwriter which sells Common Shares of
the Fund with an aggregate purchase price to the public of at least $50,000,000
shall be a "Class I Qualifying Underwriter" and each Underwriter which sells
Common Shares of the Fund with an aggregate purchase price to the public of at
least $100,000,000 shall be a "Class II Qualifying Underwriter;" provided,
however, that the amounts required to qualify as a Class I Qualifying
Underwriter or a Class II Qualifying Underwriter may be reduced with respect to
any
Underwriter in the sole discretion of the Investment Adviser. Class I
Qualifying Underwriters and Class II Qualifying Underwriters are referred to
collectively herein as "Qualifying Underwriters." A Qualifying Underwriter which
qualifies as a Class II Qualifying Underwriter shall not also be a Class I
Qualifying Underwriter. Within 60 days following the Closing Date, the
Qualifying Underwriters shall prepare or cause to be prepared and provide to the
Investment Adviser a chart listing each of the Qualifying Underwriters, which
chart shall indicate the number of Common Shares sold by each Qualifying
Underwriter and the Pro Rata Percentage (as defined in Section 2 hereof) of each
Qualifying Underwriter and shall be appended as Schedule A to this Additional
Compensation Agreement. Such Schedule A shall be prepared in good faith by the
Qualifying Underwriters and subject to verification by the Investment Adviser.
SECTION 2. Pro Rata Percentage. Each Qualifying Underwriter shall be
assigned a "Pro Rata Percentage," the numerator of which shall equal the
aggregate purchase price to the public of the Common Shares sold by such
Underwriter as set forth on Schedule A hereto and the denominator of which shall
equal the aggregate purchase price to the public of all of the Common Shares
purchased by the Underwriters pursuant to the Underwriting Agreement.
SECTION 3. Payment of Additional Compensation.
(a) The Investment Adviser shall pay the Additional Compensation,
quarterly in arrears, to each Class I Qualifying Underwriter in an amount equal
to the product of such Qualifying Underwriter's Pro Rata Percentage multiplied
by 0.0250% of the aggregate average weekly gross assets of the Fund for such
quarter.
(b) The Investment Adviser shall pay the Additional Compensation,
quarterly in arrears, to each Class II Qualifying Underwriter in an amount equal
to the product of such Qualifying Underwriter's Pro Rata Percentage multiplied
by 0.0375% of the aggregate average weekly gross assets of the Fund for such
quarter.
(c) All fees payable hereunder shall be paid to each Qualifying
Underwriter by wire transfer of immediately available funds within 15 days
following the end of each calendar quarter to a bank account designated by such
Qualifying Underwriter. At the time of each payment of Additional Compensation
hereunder, the Investment Adviser shall deliver to each Qualifying Underwriter
receiving an installment of Additional Compensation a statement indicating the
amount of the of the aggregate average weekly gross asset value of the Fund for
such quarter (including assets attributable to any preferred shares of the Fund
that may be outstanding) on which such payment was based.
(c) The initial payments of Additional Compensation hereunder shall be
paid with respect to the calendar quarter ending June 30, 2003. 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
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hereunder shall be in addition to any fees paid by the Investment Adviser
pursuant to the Underwriting Agreement.
SECTION 4. Maximum Additional Compensation Amount. The "Maximum
Additional Compensation Amount" payable by the Investment Adviser hereunder
shall be, with respect to each Qualifying Underwriter, such amount as, when
taken together with the amount of all underwriting compensation other than the
Additional Compensation received by such Underwriter in connection with the
offering of the Common Shares of the Fund, equals the maximum compensation
allowed under the conduct rules of the National Association of Securities
Dealers, Inc. (which we currently understand is 9.00%), as such rules are then
in effect; provided, that in determining when the maximum amount has been paid
the value of each of the quarterly payments shall be discounted at the annual
rate of 10% to the closing date of the initial offering of the Fund's common
shares. The fees payable to each Qualifying Underwriter under this Agreement
with respect to any calendar quarter shall be limited such that, when taken
together with any other fees received from Xxxxx Xxxxx in connection with the
Fund during such quarter, such fees shall not exceed 0.0250% of the average
weekly gross assets of the Fund during such quarter.
SECTION 5. Term. This Additional Compensation Agreement shall
continue coterminously with and so long as the Investment Advisory Agreement,
dated April 14, 2003, remains in effect between the Fund and Xxxxx Xxxxx, or any
similar investment advisory agreement with a successor in interest or affiliate
of Xxxxx Xxxxx remains in effect, as, and to the extent, that such investment
advisory 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 any Qualifying
Underwriter, the payment by the Investment Adviser to such Qualifying
Underwriter 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 the
Fund, the date on which the Investment Advisory Agreement or other investment
advisory agreement between the Fund and Xxxxx Xxxxx or any successor in interest
to Xxxxx Xxxxx, including but not limited to an affiliate of Xxxxx Xxxxx, shall
terminate.
SECTION 6. Not an Investment Adviser. Xxxxx Xxxxx acknowledges that
the Underwriters are 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.
SECTION 7. 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 8. No Liability. Xxxxx Xxxxx agrees that no Underwriter
shall have liability to Xxxxx Xxxxx or the Fund for any act or omission to act
by such Underwriter in
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the course of its performance under this Additional Compensation Agreement, in
the absence of gross negligence or willful misconduct on the part of such
Underwriter. Xxxxx Xxxxx agrees to indemnify and hold harmless each Underwriter
and its respective officers, directors, agents and employees against any loss or
expense arising out of or in connection with such Underwriter's performance
under this Additional Compensation Agreement. This provision shall survive the
termination, expiration or supersession of this Additional Compensation
Agreement.
SECTION 9. Assignment. This Additional Compensation Agreement may
not be assigned by any party without the prior written consent of each other
party.
SECTION 10. 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 11. Governing Law. This Additional Compensation Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York.
SECTION 12. 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.
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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
Xxxxx Xxxxx and the Qualifying Underwriters in accordance with its terms.
Very truly yours,
[Qualifying Underwriter]
By:
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Name:
Title:
[Qualifying Underwriter]
By:
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Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXX XXXXX MANAGEMENT
By:
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Name:
Title:
SCHEDULE A
Aggregate
Purchase Price to Public Pro Rata
Name of Qualifying Underwriter Class of Common Shares Sold Percentage
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