PILGRIM PRIME RATE TRUST
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
_______________, 1998
Pilgrim Securities, Inc.
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Re: DISTRIBUTION AGREEMENT
Gentlemen:
Pilgrim 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 from time to time.
You have informed us that Pilgrim Securities, Inc. is registered as a
broker-dealer under the provisions of the Securities Exchange Act of 1934 and is
a member in good standing of the National Association of Securities Dealers,
Inc. You have indicated your desire to act as distributor for certain of the
shares of the Trust issued pursuant to the Registration Statement. 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
distributor for shares of the Trust to be issued pursuant to the Registration
Statement (the "Shares"), and agree that we will deliver to you such Shares as
you may sell. You agree to use reasonable efforts to promote the sale of the
Shares, but you are not obligated to sell any specific number of the Shares. The
Shares will only be sold on such days as shall be agreed to by you and the
Trust.
2. SELECTED DEALERS. You may enter into selected dealer
agreements, on such terms and conditions as you determine are not inconsistent
with this Agreement, with broker-dealers for the sale of the Shares. Such
selected broker-dealers shall sell Shares only at the public offering price as
set forth in the Trust's then-current Prospectus under the Registration
Statement. This Agreement shall not 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. You shall not be responsible for
the acts of other dealers or agents except as and to the extent that they shall
be acting for you or under your direction or authority.
3. OFFERING PRICE. The public offering price per Share shall
be determined in accordance with the then current Prospectus of the Trust under
the Registration Statement. In no event shall the public offering price be less
than the current net asset value per Share plus the per Share amount of the
commission to be paid to you (the "Minimum Price"). You shall suspend the sale
of Shares if the per share price of the Shares is less than the Minimum Price.
4. SALES COMMISSION.
(a) You shall be entitled to receive a sales
commission from the Trust of 4% of the gross sales price per Share of the Shares
sold.
(b) You may allow selected broker-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. We will also furnish you
with such other information which you may reasonably request for use in
connection with the distribution of the Shares, including, at least annually,
audited financial statements of our books and accounts certified by independent
public accountants.
6. CONDUCT OF BUSINESS. Other than the currently effective
Prospectus and Statement of Additional Information, you will not use any sales
materials or statements except literature or advertising which conforms to the
requirements of federal and state securities laws and regulations and which have
been filed, where necessary, with the appropriate regulatory authorities. You
will furnish us with copies of all material prior to their use and no such
material shall be published if we shall reasonably and promptly object.
You shall comply with the applicable federal and state laws
and regulations where our shares are offered for sale and conduct your affairs
with us and with dealers, brokers or investors in accordance with the Conduct
Rules of the National Association of Securities Dealers, Inc.
7. 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.
8. SUSPENSION OF SALES. We reserve the right at all times to
suspend or limit the public offering of the shares upon written notice to you,
and to reject any order in whole or in part.
9. PAYMENT OF EXPENSES.
(a) You shall bear all expenses incurred by you in
connection with your duties and activities under this Agreement including the
payment to selected dealers of any sales commissions for sales of the Trust's
Shares.
(b) The Trust shall bear all costs and expenses of
the Trust, including expenses (including legal fees) pertaining to the
preparation and filing of the Registration Statement and Prospectus and any
amendment or supplement thereto, and expenses pertaining to the preparation,
printing and distribution of any reports or communications to shareholders,
including Prospectuses and Statements of Additional Information, annual or
interim reports or proxy materials.
10. 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.
11. 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.
12. STANDARD OF CARE. You shall be responsible for exercising
reasonable care in carrying out the provisions of this Agreement.
13. DECLARATION OF TRUST AND LIMITATION OF LIABILITY. A copy
of the Declaration of Trust of the Trust is on file with the Secretary of State
of the Commonwealth of Massachusetts, and notice is hereby given that this
Agreement is executed by an officer of the Trust on behalf of the trustees of
the Trust, as trustees and not individually, and that the obligations of this
Agreement with respect to the Trust shall be binding upon the assets and
properties of the Trust only and shall not be binding upon the assets or
properties of the trustees, officers, employees, agents or shareholders of the
Trust individually.
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 PRIME RATE TRUST
By:_____________________________
Agreed to and Accepted:
PILGRIM SECURITIES, INC.
By: ______________________________
