EXHIBIT h.4
ADDITIONAL COMPENSATION AGREEMENT
, 2003
PIMCO Advisors Fund Management LLC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated the date hereof
(the "Underwriting Agreement"), by and among Xxxxxxxx-Xxxxxxxxx Convertible &
Income Fund II, a closed-end management investment company (the "Fund"), PIMCO
Advisors Fund Management LLC ("PIMCO Advisors" or the "Investment Manager") 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 $0.00001 per
share (the "Common Shares"), as described therein. Reference is also made to (i)
the Investment Management Agreement, dated , 2003 (the "Investment Management
Agreement") between PIMCO Advisors 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.
PIMCO Advisors 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 PIMCO Advisors to each of the Qualifying Underwriters.
PIMCO Advisors 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 daily total
managed assets of the Fund; and provided, further, that such payments shall not
exceed the "Maximum Additional Compensation Amount" (as defined in Section 4
hereof). "Total managed assets" means the total assets of the Fund (including
assets attributable to any preferred shares or other financial leverage of the
Fund that may be outstanding) minus accrued liabilities (other than liabilities
representing financial leverage). 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 of Citigroup Global Markets Inc. and
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated (as co-lead managers of the
Underwriters) shall be a "Class II Qualifying Underwriter"; provided, however,
that the amount required to qualify as a Class I Qualifying Underwriter may be
reduced with respect to any Underwriter in the sole discretion of PIMCO Advisors
(upon consultation with the lead manager of the Underwriters), and that PIMCO
Advisors in its sole discretion (upon consultation with the lead manager of the
Underwriters) may classify any Underwriter as a Class II Qualifying Underwriter.
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 PIMCO Advisors
a chart listing each of the Qualifying Underwriters, which chart shall indicate
the aggregate purchase price to the public of the 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 PIMCO
Advisors.
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) PIMCO Advisors 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 daily total managed assets of the Fund for such
quarter.
(b) PIMCO Advisors 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 daily total managed 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,
PIMCO Advisors shall deliver to each Qualifying Underwriter receiving an
installment of Additional Compensation a statement indicating the amount of the
aggregate average daily total managed assets of the Fund for such quarter
(including assets attributable to any preferred shares or other financial
leverage 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 September 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
hereunder shall be in addition to any fees paid by the Investment Manager
pursuant to the Underwriting Agreement.
SECTION 4. Maximum Additional Compensation Amount. The "Maximum
Additional Compensation Amount" payable by the Investment Manager hereunder
shall be 4.5% of the aggregate initial offering price (at $15.00 per share) of
the Common Shares sold pursuant to the Underwriting Agreement (including the
Firm Shares and the Additional Shares, as defined in the Underwriting
Agreement); provided that, in determining when the Maximum Additional
Compensation 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.
SECTION 5. Term. This Additional Compensation Agreement shall continue
coterminously with and so long as the Investment Management Agreement, dated
, 2003, remains in effect between the Fund and PIMCO Advisors, or any
similar investment management agreement with a successor in interest or
affiliate of PIMCO Advisors remains in effect, as, and to the extent, that such
investment management 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 PIMCO Advisors 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 Management Agreement or other investment
management agreement between the Fund and PIMCO Advisors or any successor in
interest to PIMCO Advisors, including but not limited to an affiliate of PIMCO
Advisors, shall terminate.
SECTION 6. Not an Investment Adviser. PIMCO Advisors 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. PIMCO Advisors agrees that no Underwriter
shall have liability to PIMCO Advisors or the Fund for any act or omission to
act by such Underwriter in 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. PIMCO Advisors 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.
Notwithstanding the foregoing or anything to the contrary in this Additional
Compensation
Agreement, the Investment Manager's indemnification obligations shall not apply
to any losses, claims, damages, liabilities, fines or expenses (including legal
expenses) arising out of or relating to limitations on or the reasonableness or
characterization of the compensation payable by the Investment Manager to any
Underwriter or to the Underwriters in the aggregate under this Agreement,
including as a result of any violation of applicable rules of the National
Association of Securities Dealers, Inc. or other applicable law. 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.
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
PIMCO Advisors and the Qualifying Underwriters in accordance with its terms.
Very truly yours,
CITIGROUP GLOBAL MARKETS INC.
By: ________________________________
Name:
Title:
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
By: ________________________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
PIMCO ADVISORS FUND MANAGEMENT LLC
By: ________________________
Name:
Title:
SCHEDULE A
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Aggregate
Purchase Price to Public Pro Rata
Name of Qualifying Underwriter Class of Common Shares Sold Percentage
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Citigroup Global Markets Inc. II
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Xxxxxxx Lynch, Pierce, Xxxxxx &
Xxxxx Incorporated II
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