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EXHIBIT (c)(3)
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
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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 recapitalizatlon
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 compiled, 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.
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
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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
connection 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
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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.
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.
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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 state or necessary in order to make
the statements not misleading under the 1933 Act, or any other statement 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 by 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
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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 entitied 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.
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,
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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
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by them. The Principal Underwriter agrees to notify the Fund promptiy
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.
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.
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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
President
VAN XXXXXX XXXXXXX INC.
By /s/ Xxxxxxx X. Xxxxxxxx
President
