<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION DECEMBER 19, 1996
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. )
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
(NAME OF ISSUER)
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
(NAME OF PERSON(S) FILING STATEMENT)
Common Shares of Beneficial Interest, Par Value $.01 per Share
(Title of Class of Securities)
920914-108
(CUSIP Number of Class of Securities)
Ronald A. Nyberg, Esq.
Executive Vice President, General Counsel and Secretary
Van Kampen American Capital, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
(630) 684-6000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
Copies to:
Wayne W. Whalen, Esq.
Thomas A. Hale, Esq.
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 W. Wacker Drive
Chicago, Illinois 60606
(312) 407-0700
December 19, 1996
(Date Tender Offer First Published,
Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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Transaction Valuation $379,052,009(a) Amount of Filing Fees: $75,810(b)
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(a) Calculated as the aggregate maximum purchase price to be paid for
37,943,144 shares in the offer.
(b) Calculated as 1/50 of 1% of the Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
Amount Previously Paid:
Form or Registration No.:
Filing Party:
Date Filed:
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<PAGE> 2
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Van Kampen American Capital Prime Rate Income
Trust, a non-diversified, closed-end management investment company organized as
a Massachusetts business trust (the "Trust"). The principal executive offices of
the Trust are located at One Parkview Plaza, Oakbrook Terrace, IL 60181.
(b) The title of the securities being sought is common shares of beneficial
interest, par value $.01 per share (the "Common Shares"). As of December 12,
1996 there were approximately 542,044,912 Common Shares issued and outstanding.
The Trust is seeking tenders for 37,943,144 Common Shares, at the net asset
value per Common Share, calculated on the day the tender offer expires, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
December 19, 1996 (the "Offer to Purchase"), and the related Letter of
Transmittal (which together constitute the "Offer"). An "Early Withdrawal
Charge" will be imposed on most Common Shares accepted for payment that have
been held for less than five years. A copy of each of the Offer to Purchase and
the form of Letter of Transmittal is attached hereto as Exhibit (a)(1)(ii) and
Exhibit (a)(2), respectively. Reference is hereby made to the Cover Page and
Section 1 "Price; Number of Common Shares" of the Offer to Purchase, which are
incorporated herein by reference. The Trust has been informed that no trustees,
officers or affiliates of the Trust intend to tender Common Shares pursuant to
the Offer.
(c) The Common Shares are not currently traded on an established trading
market.
(d) Not Applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 12 "Source and Amount of Funds"
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Reference is hereby made to Section 7 "Purpose of the Offer," Section 8
"Plans or Proposals of the Trust," Section 10 "Interest of Trustees and
Executive Officers; Transactions and Arrangements Concerning the Common Shares,"
Section 11 "Certain Effects of the Offer" and Section 12 "Source and Amount of
Funds" of the Offer to Purchase, which are incorporated herein by reference. In
addition, the Trust regularly purchases and sells assets in its ordinary course
of business. Except as set forth above, the Trust has no plans or proposals
which relate to or would result in (a) the acquisition by any person of
additional securities of the Trust or the disposition of securities of the
Trust; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Trust; (c) a sale or transfer of a
material amount of assets of the Trust; (d) any change in the present Board of
Trustees or management of the Trust, including, but not limited to, any plans or
proposals to change the number or the term of Trustees, or to fill any existing
vacancy on the Board of Trustees or to change any material term of the
employment contract of any executive officer of the Trust; (e) any material
change in the present dividend rate or policy, or indebtedness or capitalization
of the Trust; (f) any other material change in the Trust's structure or
business, including any plans or proposals to make any changes in its investment
policy for which a vote would be required by Section 13 of the Investment
Company Act of 1940; (g) changes in the Trust's declaration of trust, bylaws or
instruments corresponding thereto or other actions which may impede the
acquisition of control of the Trust by any person; (h) a class of equity
securities of the Trust to be delisted from a national securities exchange or to
cease to be authorized to be quoted on an inter-dealer quotation system of a
registered national securities association; (i) a class of equity security of
the Trust becoming eligible for termination of registration under the Investment
Company Act of 1940; or (j) the suspension of the Trust's obligation to file
reports pursuant to Section 15(d) of the Securities Exchange Act of 1934.
2
<PAGE> 3
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Reference is hereby made to Section 10 "Interest of Trustees and Executive
Officers; Transactions and Arrangements Concerning the Common Shares" of the
Offer to Purchase and the financial statements included as part of Exhibit
(a)(1)(ii) attached hereto, which are incorporated herein by reference. Except
as set forth therein, there have not been any transactions involving the Common
Shares of the Trust that were effected during the past 40 business days by the
Trust, any executive officer or Trustee of the Trust, any person controlling the
Trust, any executive officer or director of any corporation ultimately in
control of the Trust or by any associate or subsidiary of any of the foregoing,
including any executive officer or director of any such subsidiary.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
Reference is hereby made to Section 10 "Interest of Trustees and Executive
Officers; Transactions and Arrangements Concerning the Common Shares" of the
Offer to Purchase which is incorporated herein by reference. Except as set forth
therein, the Trust does not know of any contract, arrangement, understanding or
relationship relating, directly or indirectly, to the Offer (whether or not
legally enforceable) between the Trust, any of the Trust's executive officers or
Trustees, any person controlling the Trust or any officer or director of any
corporation ultimately in control of the Trust and any person with respect to
any securities of the Trust (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies, consents or authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated by or on
behalf of the Trust to make solicitations or recommendations in connection with
the Offer.
ITEM 7. FINANCIAL INFORMATION.
(a)-(b) Reference is hereby made to the financial statements included as
part of Exhibit (a)(1)(ii) attached hereto, which are incorporated herein by
reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Reference is hereby made to Section 10 "Interests of Trustees and
Executive Officers; Transactions and Arrangements Concerning the Common Shares"
of the Offer to Purchase which is incorporated herein by reference.
(b)-(d) Not applicable.
(e) The Offer to Purchase, attached hereto as Exhibit (a)(1)(ii), is
incorporated herein by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
(a)(1)(i) Advertisement printed in The Wall Street Journal.
(ii) Offer to Purchase (including Financial Statements).
(a)(2) Form of Letter of Transmittal (including Guidelines for Certification of
Taxpayer Identification Number).
(a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(ii) Form of Letter to Clients of Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
</TABLE>
3
<PAGE> 4
<TABLE>
<C> <S>
(iii) Form of Letter to Selling Group Members.
(iv) Form of Operations Notice
(a)(4) Form of Letter to Shareholders who have requested Offer to Purchase.
(a)(5) Text of Press Release dated December 19, 1996.
(b)(1) Credit Agreement between Van Kampen American Capital Prime Rate Income
Trust and Morgan Guaranty Trust Company of New York, dated as of March 14,
1991, as amended as of January 31, 1992, January 30, 1993, January 19,
1994, January 27, 1995 and January 25, 1996.
(b)(2) Credit Agreement between Van Kampen American Capital Prime Rate Income
Trust and State Street Bank and Trust Company, dated as of March 3, 1994,
as amended as of March 13, 1995 and February 29, 1996.
(b)(3) Credit Agreement between Van Kampen American Capital Prime Rate Income
Trust and Bank of America Illinois (f/k/a Continental Bank N.A.), dated as
of July 12, 1991, as amended as of July 11, 1992, December 16, 1992,
December 15, 1993, December 14, 1994 and December 12, 1995.
(c)(1) Investment Advisory Agreement between Van Kampen American Capital Prime
Rate Income Trust and Van Kampen American Capital Investment Advisory
Corp. dated as of October 31, 1996.
(c)(2) Administration Agreement between Van Kampen American Capital Prime Rate
Income Trust and Van Kampen American Capital Distributors, Inc., dated as
of October 31, 1996.
(c)(3) Offering Agreement between Van Kampen American Capital Prime Rate Income
Trust and Van Kampen American Capital Distributors, Inc., dated as of
October 31, 1996.
(d)-(f) Not applicable.
</TABLE>
4
<PAGE> 5
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
Dated: December 19, 1996 /s/ DENNIS J. McDONNELL
------------------------------------
Dennis J. McDonnell,
Chairman, President, Chief Executive
and Trustee
5
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
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<S> <C> <C>
(a)(1)(i) Advertisement printed in The Wall Street Journal.....................
(a)(1)(ii) Offer to Purchase (including Financial Statements)...................
(a)(2) Form of Letter of Transmittal (including Guidelines for Certification
of Tax Identification Number)........................................
(a)(3)(i) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees...................................................
(a)(3)(ii) Form of Letter to Clients of Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees...................................
(a)(3)(iii) Form of Letter to Selling Group Members..............................
(a)(3)(iv) Form of Operations Notice............................................
(a)(4) Form of Letter to Shareholders who have requested Offer to
Purchase.............................................................
(a)(5) Text of Press Release dated December 19, 1996........................
(b)(1) Credit Agreement between Van Kampen American Capital Prime Rate
Income Trust and Morgan Guaranty Trust Company of New York, dated as
of March 14, 1991, as amended as of January 31, 1992, January 30,
1993, January 19, 1994, January 27, 1995 and January 25, 1996........
(b)(2) Credit Agreement between Van Kampen American Capital Prime Rate
Income Trust and State Street Bank and Trust Company, dated as of
March 3, 1994, as amended as of March 13, 1995 and February 29,
1996.................................................................
(b)(3) Credit Agreement between Van Kampen American Capital Prime Rate
Income Trust and Bank of America Illinois (f/k/a Continental Bank
N.A.), dated as of July 12, 1991, as amended as of July 11, 1992,
December 16, 1992, December 15, 1993, December 14, 1994 and December
12, 1995.............................................................
(c)(1) Investment Advisory Agreement between Van Kampen American Capital
Prime Rate Income Trust and Van Kampen American Capital Investment
Advisory Corp., dated as of October 31, 1996.........................
(c)(2) Administration Agreement between Van Kampen American Capital Prime
Rate Income Trust and Van Kampen American Capital Distributors, Inc.,
dated as of October 31, 1996.........................................
(c)(3) Offering Agreement between Van Kampen American Capital Prime Rate
Income Trust and Van Kampen American Capital Distributors, Inc.,
dated as of October 31, 1996.........................................
</TABLE>
<PAGE> 1
EXHIBIT (a)(1)(i)
This announcement is not an offer to purchase or a solicitation of an offer
to sell Common Shares. The Offer is made only by the Offer to Purchase
dated December 19, 1996 and the related Letter of Transmittal.
The Offer is not being made to, nor will tenders be accepted from or on behalf
of,
holders of Common Shares in any jurisdiction in which making or
accepting the Offer would violate that jurisdiction's laws.
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
NOTICE OF OFFER TO PURCHASE
37,943,144 OF ITS ISSUED AND OUTSTANDING COMMON SHARES
AT NET ASSET VALUE PER COMMON SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT EASTERN STANDARD
TIME ON FRIDAY, JANUARY 17, 1997, UNLESS THE OFFER IS EXTENDED.
Van Kampen American Capital Prime Rate Income Trust (the "Trust") is
offering to purchase 37,943,144 of its issued and outstanding common shares of
beneficial interest, par value of $.01 per share ("Common Shares"), at a price
equal to their net asset value ("NAV") determined as of 5:00 pm Eastern Standard
Time on Friday, January 17, 1997, the Expiration Date, unless extended, upon the
terms and conditions set forth in the Offer to Purchase dated December 19, 1996
and the related Letter of Transmittal (which together constitute the "Offer").
An "Early Withdrawal Charge" will be imposed on most Common Shares accepted for
payment that have been held for less than five years. The NAV on December 12,
1996 was $9.99 per Common Share. The purpose of the Offer is to provide
liquidity to shareholders since the Trust is unaware of any secondary market
which exists for the Common Shares. The Offer is not conditioned upon the tender
of any minimum number of Common Shares, but is subject to certain conditions as
set forth in the Offer.
If more than 37,943,144 Common Shares are duly tendered prior to the
expiration of the Offer, the Trust presently intends to, assuming no changes in
the factors originally considered by the Board of Trustees when it determined to
make the Offer and the other conditions set forth in the Offer, but is under no
obligation to, extend the Offer period, if necessary, and increase the number of
Common Shares that the Trust is offering to purchase to an amount which it
believes will be sufficient to accommodate the excess Common Shares tendered as
well as any Common Shares tendered during the extended Offer period, or purchase
37,943,144 Common Shares (or such greater number of Common Shares sought) on a
pro rata basis.
Common Shares tendered pursuant to the Offer may be withdrawn at any time
prior to 12:00 Midnight Eastern Standard Time on January 17, 1997, and, if not
yet accepted for payment by the Trust, Common Shares may also be withdrawn after
February 18, 1997.
The information required to be disclosed by paragraph (d)(1) of Rule 13e-4
under the Securities Exchange Act of 1934, as amended, is contained in the Offer
to Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assistance, for current NAV quotations or for
copies of the Offer to Purchase, Letter of Transmittal and any other tender
offer document, may be directed to Van Kampen American Capital Distributors,
Inc. at the address and telephone number below. Copies will be furnished
promptly at no expense to you. Shareholders who do not own Common Shares
directly may tender their Common Shares through their broker, dealer or nominee.
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
ONE PARKVIEW PLAZA - OAKBROOK TERRACE, IL 60181
800-421-5666
(Between the hours of 7:00 am to 7:00 pm Central Standard Time)
December 19, 1996
<PAGE> 1
EXHIBIT (a)(1)(ii)
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
OFFER TO PURCHASE 37,943,144
OF ITS ISSUED AND OUTSTANDING COMMON SHARES
AT NET ASSET VALUE PER COMMON SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT EASTERN STANDARD
TIME ON JANUARY 17, 1997, UNLESS THE OFFER IS EXTENDED. TO ENSURE PROCESSING OF
YOUR REQUEST, A LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT
(TOGETHER WITH ANY CERTIFICATES FOR COMMON SHARES AND ALL OTHER REQUIRED
DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY (AS DEFINED BELOW) ON OR BEFORE
JANUARY 17, 1997.
To the Holders of Common Shares of
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST:
Van Kampen American Capital Prime Rate Income Trust, a non-diversified,
closed-end management investment company organized as a Massachusetts business
trust (the "Trust"), is offering to purchase up to 37,943,144 of its common
shares of beneficial interest, with par value of $.01 per share ("Common
Shares"), at a price (the "Purchase Price") equal to their net asset value
("NAV") determined as of 5:00 P.M. Eastern Standard time on the Expiration Date
(as defined herein), upon the terms and conditions set forth in this Offer to
Purchase and the related Letter of Transmittal (which together constitute the
"Offer"). The Offer is scheduled to terminate as of 12:00 Midnight Eastern
Standard time on January 17, 1997, unless extended. An Early Withdrawal Charge
(as defined in Section 3) will be imposed on most Common Shares accepted for
payment that have been held for less than five years. The Common Shares are not
currently traded on an established trading market. The NAV on December 12, 1996
was $9.99 per Common Share. You can obtain current NAV quotations from Van
Kampen American Capital Distributors, Inc. ("VKAC") by calling (800) 421-5666
between the hours of 7:00 A.M. and 7:00 P.M. Central Standard time, Monday
through Friday, except holidays. See Section 9.
If more than 37,943,144 Common Shares are duly tendered prior to the
expiration of the Offer, the Trust presently intends to, subject to the
condition that there have been no changes in the factors originally considered
by the Board of Trustees when it determined to make the Offer and the other
conditions set forth in Section 6, but is under no obligation to, extend the
Offer period, if necessary, and increase the number of Common Shares that the
Trust is offering to purchase to an amount which it believes will be sufficient
to accommodate the excess Common Shares tendered as well as any Common Shares
tendered during the extended Offer period or purchase 37,943,144 Common Shares
(or such greater number of Common Shares sought) on a pro rata basis.
THIS OFFER IS BEING MADE TO ALL SHAREHOLDERS OF THE TRUST
AND IS NOT CONDITIONED UPON ANY MINIMUM NUMBER
OF COMMON SHARES BEING TENDERED.
THIS OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE SECTION 6.
29 PRT006-12/96
<PAGE> 2
IMPORTANT
If you desire to tender all or any portion of your Common Shares, you
should either (1) complete and sign the Letter of Transmittal and mail or
deliver it along with any Common Share certificate(s) and any other required
documents to ACCESS Investor Services, Inc. (the "Depositary") or (2) request
your broker, dealer, commercial bank, trust company or other nominee to effect
the transaction for you. If your Common Shares are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, you must
contact such broker, dealer, commercial bank, trust company or other nominee if
you desire to tender your Common Shares.
NEITHER THE TRUST NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S COMMON SHARES. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL
INFORMATION IN THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISERS AND MAKE
THEIR OWN DECISIONS WHETHER TO TENDER COMMON SHARES AND, IF SO, HOW MANY COMMON
SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
TRUST AS TO WHETHER SHAREHOLDERS SHOULD TENDER COMMON SHARES PURSUANT TO THE
OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST.
Questions and requests for assistance may be directed to VKAC at the
address and telephone number set forth below. Requests for additional copies of
this Offer to Purchase and the Letter of Transmittal should be directed to VKAC.
December 19, 1996 VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
Van Kampen American Capital Distributors, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
(800) 421-5666
Depositary: ACCESS Investor
Services, Inc.
By Mail, Hand Delivery or Courier:
7501 Tiffany Springs Parkway
Kansas City, MO 64153
Attn: Van Kampen American Capital
Prime Rate Income Trust
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTIONS PAGE
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<C> <S> <C>
1. Price; Number of Common Shares................................................ 4
2. Procedure for Tendering Common Shares......................................... 4
3. Early Withdrawal Charge....................................................... 6
4. Withdrawal Rights............................................................. 7
5. Payment for Shares............................................................ 8
6. Certain Conditions of the Offer............................................... 8
7. Purpose of the Offer.......................................................... 9
8. Plans or Proposals of the Trust............................................... 9
9. Price Range of Common Shares; Dividends....................................... 10
10. Interest of Trustees and Executive Officers; Transactions and Arrangements
Concerning the Common Shares.................................................. 10
11. Certain Effects of the Offer.................................................. 11
12. Source and Amount of Funds.................................................... 11
13. Certain Information about the Trust........................................... 15
14. Additional Information........................................................ 16
15. Certain Federal Income Tax Consequences....................................... 16
16. Extension of Tender Period; Termination; Amendments........................... 17
17. Miscellaneous................................................................. 17
EXHIBIT A: Financial Statements for the year ended July 31, 1996.
</TABLE>
3
<PAGE> 4
1. PRICE; NUMBER OF COMMON SHARES. The Trust will, upon the terms and
subject to the conditions of the Offer, accept for payment (and thereby
purchase) 37,943,144 or such lesser number of its issued and outstanding Common
Shares which are properly tendered (and not withdrawn in accordance with Section
4) prior to 12:00 Midnight Eastern Standard time on January 17, 1997 (such time
and date being hereinafter called the "Initial Expiration Date"). The Trust
reserves the right to extend the Offer. See Section 16. The later of the Initial
Expiration Date or the latest time and date to which the Offer is extended is
hereinafter called the "Expiration Date." The Purchase Price of the Common
Shares will be their NAV determined as of 5:00 P.M. Eastern Standard time on the
Expiration Date. The NAV on December 12, 1996 was $9.99 per Common Share. You
can obtain current NAV quotations from VKAC by calling (800) 421-5666 between
the hours of 7:00 A.M. and 7:00 P.M. Central Standard time, Monday through
Friday, except holidays. Shareholders tendering Common Shares shall be entitled
to receive all dividends declared on or before the third business day following
the Expiration Date, but not yet paid, on Common Shares tendered pursuant to the
Offer. See Section 9. The Trust will not pay interest on the Purchase Price
under any circumstances. An Early Withdrawal Charge will be imposed on most
Common Shares accepted for payment that have been held for less than five years.
See Section 3.
The Offer is being made to all shareholders of the Trust and is not
conditioned upon any minimum number of Common Shares being tendered. If the
number of Common Shares properly tendered prior to the Expiration Date and not
withdrawn is less than or equal to 37,943,144 Common Shares (or such greater
number of Common Shares as the Trust may elect to purchase pursuant to the
Offer), the Trust will, upon the terms and subject to the conditions of the
Offer, purchase at NAV all Common Shares so tendered. If more than 37,943,144
Common Shares are duly tendered prior to the expiration of the Offer and not
withdrawn, the Trust presently intends to, subject to the condition that there
have been no changes in the factors originally considered by the Board of
Trustees when it determined to make the Offer and the other conditions set forth
in Section 6, but is not obligated to, extend the Offer period, if necessary,
and increase the number of Common Shares that the Trust is offering to purchase
to an amount which it believes will be sufficient to accommodate the excess
Common Shares tendered as well as any Common Shares tendered during the extended
Offer period or purchase 37,943,144 Common Shares (or such greater number of
Common Shares sought) on a pro rata basis.
On December 12, 1996, there were approximately 542,044,912 Common Shares
issued and outstanding and there were approximately 201,823 holders of record of
Common Shares. The Trust has been advised that no trustees, officers or
affiliates of the Trust intend to tender any Common Shares pursuant to the
Offer.
The Trust reserves the right, in its sole discretion, at any time or from
time to time, to extend the period of time during which the Offer is open by
giving oral or written notice of such extension to the Depositary and making a
public announcement thereof. See Section 16. There can be no assurance, however,
that the Trust will exercise its right to extend the Offer. If the Trust
decides, in its sole discretion, to increase (except for any increase not in
excess of 2% of the outstanding Common Shares) or decrease the number of Common
Shares being sought and, at the time that notice of such increase or decrease is
first published, sent or given to holders of Common Shares in the manner
specified below, the Offer is scheduled to expire at any time earlier than the
tenth business day from the date that such notice is first so published, sent or
given, the Offer will be extended at least until the end of such ten business
day period.
2. PROCEDURE FOR TENDERING COMMON SHARES.
Proper Tender of Common Shares. Except as otherwise set forth under the
heading "Procedures for Selling Group Members" below, for Common Shares to be
properly tendered pursuant to the Offer, a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) with any required
signature guarantees, any certificates for such Common Shares, and any other
documents required by the Letter of Transmittal, must be received on or before
the Expiration Date by the Depositary at its address set forth on page 2 of this
Offer to Purchase.
It is a violation of Section 14(e) of the Securities and Exchange Act of
1934 (the "Exchange Act"), and Rule 14e-4 promulgated thereunder, for a person
to tender Common Shares in a partial tender offer for such person's own account
unless at the time of tender and until such time as the securities are accepted
for payment the person so tendering has a net long position equal to or greater
than the amount tendered in
4
<PAGE> 5
(i) the Common Shares and will deliver or cause to be delivered such shares for
purposes of tender to the Trust prior to or on the Expiration Date, or (ii) an
equivalent security and, upon the acceptance of his or her tender will acquire
the Common Shares by conversion, exchange, or exercise of such equivalent
security to the extent required by the terms of the Offer, and will deliver or
cause to be delivered the Common Shares so acquired for the purpose of tender to
the Trust prior to or on the Expiration Date.
Section 14(e) and Rule 14e-4 provide a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person.
The acceptance of Common Shares by the Trust for payment will constitute a
binding agreement between the tendering shareholder and the Trust upon the terms
and subject to the conditions of the Offer, including the tendering
shareholder's representation that (i) such shareholder has a net long position
in the Common Shares being tendered within the meaning of Rule 14e-4 promulgated
under the Exchange Act and (ii) the tender of such Common Shares complies with
Rule 14e-4.
Signature Guarantees and Method of Delivery. Signatures on the Letter of
Transmittal are not required to be guaranteed unless (1) the proceeds for the
tendered Common Shares will amount to more than $50,000, (2) the Letter of
Transmittal is signed by someone other than the registered holder of the Common
Shares tendered therewith, or (3) payment for tendered Common Shares is to be
sent to a payee other than the registered owner of such Common Shares and/or to
an address other than the registered address of the registered owner of the
Common Shares. In those instances, all signatures on the Letter of Transmittal
must be guaranteed by a member firm of a national securities exchange or a
commercial bank or trust company having an office, branch or agency in the
United States (an "Eligible Institution"). If Common Shares are registered in
the name of a person or persons other than the signer of the Letter of
Transmittal or (a) if payment is to be made to, (b) unpurchased Common Shares
are to be registered in the name of or (c) any certificates for unpurchased
Common Shares are to be returned to any person other than the registered owner,
then the Letter of Transmittal and, if applicable, the tendered Common Share
certificates must be endorsed or accompanied by appropriate authorizations, in
either case signed exactly as such name or names appear on the registration of
the Common Shares with the signatures on the certificates or authorizations
guaranteed by an Eligible Institution. See Instructions 1 and 4 of the Letter of
Transmittal.
Payment for Common Shares tendered and accepted for payment pursuant to the
Offer will be made only after receipt by the Depositary on or before the
Expiration Date of a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) and any other documents required by the
Letter of Transmittal. If your Common Shares are evidenced by certificates,
those certificates must be received by the Depositary on or prior to the
Expiration Date.
THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING CERTIFICATES FOR COMMON
SHARES, IS AT THE ELECTION AND RISK OF THE PARTY TENDERING COMMON SHARES. IF
DOCUMENTS ARE SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED.
Procedures for Selling Group Members. If you are a selling group member, in
order for you to tender any Common Shares pursuant to the Offer, you may place a
confirmed wire order with VKAC. All confirmed wire orders used to tender Common
Shares pursuant to this Offer must be placed on the Expiration Date only (wire
orders placed on any other date will not be accepted by the Trust). Common
Shares tendered by a wire order are deemed to be tendered when VKAC receives the
order but subject to the condition subsequent that the settlement instructions,
including (with respect to tendered Common Shares for which the selling group
member is not the registered owner) a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof), any other
documents required by the Letter of Transmittal and any Common Share
certificates, are received by the Depository within three New York Stock
Exchange trading days after receipt by VKAC of such order.
Determinations of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of tenders will be
determined by the Trust, in its sole discretion, whose determination shall be
final and binding. The Trust reserves the absolute right to reject any or all
tenders determined by it not to be in appropriate form or the acceptance of or
payment for which may, in the opinion of the Trust's counsel, be unlawful. The
Trust also reserves the absolute right to waive any of the conditions of the
Offer or any defect in any tender with respect to any particular Common Share(s)
or any particular shareholder, and the Trust's
5
<PAGE> 6
interpretations of the terms and conditions of the Offer will be final and
binding. Unless waived, any defects or irregularities in connection with tenders
must be cured within such times as the Trust shall determine. Tendered Common
Shares will not be accepted for payment unless the defects or irregularities
have been cured within such time or waived. Neither the Trust, VKAC, the
Depositary nor any other person shall be obligated to give notice of any defects
or irregularities in tenders, nor shall any of them incur any liability for
failure to give such notice.
Federal Income Tax Withholding. To prevent backup federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer, each
shareholder who has not previously submitted a Form W-9 to the Trust or does not
otherwise establish an exemption from such withholding must notify the
Depositary of such shareholder's correct taxpayer identification number (or
certify that such taxpayer is awaiting a taxpayer identification number) and
provide certain other information by completing the Form W-9 enclosed with the
Letter of Transmittal. Foreign shareholders who are individuals and who have not
previously submitted a Form W-9 to the Trust must do so in order to avoid backup
withholding.
The Depositary will withhold 30% of the gross payments payable to a foreign
shareholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. (Exemption from backup
withholding does not exempt a foreign shareholder from the 30% withholding). For
this purpose, a foreign shareholder, in general, is a shareholder that is not
(i) a citizen or resident of the United States, (ii) a corporation, partnership
or other entity created or organized in or under the laws of the United States
or any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of the
source of such income. The Depositary will determine a shareholder's status as a
foreign shareholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to the shareholder's address and to any outstanding
certificates or statements concerning eligibility for a reduced rate of, or
exemption from, withholding unless facts and circumstances indicate that
reliance is not warranted. A foreign shareholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such shareholder may be
eligible should consider doing so in order to avoid over-withholding. A foreign
shareholder may be eligible to obtain a refund of tax withheld if such
shareholder meets one of the three tests for capital gain or loss treatment
described in Section 15 or is otherwise able to establish that no tax or a
reduced amount of tax was due.
For a discussion of certain other federal income tax consequences to
tendering shareholders, see Section 15.
3. EARLY WITHDRAWAL CHARGE. The Depositary will impose an early withdrawal
charge (the "Early Withdrawal Charge") on most Common Shares accepted for
payment which have been held less than five years. The Early Withdrawal Charge
will be imposed on a number of Common Shares accepted for payment from a record
holder of Common Shares the value of which exceeds the aggregate value at the
time the tendered Common Shares are accepted for payment of (a) all Common
Shares owned by such holder that were purchased more than five years prior to
such acceptance, (b) all Common Shares owned by such holder that were acquired
through reinvestment of distributions, and (c) the increase, if any, of value of
all other Common Shares owned by such holder (namely, those purchased within the
five years preceding acceptance for payment) over the purchase price of such
Common Shares. The Early Withdrawal Charge will be paid to VKAC on behalf of the
holder of the Common Shares. In determining whether an Early Withdrawal Charge
is payable, Common Shares accepted for payment pursuant to the Offer shall be
deemed to be those Common
6
<PAGE> 7
Shares purchased earliest by the Shareholder. Any Early Withdrawal Charge which
is required to be imposed will be made in accordance with the following
schedule.
<TABLE>
<CAPTION>
EARLY
YEAR OF REPURCHASE WITHDRAWAL
AFTER PURCHASE CHARGE
------------------------------------------------------------- ----
<S> <C>
First........................................................ 3.0%
Second....................................................... 2.5%
Third........................................................ 2.0%
Fourth....................................................... 1.5%
Fifth........................................................ 1.0%
Sixth and following.......................................... 0.0%
</TABLE>
The following example will illustrate the operation of the Early Withdrawal
Charge. Assume that an investor purchases $10,000 worth of the Trust's Common
Shares for cash and that 21 months later the value of the account has grown
through the reinvestment of dividends and capital appreciation to $12,000. The
investor then may submit for repurchase pursuant to a tender offer up to $2,000
worth of Common Shares without incurring an Early Withdrawal Charge. If the
investor should submit for repurchase pursuant to a tender offer $5,000 worth of
Common Shares, an Early Withdrawal Charge would be imposed on $3,000 worth of
the Common Shares submitted. The charge would be imposed at the rate of 2.5%
because it is in the second year after the purchase was made and the charge
would be $75.
Exchanges. Tendering shareholders may elect to receive, in lieu of cash,
the proceeds from the tender of Common Shares of the Trust in contingent
deferred sales charge shares ("Class B Shares") of certain open-end investment
companies advised by either Van Kampen American Capital Investment Advisory
Corp. or Van Kampen American Capital Asset Management, Inc. and distributed by
VKAC ("VKAC Funds"). The Early Withdrawal Charge will be waived for Common
Shares tendered in exchange for Class B Shares in the VKAC Funds; however, such
Class B Shares immediately become subject to a contingent deferred sales charge
equivalent to the Early Withdrawal Charge on Common Shares of the Trust. Thus,
shares of such VKAC Funds may be subject to a contingent deferred sales charge
upon a subsequent redemption from the VKAC Funds. The purchase of shares of such
VKAC Fund will be deemed to have occurred at the time of the purchase of the
Common Shares of the Trust for calculating the applicable contingent deferred
sales charge.
The prospectus for each VKAC Fund describes its investment objectives and
policies. Shareholders can obtain a prospectus without charge by calling
1-800-421-5666 and should consider these objectives and policies carefully
before requesting an exchange. Each tender for an exchange must involve proceeds
from Common Shares which have a net asset value of at least $500. An exchange is
a taxable event and may result in a taxable gain or loss for the shareholders.
A shareholder may effect an exchange by electing and completing the
appropriate option on the Letter of Transmittal or by giving proper instructions
to the shareholder's broker or dealer. Although the exchange privilege has been
made available as a convenience to the Trust's shareholders, neither the Trust
nor its Board of Trustees makes any recommendation as to whether shareholders
should exchange for shares of another VKAC Fund.
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Common Shares made pursuant to the Offer will be irrevocable. You may
withdraw Common Shares tendered at any time prior to the Expiration Date and, if
the Common Shares have not yet been accepted for payment by the Trust, at any
time after 12:00 Midnight Eastern Standard time on February 18, 1997.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depositary at the address
set forth on page 2 of this Offer to Purchase. Any notice of withdrawal must
specify the name of the person having tendered the Common Shares to be
withdrawn, the number of Common Shares to be withdrawn, and, if certificates
representing such Common Shares have been delivered or otherwise identified to
the Depositary, the name of the registered holder(s) of such Common Shares as
set forth in such certificates if different from the name of the person
tendering the Common Shares. If certificates have been delivered to the
Depositary, then, prior to the release of such certificates, you must
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<PAGE> 8
also submit the certificate numbers shown on the particular certificates
evidencing such Common Shares and the signature on the notice of withdrawal must
be guaranteed by an Eligible Institution.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Trust in its sole discretion,
whose determination shall be final and binding. None of the Trust, VKAC, the
Depositary or any other person is or will be obligated to give any notice of any
defects or irregularities in any notice of withdrawal, and none of them will
incur any liability for failure to give any such notice. Common Shares properly
withdrawn shall not thereafter be deemed to be tendered for purposes of the
Offer. However, withdrawn Common Shares may be retendered by following the
procedures described in Section 2 prior to the Expiration Date.
5. PAYMENT FOR SHARES. For purposes of the Offer, the Trust will be deemed
to have accepted for payment (and thereby purchased) Common Shares which are
tendered and not withdrawn when, as and if it gives oral or written notice to
the Depositary of its acceptance of such Common Shares for payment pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, the Trust
will accept for payment (and thereby purchase) Common Shares properly tendered
promptly after the Expiration Date.
Payment for Common Shares purchased pursuant to the Offer will be made by
depositing the aggregate purchase price therefor with the Depositary, which will
act as agent for tendering shareholders for the purpose of receiving payment
from the Trust and either transmitting payment directly to the tendering
shareholders or, in the case of tendering shareholders electing an exchange in
lieu of cash, transmitting payment directly to the transfer agent for purchase
of Class B Shares of the designated VKAC Fund for the account of such
shareholders. In all cases, payment for Common Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary,
as required pursuant to the Offer, of a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof), any certificates
representing such Common Shares, if issued, and any other required documents.
Certificates for Common Shares not purchased (see Sections 1 and 6), or for
Common Shares not tendered included in certificates forwarded to the Depositary,
will be returned promptly following the termination, expiration or withdrawal of
the Offer, without expense to the tendering shareholder.
The Trust will pay all transfer taxes, if any, payable on the transfer to
it of Common Shares purchased pursuant to the Offer. If, however, payment of the
purchase price is to be made to, or (in the circumstances permitted by the
Offer) if unpurchased Common Shares are to be registered in the name of any
person other than the registered holder, or if tendered certificates, if any,
are registered or the Common Shares tendered are held in the name of any person
other than the person signing the Letter of Transmittal, the amount of any
transfer taxes (whether imposed on the registered holder or such other person)
payable on account of the transfer to such person will be deducted from the
Purchase Price unless satisfactory evidence of the payment of such taxes, or
exemption therefrom, is submitted. Shareholders tendering Common Shares shall be
entitled to receive all dividends declared on or before the third business day
following the Expiration Date, but not yet paid, on Common Shares tendered
pursuant to the Offer. The Trust will not pay any interest on the Purchase Price
under any circumstances. An Early Withdrawal Charge will be imposed on most
Common Shares accepted for payment that have been held for less than five years.
See Section 3. In addition, if certain events occur, the Trust may not be
obligated to purchase Common Shares pursuant to the Offer. See Section 6.
ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO HAS NOT PREVIOUSLY SUBMITTED A
COMPLETED AND SIGNED SUBSTITUTE FORM W-9 AND WHO FAILS TO COMPLETE FULLY AND
SIGN THE SUBSTITUTE FORM W-9 ENCLOSED WITH THE LETTER OF TRANSMITTAL MAY BE
SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS
PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 2.
6. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, the Trust shall not be required to accept for payment, purchase or
pay for any Common Shares tendered, and may terminate or amend the Offer or may
postpone the acceptance for payment of, the purchase of and payment for Common
Shares tendered, if at any time at or before the time of purchase of any such
Common Shares, any of the following events shall have occurred (or shall have
been determined by the Trust to have occurred) which, in the Trust's sole
judgment in any such case and regardless of the circumstances (including any
action or omission to act by the Trust), makes it inadvisable to proceed with
the Offer or with such purchase or
8
<PAGE> 9
payment: (1) in the reasonable judgment of the Trustees, there is not sufficient
liquidity of the assets of the Trust; (2) such transactions, if consummated,
would (a) impair the Trust's status as a regulated investment company under the
Internal Revenue Code (which would make the Trust a taxable entity, causing the
Trust's taxable income to be taxed at the Trust level) or (b) result in a
failure to comply with applicable asset coverage requirements; or (3) there is,
in the Board of Trustees' reasonable judgment, any (a) material legal action or
proceeding instituted or threatened challenging such transactions or otherwise
materially adversely affecting the Trust, (b) suspension of or limitation on
prices for trading securities generally on any United States national securities
exchange or in the over-the-counter market, (c) declaration of a banking
moratorium by federal or state authorities or any suspension of payment by banks
in the United States, (d) limitation affecting the Trust or the issuers of its
portfolio securities imposed by federal or state authorities on the extension of
credit by lending institutions, (e) commencement of war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States or (f) other event or condition which would have a material
adverse effect on the Trust or the holders of its Common Shares if the tendered
Common Shares are purchased.
The foregoing conditions are for the Trust's sole benefit and may be
asserted by the Trust regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Trust), and any such
condition may be waived by the Trust in whole or in part, at any time and from
time to time in its sole discretion. The Trust's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right; the
waiver of any such right with respect to particular facts and circumstances
shall not be deemed a waiver with respect to any other facts or circumstances;
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time. Any determination by the Trust concerning the
events described in this Section 6 shall be final and shall be binding on all
parties.
If the Trust determines to terminate or amend the Offer or to postpone the
acceptance for payment of or payment for Common Shares tendered, it will, to the
extent necessary, extend the period of time during which the Offer is open as
provided in Section 16. Moreover, in the event any of the foregoing conditions
are modified or waived in whole or in part at any time, the Trust will promptly
make a public announcement of such waiver and may, depending on the materiality
of the modification or waiver, extend the Offer period as provided in Section
16.
7. PURPOSE OF THE OFFER. The Trust currently does not believe that an
active secondary market for its Common Shares exists or is likely to develop. In
recognition of the possibility that a secondary market may not develop for the
Common Shares of the Trust, or, if such a market were to develop, the Common
Shares might trade at a discount, the Trustees have determined that it would be
in the best interest of its shareholders for the Trust to take action to attempt
to provide liquidity to shareholders or to reduce or eliminate any future market
value discount from NAV that might otherwise exist, respectively. To that end,
the Trustees presently intend each quarter to consider making a tender offer to
purchase Common Shares at their NAV. The purpose of this Offer is to attempt to
provide liquidity to the holders of Common Shares. There can be no assurance
that this Offer will provide sufficient liquidity to all holders of Common
Shares that desire to sell their Common Shares or that the Trust will make any
such tender offer in the future.
NEITHER THE TRUST NOR ITS BOARD OF TRUSTEES MAKES ANY RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
SHAREHOLDER'S COMMON SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. SHAREHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER COMMON SHARES AND, IF SO, HOW MANY COMMON SHARES TO
TENDER.
8. PLANS OR PROPOSALS OF THE TRUST. The Trust has no present plans or
proposals which relate to or would result in any extraordinary transaction such
as a merger, reorganization or liquidation involving the Trust; a sale or
transfer of a material amount of assets of the Trust other than in its ordinary
course of business; any material changes in the Trust's present capitalization
(except as resulting from the Offer or otherwise set forth herein); or any other
material changes in the Trust's structure or business.
9
<PAGE> 10
9. PRICE RANGE OF COMMON SHARES; DIVIDENDS. The Trust's NAV per Common
Share from December 12, 1994 through December 12, 1996 ranged from a high of
$10.07 to a low of $9.99. On December 12, 1996, the NAV was $9.99 per Common
Share. You can obtain current NAV quotations from VKAC by calling (800) 421-5666
between the hours of 7:00 A.M. and 7:00 P.M. Central Standard time, Monday
through Friday, except holidays. NAV quotes also may be obtained through the ICI
Pricing Service which is released each Friday evening and published by the Dow
Jones Capital Markets Wire Service on each Friday; published in the New York
Times on each Saturday; published in the Chicago Tribune on each Sunday; and
published weekly in Barron's magazine. The Trust offers and sells its Common
Shares to the public on a continuous basis through VKAC as principal
underwriter. The Trust is not aware of any secondary market trading for the
Common Shares. Dividends on the Common Shares are declared daily and paid
monthly.
Over the twelve month period preceding the commencement of the Offer, the
Trust paid the following dividends per Common Share held for the entire
respective dividend period:
<TABLE>
<CAPTION>
DIVIDEND PAYMENT AMOUNT OF DIVIDEND
DATE PER COMMON SHARE
---------------------------------------------------------- ------------------
<S> <C>
November 25, 1996......................................... $ 0.0584
October 25, 1996.......................................... $ 0.0584
September 25, 1996........................................ $ 0.0584
August 23, 1996........................................... $ 0.0567
July 25, 1996............................................. $ 0.0567
June 25, 1996............................................. $ 0.0567
May 24, 1996.............................................. $ 0.0578
April 25, 1996............................................ $ 0.0592
March 25, 1996............................................ $ 0.0605
February 23, 1996......................................... $ 0.0610
January 25, 1996.......................................... $ 0.0463
December 31, 1995......................................... $ 0.0167
December 22, 1995......................................... $ 0.0671
</TABLE>
Shareholders tendering Common Shares shall be entitled to receive all dividends
declared on or before the third business day following the Expiration Date, but
not yet paid, on Common Shares tendered pursuant to the Offer.
10. INTEREST OF TRUSTEES AND EXECUTIVE OFFICERS; TRANSACTIONS AND
ARRANGEMENTS CONCERNING THE COMMON SHARES. Except as set forth in this Section
10, as of December 12, 1996, the trustees and executive officers of the Trust as
a group beneficially owned no Common Shares. As of December 12, 1996, Dennis J.
McDonnell, Chairman, President and a trustee of the Trust, owned 751.905 Common
Shares; Wayne W. Whalen, a trustee of the Trust, owned 1,476.162 Common Shares;
and David C. Arch, a trustee of the Trust, owned 1,050.825 Common Shares. The
Trust has been informed that no trustee or executive officer of the Trust
intends to tender any Common Shares pursuant to the Offer.
Except as set forth in this Section 10, based upon the Trust's records and
upon information provided to the Trust by its trustees, executive officers and
affiliates (as such term is used in the Securities Exchange Act of 1934),
neither the Trust nor, to the best of the Trust's knowledge, any of the trustees
or executive officers of the Trust, nor any associates of any of the foregoing,
has effected any transactions in the Common Shares during the forty business day
period prior to the date hereof. Dennis J. McDonnell, Chairman, President and a
trustee of the Trust, acquired 8.712 Common Shares and Wayne W. Whalen acquired
17.081 Common Shares between October 23, 1996 and December 12, 1996 through the
reinvestment of dividends as described in the Trust's prospectus.
Dennis J. McDonnell was appointed Chairman of the Trust on August 22, 1996
upon the resignation of Don G. Powell.
Except as set forth in this Offer to Purchase, neither the Trust nor, to
the best of the Trust's knowledge, any of its affiliates, trustees or executive
officers, is a party to any contract, arrangement, understanding or relationship
with any other person relating, directly or indirectly, to the Offer with
respect to any securities of the Trust (including, but not limited to, any
contract, arrangement, understanding or relationship concerning
10
<PAGE> 11
the transfer or the voting of any such securities, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against loss
or the giving or withholding of proxies, consents or authorizations).
The Trust currently is a party to an Investment Advisory Agreement with Van
Kampen American Capital Investment Advisory Corp. (the "Adviser") under which
the Trust accrues daily and pays monthly to the Adviser an investment management
fee based on the per annum rate of: 0.95% of the first $4.0 billion of average
weekly managed assets of the Trust, 0.90% on the next $3.5 billion, 0.875% on
the next $2.5 billion and 0.85% on average weekly net assets over $10.0 billion
(i.e., the average weekly value of the total assets of the Trust, minus the sum
of the accrued liabilities of the Trust other than the aggregate amount of any
borrowings undertaken by the Trust). The Trust also is a party to an
Administration Agreement and an Offering Agreement with VKAC. Under the
Administration Agreement, the Trust pays VKAC a monthly fee based on the per
annum rate of 0.25% of the Trust's average weekly managed assets. Under the
Offering Agreement, the Trust offers and sells its Common Shares to the public
on a continuous basis through VKAC as principal underwriter.
11. CERTAIN EFFECTS OF THE OFFER. The purchase of Common Shares pursuant to
the Offer will have the effect of increasing the proportionate interest in the
Trust of shareholders who do not tender their Common Shares. If you retain your
Common Shares you will be subject to any increased risks that may result from
the reduction in the Trust's aggregate assets resulting from payment for the
tendered Common Shares (e.g., greater volatility due to decreased
diversification and higher expenses). However, the Trust believes that since the
Trust is engaged in a continuous offering of the Common Shares, those risks
would be reduced to the extent new Common Shares of the Trust are sold. All
Common Shares purchased by the Trust pursuant to the Offer will be held in
treasury pending disposition.
12. SOURCE AND AMOUNT OF FUNDS. The total cost to the Trust of purchasing
the full 37,943,144 Common Shares pursuant to the Offer would be approximately
$379,052,009(assuming a NAV of $9.99 per Common Share on the Expiration Date).
The Trust anticipates that the Purchase Price for any Common Shares acquired
pursuant to the Offer will first be derived from cash on hand, such as proceeds
from sales of new Common Shares of the Trust and specified pay-downs from the
participation interests in senior corporate loans which it has acquired, and
then from the proceeds from the sale of cash equivalents held by the Trust.
Although the Trust is authorized to borrow money to finance the repurchase of
Common Shares, the Trust believes that it has sufficient liquidity to purchase
the Common Shares tendered pursuant to the Offer without utilizing such
borrowing. However, if, in the judgment of the Trustees, there is not sufficient
liquidity of the assets of the Trust to pay for tendered Common Shares, the
Trust may terminate the Offer. See Section 6.
The Trust has entered into a Credit Agreement dated March 14, 1991, as
amended as of January 31, 1992, January 30, 1993, January 19, 1994, January 27,
1995, and January 25, 1996 (the "Morgan Agreement") with Morgan Guaranty Trust
Company of New York ("Morgan") pursuant to which Morgan has agreed to provide a
credit facility in the maximum amount of $50,000,000 to the Trust, which is not
secured by the assets of the Trust or other collateral. The Trust has not drawn
down any of the money available under the Morgan Agreement. The purpose of the
Morgan Agreement is to provide the Trust with additional liquidity to meet its
obligations to purchase Common Shares pursuant to any tender offer that it may
make. The Morgan Agreement has terms and conditions substantially similar to the
following:
a. The Trust is entitled to borrow from Morgan amounts which in the aggregate
do not exceed the lesser of (i) the $50 million credit facility or (ii) ten
percent (10%) of the net asset value of the Trust (defined as total assets
minus total liabilities). The Trust will only be entitled to obtain a loan
on a business day which falls within five (5) domestic business days
following the Quarterly Tender Date which is defined therein as the
expiration date of a tender offer by the Trust.
b. Loans made under the Morgan Agreement, if any, will bear interest daily at
a rate equal to the higher of (i) the prime rate for such day and (ii) the
sum of one-half of one percent ( 1/2 of 1%) plus the federal funds rate for
such day. Such interest will be due on the outstanding principal amount of
each loan on each Interest Payment Date, thirty (30) days from the date of
the loan and each day which is thirty days thereafter. Overdue payments of
principal and interest will bear interest, payable upon demand, at a
penalty rate.
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<PAGE> 12
c. The Trust paid approximately $30,000 of fees and expenses to Morgan on the
date the Morgan Agreement was executed. In addition, during the term of the
Morgan Agreement, the Trust is obligated to pay a commitment fee computed
at the rate of 0.10 of 1% per annum on the average daily amount of the
unused facility.
d. The principal amount of loans made under the Morgan Agreement, if any, are
required to be paid on the last day of the applicable Interest Period,
thirty (30) days from the date of the loan. Any loans outstanding must be
repaid in full not later than 5 business days prior to the earlier of the
next Quarterly Tender Date and the Termination Date. The Trust is entitled
to prepay a loan in multiples of five hundred thousand dollars ($500,000),
provided that the Trust gives sufficient notice of prepayment. On the
Termination Date, all outstanding principal and accrued interest under the
Morgan Agreement will be due and payable in full.
e. The drawdown of the initial loan, if any, under the Morgan Agreement is
subject to certain conditions, including, among other things, executing and
providing to Morgan a promissory note in the form attached to the Morgan
Agreement (the "Morgan Note").
The drawdown of each loan, if any, is further conditioned upon the
satisfaction of additional conditions, including, without limitation, (i)
the providing of notice with respect to the loan, (ii) there being no
default or event of default in existence and (iii) the representations and
warranties made in the Morgan Agreement continuing to be true.
f. The Morgan Agreement contains various affirmative and negative covenants of
the Trust, including, without limitation, obligations: (i) to provide
periodic financial information; (ii) to not consolidate with or merge into
any other entity or have any other entity merge into it or sell all or
substantially all of its assets; (iii) to continue to engage in its current
type of business and to maintain its existence as a business trust; (iv) to
comply with applicable laws, rules and regulations and perform its
obligations under the Morgan Agreement; (v) to maintain insurance on its
property and business; (vi) to limit amount of its debt based upon the
lesser of $75,000,000 or 10% of the net asset value of the Trust; and (vii)
to not create any lien, with certain exceptions.
g. The Morgan Agreement also contains various events of default (with certain
specified grace periods), including, without limitation: (i) failure to pay
when due any amounts required to be paid to Morgan under the Morgan
Agreement or the Note; (ii) any material misrepresentations in the Morgan
Agreement or documents delivered to Morgan; (iii) failure to observe or
perform certain terms, covenants and agreements contained in the Morgan
Agreement, the Morgan Note or other documents delivered to Morgan; (iv)
failure to comply with the Trust's fundamental investment policies and
investment restrictions; (v) failure to comply with all material provisions
of the Investment Company Act of 1940; (vi) the voluntary or involuntary
bankruptcy of the Trust; (vii) the entry of judgments for the payment of
money in excess of $5,000,000 in the aggregate which remains unsatisfied or
unstayed for a period of 10 days; and (viii) a change in a majority of the
Trustees of the Trust during any period of twelve consecutive calendar
months.
h. The credit facility provided pursuant to the Morgan Agreement will
terminate on January 24, 1997, unless extended pursuant to the terms
thereof, and all accrued interest and principal will be due thereon.
The Trust is a party to a letter agreement dated March 3, 1994, as amended
as of March 13, 1995, and February 29, 1996 (the "State Street Agreement") with
State Street Bank and Trust Company ("State Street") pursuant to which State
Street has agreed to provide up to $50,000,000 of unsecured bank financing to
the Trust. The Trust has not drawn down any of the money available under the
State Street Agreement. The purpose of the State Street Agreement is to provide
the Trust with additional liquidity to meet its obligation to purchase common
shares of the Fund pursuant to any tender offer the Trust may make or for
temporary or emergency purposes. The State Street Agreement has terms and
conditions substantially similar to the following:
a. The Trust is entitled to borrow from State Street in such amounts as
the Trust may from time to time request, but not exceeding $50,000,000
in the aggregate at any one time outstanding.
b. The drawdown of the initial loan, if any, under the State Street
Agreement is subject to certain conditions, including, among other
things, executing and providing to State Street: (i) an advance
12
<PAGE> 13
request form, substantially in the form set forth as an exhibit to the
State Street Agreement, (ii) a demand promissory note, substantially
in the form set forth as an exhibit to the State Street Agreement,
(iii) a certified copy of the resolutions of the Board of Trustees of
the Trust approving the loan, and (iv) an opinion of counsel to the
Trust satisfactory to State Street. The drawdown advance is further
conditioned upon the Trust warranting (i) its compliance with the
Investment Company Act of 1940 and the prospectus and statement of
additional information of the Trust, (ii) usage in accordance with the
terms of the State Street Agreement, and (iii) compliance with the
requirement that all borrowings utilized to fund previous tender
requests be paid in full.
c. Subsequent advances under the State Street Agreement require
a completed advance request form.
d. The principal amount of any advances made pursuant to the State Street
Agreement are payable on demand by State Street. The principal amount
bears interest (computed on the basis of actual days elapsed and a 360
day-year) at a fluctuating rate per annum, as it exists from time to
time, announced by the Bank of Boston as its prime rate (the "State
Street Rate") and payable in arrears on the same day as the principal
amount is paid or demand is made, whichever is earlier. Overdue
payments of principal bear interest at a fluctuating rate equal to 4%
above the State Street Rate.
e. While any advance is outstanding under the State Street Agreement, the
Trust shall not create, incur or assume or suffer to exist any lien
(statutory or otherwise), security interest, priority, conditional
sale, pledge, charge or other encumbrance or similar rights of others
or any agreement to give any of the foregoing, upon or with respect to
any of its properties, owned or acquired during such period and the
Trust shall maintain a net asset value of at least $500,000,000.
f. While any advance is outstanding under the State Street Agreement, the
Trust shall furnish to State Street a statement of assets and
liabilities as of the end of each semi-annual period, the portfolio of
investments as of the end of each fiscal quarter, proxy materials,
reports to shareholders and other information as reasonably requested
by State Street.
g. During the term of the State Street Agreement, the Trust is required to
pay a commitment fee computed at a rate of 0.10 of 1% per annum on the
unused portion of the commitment. Such fee is payable quarterly in
arrears.
h. The State Street Agreement contains the following events of default
causing any amounts outstanding to become immediately due and payable
without notice or demand: (i) failure of the Trust to make payment on
any loan when due, (ii) failure of the Trust to perform any obligation
under the State Street Agreement or other borrowing agreements, (iii)
failure of any representation or warranty in any document delivered to
State Street pursuant to the State Street Agreement, (iv) failure to
promptly furnish financial information to State Street, (v) loss,
theft, substantial damage, sale or encumbrance of any Trust property
deemed collateral under the State Street Agreement, (vi) default under
any instrument with respect to such collateral and (vii) the occurrence
of any of the following: admission of the Trust in writing of its
inability, or to be generally unable, to pay debts as they become due,
dissolution, termination of existence, business failure, insolvency,
appointment of a receiver for the benefit of creditors or commencement
of any proceedings under bankruptcy or insolvency laws.
i. The State Street Agreement terminates on February 28, 1997.
The Trust is a party to a Revolving Credit Agreement dated July 12, 1991
and amended as of July 11, 1992, December 16, 1992, December 15, 1993, December
14, 1994, and December 12, 1995 (the "Bank of America" Agreement) with Bank of
America Illinois (f/k/a Continental Bank N.A.) ("Bank of America") pursuant to
which Bank of America has agreed to provide a credit facility in the maximum
amount of $50,000,000 to the Trust, which is not secured by the assets of the
Trust or other collateral. The Trust has not drawn down any of the money
available under the Bank of America Agreement. The purpose of the Bank of
America Agreement is to provide the Trust with additional liquidity to meet its
obligations to purchase
13
<PAGE> 14
Common Shares pursuant to any tender offer that it may make. The Bank of America
Agreement has terms and conditions substantially similar to the following:
a. The Trust is entitled to borrow from Bank of America in such amounts as
the Trust may from time to time request, but not exceeding $50,000,000
in the aggregate at any one time outstanding.
b. Loans made under the Bank of America Agreement, if any, will bear
interest, at the option of the Trust, either, (1) in the case of an
Alternate Reference Rate Loan, at a rate equal to the fluctuating rate
per annum equal to the greater of (i) the rate of interest announced
from time to time by Bank of America at Chicago, Illinois as its
reference rate or (ii) the federal funds rate for any such day plus
1/4 of 1% per annum, or (2) in the case of an Eurodollar Loan, at a
rate per annum equal to the rate at which dollar deposits are offered
to Bank of America's eurodollar office by major banks in the interbank
eurodollar market (adjusted for any applicable reserve requirements)
plus 0.75%. Accrued interest shall be payable on (1) with respect to
any Alternate Reference Rate Loan, the last day of each June,
September, December and March, and (2) with respect to any Eurodollar
Loan, the last day of each Interest Period (defined as a period
commencing on the borrowing date and ending not less than one day nor
more than two months thereafter, as selected by the Trust upon the
initiation of the loan). All accrued interest on both Alternate
Reference Rate Loans and Eurodollar Loans shall be payable on the
Termination Date. Overdue payments of principal will bear interest,
payable upon demand, at a penalty rate.
c. The Trust paid a closing fee in an amount equal to $12,500 to Bank of
America upon the execution of the Bank of America Agreement and the
closing of the transactions contemplated thereby. In addition, during
the term of the Bank of America Agreement, the Trust is obligated to
pay a commitment fee computed at the rate of 0.10% per annum on the
daily average of Bank of America's commitment to make loans under the
terms of the agreement.
d. The principal amounts of loans made under the Bank of America
Agreement, if any, are required to be paid not later than, in the case
of an Eurodollar Loan, on the last day of the Interest Period related
thereto (subject to continuation or conversion to an Alternate
Reference Rate Loan), and in any case, for each loan on the termination
date (see paragraph h below). The Trust is entitled to prepay a loan in
multiples of $100,000, provided that the Trust gives sufficient notice
of prepayment. The Trust must indemnify Bank of America for any losses
or expenses incurred as a result of prepayment of a Eurodollar Loan on
a date other than the last day of the Interest Period for such loan.
e. The drawdown of the initial loan, if any, under the Bank of America
Agreement is subject to certain conditions, including, among other
things, executing and providing to Bank of America a promissory note,
substantially in the form set forth as an exhibit to the Bank of
America Agreement.
The drawdown of each loan is further conditioned upon the satisfaction
of additional conditions, including, without limitation, (i) the
providing of notice with respect to the loan, (ii) there being no event
of default or unmatured event of default having occurred, (iii) the
warranties made in the Bank of America Agreement continuing to be true,
(iv) there being no material adverse change with respect to the assets
of or the business, revenues, conditions (financial or otherwise) or
operations of the Trust or the ability of the Trust to perform any of
its obligations under the Bank of America Agreement or promissory notes
issued thereunder and (v) certification by the Trust as to satisfaction
of the above conditions and certification by the Trust as to its asset
coverage ratio.
f. The Bank of America Agreement contains various affirmative and negative
covenants of the Trust, including, without limitation, obligations (i)
to provide periodic financial information, (ii) to provide notice to
Bank of America of material events with respect to the operations of
the Trust or the ability of the Trust to perform any of its obligations
under the Bank of America Agreement or promissory notes issued
thereunder, (iii) to continue to engage in its current type of business
and to maintain its existence as a business trust, (iv) to maintain
insurance customary for similarly situated closed-end investment
companies, (v) to not merge or consolidate with any other entity or
have another entity merge with it, sell all or substantially all of the
assets of the Trust or purchase all or substantially all of the assets
of another entity, (vi) to maintain a specified asset coverage ratio,
(vii) to not make any changes with respect to certain provisions of the
Morgan Agreement, (viii) to comply in all material
14
<PAGE> 15
respects with all statutes and governmental rules and regulations, (ix)
to adhere to limitations regarding providing guarantees, incurring
additional indebtedness and creating liens, except to the extent and in
the manner specified in the Bank of America Agreement and (x) not to
make any material changes in the Trust's investment restrictions set
forth in its then most recent prospectus or make any material change to
the Trust's Amended and Restated Declaration of Trust.
g. The Bank of America Agreement also contains various events of default
(with certain specified grace periods), including without limitation:
(i) default in the payment of amounts required to be paid to Bank of
America under the Bank of America Agreement; (ii) failure to pay when
due other Indebtedness, as defined in the Bank of America Agreement, in
an amount in excess of $5,000,000, or the occurrence of any event which
results in the acceleration of the maturity of certain other
indebtedness; (iii) failure to perform or observe any material
obligation of the Trust to or with Bank of America or any other entity;
(iv) the insolvency of the Trust or the voluntary or involuntary
bankruptcy of the Trust; (v) failure to perform or comply with any
provision contained in the Bank of America Agreement; (vi) any untrue
or misleading warranty or other document delivered to Bank of America
pursuant to the Bank of America Agreement; (vii) the entry of judgments
for the payment of money in excess of $5,000,000 in the aggregate which
remains unsatisfied or unstayed for a period of 30 days and for which
the Trust is not insured; and (viii) a change in the majority of the
Board of Trustees of the Trust during any period of twelve consecutive
calendar months or Van Kampen American Capital Investment Advisory
Corp. ceasing to act as investment adviser to the Trust.
h. The credit facility provided pursuant to the Bank of America Agreement
terminates on December 11, 1996. The Trust is currently negotiating an
extension of the Bank of America Agreement and anticipates such
extension to be effective by the Expiration Date.
The Trust intends to repay any loans under the Morgan Agreement, the State
Street Agreement and the Bank of America Agreement from the specified pay-downs
from the interests in Senior Loans (as defined below) which will be acquired and
from the sale of Common Shares.
The foregoing descriptions of the Morgan Agreement, the State Street
Agreement and the Bank of America Agreement do not purport to be complete or
final, and are qualified in their entirety by reference to the Morgan Agreement,
the State Street Agreement and the Bank of America Agreement included as
exhibits (b)(1), (b)(2) and (b)(3), respectively, to the Issuer Tender Offer
Statement on Schedule 13E-4 of the Trust. See Section 14.
13. CERTAIN INFORMATION ABOUT THE TRUST. The Trust was organized as a
Massachusetts business trust on July 14, 1989 and is a non-diversified,
closed-end management investment company under the Investment Company Act of
1940. The Trust seeks as high a level of current income as is consistent with
the preservation of capital by investing in a professionally managed portfolio
of interests in floating or variable rate senior loans ("Senior Loans") to
United States corporations, partnerships and other entities ("Borrowers").
Although the Trust's NAV will vary, the Trust's policy of acquiring interests in
floating or variable rate Senior Loans is expected to minimize fluctuations in
the Trust's NAV as a result of changes in interest rates. Senior Loans in which
the Trust will invest generally pay interest at rates which are periodically
redetermined by reference to a base lending rate plus a premium. These base
lending rates are generally the prime rate offered by one or more major United
States banks ("Prime Rate"), the London Inter-Bank Offered Rate ("LIBOR"), the
certificate of deposit rate or other base lending rates used by commercial
lenders. The Trust seeks to achieve over time an effective yield that
approximates the average published Prime Rate of major United States banks. The
Senior Loans in the Trust's portfolio at all times have a dollar-weighted
average time until next interest rate redetermination of 90 days or less. As a
result, as short-term interest rates increase, the interest payable to the Trust
from its investments in Senior Loans should increase, and as short-term interest
rates decrease, the interest payable to the Trust on its investments in Senior
Loans should decrease. The amount of time required to pass before the Trust
realizes the effects of changing short-term market interest rates on its
portfolio varies with the dollar-weighted average time until next interest rate
redetermination on securities in the Trust's portfolio.
The Trust has registered as a "non-diversified" investment company so that,
subject to its investment restrictions, it is able to invest more than 5% of the
value of its assets in the obligations of any single issuer,
15
<PAGE> 16
including Senior Loans of a single Borrower or participations in Senior Loans
purchased from a single lender. To the extent the Trust invests a relatively
high percentage of its assets in obligations of a limited number of issuers, the
Trust will be more susceptible than a more widely diversified investment company
to any single corporate, economic, political or regulatory occurrence.
VKAC compensates broker-dealers participating in the continuous offering of
the Trust's Common Shares at a rate of 3.0% of the dollar value of Common Shares
purchased from the Trust by such broker-dealers. VKAC also compensates
broker-dealers who have entered into sales agreements with VKAC at an annual
rate, paid quarterly, equal to an amount up to 0.35% of the value of Common
Shares sold by each respective broker-dealer and remaining outstanding after one
year from the date of their original purchase. VKAC also may provide, from time
to time, additional cash incentives to broker-dealers which employ
representatives who sell a minimum dollar amount of the Common Shares. All such
compensation is or will be paid by VKAC out of its own assets, and not out of
the assets of the Trust. The compensation paid to such broker-dealers and to
VKAC, including the compensation paid at the time of purchase, the quarterly
payments, any additional incentives paid from time to time and the Early
Withdrawal Charge, if any, will not in the aggregate exceed the applicable limit
(currently 8%) imposed by the National Association of Securities Dealers (the
"NASD"), unless the approval of the NASD has been received.
The principal executive offices of the Trust are located at One Parkview
Plaza, Oakbrook Terrace, IL 60181.
Reference is hereby made to Section 9 of this Offer to Purchase and the
financial statements attached hereto as Exhibit A which are incorporated herein
by reference.
14. ADDITIONAL INFORMATION. The Trust has filed an Issuer Tender Offer
Statement on Schedule 13E-4 with the Securities and Exchange Commission (the
"Commission") which includes certain additional information relating to the
Offer. Such material may be inspected and copied at prescribed rates at the
Commission's public reference facilities at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549; Jacob K. Javits Federal Building, 26 Federal
Plaza, New York, New York 10278; and, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may also be obtained by mail at prescribed rates from the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549.
15. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
general summary of the federal income tax consequences of a sale of Common
Shares pursuant to the Offer. Shareholders should consult their own tax advisers
regarding the tax consequences of a sale of Common Shares pursuant to the Offer,
as well as the effects of state, local and foreign tax laws.
The sale of Common Shares pursuant to the Offer will be a taxable
transaction for federal income tax purposes, either as a "sale or exchange," or
under certain circumstances, as a "dividend." Under Section 302(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), a sale of Common Shares
pursuant to the Offer generally will be treated as a "sale or exchange" if the
receipt of cash: (a) results in a "complete termination" of the shareholder's
interest in the Trust, (b) is "substantially disproportionate" with respect to
the shareholder, or (c) is "not essentially equivalent to a dividend" with
respect to the shareholder. In determining whether any of these tests has been
met, Common Shares actually owned, as well as Common Shares considered to be
owned by the shareholder by reason of certain constructive ownership rules set
forth in Section 318 of the Code, generally must be taken into account. If any
of these three tests for "sale or exchange" treatment is met, a shareholder will
recognize gain or loss equal to the difference between the amount of cash
received pursuant to the Offer and the tax basis of the Common Shares sold. If
such Common Shares are held as a capital asset, the gain or loss will be a
capital gain or loss and will be long-term if such Common Shares have been held
for more than one year.
If none of the tests set forth in Section 302(b) of the Code is met,
amounts received by a shareholder who sells Common Shares pursuant to the Offer
will be taxable to the shareholder as a "dividend" to the extent of such
shareholder's allocable share of the Trust's current or accumulated earnings and
profits, and the excess of such amounts received over the portion that is
taxable as a dividend would constitute a non-taxable return of capital (to the
extent of the shareholder's tax basis in the Common Shares sold pursuant to the
Offer) and any amounts in excess of the shareholder's tax basis would constitute
taxable gain. Thus, a
16
<PAGE> 17
shareholder's tax basis in the Common Shares sold will not reduce the amount of
the "dividend." Any remaining tax basis in the Common Shares tendered to the
Trust will be transferred to any remaining Common Shares held by such
shareholder. In addition, if a tender of Common Shares is treated as a
"dividend" to a tendering shareholder, a constructive dividend under Section
305(c) of the Code may result to a non-tendering shareholder whose proportionate
interest in the earnings and assets of the Trust has been increased by such
tender. The Trust believes, however, that the nature of the repurchase will be
such that a tendering shareholder will qualify for "sale or exchange" treatment
(as opposed to "dividend" treatment).
16. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Trust
reserves the right, at any time and from time to time, to extend the period of
time during which the Offer is pending by making a public announcement thereof.
In the event that the Trust so elects to extend the tender period, the Purchase
Price for the Common Shares tendered will be determined as of 5:00 P.M. Eastern
Standard time on the Expiration Date, as extended, and the Offer will terminate
as of 12:00 Midnight Eastern Standard time on the Expiration Date, as extended.
During any such extension, all Common Shares previously tendered and not
purchased or withdrawn will remain subject to the Offer. The Trust also reserves
the right, at any time and from time to time up to and including the Expiration
Date, to (a) terminate the Offer and not to purchase or pay for any Common
Shares or, subject to applicable law, postpone payment for Common Shares upon
the occurrence of any of the conditions specified in Section 6, and (b) amend
the Offer in any respect by making a public announcement thereof. Such public
announcement will be issued no later than 9:00 A.M. Eastern Standard time on the
next business day after the previously scheduled Expiration Date and will
disclose the approximate number of Common Shares tendered as of that date.
Without limiting the manner in which the Trust may choose to make a public
announcement of extension, termination or amendment, except as provided by
applicable law (including Rule 13e-4(e)(2)), the Trust shall have no obligation
to publish, advertise or otherwise communicate any such public announcement,
other than by making a release to the Dow Jones News Service.
If the Trust materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Trust will extend the Offer to the extent required by Rule 13e-4 promulgated
under the Exchange Act. These rules require that the minimum period during which
an offer must remain open following material changes in the terms of the offer
or information concerning the offer (other than a change in price or a change in
percentage of securities sought) will depend on the facts and circumstances,
including the relative materiality of such terms or information. If (i) the
Trust increases or decreases the price to be paid for Common Shares, or the
Trust increases the number of Common Shares being sought by an amount exceeding
2% of the outstanding Common Shares, or the Trust decreases the number of Common
Shares being sought and (ii) the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that notice of such increase or decrease is first
published, sent or given, the Offer will be extended at least until the
expiration of such period of ten business days.
17. MISCELLANEOUS. The Offer is not being made to, nor will the Trust
accept tenders from, owners of Common Shares in any jurisdiction in which the
Offer or its acceptance would not comply with the securities or Blue Sky laws of
such jurisdiction. The Trust is not aware of any jurisdiction in which the
making of the Offer or the tender of Common Shares would not be in compliance
with the laws of such jurisdiction. However, the Trust reserves the right to
exclude holders in any jurisdiction in which it is asserted that the Offer
cannot lawfully be made. So long as the Trust makes a good-faith effort to
comply with any state law deemed applicable to the Offer, the Trust believes
that the exclusion of holders residing in such jurisdiction is permitted under
Rule 13e-4(f)(9) promulgated under the Exchange Act. In any jurisdiction the
securities or Blue Sky laws of which require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on the Trust's behalf by
one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
December 19, 1996 VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
17
<PAGE> 18
INDEPENDENT ACCOUNTANTS' REPORT
The Board of Trustees and Shareholders of
Van Kampen American Capital Prime Rate Income Trust:
We have audited the accompanying statement of assets and liabilities of Van
Kampen American Capital Prime Rate Income Trust (the "Trust"), including the
portfolio of investments, as of July 31, 1996, and the related statements of
operations and cash flows for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities and variable rate
senior loan interests owned as of July 31, 1996, by correspondence with the
custodian and selling or agent banks; where replies were not received we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of Van
Kampen American Capital Prime Rate Income Trust as of July 31, 1996, the results
of its operations and cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
September 18, 1996
A-1
<PAGE> 19
PORTFOLIO OF INVESTMENTS
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Stated Value
(000) Borrower Maturity* (000)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
VARIABLE RATE** SENIOR LOAN INTERESTS
AEROSPACE/DEFENSE 1.8%
$ 14,604 Alliant Techsystems, Inc., Term Loan -- Manufacturer of ordnance,
composite metals......................................................... 03/15/01 $ 14,649
10,205 Grimes Aerospace Co., Term Loan -- Airplane electronics manufacturer..... 12/31/99 10,483
3,237 Grimes Aerospace Co., Revolving Credit................................... 12/31/99 3,380
19,800 Gulfstream Delaware Corp., Term Loan -- Aircraft manufacturer............ 03/31/98 19,786
9,611 Howmet Acquisition Co., Term Loan -- Manufacturer of aerospace
supplies................................................................. 11/20/02 to 05/20/03 9,641
21,151 Northrop Grumman Corp., Term Loan -- Manufacturer and contractor of
defense aircraft and electronic systems.................................. 03/02/02 21,319
9,325 Tracor, Inc., Term Loan -- Manufacturer of electronic systems and devices
for the defense and aerospace industries................................. 10/31/00 to 04/30/01 9,351
----------
88,609
----------
BUILDING/HOUSING 2.1%
59,950 National Gypsum Co., Term Loan -- Wallboard manufacturer................. 09/20/03 60,054
19,760 PrimeCo, Inc., Term Loan -- Equipment leasing............................ 12/31/00 19,783
3,333 RSI Home Products, Inc., Term Loan -- Bath and kitchen cabinet
manufacturer............................................................. 11/30/99 3,361
19,833 Walter Industries, Inc., Term Loan -- Home builder....................... 01/22/03 19,863
----------
103,061
----------
CABLE 11.0%
9,368 Adelphia Cable Partners, L.P., Revolving Credit -- Cable television
operator................................................................. 12/31/03 9,388
3,507 Alexcom Limited Partnership, Term Loan -- Cellular telephone systems
operator................................................................. 06/30/20 3,506
12,000 Cablevision of Ohio, Term Loan -- Cable television owner/operator........ 12/31/05 12,017
70,000 Charter Communications, Term Loan -- Cable television systems operator... 12/31/03 to 12/31/04 70,322
42,500 Chelsea Communications, Inc., Term Loan -- Cable television systems
operator................................................................. 09/30/04 42,625
21,500 Classic Cable, Inc., Term Loan -- Cable television systems operator...... 06/30/05 21,658
16,830 Coaxial Communications of Central Ohio, Term Loan -- Cable television
systems operator......................................................... 12/31/99 16,722
52,861 Colony Communications, Revolving Credit -- Cable television operator..... 09/30/04 53,017
26,625 Comcast MH Holdings, Term loan -- Cable television systems operator...... 12/31/03 26,681
45,789 Continental Cablevision, Revolving Credit -- Cable television systems
operator................................................................. 10/10/03 45,900
3,281 CSG Systems International, Inc., Term Loan -- Communications management
consultant............................................................... 12/31/00 3,285
38,000 Falcon Cable Media, Term Loan -- Cable television systems operator....... 07/11/05 38,074
26,500 Frontiervision Operating Partners, L.P., Term Loan -- Cable television
operator................................................................. 06/30/05 26,639
6,650 James Cable Partners, L.P., Term Loan -- Cable television systems
operator................................................................. 06/30/00 6,716
200 James Cable Partners, L.P., Revolving Credit............................. 06/30/00 209
6,250 Lenfest Communications, Term Loan -- Cable television operator........... 09/30/03 6,325
60,313 Marcus Cable Operating Co., L.P., Term Loan -- Cable television systems
operator................................................................. 12/31/02 to 04/30/04 60,874
2,500 Marcus Cable Operating Co., L.P., Revolving Credit....................... 12/31/02 2,657
8,711 Maryland Cable, Term Loan -- Cable television systems operator........... 12/31/02 8,717
8,500 Northland Cable Television, Inc., Term Loan -- Cable television systems
operator................................................................. 09/30/03 8,503
47,500 TCI Pacific Communications, Term Loan -- Cable television services
provider................................................................. 12/31/04 47,667
6,964 TCI Southeast, Inc., Term Loan -- Cable television systems operator...... 06/30/01 6,964
2,657 TCI Southeast, Inc., Revolving Credit.................................... 06/30/01 2,681
10,000 UCA Corp., Revolving Credit -- Cable television operator................. 09/30/03 10,088
3,334 Viacom Cablevision, Term Loan -- Cable television systems operator....... 07/01/02 3,345
----------
534,580
----------
CHEMICAL 2.3%
9,951 AEP Industries, Inc., Term Loan -- Manufacturer and converter of plastic
products................................................................. 07/31/02 9,976
9,250 Cedar Chemicals Corp., Term Loan -- Manufacturer of fertilizer........... 10/30/03 9,308
6,429 Chattem, Inc., Term Loan -- Manufacturer and marketer of
pharmaceuticals.......................................................... 10/30/02 6,457
8,887 Freedom Chemical Co., Term Loan -- Manufacturer of specialty chemicals... 06/30/02 8,820
9,923 Hampshire Chemical Co., Term Loan -- Manufacturer of specialty
chemicals................................................................ 09/01/03 9,949
</TABLE>
See Notes to Financial Statements
A-2
<PAGE> 20
PORTFOLIO OF INVESTMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Stated Value
(000) Borrower Maturity* (000)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CHEMICAL (CONTINUED)
$ 33,641 Huntsman Group Holding Corp., Term Loan -- Integrated chemical, plastic
and packaging producer................................................... 12/31/02 $ 33,688
11,143 Huntsman Group Holding Corp., Revolving Credit........................... 12/31/02 11,171
2,253 Rheox, Inc., Term Loan -- Chemical additives manufacturer................ 12/31/97 2,218
7,000 Texas Petrochemicals, Term Loan -- Processor of petrochemicals........... 06/30/04 7,024
12,507 Thoro System Products, Inc., Term Loan -- Manufacturer of chemicals for
construction industry.................................................... 12/20/02 12,414
----------
111,025
----------
ELECTRIC/ELECTRONICS 1.0%
34,125 Berg Electronics, Inc., Term Loan -- Manufacturer of electronic
connectors............................................................... 12/31/02 34,196
1,950 Exide Electronics Group, Inc., Term Loan -- Manufacturer of
uninterruptible power supply products.................................... 03/13/01 1,958
3,120 Exide Electronics Group, Inc., Revolving Credit.......................... 03/13/01 3,141
8,358 Rowe International, Inc., Term Loan -- Manufacturer of jukeboxes and
electronic equipment..................................................... 12/31/96 7,940
----------
47,235
----------
ENTERTAINMENT/LEISURE 4.1%
3,452 DW Investment, Inc., Term Loan -- Communications and entertainment
conglomerate............................................................. 08/09/00 3,459
6,643 Fairways Group, L.P., Term Loan -- Multiple golf course owner/operator... 04/30/02 6,735
6,000 H.E.C. Investments, Inc., Term Loan -- Fitness club operator............. 12/31/00 6,030
30,000 Marvel Entertainment, Term Loan -- Children's magazine publisher......... 02/28/02 30,069
8,500 Marvel IV Holdings, Revolving Credit -- Comic books, sports cards and
outdoor equipment distributor............................................ 06/03/99 8,741
30,000 Metro-Goldwyn-Mayer, Term Loan -- Movie/television producer.............. 04/15/97 30,101
25,000 Orion Pictures Corp., Term Loan -- Theatrical production................. 06/30/01 25,188
8,000 Panavision International, L.P., Term Loan -- Manufacturer and lessor of
motion picture cameras and lenses........................................ 03/31/04 8,040
26,115 Six Flags Theme Parks, Term Loan -- Theme park operator.................. 06/23/03 26,181
8,333 TW Recreational Service, Term Loan -- Provider of food and services for
state and national parks................................................. 09/30/02 8,394
9,700 The U.S. Playing Card Co., Term Loan -- Manufacturer/distributor of
playing cards............................................................ 09/30/02 9,668
34,901 Viacom, Inc., Term Loan -- Entertainment media/television programming.... 07/01/02 34,977
----------
197,583
----------
FINANCE 0.7%
8,000 American Life Holding Co., Term Loan -- Life insurance company........... 04/15/03 8,012
4,991 Ark Asset Holdings, Inc., Term Loan -- Institutional money manager....... 11/30/01 5,008
12,500 Blackstone Capital Co., Term Loan -- Financial services company.......... 01/13/97 12,500
7,833 Conseco, Inc., Revolving Credit -- Life insurance company................ 04/12/01 7,898
----------
33,418
----------
FOOD/BEVERAGE 6.8%
10,973 American Italian Pasta Co., Term Loan -- Pasta products producer......... 02/28/04 11,030
11,720 Amerifoods, Inc., Term Loan -- Manufacturer of snack foods and bakery
products................................................................. 12/31/97 to 06/30/02 9,999
4,178 Edwards Baking Corp., Term Loan -- Manufacturer of bakery products....... 09/30/00 to 10/31/02 4,200
22,687 Foodbrands America, Term Loan -- Manufacturer of food products........... 01/15/00 to 02/28/03 22,769
473 Foodbrands America, Revolving Credit..................................... 01/15/00 476
4,888 Ghirardelli Holdings Corp., Term Loan -- Manufacturer of chocolate
products................................................................. 03/30/03 4,940
9,979 IM Stadium, Inc., Term Loan -- Sports stadium concessions................ 12/31/02 to 12/31/03 10,049
14,943 Keebler Holding Corp., Term Loan -- Manufacturer and distributor of
cookies and crackers..................................................... 07/31/03 to 07/31/04 14,961
1,995 Mistic Brands, Inc., Revolving Credit -- Producer and marketer of
carbonated and non-carbonated beverages.................................. 09/30/99 2,042
5,625 Mistic Brands, Inc., Term Loan........................................... 09/30/01 5,759
18,905 President Baking Co., Inc., Term Loan -- Bread/bread products
manufacturer............................................................. 12/30/02 18,857
35,000 Rykoff-Sexton, Inc., Term Loan -- Distributor and manufacturer of food
and related non-food products............................................ 10/31/02 to 04/30/03 35,106
46,691 S.C. International Services, Term Loan -- In-flight food services........ 09/30/00 to 09/30/03 46,895
14,165 Select Beverages, Inc., Term Loan -- Independent bottler................. 06/30/01 to 06/30/02 14,238
</TABLE>
See Notes to Financial Statements
A-3
<PAGE> 21
PORTFOLIO OF INVESTMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Stated Value
(000) Borrower Maturity* (000)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
FOOD/BEVERAGE (CONTINUED)
$ 68,298 Silgan Corp., Term Loan -- Manufacturer of food cans..................... 12/31/00 to 03/15/02 $ 68,314
4,805 Silgan Corp., Revolving Credit........................................... 12/31/00 4,805
25,000 Stroh Brewery Co., Term Loan -- Beer producer and distributor............ 06/30/03 25,135
3,281 Tom's Foods, Inc., Term Loan -- Snack foods producer/distributor (d)..... 12/31/98 1,968
21,000 Van De Kamp's, Inc., Term Loan -- Frozen seafood processor/distributor... 04/30/03 to 09/30/03 21,084
7,673 Windsor Quality Food, Term Loan -- Frozen food processor................. 12/31/01 7,710
----------
330,337
----------
FOOD STORES 6.4%
9,600 Big V Supermarkets, Inc., Term Loan -- Northeastern retail food chain
operator................................................................. 03/15/00 9,596
61,247 Bruno's, Inc., Term Loan -- Southeastern retail food chain operator...... 02/18/03 to 02/18/05 61,570
12,935 Carr-Gottstein Foods, Term Loan -- Alaska based retail food chain
operator................................................................. 12/31/02 12,949
41,985 Dominick's Finer Foods, Inc., Term Loan -- Illinois based retail food
chain operator........................................................... 03/31/02 to 09/30/03 42,240
20,128 Grand Union Co., Term Loan -- New York based retail food chain
operator................................................................. 06/15/02 20,131
7,733 Harvest Foods, Inc., Term Loan -- Mississippi based retail food chain
operator (d) (g)......................................................... 06/30/02 7,051
31,678 Pathmark Stores, Inc., Term Loan -- New Jersey based retail food chain
operator................................................................. 07/31/98 to 10/31/99 31,604
3,294 Ralph's Grocery Co., Revolving Credit -- Los Angeles, California based
retail food chain operator............................................... 06/15/01 3,441
47,786 Ralph's Grocery Co., Term Loan........................................... 06/15/01 to 02/15/04 47,976
70,097 Smith Food & Drug Center, Term Loan -- Food and drug retailer............ 08/31/02 to 11/30/04 70,449
6,684 Star Markets Co., Inc., Term Loan -- New England based retail food chain
operator................................................................. 01/31/02 to 12/31/02 6,695
----------
313,702
----------
FUEL RETAILER 0.1%
3,721 Petro PSC Properties, L.P., Term Loan -- Multi-service truck-stop
operator................................................................. 05/18/01 3,721
3,048 Truckstops of America, Inc., Term Loan -- Interstate fueling stations
operator................................................................. 12/10/00 3,014
----------
6,735
----------
HEALTHCARE 3.3%
60,000 Community Health Systems, Inc., Term Loan -- Provider of healthcare
services................................................................. 12/31/03 to 12/31/05 60,290
57,265 Dade International, Inc., Term Loan -- Medical equipment
manufacturer/marketer.................................................... 12/31/01 to 12/31/04 57,543
168 Dade International, Inc., Revolving Credit............................... 12/31/01 184
15,923 Graphic Controls Corp., Term Loan -- Manufacturer of medical equipment... 09/28/03 15,970
7,542 Integrated Health Services, Inc., Revolving Credit -- Provider of
post-acute healthcare services........................................... 06/30/02 7,746
18,500 Merit Behavioral Corp., Term Loan -- Psychiatric hospital operator....... 10/06/03 18,565
----------
160,298
----------
MANUFACTURING 11.6%
12,406 Calmar, Inc., Term Loan -- Manufacturer of dispensing and spray
products................................................................. 09/15/03 to 03/15/04 12,443
21,400 Cambridge Industries, Inc., Term Loan -- Manufacturer of plastic
components for autos..................................................... 05/17/02 to 05/17/04 21,577
9,979 CBP Resources, Inc., Term Loan -- Manufacturer of animal feed
ingredients.............................................................. 09/30/03 10,035
18,759 Collins & Aikman Products Co., Term Loan -- Manufacturer of auto
interiors, home interiors and wallpapers................................. 12/31/02 18,756
9,697 Dal-Tile Group, Inc., Revolving Credit -- Ceramic tile and floor covering
manufacturer/retailer.................................................... 01/09/98 9,697
21,978 Desa International, Inc., Term Loan -- Diversified manufacturer of
heaters, fireplaces, and specialty tools................................. 02/28/03 22,144
9,321 Ebel USA, Inc., Term Loan -- Manufacturer of luxury time pieces.......... 09/30/01 9,330
6,038 Essex Group, Inc., Term Loan -- Manufacturer of electrical wire and
cable.................................................................... 04/30/00 6,048
8,936 Fiberite, Inc., Term Loan -- Manufacturer of composite fibers............ 12/31/01 8,977
43,588 Furniture Brands International, Inc., Term Loan -- Manufacturer and
marketer of furniture.................................................... 12/29/01 to 03/29/04 43,702
7,821 The Hawk Group of Companies, Inc., Term Loan -- Manufacturer of powdered
metals and friction materials............................................ 06/30/02 7,857
11,042 Health O Meter, Inc., Term Loan -- Manufacturer of small appliances...... 08/15/01 10,982
</TABLE>
See Notes to Financial Statements
A-4
<PAGE> 22
PORTFOLIO OF INVESTMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Stated Value
(000) Borrower Maturity* (000)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
MANUFACTURING (CONTINUED)
$ 10,000 Hedstrom Corp., Term Loan -- Manufacturer of children's outdoor toys..... 04/27/01 $ 10,039
36,486 Hayes Wheels International, Inc., Term Loan -- Designer and manufacturer
of car and truck wheels.................................................. 07/31/02 to 07/31/04 36,606
239 Hayes Wheels International, Inc., Revolving Credit....................... 07/31/04 239
9,444 Hunt Manufacturing Co., Term Loan -- Manufacturer and distributor of
office and art supplies.................................................. 12/31/00 9,450
9,941 Intermetro Industries Corp., Term Loan -- Manufacturer of metal/polymer
storage products......................................................... 06/30/01 to 12/31/02 9,891
36,124 International Wire Group, Term Loan -- Manufacturer of auto, appliance
and
communication wires...................................................... 09/30/02 to 09/30/03 36,242
10,072 IPC, Inc., Term Loan -- Manufacturer of packaging materials.............. 09/30/01 10,101
29,501 Johnstown America, Term Loan -- Manufacturer of railcars................. 03/31/03 29,597
29,878 K-Tec Holdings, Inc., Term Loan -- Manufacturer of telecommunications
equipment................................................................ 02/01/03 to 02/01/04 29,961
19,463 Lear Seating Corp., Revolving Credit -- Manufacturer of automobile and
truck seat systems....................................................... 09/30/01 19,449
8,982 Merkle-Korff Industries, Term Loan -- Manufacturer of electrical
motors................................................................... 09/22/01 to 06/15/03 9,048
53 Merkle-Korff Industries, Revolving Credit................................ 09/22/01 61
15,772 M.W. Manufacturers, Term Loan -- Conglomerate............................ 09/15/02 15,871
11,709 National-Oilwell, L.P., Term Loan -- Oil equipment manufacturer.......... 12/31/01 11,760
11,967 Numatics, Inc., Term Loan -- Manufacturer of pneumatic fluid power
equipment................................................................ 12/31/03 12,059
8,000 Personal Care Holdings, Term Loan -- Manufacturer and marketer of
consumer products........................................................ 04/03/03 8,074
5,000 Precise Technology, Term Loan -- Custom injection molding company........ 03/31/03 5,052
10,000 RBX Corp., Term Loan -- Manufacturer of rubber products.................. 12/31/03 10,025
9,694 RTI Funding Corp., Term Loan -- Manufacturer of building blocks for
children................................................................. 02/08/03 to 02/03/04 9,766
1,111 Samsonite Corp., Term Loan -- Manufacturer of luggage.................... 07/14/00 1,111
556 Samsonite Corp., Revolving Credit........................................ 07/14/00 556
7,000 Simmons Co., Term Loan -- Manufacturer and distributor of bedding........ 03/31/03 7,028
16,204 Spalding & Evenflo Cos., Inc., Term Loan -- Manufacturer of sporting
goods.................................................................... 10/31/00 to 10/14/02 16,264
6,700 Sportcraft, Ltd., Term Loan -- Supplier of branded sporting goods........ 12/31/02 6,764
10,559 Stanadyne Automotive, Term Loan -- Manufacturer of diesel injection
devices and engine parts................................................. 12/31/01 10,589
18,400 Thompson Minwax Co., Term Loan -- Manufacturer of wood stains and
finishing products....................................................... 12/31/02 18,433
15,621 T.K.G. Acquisition, Term Loan -- Office furniture manufacturer........... 02/28/02 to 08/31/03 15,684
27,000 UCAR International, Inc., Term Loan -- Manufacturer of graphite/carbide
electrodes............................................................... 12/31/02 27,050
7,910 U.F. Acquisition, Term Loan -- Provider of fixtures and storage for
retail stores............................................................ 12/15/02 8,013
----------
566,331
----------
PAPER 7.1%
4,963 Crown Paper Co./Crown Vantage, Inc., Term Loan -- Producer of value-added
paper products........................................................... 08/22/03 4,962
4,750 CST Office Products, Inc., Term Loan -- Manufacturer and distributor of
stock computer forms..................................................... 03/31/01 4,815
66,278 Fort Howard Corp., Term Loan -- Paper manufacturer....................... 03/31/02 to 12/31/02 66,621
113,319 Jefferson Smurfit Corp., Term Loan -- Corrugated paper products
manufacturer............................................................. 04/30/01 to 10/31/02 113,463
10,112 Mail-Well Corp., Term Loan -- Manufacturer of envelopes and graphic
printers................................................................. 07/31/98 to 07/31/03 10,176
1,042 Mail-Well SPX, Term Loan -- Manufacturer of envelopes and graphic
printers................................................................. 07/31/03 1,047
2,609 Mail-Well SPX, Revolving Credit.......................................... 07/31/03 2,624
29,787 S.D. Warren Co., Term Loan -- Coated-free paper manufacturer............. 04/26/04 29,850
92,145 Stone Container Corp., Term Loan -- Paper products manufacturer.......... 04/01/00 to 10/01/03 92,212
18,064 United Stationers Supply Co., Term Loan -- Distributor of office
products................................................................. 03/31/02 18,129
----------
343,899
----------
PERSONAL/NON-DURABLE 3.1%
44,640 Mary Kay Cosmetics, Term Loan -- Direct cosmetic sales................... 12/06/02 44,714
37,935 Playtex Products, Inc., Term Loan -- Manufacturer of beauty aid and
hygiene products......................................................... 06/30/02 38,017
55,000 Revlon Consumer Products Corp., Term Loan -- Manufacturer of cosmetics... 12/31/00 55,430
11,000 Treasure Chest Advertising Co., Inc., Term Loan -- Advertising and
information services..................................................... 12/31/01 11,000
----------
149,161
----------
</TABLE>
See Notes to Financial Statements
A-5
<PAGE> 23
PORTFOLIO OF INVESTMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Stated Value
(000) Borrower Maturity* (000)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
PRINTING 2.0%
$ 16,500 Advanstar Holdings, Inc., Term Loan -- Trade magazine publisher and trade
show exhibitor........................................................... 12/21/03 $ 16,594
47,889 American Media Operations, Inc., Term Loan -- Magazine/newspaper
publisher................................................................ 09/30/01 to 09/30/02 47,840
28,350 Journal News, Inc., Term Loan -- Multiple newspaper printer.............. 12/31/01 28,411
7,097 Polyfibron Technologies, Inc., Term Loan -- Textile manufacturer......... 12/31/01 7,131
----------
99,976
----------
RADIO AND TELEVISION BROADCASTING 8.2%
9,100 Benedek Broadcasting Corp., Term Loan -- Television station
owner/operator........................................................... 05/01/01 to 11/01/02 9,131
11,629 Chancellor Corp., Term Loan -- Radio station owner/operator.............. 09/01/02 to 09/01/03 11,720
356 Chancellor Corp., Revolving Credit....................................... 09/01/02 370
44,000 E.H. & F., Inc., Term Loan -- Outdoor media.............................. 06/30/02 to 12/21/03 44,198
32,859 Ellis Communications, Inc., Term Loan -- Southeastern U.S. television
station owner/operator................................................... 03/31/02 to 03/31/03 32,929
4,800 Evergreen Media Corp., Term Loan -- Radio station owner/operator......... 12/31/02 4,802
12,544 Evergreen Media Corp., Revolving Credit.................................. 12/31/02 12,551
1,500 Granite Broadcasting Corp., Revolving Credit -- Midwestern television
station owner/operator................................................... 12/31/01 1,510
14,000 Heftel Broadcasting Corp., Term Loan -- Spanish language radio
broadcasting............................................................. 09/30/02 14,113
15,000 NWC Acquisition Corp., Term Loan -- Television production and
broadcasting............................................................. 09/30/01 15,023
15,000 Patterson Broadcasting, Term Loan -- Radio station operator.............. 06/30/04 15,107
10,800 River City Broadcasting, L.P., Term Loan -- Midwestern radio station
owner/operator........................................................... 12/31/99 10,853
13,145 Shared Technologies, Term Loan -- Provider of telecommunications
services................................................................. 03/30/01 to 03/31/03 13,211
667 Shared Technologies, Revolving Credit.................................... 03/30/01 677
53,750 Sinclair Broadcasting Group, Inc., Term Loan -- Television and radio
station owner/operator................................................... 12/31/02 to 11/30/03 53,863
2,763 Sinclair Broadcasting Group, Inc., Revolving Credit...................... 11/30/03 2,770
13,345 SKTV, Inc., Term Loan -- Television station owner/operator............... 07/31/02 13,260
7,133 Smith Television, Term Loan -- Television station owner/operator......... 12/31/02 7,185
23,320 Sullivan Broadcasting, Term Loan -- Television station owner/operator.... 12/31/03 23,405
1,680 Sullivan Broadcasting, Revolving Credit.................................. 12/31/03 1,685
111,795 Westinghouse Electric, Term Loan -- Radio and television broadcaster..... 11/24/02 112,046
----------
400,409
----------
RESTAURANTS 0.3%
8,952 America's Favorite Chicken Co., Term Loan -- Church's and Popeye's Fried
Chicken restaurants...................................................... 10/31/01 8,951
1,085 Carvel Corp., Term Loan -- Soft ice cream products franchiser............ 12/31/98 1,084
6,394 Long John Silver's Restaurants, Inc., Term Loan -- Retail seafood
restaurant owner/operator................................................ 09/30/97 6,394
----------
16,429
----------
RETAIL 7.0%
175 American Blind and Wallpaper Factory, Inc., Term Loan -- Wallcover
distributor.............................................................. 10/31/96 173
32,500 Camelot Music, Inc., Term Loan -- Retail distributor of music and video
cassettes (f)............................................................ 02/28/02 24,375
17,525 Color Tile, Inc., Term Loan -- National retailer of floor and wall
covering products (d) (g)................................................ 12/31/98 12,271
780 Color Tile Holdings, Inc., Revolving Credit -- National retailer of floor
and wall covering products (g)........................................... 12/31/96 763
8,400 Eckerd Corp., Term Loan -- Retail drug store............................. 11/29/00 8,403
20,366 Federated Department Stores, Inc., Term Loan -- National department store
chain.................................................................... 03/31/00 20,610
4,782 Federated Department Stores, Inc., Revolving Credit...................... 03/31/00 5,022
3,000 Kirklands Holdings, Term Loan -- Retailer of decorative home accessories
and gift items........................................................... 06/30/02 3,022
50,000 Kmart Corp., Term Loan -- International mass merchandise retailer........ 06/17/99 50,704
5,368 Luxottica U.S. Holdings, Revolving Credit -- Manufacturer/distributor of
eyeglasses............................................................... 06/30/01 5,380
15,311 Luxottica U.S. Holdings, Term Loan....................................... 06/30/01 15,323
7,470 Nebraska Book Co., Term Loan -- Used book distributor.................... 10/31/03 7,512
6,455 Nine West Group, Inc., Term Loan -- Shoe designer and retailer........... 10/01/01 6,455
38,857 Payless Cashways, Inc., Term Loan -- Building products retailer.......... 11/18/00 38,922
10,939 Peebles, Inc., Term Loan -- Mid-Atlantic retailer........................ 06/09/02 11,206
19,792 QVC Programming, Term Loan -- Home shopping television network........... 02/15/02 19,853
</TABLE>
See Notes to Financial Statements
A-6
<PAGE> 24
PORTFOLIO OF INVESTMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Stated Value
(000) Borrower Maturity* (000)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
RETAIL (CONTINUED)
$ 31,495 Saks & Co., Term Loan -- Retail fashions and accessories................. 06/30/00 $ 31,674
2,191 Service Merchandise, Revolving Credit -- Catalog retailer................ 06/08/99 2,279
16,875 Thrifty Payless, Inc., Term Loan -- Retail drug store.................... 10/19/02 17,026
26,393 Thrifty Payless, Inc., Revolving Credit.................................. 10/19/02 26,848
31,429 TJX Companies, Inc., Term Loan -- Specialty apparel retailer............. 11/17/00 31,827
----------
339,648
----------
TEXTILES 2.1%
11,443 American Marketing Industries, Inc., Term Loan -- Textile manufacturer... 11/30/02 11,538
8,645 Hosiery Corp. of America, Term Loan -- Manufacturer/direct mail marketer
of women's hosiery....................................................... 07/31/01 8,526
11,578 Ithaca Industries, Inc., Term Loan -- Undergarment and hosiery
manufacturer............................................................. 10/31/98 11,401
842 Ithaca Industries, Inc., Revolving Credit................................ 10/31/98 924
14,652 Johnston Industries, Term Loan -- Diversified manufacturer of home
furnishings and textiles................................................. 03/28/03 14,782
3,083 London Fog Industries, Revolving Credit -- Manufacturer of rainwear and
outerwear................................................................ 03/31/97 3,150
31,466 London Fog Industries, Inc., Term Loan................................... 05/31/02 29,866
20,000 Polymer Group, Inc., Term Loan -- Manufacturer of polyolefin products.... 03/31/02 20,050
----------
100,237
----------
TRANSPORTATION 0.2%
12,500 Northwest Airlines, Inc., Term Loan -- Minnesota-based cargo and
passenger airliner....................................................... 12/15/99 12,548
----------
WIRELESS COMMUNICATIONS 3.8%
16,750 Arch Communications Group, Inc., Term Loan -- Wireless communications
operator................................................................. 12/31/02 to 12/31/03 16,799
1,163 Arch Communications Group, Inc., Revolving Credit........................ 12/31/02 1,163
5,000 Clarity Telecom, Inc., Term Loan -- Seller and servicer of telephone
systems and software..................................................... 11/30/02 5,036
8,125 Comcast Cellular Communications, Revolving Credit -- Cellular systems
operator................................................................. 09/30/03 8,124
17,739 Comcast Cellular Communications, Term Loan............................... 09/30/04 17,942
6,585 Intesys Technologies, Inc., Term Loan -- Equipment manufacturer for
telecommunications/autos................................................. 12/31/01 6,614
39,000 Mobilemedia Communications, Term Loan -- Nationwide paging operator...... 06/30/02 to 06/30/03 38,999
11,050 Skytel Corp., Revolving Credit -- Paging and personal communications
services operator........................................................ 12/31/01 11,153
39,257 Smart SMR of California, Inc., Term Loan -- Cellular telephone systems
operator................................................................. 03/15/01 39,257
40,000 Western Wireless Corp., Term Loan -- Cellular and personal communications
services operator........................................................ 03/31/05 40,064
----------
185,151
----------
OTHER 4.5%
24,000 Advo, Inc., Term Loan -- Direct mail marketer............................ 03/31/04 24,094
25,000 Amax Gold, Inc., Term Loan -- Gold and silver mining and processing...... 12/31/01 25,199
58,141 AMF Group, Inc., Term Loan -- Integrated bowling equipment
manufacturer............................................................. 03/31/01 to 03/31/04 58,198
267 AMF Group, Inc., Revolving Credit........................................ 03/31/01 267
6,913 Bankers Systems, Inc., Term Loan -- Compliance services supplier......... 11/02/02 6,916
35,712 Borg-Warner Security Corp., Term Loan -- Protection services............. 12/31/98 36,192
9,768 Fairmont Minerals, Ltd., Term Loan -- Silica pond and gravel supplier.... 03/31/03 9,840
10,000 HG Holdings, Inc., Term Loan -- Information processor.................... 06/30/01 10,065
5,840 Iron Mountain Information Services Inc., Term Loan -- Records management
and storage.............................................................. 06/28/02 5,840
11,350 Loewen Group, Inc., Revolving Credit -- Funeral home and cemetery
owner/operator........................................................... 05/29/01 11,546
20,000 Primark Corp., Term Loan -- Information services provider................ 06/30/02 20,020
9,000 USS Acquisition, Inc., Term Loan -- Producer of industrial silica........ 12/31/03 9,096
----------
217,273
----------
TOTAL VARIABLE RATE ** SENIOR LOAN INTERESTS 89.5%...................... 4,357,645
----------
</TABLE>
See Notes to Financial Statements
A-7
<PAGE> 25
PORTFOLIO OF INVESTMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Borrower (000)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C>
EQUITIES 0.5%
America's Favorite Chicken Co. (604,251 common shares) (b)(c)................................. $ 2,004
America's Favorite Chicken Co. ($3,486,400 par amount of preferred stock, 10.0% coupon,
maturity 08/11/04, convertible to 10.0% cash pay subordinated debt) (b)(e).................... 3,593
Best Products Co., Inc. (297,480 common shares) (c)........................................... 372
Best Products Co., Inc. (Warrants for 28,080 common shares) (c)............................... 0
Braelan Corp. Class A (10,975 common shares) (b)(c)........................................... 1,967
Classic Cable, Inc. (Warrants for 760 common shares) (c)...................................... 0
Core-Mark International, L.L.C. (Class B ownership interest) (b).............................. 4,368
Flagstar Cos., Inc. (8,755 common shares) (c)................................................. 23
London Fog Industries, Inc. (10,833,012 common shares) (b)(c)................................. 0
London Fog Industries, Inc., ($17,687,936 par amount of preferred stock, 17.5% coupon,
maturity 05/31/02) (b)(e)..................................................................... 12,503
Nextel Communications, Inc. (Warrants for 60,000 common shares) (b)(c)........................ 8
----------
TOTAL EQUITIES................................................................................ 24,838
----------
TOTAL LONG-TERM INVESTMENTS 90.0%
(Cost $4,388,796)(a)........................................................................ 4,382,483
----------
SHORT-TERM INVESTMENTS AT AMORTIZED COST
COMMERCIAL PAPER 2.2%
Amoco Corp. ($20,000,000 par, maturing 08/05/96, yielding 5.33%).............................. 19,988
AT&T Corp. ($20,000,000 par, maturing 08/01/96, yielding 5.33%)............................... 20,000
Cargill Financial Services Corp. ($20,000,000 par, maturing 08/05/96, yielding 5.36%)......... 19,988
Illinois Central Railroad Co. ($13,050,000 par, maturing 08/16/96, yielding 5.53% to 5.54%)... 13,020
International Paper Co. ($20,000,000 par, maturing 08/07/96, yielding 5.34%).................. 19,982
Nabisco Inc. ($14,000,000 par, maturing 08/01/96 to 08/20/96, yielding 5.46% to 5.70%)........ 13,977
----------
TOTAL COMMERCIAL PAPER........................................................................ 106,955
----------
SHORT-TERM LOAN PARTICIPATIONS 7.4%
Anadarko Petroleum Corp. ($20,000,000 par, maturing 08/06/96 to 08/07/96, yielding 5.43% to
5.56%)........................................................................................ 20,000
Army & Air Force Exchange Services ($17,000,000 par, maturing 08/13/96, yielding 5.41%)....... 17,000
Ashland Oil Co. ($20,000,000 par, maturing 08/01/96 to 08/07/96, yielding 5.43% to 5.68%)..... 20,000
Baxter International, Inc. ($20,000,000 par, maturing 08/26/96, yielding 5.55%)............... 20,000
Bell Atlantic Financial Services ($20,000,000 par, maturing 08/01/96, yielding 5.44%)......... 20,000
Bell Atlantic Network Funding ($8,900,000 par, maturing 08/05/96, yielding 5.33%)............. 8,900
Cabot Corp. ($10,000,000 par, maturing 08/01/96, yielding 5.43%).............................. 10,000
Centex Corp. ($20,000,000 par, maturing 08/08/96, yielding 5.50%)............................. 20,000
Conagra Inc. ($20,000,000 par, maturing 08/30/96, yielding 5.50%)............................. 20,000
Echlin, Inc. ($7,000,000 par, maturing 08/02/96, yielding 5.32%).............................. 7,000
Englehard Corp. ($20,000,000 par, maturing 08/02/96, yielding 5.40%).......................... 20,000
Enron Corp. ($20,000,000 par, maturing 08/05/96, yielding 5.47%).............................. 20,000
Gillette Co. ($10,650,000 par, maturing 08/01/96, yielding 5.63%)............................. 10,650
Hertz Corp. ($10,000,000 par, maturing 08/02/96, yielding 5.41%).............................. 10,000
Nabisco Inc. ($6,000,000 par, maturing 08/01/96, yielding 5.80%).............................. 6,000
Olin Corp. ($20,000,000 par, maturing 08/01/96, yielding 5.75%)............................... 20,000
Pacific Telecom Inc. ($10,000,000 par, maturing 08/16/96, yielding 5.51%)..................... 10,000
Pacificorp ($12,000,000 par, maturing 08/12/96, yielding 5.59%)............................... 12,000
Ralston Purina Co. ($20,000,000 par, maturing 08/09/96, yielding 5.55%)....................... 20,000
Tandy Corp. ($6,350,000 par, maturing 08/20/96, yielding 5.47%)............................... 6,350
Temple Inland Inc. ($11,000,000 par, maturing 08/01/96, yielding 5.45%)....................... 11,000
</TABLE>
See Notes to Financial Statements
A-8
<PAGE> 26
PORTFOLIO OF INVESTMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Borrower (000)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
SHORT-TERM LOAN PARTICIPATIONS (CONTINUED)
Tyson Foods ($20,000,000 par, maturing 08/08/96, yielding 5.44% to 5.45%)..................... $ 20,000
USAA Capital Corp. ($10,000,000 par, maturing 08/01/96, yielding 5.40%)....................... 10,000
Western Resources Inc. ($20,000,000 par, maturing 08/06/96 to 08/19/96, yielding 5.50%)....... 20,000
----------
TOTAL SHORT-TERM LOAN PARTICIPATIONS.......................................................... 358,900
----------
TOTAL SHORT-TERM INVESTMENTS AT AMORTIZED COST 9.6%.......................................... 465,855
----------
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4%................................................... 17,446
----------
NET ASSETS 100.0%............................................................................ $4,865,784
==========
</TABLE>
(a) At July 31, 1996, cost for federal income tax purposes is $4,392,208,484;
the aggregate gross unrealized appreciation is $24,440,164, and the
aggregate gross unrealized depreciation is $34,165,402, resulting in net
unrealized depreciation of $9,725,238.
(b) Restricted security.
(c) Non-income producing security, as this stock currently does not declare
dividends.
(d) This Senior Loan Interest is non-income producing.
(e) Payment-in-kind security.
(f) In August, 1996, this Borrower filed for protection in federal bankruptcy
court and as a result has become a non-income producing Senior Loan
interest.
(g) This Borrower has filed for protection in federal bankruptcy court.
* Senior Loans in the Trust's portfolio generally are subject to mandatory
and/or optional prepayment. Because of these mandatory prepayment conditions
and because there may be significant economic incentives for a Borrower to
prepay, prepayments of Senior Loans in the Trust's portfolio may occur. As a
result, the actual remaining maturity of Senior Loans held in the Trust's
portfolio may be substantially less than the stated maturities shown.
Although the Trust is unable to accurately estimate the actual remaining
maturity of individual Senior Loans, the Trust estimates that the actual
average maturity of the Senior Loans held in its portfolio will be
approximately 18-24 months.
** Senior Loans in which the Trust invests generally pay interest at rates
which are periodically redetermined by reference to a base lending rate plus
a premium. These base lending rates are generally (i) the prime rate offered
by one or more major United States banks, (ii) the lending rate offered by
one or more major European banks, such as the London Inter-Bank Offered Rate
("LIBOR") and (iii) the certificate of deposit rate. Senior loans are
generally considered to be restricted in that the Trust ordinarily is
contractually obligated to receive approval from the Agent Bank and/or
borrower prior to the disposition of a Senior Loan.
See Notes to Financial Statements
A-9
<PAGE> 27
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1996
All amounts, except for Net Asset Value information, reported in thousands
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at Market Value (Cost $4,388,796) (Note 1)........................ $4,382,483
Short-Term Investments (Note 1)................................................ 465,855
Receivables:
Interest and Fees............................................................ 34,523
Fund Shares Sold............................................................. 16,612
Investments Sold............................................................. 44
Other.......................................................................... 53
----------
Total Assets............................................................... 4,899,570
----------
LIABILITIES:
Deferred Facility Fees......................................................... 20,716
Payables:
Income Distributions......................................................... 5,672
Investment Advisory Fee (Note 2)............................................. 3,862
Administrative Fee (Note 2).................................................. 1,026
Custodian Bank............................................................... 557
Distributor and Affiliates (Note 2).......................................... 353
Accrued Expenses............................................................... 1,555
Deferred Compensation and Retirement Plans (Note 2)............................ 45
----------
Total Liabilities.......................................................... 33,786
----------
NET ASSETS..................................................................... $4,865,784
==========
NET ASSETS CONSIST OF:
Common Shares ($.01 par value with an unlimited number of shares authorized,
486,490,317 shares issued and outstanding) (Note 3).......................... $ 4,865
Paid in Surplus (Note 3)....................................................... 4,872,393
Accumulated Undistributed Net Investment Income................................ 2,875
Net Unrealized Depreciation on Investments..................................... (6,313)
Accumulated Net Realized Loss on Investments................................... (8,036)
----------
NET ASSETS..................................................................... $4,865,784
==========
NET ASSET VALUE PER COMMON SHARE
($4,865,784,178 divided by 486,490,317 shares outstanding)................... $ 10.00
==========
</TABLE>
See Notes to Financial Statements
A-10
<PAGE> 28
STATEMENT OF OPERATIONS
For the Year Ended July 31, 1996
All amounts reported in thousands
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest...................................................................... $311,378
Fees.......................................................................... 24,771
Other......................................................................... 1,992
--------
Total Income.............................................................. 338,141
--------
EXPENSES:
Investment Advisory Fee (Note 2).............................................. 36,408
Administrative Fee (Note 2)................................................... 9,615
Shareholder Services (Note 2)................................................. 4,708
Legal (Note 2)................................................................ 1,281
Trustee Fees and Expenses (Note 2)............................................ 35
Other......................................................................... 4,125
--------
Total Expenses............................................................ 56,172
--------
NET INVESTMENT INCOME......................................................... $281,969
========
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Net Realized Gain on Investments.............................................. $ 542
--------
Unrealized Appreciation/Depreciation on Investments:
Beginning of the Period..................................................... 8,637
End of the Period........................................................... (6,313)
--------
Net Unrealized Depreciation on Investments During the Period.................. (14,950)
--------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS............................... $(14,408)
========
NET INCREASE IN NET ASSETS FROM OPERATIONS.................................... $267,561
========
</TABLE>
See Notes to Financial Statements
A-11
<PAGE> 29
STATEMENT OF CHANGES IN NET ASSETS
For the Years Ended July 31, 1996 and 1995
All amounts reported in thousands
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
July 31, 1996 July 31, 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
Net Investment Income................................................ $ 281,969 $ 137,069
Net Realized Gain/Loss on Investments................................ 542 (5,468)
Net Unrealized Appreciation/Depreciation on Investments
During the Period.................................................. (14,950) 2,107
----------- -----------
Change in Net Assets from Operations................................. 267,561 133,708
Distributions from Net Investment Income............................. (283,580) (133,994)
----------- -----------
NET CHANGE IN NET ASSETS FROM INVESTMENT ACTIVITIES.................. (16,019) (286)
----------- -----------
FROM CAPITAL TRANSACTIONS (NOTES 3 AND 5):
Proceeds from Common Shares Sold..................................... 2,551,158 1,349,284
Value of Shares Issued Through Dividend Reinvestment................. 155,100 74,961
Cost of Shares Repurchased........................................... (354,520) (122,898)
----------- -----------
NET CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS................... 2,351,738 1,301,347
----------- -----------
TOTAL INCREASE IN NET ASSETS......................................... 2,335,719 1,301,061
NET ASSETS:
Beginning of the Period.............................................. 2,530,065 1,229,004
----------- -----------
End of the Period (Including undistributed net investment income
of $2,875 and $6,627, respectively)................................ $ 4,865,784 $ 2,530,065
=========== ===========
</TABLE>
See Notes to Financial Statements
A-12
<PAGE> 30
STATEMENT OF CASH FLOWS
For the Year Ended July 31, 1996
All amounts reported in thousands
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CHANGE IN NET ASSETS FROM OPERATIONS.......................................... $ 267,561
-----------
Adjustments to Reconcile the Change in Net Assets from
Operations to Net Cash Provided by Operating Activities:
Increase in Investments at Value............................................ (2,382,924)
Increase in Interest and Fees Receivables................................... (18,282)
Increase in Other Assets.................................................... (53)
Increase in Receivable for Investments Sold................................. (44)
Decrease in Short-Term Investments at Amortized Cost........................ 29,860
Increase in Deferred Facility Fees.......................................... 3,711
Increase in Investment Advisory and Administrative Fees Payable............. 2,411
Increase in Accrued Expenses................................................ 469
Increase in Distributor and Affiliates Payable.............................. 251
Increase in Deferred Compensation and Retirement Plans Expenses............. 26
-----------
Total Adjustments......................................................... (2,364,575)
-----------
NET CASH USED FOR OPERATING ACTIVITIES........................................ (2,097,014)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES (NOTES 3 AND 5):
Proceeds from Shares Sold..................................................... 2,566,669
Payments on Shares Repurchased................................................ (354,528)
Increase in Intra-day Credit Line............................................. 557
Cash Dividends Paid........................................................... (126,019)
-----------
Net Cash Provided by Financing Activities................................... 2,086,679
-----------
NET DECREASE IN CASH.......................................................... (10,335)
Cash at Beginning of the Period............................................... 10,335
-----------
CASH AT END OF THE PERIOD..................................................... $ -0-
===========
</TABLE>
See Notes to Financial Statements
A-13
<PAGE> 31
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for one common share
of the Trust outstanding throughout the periods indicated.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended July 31
--------------------------------------------------------
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of the Period......................... $ 10.046 $ 10.052 $ 10.004 $ 9.998 $ 9.985
-------- -------- -------- -------- --------
Net Investment Income.......................................... .735 .756 .618 .600 .698
Net Realized and Unrealized Gain/Loss on Investments........... (.028) (.004) .015 .008 .004
-------- -------- -------- -------- --------
Total from Investment Operations................................. .707 .752 .633 .608 .702
-------- -------- -------- -------- --------
Less:
Distributions from Net Investment Income....................... .751 .758 .585 .600 .689
Distributions in Excess of Net Investment Income (Note 1)...... -0- -0- -0- .002 -0-
-------- -------- -------- -------- --------
Total Distributions.............................................. .751 .758 .585 .602 .689
-------- -------- -------- -------- --------
Net Asset Value, End of the Period............................... $ 10.002 $ 10.046 $ 10.052 $ 10.004 $ 9.998
======== ======== ======== ======== ========
Total Return (a)................................................. 7.22% 7.82% 6.52% 6.17% 7.25%
Net Assets at End of the Period (In millions).................... $4,865.8 $2,530.1 $1,229.0 $ 966.7 $ 928.3
Ratio of Expenses to Average Net Assets.......................... 1.46% 1.49% 1.53% 1.53% 1.55%
Ratio of Net Investment Income to Average Net Assets............. 7.33% 7.71% 6.16% 5.96% 6.98%
Portfolio Turnover (b)........................................... 66% 71% 74% 67% 59%
</TABLE>
(a) Total return is based upon net asset value which does not include payment of
the contingent deferred sales charge.
(b) Calculation includes the proceeds from repayments and sales of variable rate
senior loan interests.
See Notes to Financial Statements
A-14
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Van Kampen American Capital Prime Rate Income Trust (the "Trust") is registered
as a non-diversified closed-end management investment company under the
Investment Company Act of 1940, as amended. The Trust's investment objective is
to provide a high level of current income, consistent with preservation of
capital. The Trust seeks to achieve its objective by investing primarily in a
portfolio of interests in floating or variable rate senior loans to United
States corporations, partnerships and other entities. The Trust commenced
investment operations on October 4, 1989.
The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
A. SECURITY VALUATION--The value of the Trust's Variable Rate Senior Loan
interests, totaling $4,357,645,025 (89.5% of net assets) is determined in the
absence of actual market values by Van Kampen American Capital Investment
Advisory Corp. (the "Adviser") following guidelines and procedures established,
and periodically reviewed, by the Board of Trustees. The value of a Variable
Rate Senior Loan interest in the Trust's portfolio is determined with reference
to changes in market interest rates and to the creditworthiness of the
underlying obligor. In valuing Variable Rate Senior Loan interests, the Adviser
considers market quotations and transactions in instruments that the Adviser
believes may be comparable to such Variable Rate Senior Loan interests. In
determining the relationship between such instruments and the Variable Rate
Senior Loan interests, the Adviser considers such factors as the
creditworthiness of the underlying obligor, the current interest rate, the
interest rate redetermination period and maturity date. To the extent that
reliable market transactions in Variable Rate Senior Loan interests have
occurred, the Adviser also considers pricing information derived from such
secondary market transactions in valuing Variable Rate Senior Loan interests.
Because of uncertainly inherent in the valuation process, the estimated value of
a Variable Rate Senior Loan interest may differ significantly from the value
that would have been used had there been market activity for that Variable Rate
Senior Loan interest. Equity securities are valued on the basis of prices
furnished by pricing services or as determined in good faith by the Adviser.
Short-term securities are valued at amortized cost.
B. SECURITY TRANSACTIONS--Investment transactions are recorded on a trade date
basis. Realized gains and losses are determined on an identified cost basis.
C. INVESTMENT INCOME--Interest income is recorded on an accrual basis. Facility
fees received are recognized as income ratably over the expected life of the
loan. Market premiums and discounts are amortized over the stated life of each
applicable security.
A-15
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
D. FEDERAL INCOME TAXES--It is the Trust's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Therefore, no provision for federal income taxes is required.
The Trust intends to utilize provisions of the federal income tax laws
which allow it to carry a realized capital loss forward for eight years
following the year of the loss and offset such losses against any future
realized capital gains. At July 31, 1996, the Trust had an accumulated capital
loss carryforward for tax purposes of $4,507,275, which will expire on July 31,
2004. Net realized gains or losses may differ for financial and tax reporting
purposes primarily as a result of post October 31 losses which are not
recognized for tax purposes until the first day of the following fiscal year.
E. DISTRIBUTION OF INCOME AND GAINS--The Trust declares daily and pays monthly
dividends from net investment income. Net realized gains, if any, are
distributed annually.
Permanent book and tax basis differences relating to the recognition of
expenses totaling $26,779 have been reclassified from paid in surplus to
undistributed net investment income. Additionally, $2,168,429, representing
permanent differences related to the recognition of income on certain
investments between book and tax reporting purposes was reclassified from
undistributed net investment income to accumulated net realized gain on
investments.
2. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the Trust's Investment Advisory Agreement, the Adviser will
provide investment advice and facilities to the Trust for an annual fee payable
monthly as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS % PER ANNUM
- ------------------------------------------------------------------------------
<S> <C>
First $4.0 billion............................................. .950 of 1%
Next $3.5 billion.............................................. .900 of 1%
Next $2.5 billion.............................................. .875 of 1%
Over $10.0 billion............................................. .850 of 1%
</TABLE>
In addition, the Trust will pay a monthly administrative fee to Van
Kampen American Capital Distributors, Inc., the Trust's Administrator, at an
annual rate of .25% of the average net assets of the Trust. The administrative
services to be provided by the Administrator include monitoring the provisions
of the loan agreements and any agreements with respect to participations and
assignments, record keeping responsibilities with respect to interests in
Variable Rate Senior Loans in the Trust's portfolio and providing certain
services to the holders of the Trust's securities.
Certain legal expenses are paid to Skadden, Arps, Slate, Meagher & Flom,
counsel to the Trust, of which a trustee of the Trust is an affiliated person.
For the year ended July 31, 1996, the Trust recognized expenses of
approximately $38,800 representing the Administrator's or its affiliates'
(collectively "VKAC") cost of providing legal services to the Trust.
A-16
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
ACCESS Investor Services, Inc. ("ACCESS"), an affiliate of the Adviser,
serves as the shareholder servicing agent of the Trust. For the year ended July
31, 1996, the Fund recognized expenses of approximately $3,848,300, representing
ACCESS' cost of providing transfer agency and shareholder services plus a
profit.
Certain officers and trustees of the Trust are also officers and
directors of VKAC. The Fund does not compensate its officers or trustees who are
officers of VKAC.
The Trust has implemented deferred compensation and retirement plans for
its trustees. Under the deferred compensation plan, trustees may elect to defer
all or a portion of their compensation to a later date. The retirement plan
covers those trustees who are not officers of VKAC.
3. CAPITAL TRANSACTIONS
At July 31, 1996 and 1995, paid in surplus aggregated $4,872,393,497 and
$2,523,028,402, respectively.
Transactions in common shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1996 JULY 31, 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Beginning Shares.................................... 251,848,949 122,267,677
------------ ------------
Shares Sold......................................... 254,577,948 134,357,255
Shares Issued Through Dividend Reinvestment......... 15,483,081 7,465,118
Shares Repurchased.................................. (35,419,661) (12,241,101)
------------ ------------
Net Increase in Shares Outstanding.................. 234,641,368 129,581,272
------------ ------------
Ending Shares....................................... 486,490,317 251,848,949
============ ============
</TABLE>
4. INVESTMENT TRANSACTIONS
During the period, the cost of purchases and proceeds from investments sold and
repaid, excluding short-term investments, for the year ended July 31, 1996, were
$4,564,819,045 and $2,168,339,118, respectively.
5. TENDER OF SHARES
The Board of Trustees currently intends, each quarter, to consider authorizing
the Trust to make tender offers for all or a portion of its then outstanding
common shares at the then net asset value of the common shares. For the year
ended July 31, 1996, 35,419,661 shares were tendered and repurchased by the
Trust.
A-17
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
6. EARLY WITHDRAWAL CHARGE
An early withdrawal charge to recover offering expenses will be imposed in
connection with most common shares held for less than five years which are
accepted by the Trust for repurchase pursuant to tender offers. The early
withdrawal charge will be payable to VKAC. Any early withdrawal charge which is
required to be imposed will be made in accordance with the following schedule.
<TABLE>
<CAPTION>
YEAR OF REPURCHASE WITHDRAWAL CHARGE
- ---------------------------------------------------------------------------
<S> <C>
First.................................................. 3.0%
Second................................................. 2.5%
Third.................................................. 2.0%
Fourth................................................. 1.5%
Fifth.................................................. 1.0%
Sixth and following.................................... 0.0%
</TABLE>
For the year ended July 31, 1996, VKAC received early withdrawal charges
of approximately $5,721,300 in connection with tendered shares of the Trust.
7. COMMITMENTS
Pursuant to the terms of certain of the Variable Rate Senior Loan agreements,
the Trust had unfunded loan commitments of approximately $472,375,400 as of July
31, 1996. The Trust generally will maintain with its custodian short-term
investments having an aggregate value at least equal to the amount of unfunded
loan commitments.
The Trust has entered into revolving credit agreements with Morgan
Guaranty Trust Company of New York, Bank of America and State Street Bank and
Trust Company for an aggregate of $150,000,000. The proceeds of any borrowing by
the Trust under the revolving credit agreements may only be used, directly or
indirectly, for liquidity purposes in connection with the consummation of a
tender offer by the Trust for its shares. Annual commitment fees under each
facility of 1/10 of 1% are charged on the unused portion of the credit lines.
Borrowings under these facilities will bear interest at either the banks' prime
rate or the Federal Funds rate plus 1/4 to 1/2 of 1%. There have been no
borrowings under these agreements to date.
A-18
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
July 31, 1996
- --------------------------------------------------------------------------------
8. SENIOR LOAN PARTICIPATION COMMITMENTS
The Trust invests primarily in participations, assignments, or acts as a party
to the primary lending syndicate of a Variable Rate Senior Loan interest to
United States corporations, partnerships, and other entities. When the Trust
purchases a participation of a Senior Loan interest, the Trust typically enters
into a contractual agreement with the lender or other third party selling the
participation, but not with the borrower directly. As such, the Trust assumes
the credit risk of the Borrower, Selling Participant or other persons
interpositioned between the Trust and the Borrower.
At July 31, 1996, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Trust on a participation
basis.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SELLING PARTICIPANT (000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
Bankers Trust......................................... $213,651 $214,095
Pearl Street L.P...................................... 51,632 52,040
NationsBank........................................... 33,002 33,072
Canadian Imperial Bank of Commerce.................... 29,883 29,923
Merrill Lynch Capital Corp............................ 22,273 22,431
Mellon Bank........................................... 20,000 20,020
Chase Securities Inc.................................. 18,007 18,000
Natwest USA........................................... 9,697 9,697
G. E. Capital Corp.................................... 7,467 7,499
ABN AMRO.............................................. 5,000 5,041
Citibank.............................................. 4,182 4,182
FNB Canada............................................ 3,281 1,968
-------- --------
Total................................................. $418,075 $417,968
======== ========
</TABLE>
A-19
<PAGE> 1
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
REGARDING COMMON SHARES
OF
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
TENDERED PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 19, 1996
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT EASTERN STANDARD
TIME ON JANUARY 17, 1997, UNLESS THE OFFER IS EXTENDED
Ladies and Gentlemen:
The undersigned hereby tenders to the Van Kampen American Capital
Prime Rate Income Trust, a non-diversified, closed-end management
investment company organized as a Massachusetts business trust (the
"Trust"), the common shares of beneficial interest, par value $.01 per
share, of the Trust (the "Common Shares") described below in Box No. 1, at
a price (the "Purchase Price") equal to the net asset value per Common
Share ("NAV") determined as of 5:00 P.M. Eastern Standard time on the
Expiration Date (as defined in the Offer to Purchase), upon the terms and
conditions set forth in the Offer to Purchase, dated December 19, 1996,
receipt of which is hereby acknowledged, and in this Letter of Transmittal
and the Instructions hereto (which together constitute the "Offer"). An
Early Withdrawal Charge (as defined in the Offer to Purchase) will be
imposed on most Common Shares accepted for payment which have been held for
less than five years.
Subject to and effective upon acceptance for payment of the Common
Shares tendered hereby in accordance with the terms of the Offer
(including, if the Offer is extended or amended, the terms or conditions of
any such extension or amendment), the undersigned hereby sells, assigns and
transfers to or upon the order of the Trust all right, title and interest
in and to all Common Shares tendered hereby that are purchased pursuant to
the Offer and hereby irrevocably constitutes and appoints ACCESS Investor
Services, Inc. (the "Depositary") as attorney-in-fact of the undersigned
with respect to such Common Shares, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (a) deliver certificates for such Common Shares or transfer
ownership of such Common Shares on the Trust's books, together in either
such case with all accompanying evidences of transfer and authenticity, to
or upon the order of the Trust, upon receipt by the Depositary, as the
undersigned's agent, of the NAV per Common Share with respect to such
Common Shares; (b) present certificates for such Common Shares, if any, for
cancellation and transfer on the Trust's books; (c) deduct from the
Purchase Price deposited with the Depositary any applicable Early
Withdrawal Charge and remit such charge to Van Kampen American Capital
Distributors, Inc.; and (d) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Common Shares, subject to the next
paragraph, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that: (a) the
undersigned has a "net long position" in the Common Shares tendered hereby
within the meaning of Rule 14e-4 promulgated under the Securities Act of
1934, as amended, and has full power and authority to validly tender, sell,
assign and transfer the Common Shares tendered hereby; (b) when and to the
extent the Trust accepts the Common Shares for purchase, the Trust will
acquire good, marketable and unencumbered title to them, free and clear of
all security interests, liens, charges, encumbrances, conditional sales
agreements or other obligations relating to their sale or transfer, and not
subject to any adverse claim; (c) on request, the undersigned will execute
and deliver any additional documents the Depositary or the Trust deems
necessary or desirable to complete the assignment, transfer and purchase of
the Common Shares tendered hereby; and (d) the undersigned has read and
agrees to all of the terms of this Offer.
The names and addresses of the registered owners should be printed, if
they are not already printed, in Box 1 as they appear on the registration
of the Common Shares. The number of Common Shares that the undersigned
wishes to tender should be indicated in Box No. 1, which number may be
determined by indicating in Option B of such box the dollar amount of
proceeds the undersigned desires to receive pursuant to the tender offer
after any applicable Early Withdrawal Charge has been deducted from such
proceeds. The undersigned may elect to receive, in lieu of cash, Class B
Shares of certain open-end investment companies advised by either Van
Kampen American Capital Investment Advisory Corp. or Van Kampen American
Capital Asset Management, Inc. and distributed by Van Kampen American
Capital Distributors, Inc. by indicating in Option C. If the Common Shares
tendered hereby are in certificate form, the certificates representing such
Common Shares must be returned together with this Letter of Transmittal.
The undersigned recognizes that under certain circumstances set forth
in the Offer to Purchase, the Trust may terminate or amend the Offer or may
not be required to purchase any of the Common Shares tendered hereby. In
any such event, the undersigned understands that certificate(s) for any
Common Shares not purchased, if any, will be returned to the undersigned at
the address indicated below in Box No. 1 unless otherwise indicated under
the Special Payment and Delivery Instructions in Box No. 2.
The undersigned understands that acceptance of Common Shares by the
Trust for payment will constitute a binding agreement between the
undersigned and the Trust upon the terms and subject to the conditions of
the Offer.
The check for the Purchase Price of the tendered Common Shares
purchased, minus any applicable Early Withdrawal Charge, will be issued to
the order of the undersigned and mailed to the address indicated below in
Box No. 1, unless otherwise indicated below in Box No. 2. Shareholders
tendering Common Shares shall be entitled to receive all dividends declared
on or before the third business day following the Expiration Date, but not
yet paid, on Common Shares tendered pursuant to the Offer. The Trust will
not pay interest on the Purchase Price under any circumstances.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and all obligations of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Except as
stated in the Offer, this tender is irrevocable.
DELIVERY TO AN ADDRESS OTHER THAN THAT SHOWN BELOW DOES NOT CONSTITUTE
VALID DELIVERY.
SEND TO: ACCESS INVESTOR SERVICES, INC., Depositary
<TABLE>
<S> <C>
By Regular Mail, By, Certified, Registered,
ACCESS Investor Services, Inc. Overnight Mail or Courier
P.O. Box 419511 ACCESS Investor Services, Inc.
Kansas City, MO 64141-6511 7501 Tiffany Springs Parkway
Attn: Van Kampen American Capital Kansas City, MO 64153
Prime Rate Income Trust Tender Attn: Van Kampen American Capital
Prime Rate Income Trust Tender
</TABLE>
FOR ADDITIONAL INFORMATION CALL:
(800) 341-2911
29 PRT004-12/96
<PAGE> 2
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY IF THE COMMON SHARES TO
BE TENDERED ARE REGISTERED IN THE SHAREHOLDER'S NAME AND THE NECESSARY
DOCUMENTS WILL BE TRANSMITTED TO THE DEPOSITARY BY THE SHAREHOLDER OR HIS
BROKER, DEALER OR OTHER SELLING GROUP MEMBER. DO NOT USE THIS FORM IF A
BROKER, DEALER OR OTHER SELLING GROUP MEMBER IS THE REGISTERED OWNER OF THE
COMMON SHARES AND IS EFFECTING THE TRANSACTION FOR THE SHAREHOLDER.
IF THE COMMON SHARES TENDERED HEREBY ARE IN CERTIFICATE FORM, THE
CERTIFICATES REPRESENTING SUCH COMMON SHARES MUST BE RETURNED TOGETHER WITH
THIS LETTER OF TRANSMITTAL. PLEASE NOTE THAT WE SUGGEST THAT SUCH
CERTIFICATES BE RETURNED VIA CERTIFIED OR REGISTERED MAIL.
TO ENSURE PROCESSING OF YOUR REQUEST, THIS LETTER OF TRANSMITTAL OR A
MANUALLY SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR COMMON
SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY
ON OR BEFORE THE EXPIRATION DATE (JANUARY 17, 1997).
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BOX NO. 1: SHAREHOLDER INFORMATION
- ----------------------------------------------------------------------------------------------------------
Name and Address of Registered Owner Shareholder Information
- ----------------------------------------------------------------------------------------------------------
PLEASE PROVIDE: Social Security No.
-------
Confirm No.
-------
(if applicable)
ACCOUNT NO.:
- ----------------------------------------------------------------------------------------------------------
</TABLE>
CHECK ONE OF THE FOLLOWING AND FILL IN THE APPROPRIATE AMOUNT
OPTION A: [ ] I hereby tender __________ COMMON SHARES of the Trust. I
understand that an Early Withdrawal Charge will be
imposed on most Common Shares accepted for payment that
have been held for less than five years and that such
charge, if any, will be deducted from the proceeds from
such Common Shares. (See Instruction 3 and 4(f)).
OPTION B: [ ] I hereby tender that certain number of Common Shares of
the Trust necessary to receive $__________ from the
Trust after the Early Withdrawal Charge, if any, has
been deducted from the proceeds from such Common Shares.
(See Instruction 3 and 4(f)).
OPTION C: [ ] I hereby tender __________ Common Shares of the Trust
and, in lieu of cash, elect to have the proceeds from
such tender EXCHANGED for Class B Shares of Van Kampen
American Capital __________ Fund Acct. No. __________
(if applicable). (See Instruction 3).
- --------------------------------------------------------------------------------
PLEASE NOTE: If the account indicated by the account number in this
Box No. 1 is a Van Kampen American Capital fiduciary IRA account, an
IRA distribution form MUST be submitted with this Letter of
Transmittal.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
BOX NO. 2: SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 2, 3 AND 4)
- ------------------------------------------------------------------------------------------------------------------
To be completed ONLY if certificates for Common Shares not tendered or not purchased and/or any checks are
to be sent or wired to someone other than the undersigned or are to be sent to the undersigned at an
address other than that shown above in Box No. 1. A SIGNATURE GUARANTEE IS REQUIRED IF THIS PORTION IS
COMPLETED.
- ------------------------------------------------------------------------------------------------------------------
Wire Proceeds To: [ ] Checking [ ] Savings
(Minimum $5,000 to be wired)
Bank
(NAME)
Mail: [ ] Check [ ] Certificates to:
Address
Name(s)
(PLEASE PRINT) ABA Routing No.
Address Account No.
(SHAREHOLDER'S BANK ACCOUNT NO.)
PLEASE ATTACH A VOIDED CHECK OR DEPOSIT SLIP IF
(INCLUDE ZIP CODE) POSSIBLE.
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
BOX NO. 3: SIGNATURES (SEE INSTRUCTIONS 2, 3 AND 4)
- --------------------------------------------------------------------------------
A. By signing this Letter of Transmittal, you represent that you have
read the letter printed on the other side of this page and the
Instructions enclosed herewith, which Instructions form part of the
terms and conditions of the Offer.
B. This Letter of Transmittal must be signed by the registered owner(s)
of the Common Shares tendered hereby or by person(s) authorized to
become registered owner(s) by documents transmitted herewith. If
signature is by attorney-in-fact, executor, administrator, trustee,
guardian, officer of a corporation or another acting in a fiduciary
or representative capacity, please set forth the full title and
include the required legal documents. (See Instruction 4)
C. Your signature MUST BE GUARANTEED and you MUST complete the
signature guarantee in this Box No. 3 if (i) the value of the Common
Shares tendered herewith pursuant to the OFFER IS GREATER THAN
$50,000, (ii) this LETTER OF TRANSMITTAL IS SIGNED BY SOMEONE OTHER
THAN THE REGISTERED HOLDER OF THE COMMON SHARES TENDERED HEREWITH,
or (iii) you REQUEST PAYMENT FOR THE COMMON SHARES TENDERED HEREWITH
TO BE SENT TO A PERSON OTHER THAN THE REGISTERED OWNER OF SUCH
Common Shares for the benefit of such owner(s) and/or TO AN ADDRESS
OTHER THAN THE REGISTERED ADDRESS OF THE REGISTERED OWNER of the
Common Shares. For information with respect to what constitutes an
acceptable guarantee, please see Instruction 4(f).
D. See Instruction 8 and Form W-9 enclosed herewith regarding backup
withholding.
.........................................................................
(SIGNATURE(S) OF OWNER(S) EXACTLY AS REGISTERED)
Dated
................................................, 19....
DAYTIME TELEPHONE NUMBER ( ) ....................................
SIGNATURE GUARANTEE (IF
APPLICABLE):
...............................
Bank Name
...............................
Print Name of Authorized Signer
Telephone Number ( ) ... (Affix signature guarantee stamp above if
required)
- --------------------------------------------------------------------------------
<PAGE> 3
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used only if the Common Shares to be tendered are
registered in the shareholder's name and the necessary documents will be
transmitted to the Depositary by the shareholder or his broker, dealer or other
selling group member. Do not use this form if a broker, dealer or other selling
group member is the registered owner of the Common Shares and is effecting the
transaction for the shareholder. A PROPERLY COMPLETED AND DULY EXECUTED LETTER
OF TRANSMITTAL OR MANUALLY SIGNED FACSIMILE OF IT, ANY CERTIFICATES REPRESENTING
COMMON SHARES TENDERED AND ANY OTHER DOCUMENTS REQUIRED BY THIS LETTER OF
TRANSMITTAL SHOULD BE MAILED OR DELIVERED TO THE DEPOSITARY AT THE ADDRESS SET
FORTH IN THIS LETTER OF TRANSMITTAL AND MUST BE RECEIVED BY THE DEPOSITARY ON OR
PRIOR TO THE EXPIRATION DATE (JANUARY 17, 1997).
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR COMMON
SHARES, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS
BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
THE TRUST WILL NOT ACCEPT ANY ALTERNATIVE, CONDITIONAL OR CONTINGENT
TENDERS. ALL TENDERING SHAREHOLDERS, BY EXECUTION OF THIS LETTER OF TRANSMITTAL
(OR A MANUALLY SIGNED FACSIMILE OF IT), WAIVE ANY RIGHT TO RECEIVE ANY NOTICE OF
THE ACCEPTANCE OF THEIR TENDER.
2. COMPLETING THIS LETTER OF TRANSMITTAL. If you intend to tender any
Common Shares pursuant to the Offer, please complete the Letter of Transmittal
as follows:
(a) Read the Letter of Transmittal in its entirety. By signing the
Letter of Transmittal in Box No. 3, you agree to its terms.
(b) Complete Box No. 1 by providing your Social Security Number, a
Confirm Number, if applicable, and selecting and completing either Option
A, Option B or Option C.
(c) Complete Box No. 2 if certificates for Common Shares not tendered
or not purchased and/or any check issued in the name of a person other than
the signer of the Letter of Transmittal are to be sent or wired to someone
other than such signer or to the signer at an address other than that shown
in Box No. 1.
(d) Complete Box No. 3 in accordance with Instruction 4 set forth
below.
3. PARTIAL TENDERS, UNPURCHASED SHARES AND EXCHANGES. If fewer than all of
the Common Shares evidenced by any certificate submitted are to be tendered and
if any tendered Common Shares are purchased, a new certificate for the remainder
of the Common Shares evidenced by your old certificate(s) will be issued and
sent to the registered owner, unless otherwise specified in Box No. 2 of this
Letter of Transmittal, as soon as practicable after the Expiration Date of the
Offer.
Tendering shareholders who elect to receive, in lieu of cash, the proceeds
from the tender of Common Shares of the Trust in exchange for Class B Shares of
certain open-end investment companies advised by either Van Kampen American
Capital Investment Advisory Corp. or Van Kampen American Capital Asset
Management, Inc. and distributed by Van Kampen American Capital Distributors,
Inc. should select and complete Option C. The Early Withdrawal Charge will be
waived for Common Shares tendered in exchange for shares in such funds. Such
shares may be subject to a contingent deferred sales charge upon a subsequent
redemption from the exchanged fund.
4. SIGNATURES ON LETTER OF TRANSMITTAL, AUTHORIZATIONS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered owner(s)
of the Common Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) in which the Common Shares are registered.
(b) If the Common Shares are held of record by two or more joint
owners, each such owner must sign this Letter of Transmittal.
(c) If any tendered Common Shares are registered in different names,
it will be necessary to complete, sign and submit as many separate Letters
of Transmittal (or manually signed facsimiles of it) as there are different
registrations of Common Shares.
(d) When this Letter of Transmittal is signed by the registered
owner(s) of the Common Shares listed and transmitted hereby, no
endorsements of any certificate(s) representing such Common Shares or
separate authorizations are required. If, however, payment is to be made to
a person other than the registered owner(s), any unpurchased Common Shares
are to be registered in the name of any person other than the registered
owner(s) or any certificates for unpurchased Common Shares are to be issued
to a person other than the registered owner(s), then the Letter of
Transmittal and, if applicable, the certificate(s) transmitted hereby, must
be endorsed or accompanied by appropriate authorizations, in either case
signed exactly as such name(s) appear on the registration of the Common
Shares and on the face of the certificate(s) and such endorsements or
authorizations must be guaranteed by an institution described in Box No. 3.
(e) If this Letter of Transmittal or any certificates or
authorizations are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in
a fiduciary or representative capacity, such persons should so indicate
when signing and must submit proper evidence satisfactory to the Trust of
their authority so to act.
(f) Your signature MUST be guaranteed and you MUST complete the
signature guarantee in Box No. 3 if (i) the value of the Common Shares
tendered herewith pursuant to the Offer is greater than $50,000, (ii) this
Letter of Transmittal is signed by someone other than the registered holder
of the Common Shares tendered herewith, or (iii) you request payment for
the Common Shares tendered herewith to be sent to a payee other than the
registered owner of such Common Shares and/or to an address other than the
registered address of the registered owner of the Common Shares. An
acceptable guarantee is one made by a commercial bank or trust company
having an office, branch or agency in the United States, a member firm of a
registered national securities exchange, a credit union or a savings
association. The guarantee must state the words "Signature Guaranteed"
along with the name of the granting institution. Shareholders should verify
with the institution that it is an eligible guarantor prior to signing. A
guarantee from a notary public is not acceptable.
29 PRT005-12/96
<PAGE> 4
5. TRANSFER TAXES. The Trust will pay all share transfer taxes, if any,
payable on the transfer to it of Common Shares purchased pursuant to the Offer.
If, however, (a) payment of the Purchase Price is to be made to any person other
than the registered owner(s), (b) (in the circumstances permitted by the Offer)
unpurchased Common Shares are to be registered in the name(s) of any person
other than the registered owner(s) or (c) tendered certificates are registered
in the name(s) of any person other than the person(s) signing this Letter of
Transmittal, the amount of any transfer taxes (whether imposed on the registered
owner(s) or such other persons) payable on account of the transfer to such
person(s) will be deducted from the Purchase Price by the Depositary unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted.
6. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Common Shares will
be determined by the Trust in its sole discretion, whose determination shall be
final and binding on all parties. The Trust reserves the absolute right to
reject any or all tenders determined by it not to be in appropriate form or the
acceptance of or payment for any Common Shares which may, in the opinion of the
Trust's counsel, be unlawful. The Trust also reserves the absolute right to
waive any of the conditions of the Offer or any defect or irregularity in tender
of any particular Common Shares or any particular shareholder, and the Trust's
interpretations of the terms and conditions of the Offer (including these
Instructions) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as the Trust shall determine. Tendered Common Shares will not be accepted
for payment unless all defects and irregularities have either been cured within
such time or waived by the Trust. None of the Trust, Van Kampen American Capital
Distributors, Inc., the Depositary, or any other person shall be obligated to
give notice of defects or irregularities in tenders, nor shall any of them incur
any liability for failure to give any such notice.
7. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, and additional copies of the
Offer to Purchase and this Letter of Transmittal may be obtained from Van Kampen
American Capital Distributors, Inc. located at One Parkview Plaza, Oakbrook
Terrace, IL 60181, or by telephoning (800) 341-2911.
8. FORM W-9. Each tendering shareholder who has not already submitted a
completed and signed Form W-9 to the Trust is required to provide the Depositary
with a correct taxpayer identification number ("TIN") on Form W-9 which is
enclosed herewith. Failure to provide the information on the form may subject
the tendering shareholder to 31% federal income tax withholding on the payments
made to the shareholder or other payee with respect to Common Shares purchased
pursuant to the Offer.
9. WITHHOLDING ON FOREIGN SHAREHOLDERS. The Depositary will withhold
federal income taxes equal to 30% of the gross payments payable to a foreign
shareholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. For this purpose, a foreign
shareholder is any shareholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or (iii) any estate or trust the income of which is subject to United
States federal income taxation regardless of the source of such income. The
Depositary will determine a shareholder's status as a foreign shareholder and
eligibility for a reduced rate of, or an exemption from, withholding by
reference to the shareholder's address and to any outstanding certificates or
statements concerning eligibility for a reduced rate of, or exemption from,
withholding unless facts and circumstances indicate that reliance is not
warranted. A foreign shareholder who has not previously submitted the
appropriate certificates or statements with respect to a reduced rate of, or an
exemption from, withholding for which such shareholder may be eligible should
consider doing so in order to avoid overwithholding. A foreign shareholder may
be eligible to obtain a refund of tax withheld if such shareholder meets one of
the three tests for capital gain or loss treatment described in Section 15 of
the Offer to Purchase or is otherwise able to establish that no tax or a reduced
amount of tax was due.
IMPORTANT: THE LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT
(TOGETHER WITH ANY CERTIFICATES FOR COMMON SHARES AND ALL OTHER REQUIRED
DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE.
<PAGE> 1
EXHIBIT (a)(3)(i)
OFFER BY
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
TO PURCHASE 37,943,144
OF ITS COMMON SHARES AT
NET ASSET VALUE PER COMMON SHARE
December 19, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and other Nominees:
Pursuant to your request, we are enclosing herewith the material listed
below relating to the offer of Van Kampen American Capital Prime Rate Income
Trust (the "Trust") to purchase up to 37,943,144 of its common shares of
beneficial interest with par value of $.01 per share (the "Common Shares") at
net asset value per Common Share ("NAV") determined as of 5:00 P.M. Eastern
Standard time on the Expiration Date (defined below) upon the terms and subject
to the conditions set forth in the Offer to Purchase dated December 19, 1996 and
in the related Letter of Transmittal (which together constitute the "Offer").
The Offer and withdrawal rights will expire at 12:00 Midnight Eastern Standard
time on January 17, 1997, unless extended (the "Expiration Date"). An "Early
Withdrawal Charge" will be imposed on most Common Shares accepted for payment
which have been held for less than five years. The Offer is not conditioned upon
any minimum number of Common Shares being tendered but is subject to certain
conditions as set forth in the Offer to Purchase.
If more than 37,943,144 Common Shares are duly tendered prior to the
expiration of the Offer, the Trust presently intends to, assuming no changes in
the factors originally considered by the Board of Trustees when it determined to
make the Offer and the other conditions set forth in the Offer, but is not
obligated to, extend the Offer period, if necessary, and increase the number of
Common Shares that the Trust is offering to purchase to an amount which it
believes will be sufficient to accommodate the excess Common Shares tendered as
well as any Common Shares tendered during the extended Offer period or purchase
37,943,144 Common Shares (or such greater number of Common Shares sought) on a
pro rata basis.
No fees or commissions will be payable to brokers, dealers or other persons
for soliciting tenders of Common Shares pursuant to the Offer. The Trust will,
however, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials to those of your
clients who have requested such materials. The Trust will pay all transfer taxes
on its purchase of shares, subject to Instruction 5 of the Letter of
Transmittal. However, backup tax withholding at a 31% rate may be required
unless an exemption is proved or unless the required tax identification
information is or has previously been provided. See Section 15 of the Offer to
Purchase and Instructions 8 and 9 to the Letter of Transmittal.
For your information and for forwarding to those of your clients who have
requested them, we are enclosing the following documents:
(1) Offer to Purchase dated December 19, 1996;
(2) Letter of Transmittal to be used by holders of Common Shares to
tender such shares to the Depositary directly or through their broker,
dealer or other nominee who is not the registered owner;
(3) Guidelines for Certification of Taxpayer Identification Number;
(4) Letter to Clients which may be sent to your clients for whose
account you hold Common Shares registered in your name (or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer); and
(5) Return envelope addressed to the Depositary.
PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT
EASTERN STANDARD TIME ON JANUARY 17, 1997, UNLESS THE OFFER IS EXTENDED. TO
ENSURE PROCESSING OF YOUR OR YOUR CLIENT'S REQUEST, A LETTER OF TRANSMITTAL OR A
MANUALLY SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR COMMON
SHARES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY ON
OR BEFORE THE EXPIRATION DATE (JANUARY 17, 1997).
29 PRT009-12/96
<PAGE> 2
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Common Shares residing in any jurisdiction in which the
making of the Offer or the acceptance thereof would not be in compliance with
the laws of such jurisdiction.
Additional copies of the enclosed material may be obtained from Van Kampen
American Capital Distributors, Inc. at the appropriate address and telephone
number set forth in the Offer to Purchase. Any questions you have with respect
to the Offer should be directed to Van Kampen American Capital Distributors,
Inc. at (800) 421-5666.
Very truly yours,
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE TRUST OR THE DEPOSITARY OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY MATERIAL ON THEIR BEHALF WITH
RESPECT TO THE OFFER, OTHER THAN THE MATERIAL ENCLOSED HEREWITH AND THE
STATEMENTS SPECIFICALLY SET FORTH IN SUCH MATERIAL.
<PAGE> 1
EXHIBIT (a)(3)(ii)
OFFER BY
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
TO PURCHASE 37,943,144
OF ITS COMMON SHARES AT
NET ASSET VALUE PER COMMON SHARE
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated December
19, 1996, of Van Kampen American Capital Prime Rate Income Trust (the "Trust")
and related Letter of Transmittal pursuant to which the Trust is offering to
purchase up to 37,943,144 of its common shares of beneficial interest with par
value of $.01 per share (the "Common Shares") at the net asset value per Common
Share ("NAV") determined as of 5:00 P.M. Eastern Standard time on the Expiration
Date (defined below) upon the terms and subject to the conditions set forth in
the Offer to Purchase and the Letter of Transmittal (which together constitute
the "Offer"). An "Early Withdrawal Charge" will be imposed on most Common Shares
accepted for payment which have been held for less than five years.
The Offer to Purchase and the Letter of Transmittal are being forwarded to
you as the beneficial owner of Common Shares held by us for your account but not
registered in your name. A tender of such shares can be made only by us as the
holder of record and only pursuant to your instructions. WE ARE SENDING YOU THE
LETTER OF TRANSMITTAL FOR YOUR INFORMATION ONLY; YOU CANNOT USE IT TO TENDER
COMMON SHARES WE HOLD FOR YOUR ACCOUNT.
Your attention is called to the following:
(1) The tender price is the NAV per Common Share determined as of 5:00
P.M. Eastern Standard time on the Expiration Date. An "Early Withdrawal
Charge" will be imposed on most Common Shares accepted for payment which
have been held for less than five years.
(2) The Offer is not conditioned upon any minimum number of Common
Shares being tendered, but is subject to certain conditions set forth in
the Offer to Purchase.
(3) The Offer and withdrawal rights expire at 12:00 Midnight Eastern
Standard time on January 17, 1997, unless extended (the "Expiration Date").
(4) The Offer is for 37,943,144 Common Shares, constituting
approximately 7% of the Common Shares outstanding as of December 12, 1996.
(5) Tendering shareholders will not be obligated to pay brokerage
commissions or, subject to Instruction 5 of the Letter of Transmittal,
transfer taxes on the purchase of Common Shares by the Trust pursuant to
the Offer. However, a broker, dealer or selling group member may charge a
fee for processing the transaction on your behalf.
(6) If more than 37,943,144 Common Shares are duly tendered prior to
the expiration of the Offer, the Trust presently intends to, assuming no
changes in the factors originally considered by the Board of Trustees when
it determined to make the Offer and the other conditions set forth in the
Offer, but is under no obligation to, extend the Offer period, if
necessary, and increase the number of Common Shares that the Trust is
offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Common Shares tendered as well as any Common Shares
tendered during the extended Offer period or purchase 37,943,144 Common
Shares (or such greater number of Common Shares sought) on a pro rata
basis.
If you wish to have us tender any or all of your Common Shares, please so
instruct us by completing, executing and returning to us the attached
instruction form. An envelope to return your instructions to us is enclosed. If
you authorize us to tender your Common Shares, all such Common Shares will be
tendered
29 PRT007-12/96
<PAGE> 2
unless you specify otherwise on the attached instruction form. WE MUST RECEIVE
YOUR INSTRUCTIONS, IF ANY, SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
(JANUARY 17, 1997) TO PROVIDE US WITH TIME TO PROCESS SUCH INSTRUCTIONS AND
FORWARD THEM TO THE DEPOSITARY SO THAT THE DEPOSITARY WILL RECEIVE THEM ON OR
PRIOR TO SUCH EXPIRATION DATE. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00
MIDNIGHT EASTERN STANDARD TIME ON JANUARY 17, 1997, UNLESS THE OFFER IS
EXTENDED.
The Trust is not making the Offer to, nor will it accept tenders from or on
behalf of, owners of Common Shares in any jurisdiction in which the Offer or its
acceptance would violate the securities, Blue Sky or other laws of such
jurisdiction. In any jurisdiction the securities or Blue Sky laws of which
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on the Trust's behalf by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
<PAGE> 3
INSTRUCTIONS
WITH RESPECT TO OFFER BY
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
TO PURCHASE 37,943,144
OF ITS COMMON SHARES AT
NET ASSET VALUE PER COMMON SHARE
THIS FORM IS NOT TO BE USED TO TENDER COMMON SHARES DIRECTLY TO THE
DEPOSITARY. IT SHOULD BE SENT TO YOUR BROKER ONLY IF YOUR BROKER IS THE HOLDER
OF RECORD OF YOUR COMMON SHARES AND WILL BE EFFECTING THE TENDER ON YOUR BEHALF.
IT SHOULD BE SENT TO SUCH BROKER SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
(JANUARY 17, 1997) TO PROVIDE THE BROKER WITH TIME TO PROCESS THESE INSTRUCTIONS
AND FORWARD THEM TO THE DEPOSITARY SO THAT THE DEPOSITARY WILL RECEIVE THEM ON
OR PRIOR TO THE EXPIRATION DATE (JANUARY 17, 1997).
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated December 19, 1996, and the related Letter of
Transmittal (which together constitute the "Offer"), in connection with the
offer by Van Kampen American Capital Prime Rate Income Trust (the "Trust") to
purchase 37,943,144 common shares of beneficial interest with par value of $.01
per share (the "Common Shares") at the net asset value per Common Share
determined as of 5:00 P.M. Eastern Standard time on the Expiration Date on the
terms and subject to the conditions of the Offer. The undersigned acknowledges
that an "Early Withdrawal Charge" will be imposed on most Common Shares accepted
for payment which have been held for less than five years.
The undersigned hereby instructs you to tender to the Trust the number of
Common Shares indicated below (or, if no number is indicated below, all Common
Shares) which are held by you for the account of the undersigned, upon the terms
and subject to the conditions of the Offer.
Aggregate number of Common Shares to be tendered
by you for us (fill in number below):
______ Common Shares
Unless otherwise indicated above, it will be assumed that all of the Common
Shares held for the account of the undersigned are to be tendered.
SIGNATURE(S)
----------------------------------------------------------------------
......................................................................
......................................................................
(SIGNATURES(S) OF BENEFICIAL OWNERS)
......................................................................
(ACCOUNT NUMBER)
......................................................................
(PLEASE PRINT NAME(S) AND ADDRESSES HERE)
......................................................................
(AREA CODE AND TELEPHONE NUMBER)
......................................................................
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
----------------------------------------------------------------------
Date: , 19
- - 29 PRT008-12/96
- -
<PAGE> 1
EXHIBIT (a)(3)(iii)
[VAN KAMPEN AMERICAN CAPITAL LETTERHEAD]
December 19, 1996
RE: VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
Commencement of Tender Offer
To Our Dealer Friends:
As you may be aware, it is the policy of the Board of Trustees of Van
Kampen American Capital Prime Rate Income Trust (the "Trust") to consider on a
quarterly basis whether to make a tender offer for common shares of the Trust.
We are pleased to announce that the Board has authorized the Trust's
twenty-ninth consecutive quarterly tender offer commencing today, December 19,
1996, for the purpose of providing liquidity to its shareholders. The
commencement of the tender offer was announced in the Wall Street Journal today.
The Trust is offering to purchase up to 37,943,144 its common shares
(approximately 7% of its issued and outstanding common shares) at a price equal
to the net asset value per common share of the Trust determined as of 5:00 P.M.
Eastern Standard time on the expiration date of the offer. The offer is
scheduled to terminate as of 12:00 Midnight Eastern Standard time on January 17,
1997, the expiration date of the offer (unless extended). An "Early Withdrawal
Charge" will be imposed on most common shares accepted for payment that have
been held for less than five years.
Terms and conditions of the tender offer are contained in the Trust's Offer
to Purchase dated December 19, 1996, and the related Letter of Transmittal,
copies of which are available to you upon request.
Should you have any questions regarding the tender offer, please contact
Van Kampen American Capital's Investment Services Department at 1-800-421-5666.
Sincerely,
VAN KAMPEN AMERICAN CAPITAL
29 PRT003-12/96
<PAGE> 1
EXHIBIT (A)(3)(IV)
ANNOUNCING . . .
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
COMMENCEMENT OF TENDER OFFER
It is the policy of the Board of Trustees of the Van Kampen American
Capital Prime Rate Income Trust to consider on a quarterly basis whether to make
a Tender Offer for common shares of the Trust. We are pleased to announce that
the Board has authorized the Trust's twenty-ninth consecutive quarterly Tender
Offer commencing on December 19, 1996, for the purpose of providing liquidity to
its shareholders. The commencement of the Tender Offer is announced in today's
Wall Street Journal. Shareholders of the Trust will be able to exchange into
Class B Shares of eligible Van Kampen American Capital open-end funds excluding
the Van Kampen American Capital High Yield Municipal Fund, which is closed to
new investors. Please note that the exchanged shares will retain the Early
Withdrawal Charge schedule of the Trust.
The Trust is offering to purchase up to 37,943,144 of its common shares
(approximately 7% of its issued and outstanding common shares) at a price equal
to the net asset value per common share of the Trust as of 5:00 P.M., Eastern
Standard Time on January 17, 1997, the expiration date of the Tender Offer
(unless extended). The Tender Offer and the withdrawal rights expire at 12:00
Midnight Eastern Standard time on January 17, 1997, unless the Tender Offer is
extended. An "Early Withdrawal Charge" will be imposed on most common shares
accepted for payment that have been held for less than five years.
Terms and conditions of the tender offer are contained in the Trust's Offer
to Purchase dated December 19, 1996, and the related Letter of Transmittal.
Copies are available to you upon request by calling the number listed below.
Shareholders may tender by completing and returning the Letter of
Transmittal by January 17, 1997. Alternatively, Selling Firms may tender account
positions with a wire order redemption via NSCC Fund/SERV or by calling the Van
Kampen American Capital Order Desk at (800) 231-7166, on January 17, 1997 (trade
date of the Tender Offer). The Trust's CUSIP is 920914-108.
Should you have any questions regarding the Tender Offer, please contact
Van Kampen American Capital Investor Services Department at (800) 421-5666,
between the hours of 7AM and 7PM Central Time.
<PAGE> 1
EXHIBIT (a)(4)
Dear Shareholder:
As you requested, we are enclosing a copy of the Van Kampen American
Capital Prime Rate Income Trust ("Trust") Offer to Purchase 37,943,144 of its
issued and outstanding common shares of beneficial interest ("Common Shares")
and the related Letter of Transmittal (which together constitute the "Offer").
The Offer is at the net asset value ("NAV") per Common Share determined as of
5:00 P.M. Eastern Standard time on the Expiration Date of the Offer. An "Early
Withdrawal Charge" will be imposed on most Common Shares accepted for payment
that have been held for less than five years. Please read carefully the enclosed
documents, as well as the Trust's most current financial statements.
If, after reviewing the information set forth in the Offer, you wish to
tender Common Shares for purchase by the Trust, please either follow the
instructions contained in the Offer to Purchase and Letter of Transmittal or, if
your Common Shares are held of record in the name of a broker, dealer or other
nominee, contact such broker, dealer or nominee to effect the tender for you.
Neither the Trust nor its Board of Trustees is making any recommendation to
any holder of Common Shares as to whether to tender Common Shares. Each
shareholder is urged to consult his or her broker or tax adviser before deciding
whether to tender any Common Shares.
The Trust's NAV per Common Share from December 12, 1994 through December
12, 1996 ranged from a high of $10.07 to a low of $9.99. On December 12, 1996
the NAV was $9.99 per Common Share. You can obtain current NAV quotations from
Van Kampen American Capital Distributors, Inc. by calling (800) 341-2911 between
the hours of 7:00 A.M. and 7:00 P.M. Central Standard time, Monday through
Friday, except holidays. NAV quotes also may be obtained through the ICI Pricing
Service which will be released each Friday evening and published by the Dow
Jones Capital Markets Wire Service on each Friday; published in the New York
Times on each Saturday; published in the Chicago Tribune on each Sunday; and
published weekly in Barron's magazine. The Trust offers and sells its Common
Shares to the public on a continuous basis. The Trust is not aware of any
secondary market trading for the Common Shares.
Should you have any questions on the enclosed material, please call Van
Kampen American Capital Distributors, Inc. at (800) 341-2911 during ordinary
business hours. We appreciate your continued interest in Van Kampen American
Capital Prime Rate Income Trust.
Sincerely,
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
TO ENSURE PROCESSING OF YOUR REQUEST, A LETTER OF TRANSMITTAL OR A MANUALLY
SIGNED FACSIMILE OF IT (TOGETHER WITH ANY CERTIFICATES FOR COMMON SHARES AND ALL
OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY ON OR BEFORE THE
EXPIRATION DATE (JANUARY 17, 1997).
29 PRT-010-12/96
<PAGE> 1
EXHIBIT (a)(5)
CONTACT: Weston B. Wetherell
(630) 684-6360
FOR IMMEDIATE RELEASE
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
BEGINS TENDER OFFER FOR COMMON SHARES
OAKBROOK TERRACE, Ill., December 19, 1996 -- Van Kampen American Capital
Prime Rate Income Trust, distributed by Van Kampen American Capital
Distributors, Inc., a subsidiary of Van Kampen American Capital, Inc. (Van
Kampen American Capital), announced today that it has commenced a tender offer
for 37,943,144 or approximately seven percent of its outstanding common shares
of beneficial interest.
The offer is not conditioned on any minimum number of common shares that
must be tendered. The offer is subject to the terms and conditions set forth in
the Offer to Purchase and the Letter of Transmittal. The common shares are being
tendered for at a price equal to the net asset value per common share determined
as of 5:00 p.m., Eastern Standard time, on January 17, 1997, the expiration
date, unless extended. The offer and withdrawal rights will expire, as of 12:00
Midnight, Eastern Standard time, on January 17, 1997, unless extended. An early
withdrawal charge will be imposed on most common shares accepted for payment
that have been held for less than five years.
As indicated in the Trust's current prospectus, the Board of Trustees
currently intends, each quarter, to consider authorizing the Trust to make
tender offers for its common shares in order to attempt to provide liquidity to
its investors.
The Van Kampen American Capital Prime Rate Income Trust tender offer is
being made only by the Offer to Purchase dated December 19, 1996 and the related
Letter of Transmittal. Questions and requests for assistance, for current net
asset value quotes, or for copies of the Offer to Purchase, Letter of
Transmittal, and any other tender offer documents may be directed to Van Kampen
American Capital by calling 1-800-421-5666.
Van Kampen American Capital is a diversified asset management company with
more than two million retail investor accounts, extensive capabilities for
managing institutional portfolios, and more than $57 billion under management or
supervision. Van Kampen American Capital's more than 40 open-end and 38
closed-end funds and more than 2,500 unit investment trusts are professionally
distributed by leading financial advisors nationwide.
<PAGE> 1
EXHIBIT (b)(1)
CREDIT AGREEMENT
AGREEMENT dated as of March 14, 1991 between VAN KAMPEN MERRITT PRIME
RATE INCOME TRUST, a Massachusetts Business Trust (the "Borrower"), and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, a New York State banking corporation
(the "Bank").
SECTION 1. INTERPRETATIONS AND DEFINITIONS
1.1 Definitions. The following terms, as used herein, shall have the
following respective meanings:
"Affiliate" means any Person which directly or indirectly controls, is
under common control with, or is controlled by another Person.
"Assignee" has the meaning set forth in Section 8.3.
"Base Rate" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed to by any member of the
ERISA Group.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.
"Commitment" means the obligation of the Bank to lend the amount set
forth in Section 2.1 hereof, as such amount may be reduced from time to time
pursuant to Section 2.7 hereof.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, including, without limitation,
reimbursement obligations related to letters of credit, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all Debt of others secured by a Lien on any asset of such Person, whether or
not such Debt is assumed by such Person, and (vi) all Debt of others Guaranteed
by such Person; provided, however, that reverse repurchase agreements shall not
constitute Debt for purposes hereof.
<PAGE> 2
- 2 -
"Default" means any condition or event which constitutes
an Event of Default or which with the giving of notice or
lapse of time, or both, would unless cured or waived become an
Event of Default.
"Dollars" and the sign "$" mean lawful money of the
United States of America.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City
are authorized by law to close.
"Domestic Lending Office" means the principal office of
the Bank located at 60 Wall Street, New York, New York 10260,
or such other branch (or affiliate) as the Bank may hereafter
designate as its Domestic Lending Office.
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 3.1 hereof.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, or any successor statue.
"Event of Default" has the meaning set forth in Section 7
hereof.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100th
of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the
Domestic Business Day next succeeding such day, provided that
(i) if such day is not a Domestic Business Day, the Federal
Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and
(ii) if no such rate is so published on such next succeeding
Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to the Bank on such day on
such transactions as determined by the Bank.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person
and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities
<PAGE> 3
- 3 -
or services, to take-or-pay, to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose
of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Interest Payment Date" means the day which is 30 days
after the date of each Loan, and each day which is 30 days
thereafter.
"Interest Period" means the period commencing on the date
of a Loan and ending 30 days thereafter.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or other encumbrance
of any kind in respect of such asset. For purposes of this
Agreement, the Borrower shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement
relating to such asset.
"Loan" and "Loans" means a Loan made pursuant to Section
2.1.
"Multiemployer Plan" means at any time an employee
pension benefit plan within the meaning of Section 4001(a) (3)
of ERISA to which any member of the ERISA Group is then making
or accruing an obligation to make contributions or has within
the preceding five plan years made contributions, including
for these purposes any Person which ceased to be a member of
the ERISA Group during such five year period.
"Net Asset Value" means, at any date, Total Assets minus
Total Liabilities.
"Note" means the promissory note of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the
obligation of the Borrower to repay the Loans.
<PAGE> 4
- 4 -
"Parent" means, with respect to the Bank, any Person
controlling the Bank.
"Participant" has the meaning set forth in Section 8.3.
"Person" means an individual, a corporation, a
partnership, an association, a business trust or any other
entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV
of ERISA or subject to the minimum funding standards under
Section 412 of the Internal Revenue Code and either (i) is
maintained, or contributed to, by any member of the ERISA
Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been
maintained, or contributed to, by any Person which was at such
time a member of the ERISA Group for employees of any Person
which was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York in New
York City from time to time as its Prime Rate.
"Quarterly Tender Date" means the date set by the Board
of Trustees of the Borrower for the expiration of a tender
offer for shares of beneficial interest of the Borrower from
its shareholders.
"Refunding Loan" means a Loan which, after application of
the proceeds thereof, results in no net increase in the
outstanding principal amount of Loans made by the Bank.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from
time to time.
"Subsidiary" means any corporation or other entity of
which securities or other ownership interests having ordinary
voting power to elect a majority of the Board of Directors or
other persons performing similar functions are at the time
directly or indirectly owned by the Borrower.
"Termination Date" has the meaning set forth in Section
2.8(a).
"Total Assets" means at any date, all assets of the
Borrower which in accordance with generally accepted
accounting principles would be classified as assets upon a
<PAGE> 5
- 5 -
balance sheet of the Borrower prepared as of such date.
"Total Liabilities" means at any date, all liabilities of
the Borrower which in accordance with generally accepted
accounting principles would be classified as liabilities upon
a balance sheet of the Borrower prepared as of such date.
1.2 Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be
delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for
changes concurred in by the Borrower's independent public
accountants) with the most recent audited financial statements
of the Borrower delivered to the Bank.
SECTION 2. THE LOANS.
2.1 Revolving Credit. The Bank agrees, on the terms and
conditions set forth in this Agreement, to make Loans to the
Borrower from time to time in amounts not exceeding in the
aggregate at any one time outstanding the lesser of
$50,000,000 or 100% of the Net Asset Value of the Borrower at
the time of any Loan (the "Commitment"). Each Loan under this
Section 2.1 shall be in the minimum principal amount of
$500,000 or any larger multiple thereof (except that any such
Loan may be in the amount of the unused Commitment). After
the date hereof and prior to the Termination Date and within
the foregoing limits, the Borrower may borrow under this
Section 2.1, repay or to the extent permitted by Section 2.10
hereof prepay Loans and reborrow under this Section 2.1.
2.2 Method of Borrowing; Availability of Loans.
(a) With respect to each Loan made pursuant to
Section 2.1 hereof, the Borrower shall give the Bank notice
not later than 10:00 a.m. (New York City time) on the date of
such Loan, specifying:
(i) the date of such Loan, which shall be a
Domestic Business Day; and
(ii) the principal amount of such Loan;
provided, however, that no Loan shall be made unless the date
of such Loan would fall within 5 Domestic Business Days
following a Quarterly Tender Date or if such Loan would cause
the total Debt of the Borrower to exceed 10% of the Borrower's
Net Asset Value. Each notice of Borrowing shall also contain
<PAGE> 6
- 6 -
in detail reasonably satisfactory to the Bank, (i) a
computation of Borrower's Net Asset Value as of one Domestic
Business Day prior to the date of such Loan and (ii) the
amount of Debt of the Borrower outstanding on such date, other
than Debt arising pursuant to this Agreement and the Note,
certified by a duly authorized officer of the Borrower.
(b) On the date of each Loan the Bank will make the
proceeds thereof available to the Borrower by 3:00 p.m. (New
York City time), in immediately available funds at the
Domestic Lending Office.
(c) If the Bank makes a new Loan hereunder on a day
on which the Borrower is to repay all or any part of an
outstanding Loan, the Bank shall apply the proceeds of its new
Loan to make such repayment and only an amount equal to the
difference (if any) between the amount being borrowed and the
amount being repaid shall be made available by the Bank to the
Borrower as provided in subsection (b) of this Section or
remitted by the Borrower to the Bank as provided in Section
2.11 hereof, as the case may be.
2.3 The Note.
(a) The Loans shall be evidenced by a single Note
payable to the order of the Bank for the account of its
Domestic Lending Office. Such Note shall be dated on or
before the date of the first Loan and shall set forth the
maximum amount of the Bank's Commitment as the maximum
principal amount thereof.
(b) The Bank shall record the date, the amount and
the maturity of each Loan made by it and the date and amount
of each payment of principal made by the Borrower with respect
thereto and, prior to any transfer of the Note, shall endorse
on the schedule forming a part thereof appropriate notations
to evidence the foregoing information with respect to each
Loan then outstanding; provided that the failure of the Bank
to make any such recordation or endorsement shall not affect
the obligations of the Borrower hereunder or under the Note.
The Bank is hereby irrevocably authorized by the Borrower to
endorse the Note as set forth above and to attach to and make
a part of the Note a continuation of any such schedule as and
when required.
2.4 Maturity of Loans. Each Loan shall mature, and the
principal amount thereof shall be due and payable, on the last
day of the Interest Period applicable to such Loan.
2.5 Interest Rate. Each Loan shall bear interest on the
outstanding principal amount thereof, for each day from the
<PAGE> 7
- 7 -
date such Loan is made until it becomes due, at a rate per
annum equal to the Base Rate for such day. Such interest
shall be payable on each Interest Payment Date. Any overdue
principal of or interest on any Base Rate Loan shall bear
interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the rate otherwise
applicable to Base Rate Loans for such day.
2.6 Arrangement Fee; Commitment Fee.
(a) The Borrower shall pay an arrangement fee to the Bank
in the amount of $25,000 upon execution of this Agreement.
(b) The Borrower shall pay to the Bank a commitment fee
computed at the rate of 3/8 of 1% per annum on the daily
average amount by which the Commitment exceeds the aggregate
outstanding principal amount of the Loans. For purposes of
this Section 2.6(b), the "Commitment" shall be deemed to be
$50,000,000. Such commitment fee shall accrue from and
including March 14, 1991 to but excluding the Termination Date
and shall be payable quarterly on the last day of each March,
June, September and December and upon the date of termination
of the Commitment in its entirety.
2.7 Optional Termination or Reduction of Commitment.
The Borrower may, upon at least three Domestic Business Days
notice to the Bank, (i) terminate the Commitment at any time,
if no Loans are outstanding at such time or (ii) reduce from
time to time by an aggregate amount of $1,000,000 or any
larger multiple thereof, the Commitment in excess of the
aggregate outstanding principal amount of the Loans. If the
Commitment is terminated in its entirety, the accrued
commitment fee shall be payable on the effective date of such
termination.
2.8 Mandatory Termination or Reduction of Commitment;
Notice of Annual Meeting; Extension of Commitment.
(a) The Commitment shall terminate on January 31,
1992, or such date to which the Commitment is extended
pursuant to the provisions of Section 2.8(b), ("the
Termination Date"), and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on
such date.
(b) Not more than 75 nor less than 60 days before
the Termination Date, the Borrower may request in writing that
the Bank extend the Commitment by an additional period of time
of 364 days or less to be agreed upon between the Bank and the
Borrower at the time of such request. If the Bank, in its
sole discretion, decides to extend the Commitment as herein
<PAGE> 8
- 8 -
provided, it shall so notify the Borrower not less than 30
days before the Termination Date in writing, along with any
modifications to or additional terms for the Agreement which
it will require in consideration for such extension. If the
Borrower and the Bank reach agreement as to the terms for such
extension not less than 10 days prior to the Termination Date,
the Commitment shall be extended for an additional period of
364 days, and the term "Termination Date" shall thereafter
refer to the date that the Commitment, as so extended, will
terminate. If the Commitment is not extended as provided in
this Section 2.8(b), this agreement will automatically
terminate on the then current Termination Date without further
action by the Borrower or the Bank.
2.9 Principal Repayments. Any Loans outstanding shall
be repaid in full not later than 5 Domestic Business Days
prior to the earlier of the Quarterly Tender Date next
following the date of such Loan or the Termination Date.
2.10 Optional Prepayments. The Borrower may, upon at
least one Domestic Business Day's notice to the Bank, prepay
the Loans without premium or penalty in whole at any time or
from time to time in part in amounts aggregating $500,000 or
any multiple thereof by paying the principal amount being
prepaid together with accrued interest thereon to the date of
prepayment.
2.11 General Provisions as to Payments. The Borrower
shall make each payment of principal of, and interest on, the
Loans and of commitment fees hereunder not later than 11:00
am. (New York City time) on the date when due in funds
immediately available in New York City at the principal office
of the Bank in New York for the account of the Domestic
Lending Office. Whenever any payment of principal of, or
interest on, the Loans or of any commitment fee shall be due
on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding
Domestic Business Day. If the date for any payment of
principal is extended by operation of law or otherwise,
interest shall be payable for such extended time.
2.12 Computation of Interest and Fees. Interest based
on the Prime Rate and commitment fees shall be computed on the
basis of a year of 365 days (or 366 days in a leap year) and
paid for actual days elapsed (including the first day but
excluding the last day). All other interest and fees shall be
computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first but
excluding the last day).
<PAGE> 9
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SECTION 3. CONDITIONS.
3.1 Initial Loan. The obligation of the Bank to make
the initial Loan hereunder shall be subject to the
satisfaction by the Borrower of the following conditions:
(a) receipt of the Bank of counterparts hereof
signed by each of the parties hereto;
(b) receipt by the Bank of a duly executed Note
dated on or before the Effective Date complying with the
provisions of Section 2.3 hereof;
(c) receipt by the Bank of an opinion of counsel
for the Borrower in the form of Exhibit B hereto;
(d) receipt by the Bank of a certificate signed by
the President or any Vice President of the Borrower,
dated the Effective Date, to the effect set forth in
clauses (b) and (c) of Section 3.2 hereof; and
(e) receipt by the Bank of all documents it may
reasonably request relating to the existence of the
Borrower, the necessary authority for and the validity of
this Agreement and the Note, and any other matters
relevant hereto, all in form and substance reasonably
satisfactory to the Bank.
3.2 Loans. The obligation of any Bank to make a Loan on
the occasion of any borrowing is subject to the satisfaction
of the following conditions:
(a) receipt by the Bank of the notice from the
Borrower required by Section 2.2 hereof;
(b) the fact that, immediately after such Loan, no
Default shall have occurred and be continuing; and
(c) the fact that the representations and
warranties of the Borrower contained in this Agreement
(except in the case of a Refunding Loan, the
representations and warranties set forth in Sections
5.4(c) and 5.5 as to any matter which has theretofore
been disclosed in writing by the Borrower to the Bank)
shall be true on and as of the date of such Loan.
Each borrowing hereunder shall be deemed to be a
representation and warranty by the Borrower on the date of
such borrowing as to the facts specified in clause (b) and
clause (c) of this Section.
<PAGE> 10
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SECTION 4. CHANGE IN CIRCUMSTANCES AFFECTING LOANS.
4.1 Regulatory Changes.
(a) If the Bank shall have determined that, after
the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein,
or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable
agency charged with the interpretation or administration
thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital
of the Bank (or its Parent) as a consequence of the Bank's
obligations hereunder to a level below that which the Bank (or
its Parent) could have achieved but for such adoption, change
or compliance (taking into consideration the Bank's policies
with respect to capital adequacy) by an amount deemed by the
Bank to be material, then from time to time, within 15 days
after demand by the Bank, the Borrower shall pay to the Bank
(or its Parent) such additional amount or amounts as will
compensate the Bank for such reduction; provided, however,
that the Borrower's obligation to pay the Bank shall be
limited to the reduced amount that is attributable to the
period commencing 90 days prior to the date on which the Bank
gave notice to the Borrower pursuant to Section 4.1(b) of the
event entitling the Bank to such compensation.
(b) The Bank will promptly notify the Borrower of
any event of which it has knowledge, occurring after the date
hereof, which will entitle the Bank to compensation pursuant
to this Section. A certificate of the Bank claiming
compensation under this Section, setting forth the additional
amount or amounts to be paid to it hereunder and indicating in
reasonable detail the Bank's calculations in determining such
amounts, shall be conclusive in the absence of manifest error.
In determining such amount, the Bank may use any reasonable
averaging and attribution methods.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Borrower
hereby represents and warrants to the Bank that:
5.1 Existence and Power. (a) The Borrower is a business
trust, validly existing under the laws of the Commonwealth of
Massachusetts, and has all necessary powers and all material
governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
(b) The Borrower is a registered, closed-end
investment company under the Investment Company Act of 1940,
<PAGE> 11
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as amended, and has registered the sale of its common shares
of beneficial interest under the Securities Act of 1933, as
amended, pursuant to a registration statement, including the
related prospectus, that is currently effective.
5.2 Authorization; No Contravention. The execution,
delivery and performance by the Borrower of this Agreement and
the Note are within the Borrower's powers, have been duly
authorized by all necessary action, require no action by or in
respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under,
any provision of applicable law or regulation, including, but
not limited to, the Investment Company Act of 1940, as
amended, and the regulations promulgated thereunder, or of the
trust agreement or any related documents of the Borrower or of
any agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or result in the creation
or imposition of any Lien on any asset of the Borrower.
5.3 Binding Effect. This Agreement constitutes a valid
and binding agreement of the Borrower and the Note, when
executed and delivered in accordance with this Agreement, will
constitute a valid and binding obligation of the Borrower,
subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally.
5.4 Financial Information.
(a) The statement of assets and liabilities of the
Borrower as at July 31, 1990 and the related statements of
operations and changes in net assets of the Borrower for the
fiscal period then ended, certified by KMPG Peat Marwick,
certified public accountants, a copy of which has been
delivered to the Bank, fairly present in conformity with
generally accepted accounting principles, the financial
position of the Borrower at such date and the results of
operations for such fiscal period.
(b) The unaudited statement of assets and
liabilities of the Borrower as at January 31, 1991 and the
related unaudited statements of operations and changes in net
assets of the Borrower for the period then ended, fairly
present in accordance with generally accepted accounting
principles applied on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the
financial position of the Borrower as at such date and the
results of operations for such period (subject to normal year-
end adjustments).
(c) Since July 31, 1990 there has been no material
<PAGE> 12
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adverse change in the business, financial position, results of
operations or prospects of the Borrower.
5.5 Litigation. There is no action, suit or proceeding
pending against, or to the knowledge of the Borrower
threatened against or affecting, the Borrower before any court
or arbitrator or any governmental body, agency or official in
which there is a reasonable likelihood of an adverse decision
which could materially adversely affect the business,
financial position or results of operations of the Borrower or
which in any manner draws into question the validity of this
Agreement or the Note.
5.6 ERISA. The Borrower does not have any Plan,
Multiemployer Plan or Benefit Arrangement subject to ERISA.
5.7 Taxes. The Borrower has filed all United States
Federal income tax returns, or extensions relating thereto,
and all other material tax returns, or extensions relating
thereto, which are required to be filed by it, if any, and has
paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower, except for any such taxes
being contested in good faith and by appropriate proceedings,
and for which adequate reserves have been established. The
charges, accruals and reserves on the books of the Borrower in
respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.
5.8 Subsidiaries. The Borrower has no Subsidiaries.
5.9 Compliance with Investment Restrictions. The
Borrower's assets are being invested in accordance with the
investment policies and restrictions contained in its most
recent prospectus, except for such non-compliances which,
singly or in the aggregate, do not and would not materially
and adversely affect the financial condition or the business
taken as a whole of the Borrower, or its ability to perform
its obligations hereunder.
5.10 Compliance with Laws. The Borrower is in
compliance with all applicable laws, statutes, ordinances,
decrees, requirements, orders, judgments, rules, regulations
of, and the terms of any license or permit issued by, any
governmental authority including, but not limited to, the
Investment Company Act of 1940, as amended, the failure to
comply with which would materially and adversely affect the
financial condition or the business taken as a whole of the
Borrower, or its ability to perform its obligations hereunder.
<PAGE> 13
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SECTION 6. COVENANTS.
So long as the Commitment shall be in effect or the Note
is outstanding, unless compliance shall have been waived in
writing by the Bank, the Borrower agrees that:
6.1 Information. The Borrower will deliver to the Bank:
(a) as soon as available and in any event within 75
days after the end of each fiscal year of the Borrower, a
statement of assets and liabilities of the Borrower as at
the end of such year, and statements of operations and
changes in net assets of the Borrower for such year,
setting forth in each case in comparative form the
figures for the preceding fiscal year, all reported on in
a manner acceptable to the Bank by KPMG Peat Marwick or
other independent certified public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 45
days after the end of the first semi-annual period of
each fiscal year of the Borrower, a statement of assets
and liabilities of the Borrower, as at the end of such
period, statements of operations and changes in net
assets of the Borrower for such period, a certificate
setting forth the computation of the aggregate amount of
shares repurchased pursuant to a tender offer and new
sales of shares of the Borrower for such period and
setting forth in each case in comparative form the
figures for the corresponding portion of the Borrower's
previous fiscal year, all certified (subject to normal
year-end adjustments) as to fairness of presentation,
generally accepted accounting principles and consistency
by the chief financial officer or the chief accounting
officer of the Borrower;
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b)
above, a certificate of the chief financial officer or
the chief accounting officer of the Borrower (i) stating
whether the Borrower was in compliance with the
requirements of the Investment Restriction Paragraph
referred to in Section 6.6 on the date of such financial
statements, (ii) stating whether, to the best of such
officer's knowledge, any Default exists on the date of
such certificate and, if any Default then exists, setting
forth the details thereof and the action which the
Borrower is taking or proposes to take with respect
thereto and (iii) certifying that since the date of the
most recent financial statements delivered to the Bank,
<PAGE> 14
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no material adverse change has occurred in the business,
financial position, results of operations or prospects of
the Borrower or, if any such material adverse change has
occurred, setting forth the details thereof and the
action which the Borrower is taking or proposes to take
with respect thereto;
(d) simultaneously with the delivery of each set of
financial statements referred to in clause (a) above, a
statement of the firm of independent public accountants
which reported on such statements (i) to the effect that
nothing has come to their attention to cause them to
believe that any Default existed on the date of such
statements and (ii) confirming the calculations set forth
in the officer's certificate delivered simultaneously
therewith pursuant to clause (c) above;
(e) within five days after the president, chief
financial officer or assistant treasurer of the Borrower
obtains knowledge of any Default, if such Default is then
continuing, a certificate of the chief financial officer
or the chief accounting officer of the Borrower setting
forth the details thereof and the action which the
Borrower is taking or proposes to take with respect
thereto;
(f) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto
and any registration statements on Form S-8 or its
equivalent) prospectuses, and annual, quarterly or
monthly reports which the Borrower shall have filed with
the Securities and Exchange Commission;
(h) if at any time the value of all "margin stock"
(as defined in Regulation U) owned by the Borrower
exceeds (or would, following application of the proceeds
of an intended Loan hereunder, exceed) 25% of the value
of the total assets of the Borrower, in each case as
reasonably determined by the Borrower, prompt notice of
such fact;
(i) promptly upon any decision by the Board of
Trustees of the Borrower that Van Kampen Merritt
Investment Advisory Corp. shall cease to be investment
advisor to the Borrower, notice of such decision; and
<PAGE> 15
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(j) from time to time such additional information
regarding the financial position or business of the
Borrower as the Bank may reasonably request.
6.2 Maintenance of Property; Insurance. The Borrower
will maintain in force with financially sound and reputable
insurers, policies with respect to its property and business
against such risks and contingencies and in such amounts as is
customary in the case of closed-end funds engaged in similar
lines of business of comparable size and financial strength.
6.3 Conduct of Business and Maintenance of Existence.
The Borrower will continue to engage in business of the same
general type as now conducted by it, and will preserve, renew
and keep in full force and effect, its existence as a business
trust and its rights, privileges and franchises necessary or
desirable in the normal conduct of its business.
6.4 Compliance with Laws; Notice of Proceedings. (a)
The Borrower will comply in all material respects with the
requirements of its trust agreement and any related documents
and all material provisions of applicable laws, ordinances,
rules, regulations, including but not limited to, the
Investment Company Act of 1940, as amended and the regulations
promulgated thereunder, and requirements of governmental
authorities, except where the necessity of compliance
therewith is contested in good faith by appropriate
proceedings.
(b) The Borrower will promptly give notice in
writing to the Bank of all litigation, arbitral proceedings
and regulatory proceedings affecting the Borrower or the
property of the Borrower, except litigation or proceedings
which, if adversely determined, would not result in the
reasonable likelihood of a material and adverse affect on the
financial condition or the business taken as a whole of the
Borrower.
6.5 Inspection of Property, Books and Records. The
Borrower will keep proper books of record and account in which
full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities;
and will permit representatives of the Bank at the Bank's
expense to visit and inspect any of properties, to examine and
make abstracts from any of its respective books and records
and to discuss its respective affairs, finances and accounts
with its respective officers, employees and independent public
accountants, all at such reasonable times and as often as may
reasonably be desired.
6.6 Concentration of Risk. (a) The Borrower will not
<PAGE> 16
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amend or otherwise alter the provisions of paragraph 1 under
the heading "Investment Restrictions" appearing on page 25 of
the Borrower's prospectus dated March 4, 1991, (the
"Investment Restriction Paragraph") without the consent of the
Bank, which consent will not be unreasonably withheld.
(b) The Borrower will not permit the aggregate amount of
its Total Assets invested in any one Person (for purposes of
this Section 6.6(b), "Person" shall not include any bank or
financial institution from whom assets are purchased by the
Borrower) to exceed 5% of the Borrower's Total Assets.
6.7 Negative Pledge. The Borrower will not create,
assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except for Liens arising in the
ordinary course of its business which (i) do not secure Debt,
(ii) do not secure any obligation in an amount exceeding
$5,000,000 and (iii) do not in the aggregate materially
detract from the value of its assets or materially impair the
use thereof in the operation of its business.
6.8 Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any
other Person or (ii) sell, lease or otherwise transfer,
directly or indirectly, all or substantially all of the assets
of the Borrower to any other Person, other than sales of
assets in the ordinary course of its business.
6.9 Debt. The Borrower will not permit its total Debt
(including Debt incurred under this Agreement and the Note) to
exceed the lesser of $75,000,000 or 10% of the Borrower's Net
Asset Value.
6.10 Use of Proceeds. The proceeds of any Loan may only
be used, directly or indirectly, in connection with the
consummation of the tender offer for shares of beneficial
interest of the Borrower expiring on the Quarterly Tender Date
next preceding such Loan. No part of the proceeds of any Loan
hereunder will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate of buying
or carrying any "margin stock" within the meaning of
Regulation U. If requested by the Bank, the Borrower will
furnish to the Bank in connection with any Loan hereunder a
statement in conformity with the requirements of Federal
Reserve Form U-l referred to in Regulation U.
6.11 Pari Passu. The indebtedness of the Borrower
hereunder will rank at least pari passu with all other Debt of
the Borrower.
SECTION 7. EVENTS OF DEFAULT.
<PAGE> 17
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If any one or more of the following events ("Events of
Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay (i) when due, any
principal of any loan or (ii) within three days of when
due, interest on any Loan or any commitment fee; or
(b) the Borrower shall fail to observe or perform
any covenant contained in Section 6.1(e) or Sections 6.6
to 6.9 (inclusive) hereof; or
(c) the Borrower shall fail to observe or perform
any covenant or agreement contained in this Agreement
(other than those covered by clause (a) or (b) above) for
30 days after written notice thereof has been given to
the Borrower by the Bank; or
(d) any representation, warranty, certification or
statement made by the Borrower in this Agreement or in
any certificate, financial statement or other document
delivered pursuant to this Agreement shall prove to have
been incorrect in any material respect upon the date when
made or deemed made; or
(e) The Borrower shall fail to comply with the
fundamental investment policies and the investment
restrictions set forth in its trust agreement or
prospectus; or
(f) the Borrower shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under
any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property,
or shall consent to any such relief or to the appointment
of or taking possession by any such official in an
involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as
they become due, or shall take any corporate action to
authorize any of the foregoing; or
(g) an involuntary case or other proceeding shall
be commenced against the Borrower seeking liquidation,
reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its
<PAGE> 18
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property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the
Borrower under the federal bankruptcy laws as now or
hereafter in effect; or
(h) the Borrower shall fail to comply with all
material provisions of the Investment Company Act of
1940, as amended, or the regulations promulgated
thereunder; or
(i) judgments or orders for the payment of money in
excess of $5,000,000 in the aggregate shall be rendered
against the Borrower and such judgments or orders shall
continue unsatisfied and unstayed for a period of 10
days; or
(j) during any period of twelve consecutive
calendar months, individuals who were trustees of the
Borrower on the first day of such period shall cease to
constitute a majority of the board of trustees of the
Borrower;
then, and in every such event, (1) in the case of any of the
Events of Default specified in paragraphs (f) or (g) above,
the Commitment shall thereupon automatically be terminated and
the principal of and accrued interest on the Note shall
automatically become due and payable without presentment,
demand, protest or other notice or formality of any kind, all
of which are hereby expressly waived and (2) in the case of
any other Event of Default specified above, the Bank may, by
notice in writing to the Borrower, terminate the Commitment
hereunder, if still in existence, and it shall thereupon be
terminated, and the Bank may, by notice in writing to the
Borrower, declare the Note and all other sums payable under
this Agreement to be, and the same shall thereupon forthwith
become, due and payable without presentment, demand, protest
or other notice or formality of any kind, all of which are
hereby expressly waived.
SECTION 8. MISCELLANEOUS.
8.1 Notices. All notices, requests and other
communications hereunder shall be in writing (including
bankwire, telex, facsimile transmission or similar writing).
Each such notice, request or other communication shall be
effective (i) if given by telex or facsimile transmission,
when such telex is transmitted to the telex number specified
in this Section and the appropriate answerback is received, or
when such facsimile transmission is confirmed, (ii) if given
<PAGE> 19
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by mail, 72 hours after such communication is deposited in the
mails with first class postage prepaid, addressed as specified
in this Section or (iii) if given by any other means, when
delivered at the address specified in this Section; provided
that notices to the Bank pursuant to Sections 2.2 and 2.10
hereof which are given otherwise than by telex or facsimile
transmitting machine shall not be effective until received by
the Bank. Any such notice, request, demand or communication
shall be delivered or addressed as follows:
(i) if to the Borrower, to it at 1001 Warrenville
Road, Lisle, Illinois 60532; Attention: Dennis
McDonnell;
(ii) if to the Bank, delivered or addressed to the
address or telex number set forth on the signature pages
hereof for its Domestic Lending Office;
or at such other address or telex number as any party hereto
may designate by written notice to the other party hereto.
8.2 Amendments and Waivers; Cumulative Remedies.
(a) None of the terms of this Agreement may be
waived, altered or amended except by an instrument in writing
duly executed by the Borrower and the Bank.
(b) No failure or delay by the Bank in exercising
any right, power or privilege hereunder or under the Note
shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided herein shall be
cumulative and not exclusive of any rights or remedies
provided by law.
8.3 Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and shall inure to the benefit
of the Borrower and the Bank and their respective successors
and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement
without the prior written consent of the Bank.
(b) The Loans are being made by the Bank in the
ordinary course of its business and not with a view toward
distribution, it being understood that the Bank may sell
participations and assignments in its Commitment and the Loans
as provided herein. The Bank may at any time assign, subject
to the Borrower's consent, which consent shall not be
unreasonably withheld, to one or more banks or other
institutions (each an "Assignee",) all, or a proportionate part
<PAGE> 20
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of all, of its rights under this Agreement and the Note. The
Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in
its Commitment or any or all of its Loans. In the event of
any such grant by the Bank of a participating interest to a
Participant, whether or not upon notice to the Borrower the
Bank shall remain responsible for the performance of its
obligations hereunder, and the Borrower shall continue to deal
solely and directly with the Bank in connection with the
Bank's rights and obligations under this Agreement. Any
agreement pursuant to which the Bank may grant such a
participating interest shall provide that the Bank shall
retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that
such participation agreement may provide that the Bank will
not agree to any modification, amendment or waiver of this
Agreement (i) which increases or decreases the Commitment of
the Bank (ii) reduces the principal of or rate of interest on
any Loan or fees hereunder or (iii) postpones the date fixed
for any payment of principal of or interest on any Loan or any
fees hereunder without the consent of the Participant. The
Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the
benefits of Section 4 hereof with respect to its participating
interest.
(c) The Bank may at any time assign all or any
portion of its rights under this Agreement and the Note to a
Federal Reserve Bank. No such assignment shall release the
Bank from its obligations hereunder.
(d) No Assignee, Participant or other transferee of
the Bank's rights shall be entitled to receive any greater
payment under Section 4.1 hereof than the Bank would have been
entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written
consent or at a time when the circumstances giving rise to
such greater payment did not exist.
8.4 Expenses; Documentary Taxes; Indemnification. (a)
The Borrower shall pay (i) all out-of-pocket expenses and
internal charges of the Bank (including reasonable fees and
disbursements of counsel and time charges of attorneys who may
be employees of the Bank) in connection with any waiver or
consent hereunder or any amendment hereof or any Default or
alleged Default hereunder and (ii) if there is an Event of
Default, all out-of-pocket expenses and internal charges
incurred by the Bank (including fees and disbursements of
counsel and time charges of attorneys who may be employees of
<PAGE> 21
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the Bank) in connection with such Event of Default and
collection and other enforcement proceedings resulting
therefrom. The Borrower shall indemnify the Bank against any
transfer taxes, documentary taxes, assessments or charges made
by any governmental authority by reason of the execution and
delivery of this Agreement or the Note.
(b) The Borrower agrees to indemnify the Bank and
hold the Bank harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind,
including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by the Bank in
connection with any investigative, administrative or judicial
proceeding (whether or not the Bank shall be designated a
party thereto) relating to or arising out of this Agreement or
any actual or proposed use of proceeds of Loans hereunder;
provided that the Bank shall not have the right to be
indemnified hereunder for its own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
8.5 Counterparts; Integration. This Agreement may be
signed in any number of counterparts with the same effect as
if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement
and understanding between the parties hereto and supersedes
any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.
8.6 Headings; Table of Contents. The section and
subsection headings used herein and the Table of Contents have
been inserted for convenience of reference only and do not
constitute matters to be considered in interpreting this
Agreement.
8.7 Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial. This Agreement and the Note shall be governed by
and construed in accordance with the laws of the State of New
York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the
Southern District of New York and of any New York State Court
sitting in New York City for purposes of all legal proceedings
arising out of or relating to this Agreement or the
transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been
brought in an inconvenient forum. THE BORROWER, AND THE BANK
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE> 22
- 22 -
Section 8.8. Liability of Shareholders, Trustees and
Officers. This Agreement is executed on behalf of the
Borrower by officers of the Borrower solely in their capacity
as such officers, and shall not constitute their personal
obligation either jointly or severally in their individual
capacities. No trustee, officer or shareholder of the
Borrower shall be liable for any obligations of the Borrower
under this Agreement and the Borrower shall be solely liable
therefore; all parties hereto shall look solely to the
Borrower's estate for the payment of any claim, or the
performance of any obligation, hereunder.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered by their proper
and duly authorized officers as of the day and year first
above written.
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By: /s/ Edward Wood III
Title: Vice President & Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ R.A. Brook
Vice president
Domestic Lending Office:
60 Wall Street
New York, New York 10260
ATTENTION: Loan Department
New York, New York 10260
Telex: 177615 MGT UT
583.ck
4/10/91
<PAGE> 23
AMENDMENT NO. 2
TO CREDIT AGREEMENT
Amendment, dated as of January 31, 1992 to the Credit
Agreement dated as of March 14, 1991 (the "Agreement") between Van
Kampen Merritt Prime Rate Income Trust (the "Borrower") and Morgan
Guaranty Trust Company of New York (the "Bank").
The parties hereto desire to amend the Agreement subject to
the terms and conditions of this Amendment, as hereinafter
provided. Accordingly, the parties hereto agree as follows:
1. Definitions. Except as otherwise defined herein,
capitalized terms used herein have the respective meanings assigned
to them in the Agreement.
2. Amendments. (a) The following definition is added to
Section 1.1 in the appropriate alphabetical location:
"`Material Debt' means Debt of the Borrower arising in one or
more related or unrelated transactions, in the aggregate
principal or face amount exceeding $1,000,000."
(b) The definition of Termination Date contained in Section 1.1 is
amended to read in its entirety as follows:
"`Termination Date' has the meaning set forth in Section
2.8."
(c) Section 2.8(a) is redesignated Section 2.8 and amended to read
in its entirety as follows:
"The Commitment shall terminate on January 30, 1993, or such
date to which the Commitment is extended pursuant to the
provisions of Section 2.8(b), (the "Termination Date"), and
any Loans then outstanding (together with accrued interest
thereon) shall be due and payable on such date."
(c) Section 2.8(b) is deleted in its entirety.
(d) The following new provisions shall be added to the Agreement
as Sections 7(k) and 7(l):
"(k) the Borrower shall fail to make any payment in respect of
any Material Debt (other than the Note) when due or within any
applicable grace period; or
(l) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables
<PAGE> 24
- 2 -
respect of any Material Debt (other than the Note) when
due or within any applicable grace period; or
(1) any event or condition shall occur which results in
the acceleration of the maturity of any Material Debt or
enables (or, with the giving of notice or lapse of time
or both, would enable) the holder of such Debt or any
Person acting on such holder's behalf to accelerate the
maturity thereof;"
3. Representations. The Borrower hereby confirms and
repeats each of the representations and warranties set forth
in the Agreement on and as of the date of this Amendment as
if made on and as of such date and as if each reference
therein to the Agreement referred to the Agreement as
modified hereby, and represents and warrants that no Event of
Default or other event which, with the giving of notice or
the lapse of time, or both, would constitute such an Event of
Default has occurred and is continuing.
4. Agreement as Amended. Except as expressly amended
hereby, the Agreement shall continue in full force and effect
in accordance with the terms thereof.
5. Governing Law. This Amendment, and the Agreement as
amended hereby, shall be construed in accordance with and
governed by the laws of the State of New York.
6. Severability. In case any one or more of the
provisions contained in this Amendment should be invalid,
illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired
thereby.
7. Counterparts; Effective Date. This Amendment may be
executed in any number of counterparts, each of which shall
constitute an original but all of which when taken together
shall constitute one and the same instrument. This Amendment
shall become effective as of the date first above written
upon receipt by the Bank of counterparts hereof executed by
each of the parties hereto.
<PAGE> 25
-3-
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized officers as
of the day and year first above written.
VAN KAMPEN MERRITT PRIME
RATE INCOME TRUST
By: /s/ John Sullivan
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ George-Ann Dicteroro
Title: Vice President
DOC/CGK1048.D
<PAGE> 26
AMENDMENT NO. 3
TO CREDIT AGREEMENT
Amendment No. 3, dated as of January 30, 1993 to the Credit
Agreement dated as of March 14, 1991, as amended (the "Agreement")
between Van Kampen Merritt Prime Rate Income Trust (the "Borrower")
and Morgan Guaranty Trust Company of New York (the "Bank").
The parties hereto desire to amend the Agreement subject to
the terms and conditions of this Amendment No. 3, as hereinafter
provided. Accordingly, the parties hereto agree as follows:
1. Definitions. Except as otherwise defined herein,
capitalized terms used herein have the respective meanings assigned
to them in the Agreement.
2. Amendment. Section 2.8 is hereby amended to read in its
entirety as follows:
"The Commitment shall terminate on January 29, 1994 (the
"Termination Date"), and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on
such date."
3. Representations. The Borrower hereby confirms and repeats
each of the representations and warranties set forth in the
Agreement on and as of the date of this Amendment No. 3 as if made
on and as of such date and as if each reference therein to the
Agreement referred to the Agreement as modified hereby, and
represents and warrants that no Event of Default or other event
which, with the giving of notice or the lapse of time, or both,
would constitute such an Event of Default has occurred and is
continuing.
4. Agreement as Amended. Except as expressly amended hereby,
the Agreement shall continue in full force and effect in accordance
with the terms thereof; and any reference to the Agreement at any
time hereafter shall refer to the Agreement as amended hereby.
5. Governing Law. This Amendment No. 3, and the Agreement as
amended hereby, shall be construed in accordance with and governed
by the laws of the State of New York.
6. Severability. In case any one or more of the provisions
contained in this Amendment No. 3 should be invalid, illegal or
unenforceable in any respect, the validity, legality and
<PAGE> 27
-2-
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
7. Counterparts; Effective Date. This Amendment No. 3 may be
executed in any number of counterparts, each of which shall
constitute an original but all of which when taken together shall
constitute one and the same instrument. This Amendment No. 3 shall
become effective as of the date first above written upon receipt
by the Bank of counterparts hereof executed by each of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 3 to be executed by their duly authorized officers as
of the day and year first above written.
VAN KAMPEN MERRITT PRIME
RATE INCOME TRUST
By: /s/ Edward Wood III
Title: V.P. & Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Anne M. Velz
Title: Vice President
*
<PAGE> 28
AMENDMENT NO. 4
TO CREDIT AGREEMENT
Amendment No. 4, dated as of January 19, 1994 to the Credit
Agreement dated as of March 14, 1991, as amended (the "Agreement")
between Van Kampen Merritt Prime Rate Income Trust (the "Borrower")
and Morgan Guaranty Trust Company of New York (the "Bank").
The parties hereto desire to amend the Agreement subject to
the terms and conditions of this Amendment No. 4, as hereinafter
provided. Accordingly, the parties hereto agree as follows:
1. Definitions. Except as otherwise defined herein,
capitalized terms used herein have the respective meanings assigned
to them in the Agreement.
2. Amendment. Section 2.8 is hereby amended to read in its
entirety as follows:
"The Commitment shall terminate on January 28, 1995 (the
"Termination Date"), and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on
such date."
3. Representations. The Borrower hereby confirms and repeats
each of the representations and warranties set forth in the
Agreement on and as of the date of this Amendment No. 4 as if made
on and as of such date and as if each reference therein to the
Agreement referred to the Agreement as modified hereby, and
represents and warrants that no Event of Default or other event
which, with the giving of notice or the lapse of time, or both,
would constitute such an Event of Default has occurred and is
continuing.
4. Agreement as Amended. Except as expressly amended hereby,
the Agreement shall continue in full force and effect in accordance
with the terms thereof; and any reference to the Agreement at any
time hereafter shall refer to the Agreement as amended hereby.
5. Governing Law. This Amendment No. 4, and the Agreement as
amended hereby, shall be construed in accordance with and governed
by the laws of the State of New York.
6. Severability. In case any one or more of the provisions
contained in this Amendment No. 4 should be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
7. Counterparts; Effective Date. This Amendment No. 4 may be
<PAGE> 29
- 2 -
executed in any number of counterparts, each of which shall
constitute an original but all of which when taken together shall
constitute one and the same instrument. This Amendment No. 4 shall
become effective as of the date first above written upon receipt by
the Bank of counterparts hereof executed by each of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 4 to be executed by their duly authorized officers as
of the day and year first above written.
VAN KAMPEN MERRITT PRIME
RATE INCOME TRUST
By: /s/ Edward Wood III
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Lauren S. McCoy
Title: VICE PRESIDENT
<PAGE> 30
AMENDMENT NO. 5
TO CREDIT AGREEMENT
Amendment No. 5, dated as of January 27, 1995 to the Credit
Agreement dated as of March 14, 1991, as amended (the "Agreement")
between Van Kampen Merritt Prime Rate Income Trust (the "Borrower")
and Morgan Guaranty Trust Company of New York (the "Bank").
The parties hereto desire to amend the Agreement subject to
the terms and conditions of this Amendment No. 5, as hereinafter
provided. Accordingly, the parties hereto agree as follows:
1. Definitions. Except as otherwise defined herein,
capitalized terms used herein have the respective meanings assigned
to them in the Agreement.
2. Amendment.
(a) Section 2.8 of the Credit Agreement is hereby amended
to read in its entirety as follows:
"The Commitment shall terminate on January 26, 1996 (the
"Termination Date"), and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on
such date."
(b) Section 2.6(b) of the Credit Agreement is hereby
amended by reducing the commitment fee from 3/8 of 1% to 1/4 of 1%.
3. Representations. The Borrower hereby confirms and repeats
each of the representations and warranties set forth in the
Agreement on and as of the date of this Amendment No. 5 as if made
on and as of such date and as if each reference therein to the
Agreement referred to the Agreement as modified hereby, and
represents and warrants that no Event of Default or other event
which, with the giving of notice or the lapse of time, or both,
would constitute such an Event of Default has occurred and is
continuing.
4. Agreement as Amended. Except as expressly amended hereby,
the Agreement shall continue in full force and effect in accordance
with the terms thereof; and any reference to the Agreement at any
time hereafter shall refer to the Agreement as amended
hereby.
5. Governing Law. This Amendment No. 5, and the Agreement as
<PAGE> 31
- 2 -
amended hereby, shall be construed in accordance with and governed
by the laws of the State of New York.
6. Severability. In case any one or more of the provisions
contained in this Amendment No. 5 should be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
7. Counterparts; Effective Date. This Amendment No. 5 may be
executed in any number of counterparts, each of which shall
constitute an original but all of which when taken together shall
constitute one and the same instrument. This Amendment No. 5 shall
become effective as of the date first above written upon receipt by
the Bank of counterparts hereof executed by each of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 5 to be executed by their duly authorized officers as
of the day and year first above written.
VAN KAMPEN MERRITT PRIME
RATE INCOME TRUST
By: /s/ Edward Wood III
Title: V.P. & Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Lauren S. McCoy
Title: VICE PRESIDENT
<PAGE> 32
AMENDMENT NO. 6
TO CREDIT AGREEMENT
Amendment No. 6, dated as of January 25, 1996 to the Credit Agreement
dated as of March 14, 1991, as amended (the "Agreement") between Van Kampen
American Capital Prime Rate Income Trust (the "Borrower") and Morgan Guaranty
Trust Company of New York (the "Bank").
The parties hereto desire to amend the Agreement subject to the terms
and conditions of this Amendment No. 6, as hereinafter provided. Accordingly,
the parties hereto agree as follows:
1. Definitions. Except as otherwise defined herein, capitalized
terms used herein have the respective meanings assigned to them in the
Agreement.
2. Amendments:
(a) Section 2.8 of the Agreement is hereby amended to
read in its entirety as follows:
"The Commitment shall terminate on January 24, 1997 (the "Termination
Date"), and any Loans then outstanding (together with accrued interest
thereon) shall be due and payable on such date."
(b) Section 2.6 (b) of the Agreement is hereby
amended by reducing the commitment fee from 1/4 of 1% to .10 of 1%.
3. Representations. The Borrower hereby confirms and repeats each
of the representations and warranties set forth in the Agreement on and as of
the date of this Amendment No. 6 as if made on and as of such date and as if
each reference therein to the Agreement referred to the Agreement as modified
hereby, and represents and warrants that no Event of Default or other event
which, with the giving of notice or the lapse of time, or both, would
constitute such an Event of Default has occurred and is continuing.
4. Agreement as Amended. Except as expressly amended hereby, the
Agreement shall continue in full force and effect in accordance
<PAGE> 33
with the terms thereof; and any reference to the Agreement at any time
hereafter shall refer to the Agreement as amended hereby.
5. Governing Law. This Amendment No. 6, and the Agreement as
amended hereby, shall be construed in accordance with and governed by the laws
of the State of New York.
6. Severability. In case any one or more of the provisions
contained in this Amendment No. 6 should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
7. Counterparts; Effective Date. This Amendment No. 6 may be
executed in any number of counterparts, each of which shall constitute an
original but all of which when taken together shall constitute one and the same
instrument. This Amendment No. 6 shall become effective as of the date first
above written upon receipt by the Bank of counterparts hereof executed by each
of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
6 to be executed by their duly authorized officers as of the day and year first
above written.
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: Nicholas Dalmaso
-----------------------------
Title: ASSISTANT SECRETARY
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Lauren S. McCoy
-----------------------------
Title: LAUREN S MCCOY
VICE PRESIDENT
<PAGE> 1
EXHIBIT (b)(2)
State Street
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105-1713
Joseph P. Belanger
Vice President
(617) 985-5919
March 1, 1994
Mr. Jeffrey W. Maillet
Vice President
Van Kampen Merritt, Inc.
One Parkview Plaza
Oakbrook Terrace, Il 60181
Re: Van Kampen Merritt Prime Rate Income Trust
Dear Jeff:
This is to advise you that, based on the information you have
furnished us and our discussions to date, State Street Bank and
Trust Company (the "Bank") has approved your request of up to
$25 million of unsecured bank financing for the Van Kampen
Merritt Prime Rate Income Trust (the "Fund"). Our willingness
to provide the proposed financing is contingent upon and subject
to the terms and conditions in this letter (the "Agreement").
The proceeds of advances made under the line (the "Advances")
may be used only to provide the Fund with additional liquidity
to meet its obligations to purchase common shares of the Fund
pursuant to any tender offer the Fund may make or for temporary
or emergency purposes.
Prior to making any initial Advance to the Fund, the Bank
shall have received with respect to that Advance from the Fund:
1. an Advance request in the form attached hereto as
Exhibit 1 (the "Advance Request") stating the principal amount
of the requested Advance and warranting (i) compliance with
the Investment Company Act of 1940 and the prospectus and
statement of additional information of the Fund, (ii) usage
in accordance with this letter, and (iii) compliance with
the further requirement that all borrowings utilized to
fund previous tender requests be repaid in full;
2. the executed Promissory Note in the form attached
hereto as Exhibit 2;
3. a certified copy of resolutions of the Board of
Trustees of the Fund approving the loan; and
<PAGE> 2
4. an opinion of counsel to the Fund in a form satisfactory
to the Bank.
Prior to making any further Advance after making an initial
Advance, the Bank shall have received a completed Advance Request.
So long as any advances under the Line of Credit remain unpaid,
the Fund shall:
1. not create, incur or assume or suffer to exist any lien
(statutory or otherwise), security interest, priority,
conditional sale, pledge, charge or other encumbrance or
similar rights of others or any agreement to give any of
the foregoing ("Liens"), upon or with respect to any of its
properties, owned or acquired during such period; and
2. maintain a net asset value of at least $500 million.
So long as the line of credit is offered pursuant to the
terms of this letter to the Fund or any amount shall be
outstanding under any Note, the Fund shall furnish to the
Bank a statement of assets and liabilities as of the end
of each semi-annual period, the portfolio of investments as
of the end of each fiscal quarter, proxy materials, reports
to the shareholders and such other information as the Bank
shall reasonably request from time to time.
The Bank will honor requests for credit under this line
until January 28, 1995. Interest on any borrowings will be
calculated at the rate, as it exists from time to time,
announced by the Bank in Boston as its Prime Rate. As
compensation for holding available this lending commitment,
the Fund agrees to pay a 1/4% per annum fee on the unused
portion of the commitment. The fee will be payable quarterly
in arrears.
As an inducement to the Bank to extend the Line of Credit you
represent and warrant to the Bank that:
1. the execution, delivery and performance of all of the
agreements and instruments in connection with the Line of Credit
are within the Fund's power and authority and have been authorized
by all necessary proceedings and will not contravene any provision
of the Fund's organizational documents, by laws, prospectus and
statement of additional information or any material agreement or
undertaking binding upon the Fund;
2. the Line of Credit is the legal, valid and binding
obligation of the Fund and does not require the consent or
approval of any governmental agency or authority, except that
enforcement may be limited by bancruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles;
3. except as described in the prospectus, there is no
litigation, proceeding or investigation pending, or to the
knowledge of the Board of Trustees of the Trust, threatened
against the Fund; and
<PAGE> 3
4. the Fund has statutory authority to enter into this
agreement and that any loan requests hereunder will not result
in an aggregate of all loans outstanding which exceed the
limits permitted under the prospectus and statement of
additional information, the Investment Company Act of 1940,
or any applicable rule, regulation or statute.
This Agreement may be executed in several counterparts, and
each such counterpart shall be deemed to be an original and
shall constitute together with all other counterparts one
and the same Agreement.
This Agreement shall be deemed to be a contract made under the
laws of the Commonwealth of Massachusetts and for all purposes
shall be construed in accordance with the laws of said
Commonwealth, without regard to principles of conflicts of
law. All obligations of the Fund and rights of the Bank
shall be in addition to and not in limitation of those
provided by applicable law.
As provided in Section 5.5 of the Amended and Restated
Declaration of Trust, the shareholders, trustees, officers,
employees and other agents of the Fund shall not personally be
bound by or liable for any indebtedness, liability or
obligation hereunder or under the Promissory Note nor shall
resort be had to their private property for the satisfaction
of any obligation or claim hereunder.
If the foregoing satisfactorily sets forth the terms and
conditions of the Line of Credit, please execute and return
the enclosed copy of this letter on or before March 31, 1994,
together with the enclosed documents and the opinion of your
outside counsel concerning this transaction.
Sincerely,
/s/ Joseph P. Belanger
Accepted:
VAN KAMPEN MERRITT PRIME RATE TRUST
by /s/ Edward C. Wood III
its: Vice President
date: March 3, 1994
<PAGE> 4
PROMISSORY NOTE
$25,000,000.00 _____________________, 1994
Boston, Massachusetts
On Demand, For Value Received, the undersigned, jointly and
severally if more than one, (herein called "Borrower"), hereby
promise(s) to pay to the order of State Street Bank and Trust
Company (herein called "Bank") at the principal office of Bank
at 225 Franklin Street, Boston, Massachusetts 02110, or such
other place as the holder hereof shall designate
TWENTY-FIVE MILLION DOLLARS
or, if less, the aggregate principal amount of all loans made
by the Bank to the Borrower pursuant to a letter agreement
dated March 1, 1994 as such letter agreement may be amended,
extended or replaced (the Agreement), as shown in the schedule
attached hereto (the "Note Schedule"), together with interest
on each loan at the rate or rates per annum set forth in the
Note Schedule. Capitalized terms contained herein and not
defined will have the meanings ascribed to them in the Agreement.
The principal amount of each loan shall be payable on demand by
the Bank. Interest on the unpaid balance of each loan shall be
payable in arrears on the same day as the principal amount of
such loan is paid or demand is made, whichever is earlier, at
the rate per annum set forth in the Note Schedule. Interest
shall be calculated on the basis of actual days elapsed and a
360-day year. Overdue payments of principal (whether at stated
maturity, by acceleration or otherwise) shall bear interest,
payable on demand, at a fluctuating interest rate per annum
equal to 4% above the Prime Rate in effect from time to time.
"Prime Rate" shall mean the rate of interest announced by the
Bank in Boston, Massachusetts from time to time as its "Prime
Rate".
All loans hereunder and all payments on account of principal
and interest hereof shall be recorded on the books and records
of the Bank and, prior to any transfer hereof, endorsed on the
Note Schedule which is part of this note. The entries on the
records of the Bank (including any appearing on this note)
shall be prima facie evidence of amounts outstanding hereunder.
<PAGE> 5
- 2 -
At the option of the holder, this note shall become
immediately due and payable without notice or demand upon the
occurrence of any of the following events of default: (a) failure
to make any payment of principal or interest or pay any fee on
any loan hereunder when due; (b) failure to pay or perform any
liability, obligation or agreement of any Obligor to or with
the holder of this note; (c) failure of any Obligor to pay or
perform any obligation of any such Obligor to others for
borrowed money or in respect of any extension of credit or
accommodation; (d) failure of any representation or warranty in
any statement or document or financial statements delivered to
Bank for the purpose of including it to make or maintain loans
under this note; (e) failure to furnish Bank promptly with
financial information concerning any Obligor; (f) loss, theft,
substantial damage, sale or encumbrance to or of any property
constituting any collateral for the loans made under this note,
or the making of any levy, seizure or attachment thereof or
thereon or the failure to pay when due any tax thereon or, with
respect to any insurance policy, any premium therefor;
(g) default under any instrument constituting, or under any
agreement relating to, any collateral; (h) change in the condition
(financial or otherwise) of any Obligor which in the opinion of
the holder will impair its security or increase its risk;
(i) the occurrence of any of the following with respect to any
Obligor: admission in writing of his or its inability, or be
generally unable, to pay his or its debts as they become due,
death, dissolution, termination of existence, business failure,
insolvency, appointment of a receiver of any part of the property
of, legal or equitable assignment, conveyance or transfer of
property for the benefit of creditors by, or commencement of
any proceedings under any bankruptcy or insolvency laws by or
against such person.
Any deposits or other sums at any time credited by or due
from holder to any Obligor, and any securities or other property
of any Obligor at any time in the possession of holder may at
all times be held and treated as collateral for the payment of
this note and any and all other liabilities (direct or indirect,
absolute or contingent, sole, joint or several, secured or
unsecured, due or to become due, now existing or hereafter
arising) of such Obligor to holder. Regardless of the adequacy
of collateral, holder may apply or set off such deposits or
other sums against such liabilities at any time in the case
of a primary Obligor, but only with respect to matured
liabilities in the case of a secondary Obligor.
Each Obligor hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement hereof
and consent that this note may be extended from time to time and
that no extension or other indulgence, and no substitution,
release or surrender of collateral, and no discharge or release
of any other party primarily or secondarily liable hereon,
shall discharge or otherwise affect the liability of such Obligor.
No delay or omission on the part of Bank in exercising any right
hereunder shall operate as a waiver of such right or of any other
right hereunder, and a waiver of any such right on any one
occasion shall not be construed as a bar to or waiver of any such
right on any future occasion. "Obligor" means any person
primarily or secondarily liable hereunder or in respect hereto;
and "holder" means the payee or any endorsee of this note who
is in possession of it, or the bearer hereof if this note is
at the time payable to bearer.
<PAGE> 6
- 3 -
This note is secured by any and all collateral at any time
granted Bank to secure any obligations of Borrower.
Each Obligor agrees to pay on demand all costs and expenses
(including legal costs and attorney's fees) incurred or paid by
the holder in enforcing this note on default.
This note shall take effect as a sealed instrument and shall
be governed by the laws (other than the conflict of law rules)
of The Commonwealth of Massachusetts.
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST
By:________________________
Title:_____________________
Date:___________________
2896E
8/93
<PAGE> 7
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST
ADVANCE REQUEST
This instrument constitutes an Advance Request for an advance
pursuant to the Promissory Note (the "Note"),
dated________________________, 1993 of Van Kampen Merritt Prime
Rate Income Trust (the "Fund") to THE STATE STREET BANK AND
TRUST COMPANY, (the "Bank"), together with all Exhibits and
Certificates and the letter Agreement attached hereto
dated ______________ (collectively, the "Line Letter").
The Fund agrees that any advance extended pursuant to this
Advance Request shall constitute indebtedness of the
Undersigned, subject to the terms of the Note. Further, the
Fund hereby represents and warrants that:
1. usage of the proceeds of the Advance shall be limited to
conform with the usage specified in the Line Letter, and
2. the Fund is in compliance with all the terms and
conditions in the Line Letter.
VAN KAMPEN MERRITT PRIME RATE TRUST
by:__________________________________
Name:________________________________
Title:_______________________________
Date:________________________________
REQUESTED AMOUNT OF ADVANCE: $________________
<PAGE> 8
State Street
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105-1713
David V. Cox
Vice President
Tel: (617) 985-0973
March 8, 1995
Mr. Jeffrey W. Maillet
Vice President
Van Kampen / American Capital, Inc.
One Parkview Plaza
Oakbrook Terrace, Il 60181
Re: Van Kampen Merritt Prime Rate Income Trust
Dear Jeff:
This is to advise you that State Street Bank & Trust Company (the "Bank")
renewed a $25 million, unsecured, committed line of credit (the "Credit
Facility") for the Van Kampen Merritt Prime Rate Income Trust (the "Fund"). Our
willingness to provide this Credit Facility is contingent upon and subject to
the terms and conditions described within this letter (the "Agreement"). The
proceeds of advances made under the Credit Facility (the "Advances") may be used
only to provide the Fund with additional liquidity to meet its obligations to
purchase common shares of the Fund pursuant to any tender offer the Fund may
make or for temporary or emergency purposes.
Prior to making any initial Advance to the Fund, the Bank shall have received
with respect to that Advance from the Fund:
1. a request in the form attached hereto as Exhibit 1 (the "Advance
Request") stating the principal amount of the requested Advance and
warranting (i) compliance with the Investment Company Act of 1940 and
the Fund's prospectus and statement of additional information, (ii)
usage in accordance with the Agreement, and (iii) compliance with the
further requirement that all borrowings utilized to fund previous
tender requests be repaid in full;
2. the executed Promissory Note in the form attached hereto as Exhibit 2;
3. a certified copy of resolutions of the Board of Trustees of the Fund
approving the loan; and
4. an opinion of counsel to the Fund in a form satisfactory to the Bank.
Prior to making any further Advance after making an initial Advance, the Bank
shall have received a completed Advance Request.
<PAGE> 9
So long as any amount outstanding under the Credit Facility remains unpaid, the
Fund shall:
1. not create, incur, assume nor suffer to exist any lien (statutory or
otherwise), security interest, priority, conditional sale, pledge,
charge or other encumbrance or similar rights of others or any
agreement to give any of the foregoing ("Liens"), upon or with respect
to any of its properties, owned or acquired during such period; and
2. maintain a net asset value of at least $500 million.
So long as the Credit Facility is offered pursuant to the Fund or any amount
shall be outstanding under any Promissory Note, the Fund shall furnish to the
Bank a statement of assets and liabilities as of the end of each semi-annual
period, the portfolio of investments as of the end of each fiscal quarter, proxy
materials, reports to the shareholders and such other information as the Bank
shall reasonably request from time to time.
The Bank will honor requests under this Credit Facility until February 28, 1996.
Interest on any borrowings will be calculated at the rate, as it exists from
time to time, announced by the Bank in Boston as its Prime Rate. As compensation
for holding available this lending commitment, the Fund agrees to pay a 1/4% per
annum fee on the unused portion of the commitment. The fee will be payable
quarterly in arrears.
As an inducement to the Bank to extend the Credit Facility you represent and
warrant to the Bank that:
1. the execution, delivery and performance of all of the agreements and
instruments in connection with the Credit Facility are within the
Fund's power and authority and have been authorized by all necessary
proceedings and will not contravene any provision of the Fund's
organizational documents, by laws, prospectus and statement of
additional information or any material agreement or undertaking
binding upon the Fund;
2. the Credit Facility is the legal, valid and binding obligation of the
Fund and does not require the consent nor approval of any governmental
agency or authority, except that enforcement may be limited by
bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles:
3. except as described in the prospectus, there is no litigation,
proceeding or investigation pending, nor to the knowledge of the Board
of Trustees of the Trust, threatened against the Fund; and
4. the Fund has statutory authority to enter into this Agreement and that
any Advance Requests hereunder will not result in an aggregate of all
loans outstanding which exceed the limits permitted under the
prospectus and statement of additional information, the Investment
Company Act of 1940, nor any applicable rule, regulation or statute.
<PAGE> 10
This Agreement may be executed in several counterparts, and each such
counterpart shall be deemed to be an original and shall constitute together with
all other counterparts one and the same Agreement.
This Agreement shall be deemed to be a contract made under the laws of the
Commonwealth of Massachusetts and for all purposes shall be construed in
accordance with the laws of said Commonwealth, without regards to principles of
conflicts of law. All obligations of the Fund and rights of the Bank shall be in
addition to and not in limitation of those provided by applicable law.
As provided in Section 5.5 of the Amended and Restated Declaration of Trust, the
shareholders, trustees, officers, employees and other agents of the Fund shall
not personally be bound by or liable for any indebtedness, liability or
obligation hereunder or under the Promissory Note nor shall resort be had to
their private property for the satisfaction of any obligation or claim
hereunder.
If the foregoing satisfactorily sets forth the terms and conditions of the
Credit Facility, please execute and return the enclosed copy of this letter on
or before March 31, 1995, together with the enclosed documents.
Sincerely,
/s/ David V. Cox
Vice President
Accepted:
VAN KAMPEN MERRITT PRIME RATE TRUST
By: /s/ Edward Wood III
Its: Vice President & Treasurer
Date: March 13, 1995
<PAGE> 11
PROMISSORY NOTE
$25,000,000.00 ________________,19__
Boston, Massachusetts
On Demand, For Value Received, the undersigned, jointly and severally if
more than one, (herein called "Borrower"), hereby promise(s) to pay to the
order of State Street Bank and Trust Company (herein called "Bank") at the
principal office of Bank at 225 Franklin Street, Boston, Massachusetts 02110,
or such other place as the holder hereof shall designate
TWENTY-FIVE MILLION DOLLARS
or, if less, the aggregate principal amount of all loans made by the Bank to the
Borrower pursuant to a letter agreement dated March 8, 1995 as such letter
agreement may be amended, extended or replaced (the Agreement), as shown in the
schedule attached hereto (the "Note Schedule"), together with interest on each
loan at the rate or rates per annum set forth in the Note Schedule. Capitalized
terms contained herein and not defined will have the meanings ascribed to them
in the Agreement. The principal amount of each loan shall be payable on demand
by the Bank. Interest on the unpaid balance of each loan shall be payable in
arrears on the same day as the principal amount of such loan is paid or demand
is made, whichever is earlier, at the rate per annum set forth in the Note
Schedule. Interest shall be calculated on the basis of actual days elapsed and
a 360-day year. Overdue payments of principal (whether at stated maturity, by
acceleration or otherwise) shall bear interest, payable on demand, at a
fluctuating interest rate per annum equal to 4% above the Prime Rate in effect
from time to time. "Prime Rate" shall mean the rate of interest announced by
the Bank in Boston, Massachusetts from time to time as its "Prime Rate".
All loans hereunder and all payments on account of principal and interest
hereof shall be recorded on the books and records of the Bank and, prior to any
transfer hereof, endorsed on the Note Schedule which is part of this note. The
entries on the records of the Bank (including any appearing on this note) shall
be prima facie evidence of amounts outstanding hereunder.
At the option of the holder, this note shall become immediately due and
payable without notice or demand upon the occurrence of any of the following
events of default: (a) failure to make any payment of principal or interest or
pay any fee on any loan hereunder when due; (b) failure to pay or perform any
liability, obligation or agreement of any Obligor to or with the holder of this
note; (c) failure of any Obligor to pay or perform any obligation of any such
Obligor to others for borrowed money or in respect of any extension of credit or
accommodation; (d) failure of any representation or warranty in any statement or
document or financial statements delivered to Bank for the purpose of including
it to make or maintain loans under this note; (e) failure to furnish Bank
promptly with financial information concerning any Obligor; (f) loss, theft,
substantial damage, sale or encumbrance to or of any property constituting any
collateral for the loans made under this note, or the making of any levy,
seizure or attachment thereof or thereon or the failure to pay when due any tax
thereon or, with respect to any insurance policy, any premium therefor; (g)
default under any instrument constituting, or under any agreement relating to,
any collateral; (h) change in the condition
<PAGE> 12
(financial or otherwise) of any Obligor which in the opinion of the
holder will impair its security or increase its risk; (i) the occurrence of
any of the following with respect to any Obligor: admission in writing of his
or its inability, or be generally unable, to pay his or its debts as they
become due, death, dissolution, termination of existence, business failure,
insolvency, appointment of a receiver of any part of the property of, legal or
equitable assignment, conveyance or transfer of property for the benefit of
creditors by, or commencement of any proceedings under any bankruptcy or
insolvency laws by or against such person.
Any deposits or other sums at any time credited by or due from holder to any
Obligor, and any securities or other property of any Obligor at any time in the
possession of holder may at all times be held and treated as collateral for the
payment of this note and any and all other liabilities (direct or indirect,
absolute or contingent, sole, joint or several, secured or unsecured, due or to
become due, now existing or hereafter arising) of such Obligor to holder.
Regardless of the adequacy of collateral, holder may apply or set off such
deposits or other sums against such liabilities at any time in the case of a
primary Obligor, but only with respect to matured liabilities in the case of a
secondary Obligor.
Each Obligor hereby waives presentment, demand, notice, protest and all
other demands and notices in connection with the delivery acceptance,
performance, default or enforcement hereof and consent that this note may be
extended form time to time and that no extension or other indulgence, and no
substitution, release or surrender of collateral, and no discharge or
release of any other party primarily or secondarily liable hereon, shall
discharge or otherwise affect the liability of such Obligor. No delay or
omission on the part of Bank in exercising any right hereunder shall operate as
a waiver of such right or of any other right hereunder, and a waiver of any such
right on any one occasion shall not be construed as a bar to or waiver of any
such right on any future occasion. "Obligor' means any person primarily or
secondarily liable hereunder or in respect hereto; and "holder" means the payee
or any endorsee of this note who is in possession of it, or the bearer hereof
if this note is at the time payable to bearer.
This note is secured by any and all collateral at any time granted Bank to
secure any obligations of Borrower.
Each Obligor agrees to pay on demand all costs and expenses (including legal
costs and attorney's fees) incurred or paid by the holder in enforcing this note
on default.
This note shall take effect as a sealed instrument and shall be governed by
the laws (other than the conflict of law rules) of The Commonwealth of
Massachusetts.
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST
By:
Title:
Date:
<PAGE> 13
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST
ADVANCE REQUEST
This instrument constitutes an Advance Request for an advance pursuant to the
Promissory Note (the "Note"), dated ___________________________ of Van Kampen
Merritt Prime Rate Income Trust (the "Fund") to THE STATE STREET BANK AND TRUST
COMPANY, (the "Bank"), together with all Exhibits and Certificates and the
Letter Agreement attached hereto dated March 8,1995, (collectively, the
"Agreement").
The Fund agrees that any advance extended pursuant to this Advance Request shall
constitute indebtedness of the Undersigned, subject to the terms of the Note.
Further, the Fund hereby represents and warrants that:
1. usage of the proceeds of the Advance shall be limited to conform with
the usage specified in the Agreement, and
2. the Fund is in compliance with all the terms and conditions in the
Agreement.
VAN KAMPEN MERRITT PRIME RATE TRUST
By: ______________________________
Name: ____________________________
Title: ___________________________
Date: ____________________________
REQUESTED AMOUNT OF ADVANCE: $___________________
<PAGE> 14
[STATE STREET LOGO]
STATE STREET BANK AND TRUST COMPANY
P.O. Box 1713
Boston, Massachusetts 02105-1713
David V. Cox
Vice President
Tel: (617) 985-0973
February 23, 1996
Mr. Jeffrey W. Maillet
Vice President
Van Kampen American Capital, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
RE: VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
Dear Jeff:
This is to advise you that State Street Bank & Trust Company (the "Bank")
increased and renewed a $25 million, unsecured, committed line of credit (the
"Credit Facility") by $25 million for a total of $50 million for the Van Kampen
American Capital Prime Rate Income Trust (the "Fund"). Our willingness to
provide this Credit Facility is contingent upon and subject to the terms and
conditions described within this letter (the "Agreement"). The proceeds of
advances made under the Credit Facility (the "Advances") may be used only to
provide the Fund with additional liquidity to meet its obligations to purchase
common shares of the Fund pursuant to any tender offer the Fund may make or for
temporary or emergency purposes as defined by the Investment Company Act of
1940.
Prior to making any initial Advance to the Fund, the Bank shall have received
with respect to that Advance from the Fund:
1. a request in the form attached hereto as Exhibit 1 (the
"Advance Request") stating the principal amount of the
requested Advance and warranting (i) compliance with the
Investment Company Act of 1940 and the Fund's prospectus and
statement of additional information, (ii) usage in
accordance with the Agreement, and (iii) compliance with the
further requirement that all borrowings utilized to fund
previous tender requests be repaid in full;
2. the executed Promissory Note in the form attached
hereto as Exhibit 2;
3. a certified copy of resolutions of the Board of
Trustees of the Fund approving the loan; and
4. an opinion of counsel to the Fund in a form
satisfactory to the Bank.
Prior to making any further Advance after making an initial Advance, the Bank
shall have received a completed Advance Request.
<PAGE> 15
So long as any amount outstanding under the Credit Facility remains unpaid, the
Fund shall:
1. not create, incur, assume nor suffer to exist
any lien (statutory or otherwise), security interest,
priority, conditional sale, pledge, charge or other
encumbrance or similar rights of others or any
agreement to give any of the foregoing ("Liens"),
upon or with respect to any of its properties, owned
or acquired during such period; and
2. maintain a net asset value of at least $500
million.
So long as the Credit Facility is offered pursuant to the Fund or any amount
shall be outstanding under any Promissory Note, the Fund shall furnish to the
Bank a statement of assets and liabilities as of the end of each semi-annual
period, the portfolio of investments as of the end of each fiscal quarter,
proxy materials, reports to the shareholders and such other information as the
Bank shall reasonably request from time to time.
The Bank will honor requests under this Credit Facility until February 28,
1997. Interest on any borrowings will be calculated at the rate, as it exists
from time to time, announced by the Bank in Boston as its Prime Rate. As
compensation for holding available this lending commitment, the Fund agrees to
pay a 1/10% per annum fee on the unused portion of the commitment. The fee will
be payable quarterly in arrears.
As an inducement to the Bank to extend the Credit Facility you represent and
warrant to the Bank that:
1. the execution, delivery and performance of all
of the agreements and instruments in connection with
the Credit Facility are within the Fund's power and
authority and have been authorized by all necessary
proceedings and will not contravene any provision of
the Fund's organizational documents, by laws,
prospectus and statement of additional information or
any material agreement or undertaking binding upon
the Fund;
2. the Credit Facility is the legal, valid and
binding obligation of the Fund and does not require
the consent nor approval of any governmental agency
or authority, except that enforcement may be limited
by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights
generally and by general equitable principles:
3. except as described in the prospectus, there is
no litigation, proceeding or investigation pending,
nor to the knowledge of the Board of Trustees of the
Trust, threatened against the Fund; and
4. the Fund has statutory authority to enter into
this Agreement and that any Advance Requests
hereunder will not result in an aggregate of all
loans outstanding which exceed the limits permitted
under the prospectus and statement of additional
information, the Investment Company Act of 1940, nor
any applicable rule, regulation or statute.
<PAGE> 16
This Agreement may be executed in several counterparts, and each such
counterpart shall be deemed to be an original and shall constitute together
with all other counterparts one and the same Agreement.
This Agreement shall be deemed to be a contract made under the laws of the
Commonwealth of Massachusetts and for all purposes shall be construed in
accordance with the laws of said Commonwealth, without regards to principles of
conflicts of law. All obligations of the Fund and rights of the Bank shall be
in addition to and not in limitation of those provided by applicable law.
Nothing within this Agreement shall be construed as to modify or supersede any
provision of the Custodian Agreement between the Bank and the Fund in any
respect.
As provided in Section 5.5 of the Amended and Restated Declaration of Trust,
the shareholders, trustees, officers, employees and other agents of the Fund
shall not personally be bound by or liable for any indebtedness, liability or
obligation hereunder or under the Promissory Note nor shall resort be had to
their private property for the satisfaction of any obligation or claim
hereunder.
If the foregoing satisfactorily sets forth the terms and conditions of the
Credit Facility, please execute and return the enclosed copy of this letter on
or before February 29, 1996, together with the enclosed documents.
Sincerely,
/s/ David V. Cox
David V. Cox
Vice President
Accepted:
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
BY: /s/ Edward Wood III
--------------------------------
ITS: Vice President
--------------------------------
DATE: February 29, 1996
--------------------------------
cc: Joseph Belanger, SSB
Nicholas Delmaso, VKAC
<PAGE> 17
EXHIBIT 1
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
ADVANCE REQUEST
This instrument constitutes an Advance Request for an advance pursuant
to the Promissory Note (the "Note"), dated of VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST (the "Fund") to THE STATE STREET BANK AND TRUST
COMPANY, (the "Bank"), together with all Exhibits and Certificates and the
Letter Agreement attached hereto dated January 30, 1996, (collectively, the
"Agreement").
The Fund agrees that any advance extended pursuant to this Advance Request
shall constitute indebtedness of the Undersigned, subject to the terms of the
Note. Further, the Fund hereby represents and warrants that:
1. usage of the proceeds of the Advance shall be
limited to conform with the usage specified in the
Agreement, and
2. the Fund is in compliance with all the terms
and conditions in the Agreement.
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By:
----------------------------------------------
Name:
----------------------------------------------
Title:
----------------------------------------------
Date:
----------------------------------------------
REQUESTED AMOUNT OF ADVANCE: $
------------------------------------
<PAGE> 18
EXHIBIT 2
PROMISSORY NOTE
$50,000,000.00 ,19
----------------- --
Boston, Massachusetts
On Demand, For Value Received, the undersigned, jointly and severally
if more than one, (herein called "Borrower"), hereby promise(s) to pay to the
order of State Street Bank and Trust Company (herein called "Bank") at the
principal office of Bank at 225 Franklin Street, Boston, Massachusetts 02110,
or such other place as the holder hereof shall designate
FIFTY MILLION DOLLARS
or, if less, the aggregate principal amount of all loans made by the Bank to
the Borrower pursuant to a letter agreement dated JANUARY 30, 1996 as such
letter agreement may be amended, extended or replaced (the Agreement), as shown
in the schedule attached hereto (the "Note Schedule"), together with interest
on each loan at the rate or rates per annum set forth in the Note Schedule.
Capitalized terms contained herein and not defined will have the meanings
ascribed to them in the Agreement. The principal amount of each loan shall be
payable on demand by the Bank. Interest on the unpaid balance of each loan
shall be payable in arrears on the same day as the principal amount of such
loan is paid or demand is made, whichever is earlier, at the rate per annum set
forth in the Note Schedule. Interest shall be calculated on the basis of actual
days elapsed and a 360-day year. Overdue payments of principal (whether at
stated maturity, by acceleration or otherwise) shall bear interest, payable on
demand, at a fluctuating interest rate per annum equal to 4% above the Prime
Rate in effect from time to time. "Prime Rate" shall mean the rate of interest
announced by the Bank in Boston, Massachusetts from time to time as its "Prime
Rate".
All loans hereunder and all payments on account of principal and
interest hereof shall be recorded on the books and records of the Bank and,
prior to any transfer hereof, endorsed on the Note Schedule which is part of
this note. The entries on the records of the Bank (including any appearing on
this note) shall be prima facie evidence of amounts outstanding hereunder.
At the option of the holder, this note shall become immediately due
and payable without notice or demand upon the occurrence of any of the
following events of default: (a) failure to make any payment of principal or
interest or pay any fee on any loan hereunder when due; (b) failure to pay or
perform any liability, obligation or agreement of any Obligor to or with the
holder of this note; (c) failure of any Obligor to pay or perform any
obligation of any such Obligor to others for borrowed money or in respect of
any extension of credit or accommodation; (d) failure of any representation or
warranty in any statement or document or financial statements delivered to Bank
for the purpose of including it to make or maintain loans under this note; (e)
failure to furnish Bank promptly with financial information concerning any
Obligor; (f) loss, theft, substantial damage, sale or encumbrance to or of any
property constituting any collateral for the loans made under this note, or the
making of any levy, seizure or attachment thereof or thereon or the failure to
pay when due any tax thereon or, with respect to any insurance policy, any
premium therefor; (g) default under any instrument constituting, or under any
agreement relating to, any collateral; (h) change in the condition
<PAGE> 19
(financial or otherwise) of any Obligor which in the opinion of the holder will
impair its security or increase its risk; (i) the occurrence of any of the
following with respect to any Obligor: admission in writing of his or its
inability, or be generally unable, to pay his or its debts as they become due,
death, dissolution, termination of existence, business failure, insolvency,
appointment of a receiver of any part of the property of, legal or equitable
assignment, conveyance or transfer of property for the benefit of creditors by,
or commencement of any proceedings under any bankruptcy or insolvency laws by
or against such person.
Any deposits or other sums at any time credited by or due from holder
to any Obligor, and any securities or other property of any Obligor at any time
in the possession of holder may at all times be held and treated as collateral
for the payment of this note and any and all other liabilities (direct or
indirect, absolute or contingent, sole, joint or several, secured or unsecured,
due or to become due, now existing or hereafter arising) of such Obligor to
holder. Regardless of the adequacy of collateral, holder may apply or set off
such deposits or other sums against such liabilities at any time in the case of
a primary Obligor, but only with respect to matured liabilities in the case of
a secondary Obligor.
Each Obligor hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery acceptance,
performance, default or enforcement hereof and consent that this note may be
extended from time to time and that no extension or other indulgence, and no
substitution, release or surrender of collateral, and no discharge or release
of any other party primarily or secondarily liable hereon, shall discharge or
otherwise affect the liability of such Obligor. No delay or omission on the
part of Bank in exercising any right hereunder shall operate as a waiver of
such right or of any other right hereunder, and a waiver of any such right on
any one occasion shall not be construed as a bar to or waiver of any such right
on any future occasion. "Obligor" means any person primarily or secondarily
liable hereunder or in respect hereto; and "holder" means the payee or any
endorsee of this note who is in possession of it, or the bearer hereof if this
note is at the time payable to bearer.
This note is secured by any and all collateral at any time granted
Bank to secure any obligations of Borrower.
Each Obligor agrees to pay on demand all costs and expenses (including
legal costs and attorney's fees) incurred or paid by the holder in enforcing
this note on default.
This note shall take effect as a sealed instrument and shall be
governed by the laws (other than the conflict of law rules) of The Commonwealth
of Massachusetts.
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By:
------------------------------
Title:
------------------------------
Date:
------------------------------
<PAGE> 1
EXHIBIT (b)(3)
- -----------------------------------------------------------------
- -----------------------------------------------------------------
REVOLVING CREDIT AGREEMENT
DATED AS OF JULY 12, 1991
BETWEEN
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST
AND
CONTINENTAL BANK N.A.
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS*
Page
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND
COMPLIANCE WITH FINANCIAL RESTRICTIONS 1
1.1 Definitions 1
"Act" 1
"Advisory" 1
"Agreement" 1
"Alternate Reference Rate" 1
"Alternate Reference Rate Loan" 2
"Amended and Restated Declaration of Trust" 2
"Asset Coverage Ratio" 2
"Bank" 2
"Banking Day" 2
"Borrower" 2
"Breakage Date" 2
"Capitalized Lease" 2
"Code" 2
"Commitment Letter" 2
"Credit" 2
"Dollars" 2
"ERISA" 3
"ERISA Affiliate" 3
"Eurocurrency Reserve Requirement" 3
"Eurodollar Loan" 3
"Eurodollar Office" 3
"Event of Default" 3
"Federal Funds Effective Rate" 4
"Federal Reserve Board" 4
"Fiscal Quarter" 4
"Fiscal Year" 4
"GAAP" 4
"Impermissible Change of Control" 4
"Indebtedness" 4
"Interbank Rate" 5
"Interbank Rate (Reserve Adjusted)" 5
"Interest Period" 5
"Lien" 6
"Loan" 6
"Material Adverse Change" 6
"Morgan Credit Agreement" 6
"Net Asset Value" 6
"Note" 6
_____________________
* The Table of Contents is not part of this Agreement.
(i)
<PAGE> 3
"Payment Date" 6
"PBGC" 7
"Person" 7
"Plan" 7
"Reference Rate" 7
"Related Party" 7
"Reportable Event" 7
"Senior Security" 7
"Senior Security Representing Indebtedness" 7
"Subsidiary" 7
"Tangible Assets" 8
"Taxes" 8
"Termination Date" 8
"Tender Offer Period"
"Total Assets" 8
"Total Liabilities" 8
"Trade Accounts Payable" 8
"Unmatured Event of Default" 8
1.2 Other Definitional Provisions 8
1.3 Interpretation of Agreement 9
1.4 Accounting and Financial Determinations 9
2. COMMITMENT OF THE BANK AND CERTAIN LOAN TERMS 9
2.1 Loans 9
2.2 Loan Options 9
2.3 Borrowing Procedures 9
2.4 Continuation and/or Conversion of Loans 10
2.5 Note Evidencing Loans; Repayments 11
2.6 Funding Losses 11
2.7 Capital Adequacy 12
3. INTEREST AND FEES 12
3.1 Interest 12
(a) Alternate Reference Rate Loans 12
(b) Eurodollar Loans 12
(c) Interest After Maturity 13
3.2 Commitment Fee 13
3.3 Closing Fee 13
3.4 Method of Calculating Interest and Fees 13
4. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT AND SETOFF 13
4.1 Place and Manner of Payment 13
4.2 Prepayments 14
4.3 Reduction or Termination of the Credit 14
4.4 Setoff 14
(ii)
<PAGE> 4
5. ADDITIONAL PROVISIONS RELATING TO EURODOLLAR LOANS 15
5.1 Increased Cost 15
5.2 Deposits Unavailable or Interest Rate
Unascertainable or Inadequate;
Impracticability 16
5.3 Changes in Law Rendering Eurodollar Loans
Unlawful 16
5.4 Funding 17
(a) Discretion of the Bank as to Manner
of Funding 17
(b) Funding Through the Sale of
Participations 17
6. WARRANTIES 17
6.1 Existence 18
6.2 Authorization 18
6.3 No Conflicts 18
6.4 Validity and Binding Effect 18
6.5 No Default 18
6.6 Asset Statements 19
6.7 Litigation 19
6.8 Liens 19
6.9 Subsidiaries 20
6.10 Partnerships 20
6.11 Purpose 20
6.12 Regulation U 20
6.13 Compliance 20
6.14 No Pension Plans 20
6.15 Taxes 20
6.16 Public Utility Holding Company Act
Representation 20
6.17 Borrower's Investment Policies 20
7. BORROWER'S COVENANTS 20
7.1 Asset Statements and Other Reports 21
(a) Annual Audit Report 21
(b) Quarterly Asset Statement 21
(c) Other Asset Statements 21
(d) Officer's Certificate 22
(e) SEC and Other Reports 22
(f) Requested Information 22
7.2 Notices 22
(a) Default 22
(b) Litigation 22
(c) Judgment 22
(d) Material Adverse Change 22
(e) Other Events 22
7.3 Existence 22
(iii)
<PAGE> 5
7.4 Nature of Business 22
7.5 Books, Records and Access 22
7.6 Insurance 23
7.7 Taxes 23
7.8 Compliance 23
7.9 Merger, Purchase and Sale 23
7.10 Asset Coverage Ratio 23
7.11 Changes to Morgan Credit Agreement 23
7.12 Indebtedness 23
7.13 Liens 24
7.14 Guaranties 24
7.15 Other Agreements 24
7.16 Use of Proceeds 25
7.17 Transactions with Related Parties 25
7.18 Changes to Investment Policies 25
7.19 Changes to Amended and Restated Declaration
of Trust 25
8. CONDITIONS PRECEDENT TO ALL LOANS 25
8.1 Notice 25
8.2 Default 25
8.3 Warranties 25
8.4 Absence of Material Adverse Change 25
8.5 Certification 26
9. CONDITION PRECEDENT TO INITIAL LOAN 26
9.1 Note 26
9.2 Satisfactory Legal Form 26
9.3 Resolutions 26
9.4 Incumbency Certificate 26
9.5 Opinion 26
9.6 Financial Condition of the Borrower 26
10. EVENTS OF DEFAULT AND REMEDIES 26
10.1 Events of Default 26
(a) Non-Payment 27
(b) Non-Payment of Other Indebtedness 27
(c) Acceleration of Other Indebtedness 27
(d) Other Obligations 27
(e) Insolvency 27
(f) Pension Plans 28
(g) Fundamental Changes 28
(h) Agreements 28
(i) Warranty 28
(j) Litigation 28
(k) Impermissible Change in Control 29
10.2 Remedies 29
(iv)
<PAGE> 6
11. GENERAL 29
11.1 Waiver and Amendments 29
11.2 Notices 29
11.3 Expenses 30
11.4 Information; Assignments and Participations 30
11.5 Severability 32
11.6 Confidentiality 32
11.7 Law 32
11.8 Successors 32
11.9 Waiver of Jury Trial 32
11.10 Fund Disclaimer 33
EXHIBIT A - Note
EXHIBIT B - Schedule of Litigation
EXHIBIT C - Schedule of Contingent Liabilities
EXHIBIT D - Schedule of Liens
EXHIBIT E - Schedule of Indebtedness
EXHIBIT F - Opinion of Counsel
(v)
<PAGE> 7
REVOLVING CREDIT AGREEMENT
THIS AGREEMENT, dated as of July ___, 1991, is entered into
between VAN KAMPEN MERRITT PRIME RATE INCOME TRUST, a
Massachusetts business trust (the "Borrower"), and CONTINENTAL
BANK N.A. ("CBNA"), a national banking association having its
principal office at 231 South LaSalle Street, Chicago, Illinois
60697 (together with its permitted successors and assigns, the
"Bank").
In consideration of the mutual agreements herein contained,
the parties hereto agree as follows:
1. DEFINITIONS, INTERPRETATION OF AGREEMENT AND COMPLIANCE
WITH FINANCIAL RESTRICTIONS.
1.1 Definitions. In addition to the terms defined
elsewhere in this Agreement, the following terms shall have the
meanings indicated for purposes of this Agreement (such meanings
to be equally applicable to both the singular and plural forms of
the terms defined):
"Act" means the Investment Company Act of 1940, as
amended, modified or supplemented from time to time, and all
rules and regulations promulgated thereunder.
"Advisory" means Van Kampen Merritt Investment Advisory
Corp., a Delaware corporation.
"Agreement" means this Revolving Credit Agreement, as
it may be amended, modified or supplemented from time to time.
"Alternate Reference Rate" means, for any day, a
fluctuating rate per annum equal to the greater of (i) the
Reference Rate in effect on such day or (ii) a rate per annum
(rounded upward to the next highest 1/8 of 1% if not already an
integral multiple of 1/8 of 1%) equal to the Federal Funds
Effective Rate in effect on such day plus 1/4 of 1% per annum.
If for any reason the Bank shall have determined (which
determination shall be conclusive in the absence of manifest
error) that it is unable to ascertain the Federal Funds Effective
Rate for any reason (including, without limitation, the inability
of the Bank to obtain sufficient bids or publications in
accordance with the terms hereof), the Alternate Reference Rate
shall be a fluctuating rate per annum equal to the Reference Rate
in effect from time to time until the circumstances giving rise
to such inability no longer exist.
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<PAGE> 8
"Alternate Reference Rate Loan" means any Loan which
bears interest at a rate determined with reference to the
Alternate Reference Rate.
"Amended and Restated Declaration of Trust" means the
Amended and Restated Agreement and Declaration of Trust dated
September 19, 1989 of the Van Kampen Merritt Prime Rate Income
Trust.
"Asset Coverage Ratio" means the ratio which the value
of the total assets of the Borrower, less all liabilities and
indebtedness not represented by Senior Securities, bears to the
aggregate amount of Senior Securities Representing Indebtedness
of the Borrower.
"Assignee" -- see Section 11.4(b).
"Bank" -- see Preamble.
"Banking Day" means any day other than a Saturday,
Sunday or legal holiday on which banks are authorized or required
to be closed in Chicago, Illinois and, with respect to Eurodollar
Loans, a day on which dealings in Dollars may be carried on by
the Bank in the interbank eurodollar market.
"Borrower" -- see Preamble.
"Breakage Date" -- see Section 2.5.
"CBNA" -- see Preamble.
"Capitalized Lease" means any lease which is or should
be capitalized on the balance sheet of the lessee in accordance
with GAAP.
"Code" means the Internal Revenue Code of 1986 and any
successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed to
also refer to any successor sections.
"Commitment Letter" means the letter, dated as of
April 9, 1991, between the Borrower and the Bank.
"Credit" means the Bank's commitment to make Loans
under the terms of this Agreement.
"Dollars" and the symbol "$" mean lawful money of the
United States of America.
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<PAGE> 9
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute of similar
import, together with the regulations thereunder, in each case as
in effect from time to time. References to sections of ERISA
shall be construed to also refer to any successor sections.
"ERISA Affiliate" means any corporation, trade or
business that is, along with the Borrower, a member of a
controlled group of corporations or a controlled group of trades
or businesses, as described in sections 414(b) and 414(c),
respectively, of the Code or section 4001 of ERISA.
"Eurocurrency Reserve Requirement" means, with respect
to any Eurodollar Loan for any Interest Period, a percentage
equal to the daily average during such Interest Period of the
percentages in effect on each day of such Interest Period, as
prescribed by the Federal Reserve Board, for determining the
aggregate maximum reserve requirements (including all basic,
supplemental, marginal and other reserves) applicable to
"Eurocurrency liabilities" pursuant to Regulation D or any other
then applicable regulation of the Federal Reserve Board which
prescribes reserve requirements applicable to "Eurocurrency
liabilities," as presently defined in Regulation D. Without
limiting the effect of the foregoing, the Eurocurrency Reserve
Requirement shall reflect any other reserves required to be
maintained by the Bank against (i) any category of liabilities
that includes deposits by reference to which the Interbank Rate
(Reserve Adjusted) is to be determined, or (ii) any category of
extensions of credit or other assets that includes Eurodollar
Loans. For purposes of this Agreement, any Eurodollar Loans
hereunder shall be deemed to be "Eurocurrency liabilities," as
defined in Regulation D, and, as such, shall be deemed to be
subject to such reserve requirements without the benefit of, or
credit for, proration, exceptions or offsets which may be
available to the Bank from time to time under Regulation D.
"Eurodollar Loan" means any Loan which bears interest
at a rate determined with reference to the Interbank Rate
(Reserve Adjusted).
"Eurodollar Office" means the office of the Bank
designated as such with its signature hereto and, thereafter,
such other office or offices of the Bank (as designated from time
to time by notice to the Borrower from the Bank) which shall be
making or maintaining the Bank's Eurodollar Loans hereunder or
such other office or offices through which the Bank determines
the Interbank Rate. A Eurodollar Office may be, at the Bank's
option, either a domestic office or a foreign office.
"Event of Default" means any of the events described in
Section 10.1.
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<PAGE> 10
"Federal Funds Effective Rate" means, for any day, an
interest rate per annum equal to the weighted average of the
rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as
published for such day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a
Banking Day, the average of the quotations for such day on such
transactions received by the Bank from three Federal funds
brokers of recognized standing selected by it. In the case of a
day which is not a Banking Day, the Federal Funds Effective Rate
for such day shall be the Federal Funds Effective Rate for the
next preceding Banking Day. For purposes of this Agreement and
the Note, each change in the Alternate Reference Rate due to a
change in the Federal Funds Effective Rate shall take effect on
the effective date of such change in the Federal Funds Effective
Rate.
"Federal Reserve Board" means the Board of Governors of
the Federal Reserve System or any successor thereto.
"Fiscal Year" means any period of 12 consecutive
calendar months ending on the last day of July. References to a
Fiscal Year with a number corresponding to any calendar year
(e.g. "Fiscal Year 1991") refer to the Fiscal Year ending on the
last day of July occurring during such calendar year.
"GAAP" means generally accepted accounting principles
as applied in the preparation of the audited asset statements of
the Borrower referred to in Section 6.6.
"Impermissible Change of Control" means any event or
condition where (a) Advisory ceases to act as investment advisor
to the Borrower; or (b) at any time, a majority of the Board of
Trustees of the Borrower consists of Persons not members of the
Board of Trustees of the Borrower twelve months before such time.
"Indebtedness" of any Person means, without
duplication, (i) any obligation of such Person for borrowed
money, including, without limitation, (a) any obligation of such
Person evidenced by bonds, debentures, notes or other similar
debt instruments, and (b) any obligation for borrowed money which
is non-recourse to the credit of such Person but which is secured
by a Lien on any asset of such Person, (ii) any obligation of
such Person on account of advances, (iii) any obligation of such
Person for the deferred purchase price of any property or
services, except Trade Accounts Payable, (iv) any obligation of
such Person as lessee under a Capitalized Lease, and (v) any
Indebtedness of another Person secured by a Lien on any asset of
such first Person, whether or not such Indebtedness is assumed by
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<PAGE> 11
such first Person. For all purposes of this Agreement, the
Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general
partner or a joint venturer.
"Interbank Rate" means, with respect to each Interest
Period for a Eurodollar Loan, the rate per annum at which Dollar
deposits in immediately available funds are offered to the Bank's
Eurodollar Office two Banking Days prior to the beginning of such
Interest Period by major banks in the interbank eurodollar market
at or about the relevant local time of such Eurodollar Office,
for delivery on the first day of such Interest Period, for the
number of days comprised therein and in an amount comparable to
the amount of the Eurodollar Loan to be outstanding during such
Interest Period. As used herein, "relevant local time" means (i)
11:00 am., London time, when the Eurodollar Office selected by
the Bank to determine the Interbank Rate is located in London,
England, and (ii) 10:00 am., Chicago time, when such Eurodollar
Office is located in Chicago, Illinois.
"Interbank Rate (Reserve Adjusted)" means, with respect
to each Interest Period for a Eurodollar Loan, a rate per annum
(rounded upward, if necessary, to the nearest 1/100 of 1%)
determined pursuant to the following formula:
Interbank Rate = Interbank Rate
(Reserve Adjusted) 1-Eurocurrency Reserve Requirement
"Interest Period" means with respect to any Eurodollar
Loan, the period commencing on the borrowing date of such
Eurodollar Loan and ending on a day not less than one day nor
more than two months thereafter, as selected by the Borrower
pursuant to Section 2.3; provided, however, that:
(a) any Interest Period which would otherwise end on a
day which is not a Banking Day shall end on the next
succeeding Banking Day unless such next succeeding Banking
Day is the first Banking Day of a calendar month, in which
case such Interest Period shall end on the Banking Day next
preceding such day;
(b) any Interest Period of one month or two months (i)
shall end on the numerically corresponding day which is one
month or two months thereafter, as the case may be, and (ii)
which begins on the last Banking Day of a calendar month (or
on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period)
shall end on the last Banking Day of the calendar month at
the end of such Interest Period; and
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<PAGE> 12
(c) no Interest Period shall extend beyond the
Termination Date.
"Lien" means any mortgage, pledge, hypothecation,
judgment lien or similar legal process, title retention lien, or
other lien or security interest, including, without limitation,
the interest of a vendor under any conditional sale or other
title retention agreement and the interest of a lessor under any
Capitalized Lease.
"Loan" means a loan by the Bank to the Borrower under
Section 2.1, and shall be an Alternate Reference Rate Loan or a
Eurodollar Loan (each of which shall be a "type" of Loan).
"Material Adverse Change" means, relative to any
occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental
investigation or proceeding), a material adverse change with
respect to:
(a) the assets of or the business, revenues, condition
(financial or otherwise), or operations of the Borrower; or
(b) the ability of the Borrower to perform any of its
obligations under this Agreement or the Note.
"Morgan Credit Agreement" means that certain Credit
Agreement, dated as of March 14, 1991, between the Borrower and
Morgan Guaranty Trust Company of New York, and any extension or
replacement thereof; provided, that no such extension or
replacement shall increase the principal amount available to be
borrowed thereunder.
"Net Asset Value" means, at any date, Total Assets less
Total Liabilities.
"Note" means the Borrower's promissory note,
substantially in the form set forth as Exhibit A with appropriate
insertions, as such promissory note may by amended, modified or
supplemented from time to time, and the term "Note" shall include
any substitutions for, or renewals of, such promissory note.
"Participant" -- see Section 11.4(b).
"Payment Date" means (i) with respect to any Eurodollar
Loan, the last day of each Interest Period with respect thereto
and (ii) with respect to any Alternate Reference Rate Loan and
the Commitment Fee, the last day of each June, September,
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<PAGE> 13
December and March, commencing on the first such date to occur
after the date hereof, and the Termination Date.
"PBGC" means the Pension Benefit Guaranty Corporation
and any entity succeeding to any or all of its functions under
ERISA.
"Person" means an individual, partnership, corporation,
trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or political
subdivision thereof, or other entity.
"Plan" means a "pension plan," as such term is defined
in ERISA, established or maintained by the Borrower or any ERISA
Affiliate or as to which the Borrower or any ERISA Affiliate
contributes or is a member or otherwise may have any liability.
"Reference Rate" means, at any time, the rate of
interest then most recently announced by CBNA at Chicago,
Illinois as its reference rate. For purposes of this Agreement
and the Note, each change in the Alternate Reference Rate due to
a change in the Reference Rate shall take effect on the effective
date of the change in the Reference Rate.
"Related Party" means, for purposes of Section 7.17
only, any Person (other than a Subsidiary) (i) which directly or
indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Borrower,
(ii) which beneficially owns or holds 5% or more of the equity
interest of the Borrower, or (iii) 5% or more of the equity
interest of which is beneficially owned or held by the
Borrower. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Reportable Event" has the meaning given to such term
in ERISA.
"Senior Security" means any bond, debenture, note, or
similar obligation or instrument constituting a security and
evidencing indebtedness, and any stock of a class having priority
over any other class as to distribution of assets or payments of
dividends.
"Senior Security Representing Indebtedness" means any
Senior Security other than stock.
"Subsidiary" means any Person of which or in which the
Borrower owns directly or indirectly 50% or more of (i) the
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<PAGE> 14
combined voting power of all classes of stock having general
voting power under ordinary circumstances to elect a majority of
the board of directors of such Person, if it is a corporation,
(ii) the capital interest or profits interest of such Person, if
it is a partnership, joint venture or similar entity, or (iii)
the beneficial interest of such Person, if it is a trust,
association or other unincorporated organization.
"Tangible Assets" means Total Assets less goodwill and
intangible assets not capable of valuation.
"Taxes" with respect to any Person means taxes,
assessments or other governmental charges or levies imposed upon
such Person, its income or any of its properties, franchises or
assets.
"Tender Offer Period" means each period of not more
than 25 business days from the date on which the Borrower
commences a tender offer for all or a portion of its common
shares at the net asset value of such shares.
"Termination Date" means July 11, 1992.
"Total Assets" means, at any date, all items which
would be set forth as assets on a balance sheet on such date in
accordance with GAAP.
"Total Liabilities" means, at any date, all items which
would be set forth as liabilities on a balance sheet on such date
in accordance with GAAP.
"Trade Accounts Payable" of any Person means trade
accounts payable of such Person with a maturity of not greater
than 90 days incurred in the ordinary course of such Person's
business.
"Unmatured Event of Default" means any event or
condition which, with the lapse of time or giving of notice to
the Borrower or both, would constitute an Event of Default.
1.2 Other Definitional Provisions. Unless otherwise
defined therein, all terms defined in this Agreement shall have
the defined meanings when used in the Note or in any certificate
or other document made or delivered pursuant hereto.
1.3 Interpretation of Agreement. A Section or an
Exhibit is, unless otherwise stated, a reference to a section
hereof or an exhibit hereto, as the case may be. Section
captions used in this Agreement are for convenience only, and
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<PAGE> 15
shall not affect the construction of this Agreement. The words
"hereof," "herein," "hereto" and "hereunder" and words of similar
purport when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement.
1.4 Accounting and Financial Determinations. Unless
otherwise specified, all accounting terms used herein or in any
certificate shall be interpreted, and all accounting
determinations and computations hereunder (including those
contained in Section 7) shall be made, and all financial
statements and reports required to be delivered hereunder shall
be prepared in accordance with GAAP consistently applied with
those generally accepted accounting principles used in the
preparation of the financial statements referred to in Section
6.6.
2. COMMITMENT OF THE BANK AND CERTAIN LOAN TERMS.
2.1 Loans. Subject to the terms and conditions of
this Agreement and in reliance upon the warranties of the
Borrower set forth herein, the Bank agrees to make loans
(collectively called the "Loans" and individually called a
"Loan") to the Borrower, which Loans the Borrower may prepay and
reborrow during the period from the date hereof to, but not
including, the Termination Date, in such amounts as the Borrower
may from time to time request, but not exceeding $25,000,000 (or
such reduced amount as may be fixed by the Borrower pursuant to
Section 4.3) in the aggregate at any one time outstanding.
2.2 Loan Options. Each Loan shall be an Alternate
Reference Rate Loan or a Eurodollar Loan, as shall be selected by
the Borrower, except as otherwise provided herein. Any
combination of types of Loans may be outstanding at the same
time, except that no more than five Eurodollar Loans having
different Interest Periods may be outstanding at any one time.
2.3 Borrowing Procedures. The Borrower shall give the
Bank prior written or telephonic notice of each Loan, which shall
be received by the Bank, in the case of an Alternate Reference
Rate Loan, not later than 10:00 a.m., Chicago time, on the
borrowing date with respect to such Loan, or, in the case of a
Eurodollar Loan, not later than 10:00 a.m., Chicago time, two
Banking Days prior to the borrowing date with respect to such
Loan. Each such notice shall specify (i) the borrowing date
(which shall be a Banking Day), (ii) the amount and type of Loan,
(iii) if such Loan is to be a Eurodollar Loan, the initial
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<PAGE> 16
Interest Period for such Loan, and the date on which such Loan is
to mature, which date shall be not less than one day nor more
than two months following the date on which such requested Loan
is made, and (iv) wire transfer instructions for the proceeds of
such Loan. Each such notice shall also include a certificate of
the Borrower's vice president or assistant treasurer as to the
Net Asset Value of the Borrower as of the close of business on
the Banking Day immediately preceding the date of such notice.
No Interest Period may end, and no Loan may mature, later than
the Termination Date. Each Loan shall be in a minimum amount of
$100,000 or in an integral multiple of $100,000 in excess
thereof. The Borrower shall promptly confirm each such
telephonic notice in writing (it being understood, however, that
the Borrower's failure to confirm any telephonic notice or
otherwise comply with the provisions of this Section 2.3 shall
not affect the obligation of the Borrower to repay each Loan in
accordance with the terms of this Agreement and the Note). On
the date specified in the notice of borrowing, upon satisfaction
of the applicable conditions precedent for such Loan, the Bank
will make same-day funds in an amount equal to the requested Loan
available to the Borrower by wire transfer to the account(s) the
Borrower shall have specified in such notice of borrowing.
2.4 Continuation and/or Conversion of Loans. The
Borrower may elect to (i) continue any outstanding Eurodollar
Loan from the current Interest Period for such Loan into a
subsequent Interest Period to begin on the day following last day
of such current Interest Period, or (ii) convert any outstanding
Alternate Reference Rate Loan into a Eurodollar Loan, or
(iii) convert any outstanding Eurodollar Loan into an Alternate
Reference Rate Loan on the last day of the current Interest
Period for such Eurodollar Loan, in each case by giving the Bank
prior written or telephonic notice of such continuation or
conversion, which shall be received by the Bank not later than
(x) 10:00 am., Chicago time, two Banking Days prior to the
effective date of any continuation or conversion which results in
a new or continued Eurodollar Loan, at or (y) 10:00 a.m., Chicago
time, of the date of continuation or conversion which results in
a new Alternate Reference Rate Loan. Each such notice shall
specify (a) the effective date of continuation or conversion
(which shall be a Banking Day), (b) the type of Loan that the
Loan is to be continued as or converted into and the amount of
such Loan, and (c) the Interest Period for such Loan, if
applicable. The Borrower shall promptly confirm each such
telephonic notice in writing. Absent timely notice of
continuation or conversion, each Eurodollar Loan shall
automatically convert into an Alternate Reference Rate Loan on
the last day of the current Interest Period for such Loan unless
paid in full on such last day. At any time that an Event of
Default or an Unmatured Event of Default shall exist, then any
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<PAGE> 17
Loans may be converted or continued only as Alternate Reference
Rate Loans.
2.5 Note Evidencing Loans; Repayments. The Loans
shall be evidenced by the Note, which shall be dated the date of
the initial Loan and shall mature no later than the Termination
Date. All Loans made by the Bank to the Borrower pursuant to this
Agreement and all payments of principal shall be evidenced by the
Bank in its records or, at its option, on the schedule (or any con-
tinuation thereof) attached to the Note, which records or schedule
shall be rebuttable presumptive evidence of the subject matter
thereof. Principal on each Eurodollar Loan shall be payable on the
Payment Date related thereto, and principal on each Loan shall be
payable on the Termination Date if any amounts shall then be unpaid
and owing.
2.6 Funding Losses. The Borrower will indemnify the
Bank upon demand against any loss or expense which the Bank may
sustain or incur (including, without limitation, any loss or
expense sustained or incurred in obtaining, liquidating or
employing deposits or other funds acquired to effect, fund or main-
tain any Eurodollar Loan) as a consequence of (i) any failure of
the Borrower to borrow a Eurodollar Loan on a date specified
therefor in a notice thereof, or (ii) any payment (including,
without limitation, any payment pursuant to Section 5.3 or Section
10.2), prepayment, or conversion of any Eurodollar Loan on a date
other than the last day of the Interest Period for such Loan. Such
loss or expense shall include an amount equal to the present value
of the excess, if any, as reasonably determined by the Bank, of
(a) the amount of interest that would have accrued on the principal
amount so paid, prepaid or converted or not continued or converted
for the period from the date of such payment, prepayment or
conversion or failure to continue or convert (such date being
hereinafter referred to as the "Breakage Date") to the last day of
the then current Interest Period for such Loan (or, in the case of
a failure to continue or convert, the Interest Period for such Loan
that would have commenced on the date of such failure) at the
Interbank Rate applicable to such Loan under the terms of this
Agreement over (b) the amount of interest that the Bank would have
earned had it invested the entire amount of funds so paid, prepaid
or converted or the entire amount of funds acquired to effect, fund
or maintain the Loan not continued or converted, as the case may
be, in U.S. Government Treasury Securities with a maturity
comparable to such Interest Period. The present value of such
excess shall be calculated by discounting such excess to the
Breakage Date at the interest rate expressly borne by such U.S.
Government Treasury Securities or, if none, the effective interest
rate on such securities. Determinations by the Bank for purposes
of this Section 2.6 of the amount required to indemnify the Bank
against any such loss or expense shall be set forth in a
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<PAGE> 18
certificate delivered by the Bank to the Borrower, which
certificate shall set forth the basis for the calculation thereof
and shall be rebuttably presumptive evidence of the matters set
forth therein.
2.7 Capital Adequacy. If the Bank shall reasonably
determine that the application or adoption of any law, rule,
regulation, directive, interpretation, treaty or guideline
regarding capital adeguacy after the date hereof, or any change
therein or in the interpretation or administration thereof, whether
or not having the force of law (including, without limitation,
application of changes to Regulation H and Regulation Y of the
Federal Reserve Board issued by the Federal Reserve Board on
January 19, 1989 and regulations of the Comptroller of the
Currency, Department of the Treasury, 12 CFR Part 3, Appendix A,
issued by the Comptroller of the Currency on January 27, 1989, but
excluding, in any event, any such law, rule, regulation, directive,
interpretation, treaty, guideline or interpretation promulgated
prior to the date hereof but which has not taken effect as of the
date hereof) increases the amount of capital reguired or expected
to be maintained by the Bank or any Person controlling the Bank,
and such increase is based upon the existence of the Bank's
obligations hereunder and other commitments of this type, then from
time to time, within 10 days after demand from the Bank, the
Borrower shall pay to the Bank such amount or amounts as will
compensate the Bank or such controlling Person, as the case may
be, for such increased capital requirement. The determination of
any amount to be paid by the Borrower under this Section 2.7 shall
take into consideration the policies of the Bank or any Person
controlling the Bank with respect to capital adequacy and shall be
based upon any reasonable averaging, attribution and allocation
methods. A certificate of the Bank setting forth the amount or
amounts as shall be necessary to compensate the Bank as specified
in this Section 2.7 and the basis of the calculation thereof, shall
be delivered to the Borrower and shall be rebuttably presumptive
evidence of the matters set forth therein.
3. INTEREST AND FEES.
3.1 Interest.
(a) Alternate Reference Rate Loans. The unpaid
principal amount of each Alternate Reference Rate Loan shall bear
interest prior to maturity at a rate per annum equal to the
Alternate Reference Rate in effect from time to time. Accrued
interest on each Alternate Reference Rate Loan shall be payable on
each Payment Date and on the Termination Date, if any amounts shall
then be unpaid and owing.
(b) Eurodollar Loans. The unpaid principal amount of
each Eurodollar Loan shall bear interest prior to the related
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<PAGE> 19
Payment Date at a rate per annum equal to the Interbank Rate
(Reserve Adjusted) in effect for each Interest Period with
respect to such Eurodollar Loan plus 2% per annum. Accrued
interest on each Eurodollar Loan shall be payable on each Payment
Date and on the Termination Date, if any amounts shall then be
unpaid and owing.
(c) Interest After Maturity. The Borrower shall pay
to the Bank interest on any amount of principal of any Loan which
is not paid when due, whether at maturity, by acceleration or
otherwise, accruing from and including the date such amount shall
have become due to, but not including, the date of payment
thereof in full at the rate per annum which is equal to 2% in
excess of the Alternate Reference Rate in effect from time to
time. After maturity, accrued interest shall be payable on
demand.
3.2 Commitment Fee. The Borrower agrees to pay to the
Bank a commitment fee of 0. 25% per annum on the daily average of
the amount of the Credit during the period from and including the
date of this Agreement to, but not including, the earlier of the
Termination Date or the date of termination of the Credit
pursuant to Section 10.2. Such commitment fee shall be payable
in arrears on each Payment Date and on the Termination Date or
the date of termination of the Credit for any period then ending
for which such commitment fee shall not have been theretofore
paid.
3.3 Closing Fee. The Borrower shall pay to the Bank a
closing fee in an amount equal to $12,500 upon execution of this
Agreement and the closing of the transactions contemplated
thereby. The Borrower confirms that the $5,000 Deposit referred
to in the Commitment Letter has not been paid.
3.4 Method of Calculating Interest and Fees. Interest
on each Loan shall be calculated on the basis of a year
consisting of 360 days and paid for actual days elapsed,
calculated as to each Loan from and including the date such Loan
is made to, but not including, the date such Loan is paid. Any
fees shall be calculated on the basis of a year consisting of 360
days and paid for actual days elapsed. Any fees, once paid,
shall be non-refundable.
4. PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT AND SETOFF.
4.1 Place and Manner of Payment. All payments
hereunder (including payments with respect to the Note) shall be
made without setoff or counterclaim and shall be made to the Bank
in immediately available funds prior to 12:30 pm., Chicago time,
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on the date due at its office at 231 South LaSalle Street,
Chicago, Illinois 60697, or at such other place or for such other
account as may be designated by the Bank to the Borrower in
writing. Any payments received after such time shall be deemed
received on the next Banking Day. Subject to the definition of
the term "Interest Period," whenever any payment to be made
hereunder or under the Note shall be stated to be due on a date
other than a Banking Day, such payment may be made on the next
succeeding Banking Day, and such extension of time shall be
included in the calculation of interest or any fees.
4.2 Prepayments. The Borrower may from time to time,
upon at least two Banking Days' prior written or telephonic
notice received by the Bank in the case of Eurodollar Loans, and
same day written or telephonic notice received by the Bank prior
to 10:00 am., Chicago time, in the case of Alternate Reference
Rate Loans, prepay the principal of the Loans in whole or in
part, as contemplated by Section 2.1; provided, however, that any
partial prepayment of principal shall be in a minimum amount of
$100,000 or in an integral multiple of $100,000 in excess
thereof, and provided, further that any prepayment of principal
on the Eurodollar Loans shall be subject to the indemnification
provisions of Section 2.6, but shall otherwise be without any
premium or penalty. The Borrower shall promptly confirm any
telephonic notice of prepayment in writing.
4.3 Reduction or Termination of the Credit. The
Borrower may from time to time, upon at least five Banking Days'
prior written or telephonic notice received by the Bank,
permanently reduce the amount of the Credit, but only upon
payment of the unpaid principal amount of the Loans, if any, in
excess of the then reduced amount of the Credit, plus (i) accrued
interest to the date of such payment on the principal amount
being repaid, if any, and (ii) any amount required to indemnify
the Bank pursuant to Section 2.6 in respect of such payment. Any
such reduction shall be in a minimum amount of $1,000,000 or in
an integral multiple of $1,000,000 in excess thereof. The
Borrower may at any time on like notice terminate the Credit upon
payment in full of (a) the Loans, (b) accrued interest thereon to
the date of such payment, (c) any amount required to indemnify
the Bank pursuant to Section 2.6 in respect of such payment, and
(d) any other liabilities of the Borrower hereunder. The
Borrower shall promptly confirm any telephonic notice of
reduction or termination of the Credit in writing.
4.4 Setoff. In addition to and not in limitation of
all other rights and remedies (including other rights of setoff)
that the Bank or other holder of the Note may have, the Bank or
such other holder shall, upon the occurrence of any Event of
Default described in Section 10.1, have the right to appropriate
and apply to the payment of any and all Loans, fees and other
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<PAGE> 21
liabilities of the Borrower hereunder, in such order of
application as the Bank or such other holder may elect, any and
all balances, credits, deposits (general or special, time or
demand, provisional or final), accounts or moneys of the Borrower
then or thereafter with the Bank or such other holder. The bank
shall promptly advise the Borrower of any such setoff and
application but failure to do so shall not affect the validity of
such setoff and application.
5. ADDITIONAL PROVISIONS RELATING TO EURODOLLAR LOANS.
5.1 Increased Cost. If, as a result of any change in
any law, rule, regulation, treaty or directive after the date
hereof, or in the interpretation or administration thereof, or
compliance by the Bank with any request or directive (whether or
not having the force of law) from any court, central bank,
governmental authority, agency or instrumentality, or comparable
agency:
(a) any tax, duty or other charge with respect to any
Eurodollar Loan, the Note (to the extent the same evidences
the Borrower's obligations with respect to Eurodollar Loans)
or the Bank's obligation to make Eurodollar Loans is
imposed, modified or deemed applicable, or the basis of
taxation of payments to the Bank of the principal of, or
interest on, any Eurodollar Loan (other than taxes imposed
on the overall net income of the Bank by the jurisdictions
(including each federal, state and local jurisdiction) in
which the Bank has its principal office or its Eurodollar
Office or any political subdivision or taxing authority of
the Eurodollar Office) is changed; or
(b) any reserve, special deposit, special assessment
or similar requirement against assets of, deposits with or
for the account of, or credit extended by, the Bank is
imposed, modified or deemed applicable;
and the Bank determines that, by reason thereof, the cost to the
Bank of making or maintaining any Eurodollar Loan is increased,
or the amount of any sum receivable by the Bank hereunder or
under the Note in respect of any Eurodollar Loan is reduced;
then, the Borrower shall pay to the Bank upon demand such
additional amount or amounts as will compensate the Bank for such
additional cost or reduction actually incurred or suffered by the
Bank (provided that the Bank has not been compensated for such
additional cost or reduction in the calculation of the
Eurocurrency Reserve Requirement). Determinations by the Bank
for purposes of this Section 5.1 of the additional amounts
required to compensate the Bank in respect of the foregoing shall
be set forth in a certificate delivered by the Bank to the
Borrower, which certificate shall set forth the basis for the
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<PAGE> 22
calculation thereof and shall be rebuttably presumptive evidence
of the matters set forth therein. In determining such amounts,
the Bank may use any reasonable averaging, attribution and
allocation methods.
5.2 Deposits Unavailable or Interest Rate
Unascertainable or Inadequate; Impracticability. If the Borrower
has any Eurodollar Loan outstanding, or has notified the Bank of
its intention to borrow a Eurodollar Loan as provided herein,
then in the event that, prior to any Interest Period, the Bank
shall have determined (which determination shall be conclusive
and binding on the parties hereto) that:
(a) deposits of the necessary amount for the relevant
Interest Period are not available to the Bank in the
relevant market or that, by reason of circumstances
affecting such market, adequate and reasonable means do not
exist for ascertaining the Interbank Rate for such Interest
Period; or
(b) the Interbank Rate (Reserve Adjusted) will not
adequately and fairly reflect the cost to the Bank of making
or funding the Eurodollar Loans for such Interest Period; or
(c) the making or funding of Eurodollar Loans has
become impracticable as a result of any event occurring
after the date of this Agreement which, in the opinion of
the Bank, materially and adversely affects such Loans or the
Bank's obligation to make such Loans or the relevant market;
the Bank shall promptly give notice of such determination to the
Borrower, and (i) any notice of a new Eurodollar Loan previously
given by the Borrower and not yet borrowed or converted shall be
deemed to be a notice to make an Alternate Reference Rate Loan
and (ii) the Borrower shall be obligated to either pay in full
any outstanding Eurodollar Loans without any premium or penalty
on the last day of the then current Interest Period with respect
thereto or convert any such Loans to Alternate Reference Rate
Loans on such last day.
5.3 Changes in Law Rendering Eurodollar Loans
Unlawful. If at any time due to the adoption of any law, rule,
regulation, treaty or directive, or any change therein or in the
interpretation or administration thereof by any court, central
bank, governmental authority, agency or instrumentality, or
comparable agency charged with the interpretation or
administration thereof, or for any other reason arising
subsequent to the date hereof, it shall become unlawful or
impossible for the Bank to make or fund any Eurodollar Loan which
it is committed to make hereunder, the obligation of the Bank to
provide such Loans shall, upon the happening of such event,
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<PAGE> 23
forthwith be suspended for the duration of such illegality or
impossibility. If any such event shall make it unlawful or
impossible for the Bank to continue any Eurodollar Loans
previously made by it hereunder, the Bank shall, upon the
happening of such event, notify the Borrower thereof in writing,
and the Borrower shall, on the earlier of (i) the last day of the
then current Interest Period with respect thereto or (ii) if
required by such law, rule, regulation, treaty, directive or
interpretation, on such date as shall be specified in such
notice, either convert each such unlawful Loan to an Alternate
Reference Rate Loan with a maturity equal to the Interest Period
of the Eurodollar Loan so converted or pay in full each such
unlawful Loan, together with accrued interest thereon, without
any premium or penalty (except as provided in Section 2.6).
5.4 Funding.
(a) Discretion of the Bank as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary,
the Bank shall be entitled to fund and maintain its funding of
all or any part of the Loans in any manner it sees fit; it being
understood, however, that for purposes of this Agreement, all
determinations with respect to Eurodollar Loans hereunder (other
than determinations made pursuant to Section 2.6 hereof) shall be
made as if the Bank had actually funded and maintained each
Eurodollar Loan during the Interest Period for such Loan through
the purchase of deposits having a term corresponding to such
Interest Period and bearing an interest rate equal, in the case
of a Eurodollar Loan, to the Interbank Rate for such Interest
Period (whether or not the Bank shall have granted any
participations in such Loan).
(b) Funding Through the Sale of Participations.
Notwithstanding any provision of this Agreement to the contrary,
the Borrower acknowledges that the Bank may fund all or any part
of the Loans by sales of participations to various participants,
and agrees that the Bank may, in invoking its rights under this
Section 5 or under Section 2.6 and subject to the provisions of
Section 11.4(c) hereof, demand and receive payment for costs and
other amounts incurred by, or allocable to, any such participant,
or take other action arising from circumstances applicable to any
such participant, to the same extent that such participant could
demand and receive payments, or take other action, under this
Section 5 or under Section 2.6 if such participant were the Bank
under this Agreement.
6. WARRANTIES. To induce the Bank to grant the Credit and
to make the Loans, the Borrower warrants that:
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<PAGE> 24
6.1 Existence. The Borrower is a Massachusetts
business trust duly organized, validly existing and in good
standing under the laws of the State of Massachusetts. The
Borrower is a duly registered, non-diversified, closed-end
investment company under the Act and has registered the sale of
its common shares of beneficial interest under the Securities Act
of 1933, as amended, pursuant to one or more registration
statements, including any related prospectus, that is or are
currently effective. The Borrower is in good standing and is
duly qualified to do business in each state where, because of the
nature of its activities or properties, such qualification is
required except where the failure to be so qualified could not
reasonably be expected to have a material adverse effect on the
business or operations of the Borrower.
6.2 Authorization. The Borrower is duly authorized to
execute and deliver this Agreement and the Note and is duly
authorized to borrow monies hereunder and to perform its
obligations under this Agreement and the Note. The execution,
delivery and performance by the Borrower of this Agreement and
the Note and the borrowings hereunder do not and will not require
any consent or approval of any governmental agency or authority
which has not been obtained.
6.3 No Conflicts. The execution, delivery and
performance by the Borrower of this Agreement and the Note do not
and will not conflict with (i) any provision of law, (ii) the
Amended and Restated Declaration of Trust or by-laws of the
Borrower, (iii) any agreement binding upon the Borrower, or (iv)
any court or administrative order or decree applicable to the
Borrower, and do not and will not require, or result in, the
creation or imposition of any Lien on any asset of the Borrower.
6.4 Validity and Binding Effect. This Agreement is,
and the Note when duly executed and delivered will be, a legal,
valid and binding obligation of the Borrower, enforceable against
the Borrower in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity.
6.5 No Default. None of the Borrower, Van Kampen or
Advisory is in default under any agreement or instrument to which
the Borrower, Van Kampen or Advisory, as the case may be, is a
party or by which any of their respective properties or assets is
bound or affected, which default might result in a Material
Adverse Change. No Event of Default or Unmatured Event of
Default has occurred and is continuing.
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<PAGE> 25
6.6 Asset Statements. The Borrower's audited asset
statement as at July 31, 1990 and the Borrower's unaudited asset
statement as at March 1, 1991, copies of which have been
furnished to the Bank, have been prepared in conformity with
generally accepted accounting principles applied on a basis
consistent with that of the preceding Fiscal Year and period and
present fairly the financial condition of the Borrower as at such
dates and the results of its operations for the periods then
ended, subject (in the case of the interim asset statement) to
year-end audit adjustments. Since March 1, 1991, there has been
no Material Adverse Change.
6.7 Litigation; Contingent Liabilities. No claims,
litigation, arbitration proceedings or governmental proceedings
are pending or threatened against or are affecting the Borrower
or any of its Subsidiaries, the results of which could reasonably
be expected to result in a Material Adverse Change, except those
referred to in a schedule furnished to the Bank contemporaneously
herewith and attached hereto as Exhibit B. Other than any
liability incident to such claims, litigation or proceedings or
provided for or disclosed in the asset statements referred to in
Section 6.6 or listed on Exhibit C, the Borrower has no
contingent liabilities which are material.
6.8 Liens. None of the property, revenues or assets
of the Borrower is subject to any Lien, except:
(a) Liens for current Taxes not delinquent or Taxes
being contested in good faith and by appropriate proceedings
and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained;
(b) statutory Liens arising in the ordinary course of
business securing obligations which are not overdue for a
period of more than 30 days or which are being contested in
good faith and by appropriate proceedings and as to which
such reserves or other appropriate provisions as may be
required by GAAP are being maintained;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social
security legislation;
(d) liens securing reverse repurchase obligations of
the Borrower permitted to be entered into by the Borrower
pursuant to the most current prospectus of the Borrower;
(e) Liens disclosed in the asset statements referred
to in Section 6.6; and
(f) Liens listed on Exhibit D.
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<PAGE> 26
6.9 Subsidiaries. The Borrower has no Subsidiaries.
6.10 Partnerships. The Borrower is not a partner or
joint venturer in any partnership or joint venture.
6.11 Purpose. The proceeds of each Loan will be used
by the Borrower for funding tender offers by investors of their
shares of beneficial interest of the Borrower on the quarterly
tender date next preceding such Loan.
6.12 Margin Regulations. No part of the proceeds of
any Loan will be used for any purpose which would violate any of
the margin regulations of the Federal Reserve Board.
6.13 Compliance. The Borrower is in material
compliance with all statutes and governmental rules and
regulations applicable to it.
6.14 No Pension Plans. Neither the Borrower nor any
ERISA Affiliate has established, maintains, is a member of,
contributes to, or otherwise has any liability with respect to,
any Plan.
6.15 Taxes. The Borrower has filed all tax returns
which are required to have been filed and has paid, or made
adequate provisions for the payment of, all of its Taxes which
are due and payable, except such Taxes, if any, as are being
contested in good faith and by appropriate proceedings and as to
which such reserves or other appropriate provisions as may be
required by GAAP have been maintained. The Borrower is not aware
of any proposed assessment against it for additional Taxes (or
any basis for any such assessment) which might be material to it
or result in a Material Adverse Change.
6.16 Public Utility Holding Company Act Representation.
The Borrower is not a "holding company" or a "subsidiary company"
of a "holding company" or an "affiliate" of a "holding company"
within the meaning of the Public Utility Holding Company Act of
1935, as amended.
6.17 Borrower's Investment Policies. The Borrower's
assets are being invested in accordance with the investment
policies and restrictions set forth in its most recent
prospectus, except where the failure to be so invested would not
result in a Material Adverse Change.
7. BORROWER'S COVENANTS. From the date of this Agreement
and thereafter until the expiration or termination of the Credit
and until the Note and other liabilities of the Borrower
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<PAGE> 27
hereunder are paid in full, the Borrower agrees that, unless the
Bank shall otherwise expressly consent in writing, it will:
7.1 Asset Statements and Other Reports. Furnish to
the Bank:
(a) Annual Audit Report. Within 60 days after each
Fiscal Year of the Borrower, a copy of the annual audit
report of the Borrower, certified by KPMG Peat Marwick or
such other independent certified public accountant who shall
be satisfactory to the Bank, together with a certificate
from such accountant (i) acknowledging to the Bank such
accountant's understanding that the Bank is relying on such
annual audit report, (ii) containing a computation of, and
showing compliance with, Section 7.10 hereof, and (iii) to
the effect that, in making the examination necessary for the
signing of such annual audit report, such accountant has not
become aware of any Event of Default or Unmatured Event of
Default that has occurred and is continuing, or, if such
accountant has become aware of any such event, describing it
and the steps, if any, being taken to cure it;
(b) Semi-Annual Asset Statement. Within 45 days after
each semi-annual period of each Fiscal Year of the Borrower,
a copy of the semi-annual unaudited asset statement of the
Borrower, certified by the Borrower's treasurer or assistant
treasurer and consisting of at least a balance sheet as at
the close of such period and statements of operations,
changes in net assets, and cash flows for such period and
for the period from the beginning of such Fiscal Year to the
close of such period;
(c) Other Asset Statements. Within 7 days after
making a request for a Loan, a copy of the unaudited asset
statement of the Borrower for the Banking Day next preceding
the date such request is made, certified by the Borrower's
treasurer or assistant treasurer, and consisting of at least
a complete current portfolio listing as at the close of such
Banking Day;
(d) Officer's Certificate. Together with the asset
statements furnished by the Borrower under preceding clauses
(a), (b), and (c), a certificate of the Borrower's
treasurer, dated the date of such annual audit report,
semi-annual asset statement, or other asset statement, as the
case may be, to the effect that no Event of Default or
Unmatured Event of Default has occurred and is continuing,
or, if there is any such event, describing it and the steps,
if any, being taken to cure it, and containing a computation
of, and showing compliance with, Section 7.10 hereof;
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<PAGE> 28
(e) SEC and Other Reports. Copies of each filing and
report made by the Borrower with or to any securities
exchange or the Securities and Exchange Commission or
otherwise required by the Act and of each communication from
the Borrower to shareholders or investors generally,
promptly upon the filing or making thereof; and
(f) Requested Information. Promptly from time to
time, such other reports or information as the Bank may
reasonably request.
7.2 Notices. Notify the Bank in writing of any of the
following immediately upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken by
the Person(s) affected with respect thereto:
(a) Default. The occurrence of an Event of Default or
an Unmatured Event of Default;
(b) Litigation. The institution of any litigation,
arbitration proceeding or governmental proceeding which
could reasonably be expected to result in a Material Adverse
Change to the Borrower;
(c) Judgment. The entry of any judgment or decree
against the Borrower if the aggregate amount of all
judgments and decrees then outstanding against the Borrower
exceeds $100,000 after deducting (i) the amount with respect
to which the Borrower is insured and with respect to which
the insurer has assumed responsibility in writing, and (ii)
the amount for which the Borrower is otherwise indemnified;
or
(d) Material Adverse Change. The occurrence of a
Material Adverse Change.
7.3 Existence. Maintain and preserve its existence as
a Massachusetts business trust and all rights, privileges,
licenses, trademarks, trade names, franchises, and other
authority to the extent material and necessary for the conduct of
its business in the ordinary course as conducted from time to
time.
7.4 Nature of Business. Engage in substantially the
same fields of business as it is engaged in on the date hereof.
7.5 Books, Records and Access. Maintain complete and
accurate books and records in which full and correct entries in
conformity with GAAP shall be made of all dealings and
transactions in relation to its respective business and
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<PAGE> 29
activities; permit access by the Bank, at the Bank's expense, to
the books and records of the Borrower during normal business
hours; and permit the Bank to make copies of such books and
records; provided, that the Bank agrees that Borrower shall not
be required to provide the Bank with access to such of its books
and records that are subject to confidentiality agreements which
prohibit such access or which are proprietary in nature.
7.6 Insurance. Maintain insurance to such extent and
against such hazards and liabilities as is customary in the case
of closed-end funds engaged in similar lines of business of
comparable size and financial strength as the Borrower.
7.7 Taxes. Pay when due, all of its Taxes, unless and
only to the extent that the Borrower is contesting such Taxes in
good faith and by appropriate proceedings and the Borrower has
set aside on its books such reserves or other appropriate
provisions therefor as may be required by GAAP.
7.8 Compliance. Comply in all material respects with
all statutes and governmental rules and regulations (including
the Act) applicable to it.
7.9 Merger. Purchase and Sale. Not:
(a) merge with or into or consolidate with any other
Person;
(b) except in the normal course of its business, sell,
transfer, convey, lease or otherwise dispose of all or
substantially all of its assets; or
(c) purchase or otherwise acquire all or substantially
all the assets of any Person.
7.10 Asset Coverage Ratio. Maintain an Asset Coverage
Ratio of 8.00 to 1.00 at all times.
7.11 Changes to Morgan Credit Agreement. Not make any
changes to Sections 2.1, 2.5, or 2.6(b) of the Morgan Credit
Agreement without the prior written consent of the Bank.
7.12 Indebtedness. Not incur or permit to exist any
Indebtedness, except:
(a) Indebtedness under the terms of this Agreement;
(b) Indebtedness of the Borrower having maturities and
terms, and which is subordinated to payment of the Note in a
manner, approved in writing by the Bank;
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<PAGE> 30
(c) Indebtedness hereafter incurred in connection with
the Liens permitted by Section 7.13;
(d) Reverse repurchase obligations of the Borrower
permitted to be entered into by the Borrower pursuant to the
most recent prospectus of the Borrower;
(e) Indebtedness under the Morgan Credit Agreement and
other Indebtedness outstanding on the date hereof and listed
on Exhibit E; and
(f) Other Indebtedness approved in writing by the
Bank.
7.13 Liens. Not create or permit to exist any Lien
with respect to any property, revenues or assets now owned or
hereafter acquired, except:
(a) Liens for current Taxes not delinquent or Taxes
being contested in good faith and by appropriate proceedings
and as to which such reserves or other appropriate
provisions as may be required by GAAP are being maintained;
(b) Statutory Liens arising in the ordinary course of
business securing obligations which are not overdue for a
period of more than 30 days or which are being contested in
good faith and by appropriate proceedings and as to which
such reserves or other appropriate provisions as may be
required by GAAP are being maintained;
(c) Pledges or deposits in connection with workers'
compensation, unemployment insurance and other social
security legislation;
(d) The Lien provided for in Section 4.4 and other
Liens in favor of the Bank; and
(e) Liens referred to in Section 6.8.
7.14 Guaranties. Not become or be a guarantor or
surety of, or otherwise become or be responsible in any manner
(whether by agreement to purchase any obligations, stock, assets,
goods or services, or to supply or advance any funds, assets,
goods or services, or otherwise) with respect to, any undertaking
of any other Person.
7.15 Other Agreements. Not enter into any agreement
containing any provision which would be violated or breached by
the Borrower's performance of its obligations hereunder or under
any instrument or document delivered or to be delivered by the
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<PAGE> 31
Borrower hereunder or in connection herewith.
7.16 Use of Proceeds. Not permit any proceeds of the
Loans to be used, either directly or indirectly, for any purpose
which would violate Regulation U of the Federal Reserve Board, as
amended from time to time; and furnish to the Bank, upon its
request, a statement in conformity with the requirements of
Federal Reserve Form U-1 referred to in Regulation U.
7.17 Transactions with Related Parties. Not enter into
or be a party to any transaction or arrangement, including,
without limitation, the purchase, sale, lease or exchange of
property or the rendering of any service, with any Related Party,
in violation of the Act.
7.18 Changes to Investment Restrictions. The Borrower
will not make any material changes to the investment restrictions
set forth in its then most recent prospectus without the prior
written consent of the Bank.
7.19 Changes to Amended and Restated Declaration of
Trust. The Borrower will not make any material changes to the
Amended and Restated Declaration of Trust without the prior
written consent of the Bank.
8. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the
Bank to make any Loan is subject to the satisfaction of each of the
following conditions precedent:
8.1 Notice. The Bank shall have received timely notice
of such Loan in accordance with Section 2.3.
8.2 Default. Before and after giving effect to such
Loan, no Event of Default or Unmatured Event of Default shall have
occurred and be continuing.
8.3 Warranties. Before and after giving effect to such
Loan, the warranties in Section 6 shall be true and correct in all
material respects as though made on the date of such Loan, except
for such changes as are specifically permitted hereunder.
8.4 Absence of Material Adverse Change. No Material
Adverse Change shall have occurred since the date of the Commitment
Letter; provided, however, that the occurrence during a Tender
Offer Period of a Material Adverse Change that does not otherwise
constitute an Event of Default or an Unmatured Event of Default
hereunder shall not constitute a failure of the Borrower to satisfy
the condition precedent contained in this Section 8.4; and
provided, further, that the Bank shall, at the request of the
Borrower, indicate to the Borrower in writing on the day prior to
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<PAGE> 32
any Tender Offer Period as to whether it believes any Material
Adverse Change has occurred since the date of the Commitment
Letter.
8.5 Certification. The Borrower shall have delivered to
the Bank a certificate of the Borrower, signed on the Borrower's
behalf by its vice president or assistant treasurer, as to the
matters set out in Sections 8.2, 8.3 and 8.4 and containing a
calculation of, and showing compliance with, Section 7.10 hereof.
9. CONDITION PRECEDENT TO INITIAL LOAN. The obligation of
the Bank to make the initial Loan hereunder is subject to the
satisfaction of the condition precedent, in addition to the
applicable conditions precedent set forth in Section 8 above, that
the Borrower shall have delivered to the Bank all of the following,
each duly executed and dated the date of the initial Loan or such
earlier date as is satisfactory to the Bank and in form and
substance reasonably satisfactory to the Bank:
9.1 Note. The Note.
9.2 Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower shall be
reasonably satisfactory in form and substance to the Bank and its
counsel; the Bank and its counsel shall have received all
information, and such counterpart originals or such certified or
other copies of such documents or instruments, as the Bank or its
counsel may reasonably request; and all legal matters incident to
the transactions contemplated by this Agreement shall be reasonably
satisfactory to counsel to the Bank.
9.3 Resolutions. A copy, duly certified by the
secretary or an assistant secretary of the Borrower, of (i) the
resolutions of the Borrower's Board of Trustees authorizing the
execution and delivery of this Agreement and the Note and
authorizing the borrowings hereunder, (ii) all documents
evidencing other necessary trust action, and (iii) all approvals
or consents, if any, with respect to this Agreement and the Note.
9.4 Incumbency Certificate. A certificate of the
secretary or an assistant secretary of the Borrower certifying
the names of the Borrower's officers authorized to sign this
Agreement, the Note and all other documents or certificates to be
delivered hereunder, together with the true signatures of such
officers.
9.5 Opinion. An opinion of Messrs. Skadden, Arps,
Slate, Meagher & Flom, counsel to the Borrower, addressed to the
Bank, in substantially the form of Exhibit F.
10. EVENTS OF DEFAULT AND REMEDIES.
- 26 -
<PAGE> 33
10.1 Events of Default. The occurrence and continuance
of each of the following shall constitute an Event of Default
under this Agreement:
(a) Non-Payment. Default, and the continuance thereof
for three days, in the payment when due of any principal of,
or interest on, any Loan or any fee hereunder.
(b) Non-Payment of Other Indebtedness. Default in the
payment when due, whether by acceleration or otherwise
(subject to any applicable grace period), of any
Indebtedness in excess of $5,000,000 (including the Morgan
Credit Agreement) of the Borrower (other than the
Indebtedness evidenced by the Note).
(c) Acceleration of Other Indebtedness. Any event or
condition shall occur which results in the acceleration of
the maturity of any Indebtedness (including the Morgan
Credit Agreement) of the Borrower (other than the
Indebtedness evidenced by the Note) or enables the holder or
holders of such other Indebtedness or any trustee or agent
for such holders (any required notice of default having been
given and any applicable grace period having expired) to
accelerate the maturity of such other Indebtedness.
(d) Other Obligations. Default in the payment when
due, whether by acceleration or otherwise, or in the
performance or observance (subject to any applicable grace
period) of (i) any material obligation or agreement of the
Borrower to or with the Bank (other than any obligation or
agreement of the Borrower hereunder or under the Note), or
(ii) any material obligation or agreement of the Borrower to
or with any other Person (other than any such material
obligation or agreement constituting or related to
Indebtedness), unless, in each case, the existence of any
such default (x) is being contested by the Borrower in good
faith and by appropriate proceedings and the Borrower shall
have set aside on its books such reserves or other
appropriate provisions therefor as may be required by GAAP
or (y) could not reasonably be expected to result in a
Material Adverse Change.
(e) Insolvency. The Borrower becomes insolvent, or
generally fails to pay, or admits in writing its inability
to pay, its debts as they mature, or applies for, consents
to, or acquiesces in, the appointment of a trustee, receiver
or other custodian for the Borrower or for a substantial
part of the property of the Borrower, or makes a general
assignment for the benefit of creditors; or, in the absence
- 27 -
<PAGE> 34
of such application, consent or acquiescence, a trustee,
receiver or other custodian is appointed for the Borrower or
for a substantial part of the property of the Borrower and
is not discharged within 60 days; or any bankruptcy,
reorganization, debt arrangement or other proceeding with
respect to the Borrower under any bankruptcy or insolvency
law, or any dissolution or liquidation proceeding, is
instituted by or against the Borrower and, if instituted
against the Borrower, is consented to or acquiesced in by
the Borrower or remains for 60 days undismissed; or any
warrant of attachment or similar legal process is issued
against any substantial part of the property of the Borrower
and is not released, stayed or otherwise discharged within
60 days of service.
(f) Pension Plans. The institution by the Borrower or
any ERISA Affiliate of steps to terminate any Plan if, in
order to effectuate such termination, (i) the Borrower would
be required to make a contribution to such Plan or would
incur a liability or obligation to such Plan and (ii)
immediately after giving effect to the payment or
satisfaction of such contribution, liability or obligation
(if made or undertaken by the Borrower) an Event of Default
or Unmatured Event of Default would exist and be continuing.
(g) Fundamental Changes. Default in the performance
of the Borrower's agreements set forth in Section 7.9, 7.18
or 7.19.
(h) Agreements. Default in the performance of any of
the Borrower's agreements herein set forth (and not
constituting an Event of Default under any of the other
subsections of this Section 10.1) and continuance of such
default for 30 days after notice thereof to the Borrower
from the Bank.
(i) Warranty. Any warranty made by the Borrower
herein is untrue or misleading in any material respect when
made or deemed made; or any schedule, statement, report,
notice, certificate or other writing furnished by the
Borrower to the Bank is untrue or misleading in any material
respect on the date as of which the facts set forth therein
are stated or certified; or any certification made or deemed
made by the Borrower to the Bank is untrue or misleading in
any material respect on or as of the date made or deemed
made.
(j) Litigation. There shall be entered against the
Borrower one or more judgments or decrees in excess of
$5,000,000 in the aggregate at any one time outstanding for
- 28 -
<PAGE> 35
the Borrower, excluding those judgments or decrees (i) which
have been satisfied or stayed within 30 calendar days from
the entry thereof or (ii) for and to the extent which the
Borrower is insured and with respect to which the insurer
has assumed responsibility in writing or for and to the
extent which the Borrower is otherwise indemnified if the
terms of such indemnification and the Person providing such
indemnification are satisfactory to the Bank.
(k) Impermissible Change in Control. An Impermissible
Change in Control shall have Occurred.
10.2 Remedies. If any Event of Default described in
Section 10.1 shall have occurred and be continuing, the Bank may
declare the Credit to be terminated and the Note to be due and
payable, whereupon the Credit shall immediately terminate and the
Note shall become immediately due and payable, all without notice
of any kind (except that if an event described in Section 10. 1(e)
occurs, the Credit shall immediately terminate and the Note shall
become immediately due and payable without declaration or notice
of any kind). The Bank shall promptly advise the Borrower of any
such declaration, but failure to do so shall not impair the
effect of such declaration.
11. GENERAL.
11.1 Waiver and Amendments. No failure or delay on the
part of the Bank or the holder of the Note in the exercise of any
power or right, and no course of dealing between the Borrower and
the Bank or the holder of the Note, shall operate as a waiver of
such power or right, nor shall any single or partial exercise of
any power or right preclude other or further exercise thereof or
the exercise of any other power or right. The remedies provided
for herein are cumulative and not exclusive of any remedies which
may be available to the Bank at law or in equity. No notice to
or demand on the Borrower not required hereunder or under the
Note shall in any event entitle the Borrower to any other or
further notice or demand in similar or other circumstances or
constitute a waiver of the right of the Bank or the holder of the
Note to any other or further action in any circumstances without
notice or demand. No amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement or the
Note shall in any event be effective unless the same shall be in
writing and signed and delivered by CBNA. Any waiver of any
provision of this Agreement or the Note, and any consent to any
departure by the Borrower from the terms of any provision of this
Agreement or the Note, shall be effective only in the specific
instance and for the specific purpose for which given.
11.2 Notices. Except as otherwise expressly provided
- 29 -
<PAGE> 36
herein, any notice hereunder to the Borrower or the Bank shall be
in writing (including telegraphic or facsimile communication) and
shall be given to the Borrower or the Bank at its address or
facsimile number set forth on the signature pages hereof or at
such other address, or facsimile number as the Borrower or the
Bank may, by written notice, designate as its address, or
facsimile number for purposes of notice hereunder. All such
notices shall be deemed to be given when transmitted by
facsimile, delivered to the telegraph office, personally
delivered or, in the case of a mailed notice, when sent by
registered or certified mail, postage prepaid, in each case
addressed as specified in this Section 11.2.
11.3 Expenses. The Borrower agrees, whether or not any
Loan is made hereunder, to pay the Bank upon demand for all
reasonable expenses, including reasonable fees of attorneys and
paralegals for the Bank and other legal expenses and costs of
collection, incurred by the Bank in connection with (i) the
preparation, negotiation and execution of this Agreement, the
Note and any other instrument or document provided for herein or
delivered or to be delivered hereunder or in connection herewith
(provided that the Borrower's obligations under this clause (i)
shall not exceed $7,500.00), (ii) the preparation, negotiation
and execution of any and all amendments to this Agreement, the
Note or any such other instrument or document, and (iii) the
enforcement of the Borrower's obligations hereunder or under the
Note or any such other instrument or document. The Borrower also
agrees to (a) indemnify and hold the Bank harmless from any loss
or expense which may arise or be created by the acceptance of
telephonic or other instructions for making Loans or disbursing
the proceeds thereof (provided, that the Borrower shall not be
liable to the Bank under this clause (a) for any action or
inaction taken or not taken by the Bank, as the case may be, in
bad faith) and (b) pay, and save the Bank harmless from all
liability for, any stamp or similar other tax which may be
payable with respect to the execution or delivery of this
Agreement or the issuance of the Note or any other instrument or
document provided for herein or delivered or to be delivered
hereunder or in connection herewith. The Borrower's foregoing
obligations shall survive any termination of this Agreement. In
case of any conflict between this Section 11.3 and the Commitment
Letter regarding expenses, the terms and conditions of the
Commitment Letter shall govern.
11.4 Information; Assignments and Participations.
(a) Subject to Section 11.6 hereof, the Bank may
furnish any information concerning the Borrower in the
possession of the Bank from time to time to assignees of the
rights and/or obligations of the Bank hereunder and to
participants in any Loan (including prospective assignees
and participants);
- 30 -
<PAGE> 37
(b) CBNA may at any time assign, subject to the
Borrower's consent, which consent shall not be unreasonably
withheld, to one or more banks or other institutions (each,
an "Assignee") an amount in the aggregate not in excess of
49% of the Credit and its related rights and obligations
under this Agreement and the Note; provided, however, that
nothing contained herein shall prohibit CBNA from assigning
all or any portion of its rights and obligations under this
Agreement and the Note to any banking regulatory authorities
in the normal course of its operations. CBNA may at any
time grant to one or more banks or other institutions (each
a "Participant") participating interests in its commitment
hereunder or any or all of its Loans. In the event of any
such grant by CBNA of a participating interest to a
Participant, whether or not upon notice to the Borrower,
CBNA shall remain responsible for the performance of its
obligations hereunder, and the Borrower shall continue to
deal solely and directly with CBNA in connection with the
CBNA's rights and obligations under this Agreement. Any
agreement pursuant to which CBNA may grant such an
assignment or participating interest shall provide that CBNA
shall retain the sole right and responsibility to enforce
the obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; provided that
any such agreement may provide that CBNA will not agree to
any modification, amendment or waiver of this Agreement
which (i) increases the commitment of the Bank to make Loans
hereunder, (ii) reduces the principal of or rate of interest
on any Loan or fees hereunder, or (iii) postpones the date
fixed for any payment of principal of or interest on any
Loan or any fees hereunder without the consent of such
Assignee or Participant, as the case may be. The Borrower
agrees that each Assignee and each Participant shall, to the
extent provided in its participation agreement and subject
to Section 11.4(c) hereof, be entitled to the benefits of
Section 5 and Section 2.6 hereof with respect to its
participating interests;
(c) No Assignee, Participant, or other transferee of
CBNA's rights shall be entitled to receive any greater
payment under Section 5 or Section 2.6 hereof that CBNA
would have been entitled to receive with respect to the
rights transferred had no such transfer occurred; and
(d) CBNA hereby agrees that it will obtain from each
Assignee and Participant that it is incorporated under the
laws of the United States of America or a state thereof,
prior to the first date on which any payment is due to such
- 31 -
<PAGE> 38
Assignee or Participant with respect to this Agreement or
any participation agreement between CBNA and any such
Participant (collectively, "Payments") (i) two duly
completed copies of United States Internal Revenue Service
Form 1001 or 4224 or successor applicable form, as the case
may be, certifying in each case that such Assignee or
Participant is entitled to receive Payments, without
deduction or withholding of any United States federal income
taxes, and (ii) an Internal Revenue Service Form W-8 or W-9
or successor applicable form, as the case may be, to
establish an exemption from United States backup withholding
tax. CBNA will deliver one copy of each such form to the
Borrower upon receipt.
(e) The Borrower agrees that, upon the Bank's
reasonable request, it will use its best efforts to assist
the Bank in its efforts to sell assignments and
participations.
11.5 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
11.6 Confidentiality. The Bank hereby agrees (on
behalf of itself and each of its affiliates, directors, officers,
employees, and representatives) to use reasonable precautions to
keep confidential, in accordance with safe and sound banking
practices, any non-public information supplied to it by the
Borrower pursuant to this Agreement; provided, that nothing
herein shall limit the disclosure of such information (i) to the
extent required by statute, rule, regulation or judicial process,
(ii) to counsel for the Bank, (iii) to bank examiners, auditors
or accountants, or (iv) to any Assignee of Participant (or any
prospective Assignee or Participant) so long as such Assignee of
Participant (or prospective Assignee or Participant) agrees in
writing to be bound to the provisions of this Section 11.6.
11.7 Law. THIS AGREEMENT AND THE NOTE SHALL BE
CONTRACTS MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS.
11.8 Successors. This Agreement shall be binding upon
the Borrower and the Bank and their respective successors and
assigns, and shall inure to the benefit of the Borrower and the
Bank and the successors and assigns of the Bank. The Borrower
shall not assign its rights or duties hereunder without the
consent of the Bank.
- 32 -
<PAGE> 39
11.9 Waiver of Jury Trial. EACH OF THE BORROWER AND
THE BANK WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (i) UNDER THIS
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR (ii) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
11.10 Fund Disclaimer. As provided for in Section 5.5
of the Amended and Restated Declaration of Trust, the
shareholders, trustees, officers, employees and other agents of
the Trust shall not personally be bound by or liable for any
indebtedness, liability or obligation hereunder or under the Note
nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder.
- 33 -
<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed at Chicago, Illinois by their respective
officers thereunto duly authorized as of the date first written
above.
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By /s/ Edward C. Wood, III
Title: Vice President & Treasurer
Address: 1001 Warrenville Road
Lisle, Illinois 60502
Attention: Edward Wood,
First Vice President
Facsimile number: (708) 719-6360
CONTINENTAL BANK, N.A.
By /s/ Ramon Uribarri
Title: Vice President
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Attention: Ramon Uribarri,
Vice President
Facsimile number: (312) 987-6982
Eurodollar Office: Chicago
- 34 -
<PAGE> 41
SCHEDULE OF EXHIBITS
EXHIBIT A - Promissory Note
EXHIBIT B - Schedule of Litigation,
Arbitration Proceedings,
and Governmental Proceedings
EXHIBIT C - Schedule of Contingent Liabilities
EXHIBIT D - Schedule of Liens
EXHIBIT E - Schedule of Indebtedness
EXHIBIT F - Opinion of Borrower's Counsel
<PAGE> 42
EXHIBIT A
PROMISSORY NOTE
$25,000,000.00 Chicago, Illinois
July 12, 1991
FOR VALUE RECEIVED, the undersigned, VAN KAMPEN MERRITT
PRIME RATE INCOME TRUST, a Massachusetts Business trust (the
"Borrower"), promises to pay to the order of CONTINENTAL BANK
N.A., a national banking association (the "Bank"), on May 29,
1992, or such earlier date as set forth in the Credit Agreement
hereinafter referred to, the principal sum of TWENTY-FIVE MILLION
AND 00/100 DOLLARS ($25,000,000.00), or if less, the then
aggregate unpaid principal amount of Alternate Reference Rate
Loans and Eurodollar Loans (as such terms are defined in the
Credit Agreement referred to below) as may be borrowed by the
Borrower under the Credit Agreement. The Borrower may borrow,
repay and reborrow hereunder in accordance with the provisions of
the Credit Agreement. All Alternate Reference Rate Loans and
Eurodollar Loans and all payments of principal shall be recorded
by the holder in its records or, at its option, on the schedule
(or any continuation thereof) attached to this Note.
The Borrower further promises to pay to the order of the
Bank interest on the aggregate unpaid principal amount hereof
from time to time outstanding from the date hereof until paid in
full at the rates per annum which shall be determined in
accordance with the provisions of the Credit Agreement. Accrued
interest shall be payable on the dates specified in the Credit
Agreement.
All payments of principal and interest under this Note shall
be made in lawful money of the United States of America in
immediately available funds at the Bank's office at 231 South
LaSalle Street, Chicago, Illinois 60697, or at such other place
as may be designated by the Bank to the Borrower in writing.
This Note is the Note referred to in, and evidences
indebtedness incurred under, a Revolving Credit Agreement dated
as of July 12, 1991 (herein, as it may be amended, modified or
supplemented from time to time, called the "Credit Agreement")
between the Borrower and the Bank, to which Credit Agreement
reference is made for a statement of the terms and provisions
thereof, including those under which the Borrower is permitted
and required to make prepayments and repayments of principal of
such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.
<PAGE> 43
All parties hereto, whether as makers, endorsers or
otherwise, severally waive presentment, demand, protest and
notice of dishonor in connection with this Note.
This Note is made under and governed by the internal laws of
the State of Illinois.
Address: VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
1001 Warrenville Road
Lisle, Illinois 60532 By ____________________________
Title: _______________________
- 2 -
<PAGE> 44
Schedule attached to Promissory Note dated July 12, 1991 of
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST, payable to the order
of CONTINENTAL BANK N.A.
LOANS AND PRINCIPAL PAYMENTS
Type of Loan Interest Amount of Unpaid
Amount of & Applicable Period (if Principal Principal Notation
Date Loan Made Interest Rate Applicable) Repaid Balance Made By
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and
unpaid on this Note. The failure to record the date and amount of any
Loan on this schedule shall not, however, limit or otherwise affect
the Borrower's obligations under the Credit Agreement' or this Note to
repay the principal amount of the Loans together with all interest
accruing thereon.
<PAGE> 45
EXHIBIT B
Schedule of Litigation, Arbitration
Proceedings, and Governmental Proceedings
NONE
<PAGE> 46
EXHIBIT C
Schedule of Contingent Liabilities
NONE
<PAGE> 47
EXHIBIT D
Schedule of Liens
NONE
<PAGE> 48
EXHIBIT E
Schedule of Indebtedness
NONE
<PAGE> 49
EXHIBIT F
[Letterhead of SASM&F]
July ___, 1991
TO: Continental Bank N.A.
Re: Revolving Credit Security Agreement, dated
as of July ___, 1991, between Van Kampen
Merritt Prime Rate Income Trust and
Continental Bank N.A.
Ladies and Gentlemen:
We have acted as special counsel to Van Kampen
Merritt Prime Rate Income Trust, a Massachusetts business
trust (the "Borrower"), in connection with the prepara-
tion of that certain Revolving Credit Agreement, dated as
of July ___,1991 (the "Revolving Credit Agreement"),
between the Borrower and Continental Bank N.A. (the
"Lender"). This opinion is being delivered pursuant to
Section 9.5 of the Revolving Credit Agreement. Capital-
ized terms used herein and not otherwise defined herein
shall have the meanings herein as ascribed thereto in the
Revolving Credit Agreement.
In rendering the opinions set forth herein, we
have examined originals or copies of the following:
(i) the Revolving Credit Agreement;
(ii) the Note;
(iii) a certificate of the Secretary of
State of the Commonwealth of Massachusetts,
dated _________, 1991, as to the authorization
of the Borrower;
(iv) the Amended and Restated Declaration
of Trust of the Borrower, as amended to date
(the "Declaration of Trust");
<PAGE> 50
Continental Bank N.A.
July ___, 1991
Page Two
(v) the By-laws of the Borrower, as
amended to date (the "By-laws");
(vi) resolutions adopted by the board of
trustees of the Borrower relating to the Re-
volving Credit Agreement and the transactions
contemplated thereby;
(vii) a certificate of the Borrower,
dated the date hereof, a copy of which is at-
tached as Annex I hereto (the "Borrower's Cer-
tificate");
(viii) the Identified Contracts (as hereinafter
defined); and
(ix) such other documents as we have
deemed necessary, or appropriate as a basis for
the opinions set forth below.
The item listed in clauses (i) and (ii) above
are sometimes referred to herein as the "Loan Documents."
For purposes of this opinion: (i) the term "Applicable
Laws" means the laws, rules and regulations of the State
of Illinois and the in United States of America which, in
our experience, are normally applicable to transactions
of the type contemplated by the Loan Documents; (ii) the
term "Identified Orders" means those orders or decrees of
any Governmental Authority (as hereinafter defined) of
the State of Illinois, the Commonwealth of Massachusetts
and the United States of America by which the Borrower is
bound, the existence of which has been specifically dis-
closed to us in writing and identified on Exhibit A to
the Borrower's Certificate; (iii) the term "Governmental
Authority" means any legislative, judicial, administra-
tive or regulatory body of the State of Illinois, the
Commonwealth of Massachusetts or the United States of
America; (iv) the term "Governmental Approval" means any
consent, approval, license, authorization or validation
of, or filing, recording or registration with, any Gov-
ernmental Authority pursuant to Applicable Laws; and
(v) the term "Identified Contracts" means those agree-
ments of instruments to which the Borrower is subject and
which have been specifically identified to us by officers
of the Borrower as the agreements and instruments which
<PAGE> 51
Continental Bank N.A.
July ___, 1991
Page Three
are material to the business or financial condition of
the Borrower and which are set forth on Exhibit B to the
Borrower's Certificate.
In our examination we have assumed the genuine-
ness of all signatures including endorsements, the legal
capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of
the originals of such copies. As to any facts material
to this opinion which we did not independently establish
or verify, we have relied upon statements and representa-
tions of the Borrower and its officers and other repre-
sentatives and of public officials (including, without
limitation, those set forth in the Borrower's Certificate).
We have assumed that each of the Loan Documents
is the valid and binding obligation of each party thereto
other than the Borrower, enforceable against each such
party in accordance with its respective terms. We ex-
press no opinion as to the effect on the opinions herein
stated of (i) the compliance or noncompliance by the
Lender with any state, federal or other laws or regula-
tions applicable to it or (ii) the legal or regulatory
status or the nature of the business of the Lender.
Members of this firm are admitted to practice
law in the Commonwealth of Massachusetts and the State of
Illinois and, in rendering the opinions expressed herein,
we express no opinion as to the laws of any jurisdiction
other than (i) the laws of the Commonwealth of Massachu-
setts and the State of Illinois and (ii) the federal laws
of the United States of America to the extent referred to
specifically herein.
Based upon the foregoing and subject to the
qualifications and exceptions set forth herein, we are of
the opinion that:
1. The Borrower has been duly formed and is
subsisting as a Massachusetts business trust and the
Borrower is duly authorized to exercise in the Common-
wealth of Massachusetts all of the powers recited in the
Declaration of Trust and to transact business in the
Commonwealth of Massachusetts.
<PAGE> 52
Continental Bank N.A.
July ___, 1991
Page Four
2. The execution and delivery by the Borrower
of the Loan Documents and the consummation by the Borrow-
er of the transactions contemplated thereby are within
the powers set forth in the Declaration of Trust and have
been authorized by all requisite action or the Part of
the Borrower.
3. Each off the Loan Documents has been duly
executed and delivered by the Borrover.
4. The execution and delivery by the Borrower
of each of the Loan Documents and the performance by the
Borrower of its obligations thereunder, each in accor-
dance with its terms, do not (i) conflict with the Bor-
rower's Declaration of Trust or By-laws, (ii) contravene
any provision of any Applicable Law or Identified Order,
(iii) constitute a violation of or a default under any
Identified Contract or (iv) cause the creation of any
security interest or lien upon any of the property of the
Borrower pursuant to any Identified Contract.
5. Each of the Loan Documents constitutes the
valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its terms, except
that in each case, (i) enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, mora-
torium or other similar laws affecting creditors' rights
generally, and by general principles of equity (regard-
less of whether enforcement is sought in a proceeding in
equity or at law), (ii) we express no opinion as to the
enforceability of any rights to contribution or indemni-
fication provided for in the Revolving Credit Agreement
which are violative of the public policy underlying any
law, rule or regulation (including, without limitation,
any federal or state securities law, rule or regulation),
(iii) we express no opinion as to Sections 4.4 of the
Revolving Credit Agreement to the extent that it may
authorize or permit any party to any Loan Document or any
purchaser of a participations interest from any party to
set off or apply any deposit or property or any indebted-
ness with respect to any participations interest, (iv) we
express no opinion with respect to any provision relating
to governing law to the extent procedural and not sub-
stantive laws are involved and (v) we express no opinion
with respect to the enforceability of Section 11.1 of the
<PAGE> 53
Continental Bank N.A.
July ___, 1991
Page Five
Revolving Credit Agreement to the extent that it provides
that provisions of the Loan Documents may only be amended
or waived in writing.
6. Based on our review of Applicable Laws and
the Identified Orders, but without our having made any
special investigation of any kind concerning any other
law, rule, regulation, order or decree, no material Gov-
ernmental Approval which has not been obtained or, taken
and is not in full force and effect is required to autho-
rise, or is required in connection with, the execution
and delivery by the Borrower of the Loan Documents and
the performance by the Borrover of its obligations there-
under.
7. The Borrower is a duly registered, closed-
end investment company under the Act and has registered
the sale of its common shares of beneficial interest
under the Securities Act of 1933, as amended, pursuant to
one or more registration statements, including any relat-
ed prospectus that is or are currently effective.
This opinion is rendered only to the Lender in
connection with the above transactions and is solely for
its benefit. This opinion may not be used, circulated,
quoted, relied upon or otherwise referred to by any other
person, firm or corporation for any purpose without our
prior written consent.
Very truly yours,
<PAGE> 54
Annex I
to Opinion of
Special Counsel
to the Borrower
Borrower's Certificate
I, ___________ am the ____________ of Van Kampen
Merritt Prime Rate Income Trust, a Massachusetts business
trust (the "Borrower"). I understand that pursuant to
Section 9.5 of that certain Revolving Credit Agreement,
dated as of July _____, 1991 (the "Revolving Credit Agree-
ment"), between the Borrower and Continental Bank N.A.
(the "Lender"), Skadden, Arps, Slate, Meagher & Flom is relying on
this Certificate and the statements made herein in ren-
dering such opinion.
With regard to the foregoing, I certify that:
1. Less than 20 percent of the assets of
the Borrower on consolidated basis and on an
unconsolidated basis consist of margin stock
(as such term is defined in Regulation G, Regu-
lation U or Regulation X of the Board of Gover-
nors of the Federal Reserve System).
2. Set forth on Exhibit A hereto are
those orders and decrees of any Governmental
Authority (as such term is used in the opinion
of Skadden, Arps, Slate, Meagher & Flom re-
ferred to above) of the State of Illinois, the
Commonwealth of Massachusetts and the United
States of America by which the Borrower is
bound and included on Exhibit A are all such
orders and decrees.
3. Set forth on Exhibit B hereto are the
agreements and instruments to which the Borrow-
er is subject which are material to the busi-
<PAGE> 55
ness or financial condition of the Borrower and
included on Exhibit B are all such agreements.
4. The resolutions of the Borrower deliv-
ered to the Lender in connection with the exe-
cution and delivery of the Revolving Credit
Agreement have not been amended, modified or
rescinded and remain in full force and effect
on the date hereof.
IN WITNESS WHEREOF, I have executed this Cer-
tificate this ___ day of ____, 1991.
_____________________________
<PAGE> 56
EXHIBIT A
to Borrower's
Certificate
IDENTIFIED ORDERS AHD DECREES
(None)
<PAGE> 57
EXHIBIT B
to Borrower's
Certificate
IDENTIFIED CONTRACTS
To Come
<PAGE> 58
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Amendment, dated as of July 11, 1992, is entered into
between VAN KAMPEN MERRITT PRIME RATE INCOME TRUST, a
Massachusetts business trust (the "Borrower"), and CONTINENTAL
BANK N.A. (the "Bank").
RECITALS:
A. The Borrower and the Bank have previously entered into
a certain Revolving Credit Agreement dated as of July 12, 1991
(the "Original Credit Agreement"); and
B. The parties hereto wish to amend the Original Credit
Agreement in certain respects, as hereinafter provided, and
provide for the issuance of a replacement promissory note;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants herein contained, the parties hereto agree as
follows:
Section 1. Definitions. Terms used herein shall, unless
otherwise defined herein or the context otherwise requires, have
the meanings assigned to such terms in the Original Credit
Agreement as amended hereby.
Section 2. Amendment to Original Credit Agreement. The
definition of "Termination Date" contained in Section 1.1 of the
Original Credit Agreement is amended by deleting the date "July
11, 1992" and substituting therefor the date "December 16".
Section 3. Replacement Note. Concurrently herewith, the
Borrower will execute and deliver to the Bank a new promissory
note (herein called the "Replacement Note"), in the form of
Exhibit A to this Amendment, dated as of the date hereof, and
payable to the Bank's order. The initial entry on the schedule
attached to Replacement Note shall include all entries
theretofore made by the Bank on the Note issued pursuant to the
Original Credit Agreement (in this Section 3, called the "Prior
Note"). The Replacement Note is issued in extension, renewal and
restatement of, and is a substitute and replacement for, the
Prior Note and the continuing indebtedness evidenced thereby, and
does not constitute a payment, prepayment or novation of the
Prior Note. After the date hereof, all references in the
Original Credit Agreement as amended by this Amendment and any
documents issued in connection therewith to "Note" shall also be
deemed a reference to the Replacement Note.
<PAGE> 59
Section 4. Conditions to Effectiveness. This Amendment
shall become effective upon the satisfaction of the following
conditions:
(a) The Bank shall have received counterparts, duly
executed by each party hereto, of this Amendment.
(b) The Bank shall have received the duly executed
Replacement Note.
(c) The Bank shall have received the signed certificate or
certificates of appropriate officers of the Borrower, dated the
date hereof or such earlier or later date as to which the parties
hereto shall agree (such date may be referred to hereafter as the
"Closing Date"), certifying the incumbency and specimen
signatures of the officers of the Borrower authorized to execute
this Amendment and the Replacement Note and any other documents
delivered on behalf of the Borrower pursuant to this Section.
(d) The Bank shall have received a certificate of
appropriate officers of the Borrower to the effect of the
following Paragraphs (e) and (f).
(e) The representations and warranties contained in
Section 6 of the Original Credit Agreement as amended hereby
shall be true and correct in all material respects on the Closing
Date as though made on and as of such time.
(f) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing on the Closing Date.
(g) The Bank shall have received an opinion of the
Borrower's counsel in form and substance satisfactory to the Bank
and its counsel.
Section 5. Warranties. To induce the Bank to enter into
this Amendment, the Borrower hereby represents and warrants to
the Bank that:
(a) Authorization; No Conflict. The execution and delivery
by the Borrower of this Amendment and the Replacement Note, and
the performance by the Borrower of the Original Credit Agreement
as amended by this Amendment, have been duly authorized by all
necessary action on the part of the Borrower, and do not and will
not (i) violate any provision of any law, rule, regulation,
order, writ, judgment, decree, determination or award presently
in effect having applicability to the Borrower or of the
organizational documents of the Borrower, or (ii) result in a
breach of or constitute a default under any indenture or loan or
credit agreement, or any other agreement or instrument, to which
the Borrower is a party or by which the Borrower or its
- 2 -
<PAGE> 60
properties may be bound or affected, or (iii) result in, or
require, the creation or imposition of any Lien of any nature in,
upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower.
(b) Validity and Binding Nature. Assuming this Amendment
constitutes the binding obligation of each other necessary party
hereto, this Amendment, the Original Credit Agreement as amended
by this Amendment, and the Replacement Note each constitutes the
legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(c) Representations and Warranties. Each representation
and warranty of the Borrower set forth in Section 6 of the
Original Credit Agreement as amended hereby is true and correct
as of the date hereof as though made on and as of such date.
(d) No Default. As of the Closing Date, and as of the date
of the execution and delivery by the Borrower of this Amendment,
no Event of Default or Unmatured Event of Default has occurred
and is continuing.
Section 6. Costs, Expenses, and Taxes. This Amendment
constitutes an amendment to the Original Credit Agreement for
purposes of Section 11.3 thereof.
Section 7. Oriqinal Credit Agreement to Remain in Full
Force and Effect. The Original Credit Agreement as amended
hereby shall remain in full force and effect and is hereby
ratified, adopted and confirmed in all respects. All references
to the Original Credit Agreement in any other agreement or
document shall hereafter be deemed to refer to the Original
Credit Agreement as amended hereby. In addition, each reference
in the Original Credit Agreement to the terms "this Agreement",
"hereunder", "hereof" or terms or words of similar import shall
hereafter mean the Original Credit Agreement as amended hereby.
Section 8. Counterparts. This Amendment may be executed in
several counterparts, and each such counterpart shall be deemed
to be an original and shall constitute together with all other
counterparts but one and the same Amendment.
Section 9. Governing Law. This Amendment shall be deemed
to be a contract made under the laws of the State of Illinois and
for all purposes shall be construed in accordance with the laws
of said State, without regard to principles of conflicts of law.
All obligations of the Borrower and rights of the Bank shall be
- 3 -
<PAGE> 61
in addition to and not in limitation of those provided by
applicable law.
Section 10. Fund Disclaimer. As provided for in Section 5.5
of the Amended and Restated Declaration of Trust, the
shareholders, trustees, officers, employees and other agents of
the Borrower shall not personally be bound by or liable for any
indebtedness, liability or obligation hereunder or under the
Replacement Note nor shall resort be had to their private
property for the satisfaction of any obligation or claim
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By /s/ Edward C. Wood, III
Title: Vice President & Treasurer
CONTINENTAL BANK N.A.
By /s/ Jeffrey S. Kovarik
Title: Vice President
<PAGE> 62
EXHIBIT A
PROMISSORY NOTE
$25,000,000.00 Chicago, Illinois: as of July 11, 1992
Due: December 16, 1992
FOR VALUE RECEIVED, the undersigned, VAN KAMPEN MERRITT
PRIME RATE INCOME TRUST, a Massachusetts business trust (the
"Borrower"), promises to pay to the order of CONTINENTAL BANK
N.A., a national banking association (the "Bank"), on December
16, 1992, or such earlier date as set forth in the Credit
Agreement hereinafter referred to, the principal sum of TWENTY-
FIVE MILLION AND 00/100 DOLLARS ($25,000,000.00), or if less, the
then aggregate unpaid principal amount of Alternate Reference
Rate Loans and Eurodollar Loans (as such terms are defined in the
Credit Agreement referred to below) as may be borrowed by the
Borrower under the Credit Agreement. The Borrower may borrow,
repay and reborrow hereunder in accordance with the provisions of
the Credit Agreement. All Alternate Reference Rate Loans and
Eurodollar Loans and all payments of principal shall be recorded
by the holder in its records or, at its option, on the schedule
(or any continuation thereof) attached to this Note.
The Borrower further promises to pay to the order of the
Bank interest on the aggregate unpaid principal amount hereof
from time to time outstanding from the date hereof until paid in
full at the rates per annum which shall be determined in
accordance with the provisions of the Credit Agreement. Accrued
interest shall be payable on the dates specified in the Credit
Agreement.
All payments of principal and interest under this Note shall
be made in lawful money of the United States of America in
immediately available funds at the Bank's office at 231 South
LaSalle Street, Chicago, Illinois 60697, or at such other place
as may be designated by the Bank to the Borrower in writing.
This Note is the Note referred to in, and evidences
indebtedness incurred under, a Revolving Credit Agreement dated
as of July 12, 1991 and amended as of July 11, 1992 (herein, as
it may be further amended, modified or supplemented from time to
time, called the "Credit Agreement") between the Borrower and the
Bank, to which Credit Agreement reference is made for a statement
of the terms and provisions thereof, including those under which
the Borrower is permitted and required to make prepayments and
repayments of principal of such indebtedness and under which such
indebtedness may be declared to be immediately due and payable.
<PAGE> 63
This Note is an extension, renewal and restatement of, and
is a substitute and replacement for, a promissory note dated as
of July 12, 1991 in the principal amount of $25,000,000 payable
to the Bank's order. The indebtedness originally evidenced by
such promissory note is a continuing indebtedness now evidenced
by this Note and nothing herein contained shall be construed to
deem this Note a payment or prepayment of such promissory note.
All parties hereto, whether as makers, endorsers or
otherwise severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.
This Note is made under and governed by the internal laws of
the State of Illinois.
Address: VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
One Parkview Plaza
Oak Brook Terrace, Illinois 60181
By ___________________________
Title: _____________________
- 2 -
<PAGE> 64
Schedule attached to Promissory Note dated July 11, 1992 of
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST, payable to the order
of CONTINENTAL BANK N.A.
LOANS AND PRINCIPAL PAYMENTS
Type of Loan Interest Amount of Unpaid
Amount of & Applicable Period (if Principal Principal Notation
Date Loan Made Interest Rate Applicable) Repaid Balance Made By
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and
unpaid on this Note. The failure to record the date and amount of any
Loan on this schedule shall not, however, limit or otherwise affect
the Borrower's obligations under the Credit Agreement or this Note to
repay the principal amount of the Loans together with all interest
accruing thereon.
<PAGE> 65
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Amendment, dated as of December 16, 1992, is entered
into between VAN KAMPEN MERRITT PRIME RATE INCOME TRUST, a
Massachusetts business trust (the "Borrower"), and CONTINENTAL
BANK N.A. (the "Bank").
RECITALS:
A. The Borrower and the Bank have previously entered into
a certain Revolving Credit Agreement dated as of July 12, 1991,
as amended pursuant to that certain Amendment to Revolving Credit
Agreement dated as of July 11, 1992 (as so amended, the "Original
Credit Agreement"); and
B. The parties hereto wish to amend the Original Credit
Agreement in certain respects, as hereinafter provided, and
provide for the issuance of a replacement promissory note;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants herein contained, the parties hereto agree as
follows:
Section 1. Definitions. Terms used herein shall, unless
otherwise defined herein or the context otherwise requires, have
the meanings assigned to such terms in the Original Credit
Agreement as amended hereby.
Section 2. Amendments to Original Credit Agreement.
(a) The definition of "Termination Date" contained in
Section 1.1 of the Original Credit Agreement is amended in
its entirety to read as follows:
"Termination Date" means December 15, 1993;
provided, however, that the Termination Date may
be extended for successive 364-day periods upon
the Borrower's written request received by the
Bank not less than 30 days prior to the then
applicable Termination Date and the receipt by the
Company, within 20 days of the then-current
Termination Date, of the Bank's agreement (which
shall, in any event, be within the Bank's sole
discretion) to extend the Termination Date."
(b) Section 7.1(c) of the Original Credit Agreement is
amended in its entirety to read as follows:
(c) Other Asset Statements. Each of
the following statements and reports: (i)
<PAGE> 66
within seven days after making a request for
a Loan and within seven days after the end of
each quarter of each Fiscal Year, a copy of
the unaudited asset statement of the Borrower
for the Banking Day next preceding the date
such request is made, consisting of at least
a complete current portfolio listing as at
the close of such Banking Day and (ii) within
14 days after the end of each calendar month,
a balance sheet and income statement as of
such month on a cumulative basis;
(c) Section 7.16 of the Original Credit Agreement is
amended by adding the following sentence at the end of such
section:
Notwithstanding the foregoing, the
Borrower acknowledges that the Loans are
deemed by the Board of Governors of the
Federal Reserve System to be "purpose loans"
under Regulation U of such Board because of
the Borrower's status as an investment
company under the Act.
Section 3. Replacement Note. Concurrently herewith, the
Borrower will execute and deliver to the Bank a new promissory
note (herein called the "Replacement Note"), in the form of
Exhibit A to this Amendment, dated as of the date hereof, and
payable to the Bank's order. The initial entry on the schedule
attached to Replacement Note shall include all entries
theretofore made by the Bank on the Note issued pursuant to the
Original Credit Agreement (in this Section 3, called the "Prior
Note"). The Replacement Note is issued in extension, renewal and
restatement of, and is a substitute and replacement for, the
Prior Note and the continuing indebtedness evidenced thereby, and
does not constitute a payment, prepayment or novation of the
Prior Note. After the date hereof, all references in the
Original Credit Agreement as amended by this Amendment and any
documents issued in connection therewith to "Note" shall also be
deemed a reference to the Replacement Note.
Section 4. Conditions to Effectiveness. This Amendment
shall become effective upon the satisfaction of the following
conditions:
(a) The Bank shall have received counterparts, duly
executed by each party hereto, of this Amendment.
(b) The Bank shall have received the duly executed
Replacement Note.
- 2 -
<PAGE> 67
(c) The Bank shall have received the signed certificate or
certificates of appropriate officers of the Borrower, dated the
date hereof or such earlier or later date as to which the parties
hereto shall agree (such date may be referred to hereafter as the
"Closing Date"), certifying the incumbency and specimen
signatures of the officers of the Borrower authorized to execute
this Amendment and the Replacement Note and any other documents
delivered on behalf of the Borrower pursuant to this Section.
(d) The Bank shall have received a certificate of
appropriate officers of the Borrower to the effect of the
following paragraphs (e) and (f).
(e) The representations and warranties contained in
Section 6 of the Original Credit Agreement as amended hereby
shall be true and correct in all material respects on the Closing
Date as though made on and as of such time.
(f) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing on the Closing Date.
(g) The Bank shall have received an opinion of the
Borrower's counsel in form and substance satisfactory to the Bank
and its counsel.
(h) The Bank shall have received a Form U-1 duly completed
and executed by the Borrower in substance satisfactory to the
Bank and its counsel.
Section 5. Warranties. To induce the Bank to enter into
this Amendment, the Borrower hereby represents and warrants to
the Bank that:
(a) Authorization; No Conflict. The execution and delivery
by the Borrower of this Amendment and the Replacement Note, and
the performance by the Borrower of the Original Credit Agreement
as amended by this Amendment, have been duly authorized by all
necessary action on the part of the Borrower, and do not and will
not (i) violate any provision of any law, rule, regulation,
order, writ, judgment, decree, determination or award presently
in effect having applicability to the Borrower or of the
organizational documents of the Borrower, or (ii) result in a
breach of or constitute a default under any indenture or loan or
credit agreement, or any other agreement or instrument, to which
the Borrower is a party or by which the Borrower or its
properties may be bound or affected, or (iii) result in, or
require, the creation or imposition of any Lien of any nature in,
upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower.
- 3 -
<PAGE> 68
(b) Validity and Binding Nature. Assuming this Amendment
constitutes the binding obligation of each other necessary party
hereto, this Amendment, the Original Credit Agreement as amended
by this Amendment, and the Replacement Note each constitutes the
legal, valid and binding obligation of the Borrower, enforceable
against the Borrower in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(c) Representations and Warranties. Each representation
and warranty of the Borrower set forth in Section 6 of the
Original Credit Agreement as amended hereby is true and correct
as of the date hereof as though made on and as of such date.
(d) No Default. As of the Closing Date, and as of the date
of the execution and delivery by the Borrower of this Amendment,
no Event of Default or Unmatured Event of Default has occurred
and is continuing.
Section 6. Costs, Expenses, and Taxes. This Amendment
constitutes an amendment to the Original Credit Agreement for
purposes of Section 11.3 thereof.
Section 7. Original Credit Agreement to Remain in Full
Force and Effect. The Original Credit Agreement as amended
hereby shall remain in full force and effect and is hereby
ratified, adopted and confirmed in all respects. All references
to the Original Credit Agreement in any other agreement or
document shall hereafter be deemed to refer to the Original
Credit Agreement as amended hereby. In addition, each reference
in the Original Credit Agreement to the terms "this Agreement",
"hereunder", "hereof" or terms or words of similar import shall
hereafter mean the Original Credit Agreement as amended hereby.
Section 8. Counterparts. This Amendment may be executed in
several counterparts, and each such counterpart shall be deemed
to be an original and shall constitute together with all other
counterparts but one and the same Amendment.
Section 9. Governinq Law. This Amendment shall be deemed
to be a contract made under the laws of the State of Illinois and
for all purposes shall be construed in accordance with the laws
of said State, without regard to principles of conflicts of law.
All obligations of the Borrower and rights of the Bank shall be
in addition to and not in limitation of those provided by
applicable law.
Section 10. Fund Disclaimer. As provided for in Section 5.5
of the Amended and Restated Declaration of Trust, the
shareholders, trustees, officers, employees and other agents of
- 4 -
<PAGE> 69
the Borrower shall not personally be bound by or liable for any
indebtedness, liability or obligation hereunder or under the
Replacement Note nor shall resort be had to their private
property for the satisfaction of any obligation or claim
hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By /s/ Edward C. Wood, III
Title: Vice President & Treasurer
CONTINENTAL BANK N.A.
By___________________________
Title: _________________________
- 5 -
<PAGE> 70
EXHIBIT A
PROMISSORY NOTE
$25,000,000.00 Chicago, Illinois: as of December 16, 1992
FOR VALUE RECEIVED, the undersigned, VAN KAMPEN MERRITT
PRIME RATE INCOME TRUST, a Massachusetts business trust (the
"Borrower"), promises to pay to the order of CONTINENTAL BANK
N.A., a national banking association (the "Bank"), on the
Termination Date (as that term is defined in the Credit Agreement
hereinafter referred to, or such earlier date as set forth in the
Credit Agreement, the principal sum of TWENTY-FIVE MILLION AND
00/100 DOLLARS ($25,000,000.00), or if less, the then aggregate
unpaid principal amount of Alternate Reference Rate Loans and
Eurodollar Loans (as such terms are defined in the Credit
Agreement referred to below) as may be borrowed by the Borrower
under the Credit Agreement. The Borrower may borrow, repay and
reborrow hereunder in accordance with the provisions of the
Credit Agreement. All Alternate Reference Rate Loans and
Eurodollar Loans and all payments of principal shall be recorded
by the holder in its records or, at its option, on the schedule
(or any continuation thereof) attached to this Note.
The Borrower further promises to pay to the order of the
Bank interest on the aggregate unpaid principal amount hereof
from time to time outstanding from the date hereof until paid in
full at the rates per annum which shall be determined in
accordance with the provisions of the Credit Agreement. Accrued
interest shall be payable on the dates specified in the Credit
Agreement.
All payments of principal and interest under this Note shall
be made in lawful money of the United States of America in
immediately available funds at the Bank's office at 231 South
LaSalle Street, Chicago, Illinois 60697, or at such other place
as may be designated by the Bank to the Borrower in writing.
This Note is the Note referred to in, and evidences
indebtedness incurred under, a Revolving Credit Agreement dated
as of July 12, 1991 and amended as of July 11, 1992 and as of
December 16, 1992 (herein, as it may be further amended, modified
or supplemented from time to time, called the "Credit Agreement")
between the Borrower and the Bank, to which Credit Agreement
reference is made for a statement of the terms and provisions
thereof, including those under which the Borrower is permitted
and required to make prepayments and repayments of principal of
such indebtedness and under which such indebtedness may be
declared to be immediately due and payable.
<PAGE> 71
This Note is an extension, renewal and restatement of, and
is a substitute and replacement for, a promissory note dated as
of July 11, 1992 in the principal amount of $25,000,000 payable
to the Bank's order. The indebtedness originally evidenced by
such promissory note is a continuing indebtedness now evidenced
by this Note and nothing herein contained shall be construed to
deem this Note a payment or prepayment of such promissory note.
All parties hereto, whether as makers, endorsers or
otherwise severally waive presentment, demand, protest and notice
of dishonor in connection with this Note.
This Note is made under and governed by the internal laws of
the State of Illinois.
Address: VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
One Parkview Plaza
Oak Brook Terrace, Illinois 60181
By __________________________
Title: _____________________
- 2 -
<PAGE> 72
Schedule attached to Promissory Note dated as of December 16, 1992 of VAN
KAMPEN MERRITT PRIME RATE INCOME TRUST, payable to the order of CONTINENTAL
BANK N.A.
LOANS AND PRINCIPAL PAYMENTS
Type of Loan Interest Amount of Unpaid
Amount of & Applicable Period (if Principal Principal Notation
Date Loan Made Interest Rate Applicable) Repaid Balance Made By
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on
this Note. The failure to record the date and amount of any Loan on this
schedule shall not, however, limit or otherwise affect the Borrower's
obligations under the Credit Agreement or this Note to repay the principal
amount of the Loans together with all interest accruing thereon.
<PAGE> 73
231 South LaSalle Street
Chicago Illinois 60697
312-828-2548
Fax 312-987-6982
Geoffrey R. Waters
Continental Bank Vice President
December 15, 1993
Wes Wetherell
Legal Department
The Van Kampen Merritt Companies, Inc.
One Parkview Plaza
Oakbrook Terrace, IL 60181
Re: The $25,000,000 Credit Agreement between Continental Bank and the Van
Kampen Merritt Prime Rate Income Trust
Dear Wes,
Having received your request to extend the captioned Credit Agreement, under
the terms of the Second Amendment dated December 16, 1992, Continental Bank
hereby notifies you that we agree to extend the Termination Date of the
Agreement by 364 days from December 15, 1993 to December 14, 1994. All other
terms will remain in effect as stated in the Agreement (as amended).
I will have a new note drawn "as of December 15, 1993" prepared and sent to
you for execution.
I apologize for my oversight in not sending this to you yesterday. I
obtained my internal credit approvals for the extension last week, and the new
Termination Date was posted to our official records effective yesterday.
Please let me know if there is any other way I can be of assistance.
Sincerely,
/s/ Geoffrey R. Waters
<PAGE> 74
The Van Kampen Merritt Companies, Inc.
One Parkview Plaza
Oakbrook Terrace, Illinois 60181
708/684-6000
December 14, 1994
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Ms. Diane M. Lapelle
Re: Revolving Credit Agreement - Extension of Termination Date
Ladies/Gentlemen:
Reference is hereby made to that certain Revolving Credit
Agreement, dated as of July 12, 1991, between Van Kampen Merritt
Prime Rate Income Trust, a Massachusetts business trust (the
"Borrower") and Bank of America Illinois (f/k/a Continental Bank
N.A., the "Bank"), as amended by that certain Amendment to
Revolving Credit Agreement, dated as of July 11, 1992, and that
certain Second Amendment to Revolving Credit Agreement, dated as
of December 16, 1992 (as so amended, the "Credit Agreement";
capitalized terms defined therein having the same respective
meaning herein).
The Borrower hereby requests that the current Termination
Date (that is, December 14, 1994) be extended by 364 days to
December 13, 1995, which shall be the now Termination Date and
that the Bank waive the requirement for 30 days' prior request
therefor and 20 days' prior receipt by the Borrower of the Bank's
response thereto.
Except as herein expressly provided, the credit Agreement
remains in full force and effect and, as amended hereby, the
Credit Agreement is hereby ratified, adopted and confirmed.
<PAGE> 75
The Bank may indicate agreement herewith by signing and
returning the enclosed copy hereof.
Very truly yours,
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By /s/ Wes Wetherell
Its Assistant Secretary
Agreed:
BANK 0F AMERICA ILLINOIS
By_____________________________
Its____________________________
- 2 -
<PAGE> 76
THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Amendment, dated as of December 12, 1995, is entered into between
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST (formerly known as VAN
KAMPEN MERRITT PRIME RATE INCOME TRUST), a Massachusetts business trust (the
"Borrower"), and BANK OF AMERICA ILLINOIS (formerly known as CONTINENTAL BANK
N.A.) (the "Bank").
RECITALS:
A. The Borrower and the Bank have previously entered into a
certain Revolving Credit Agreement, dated as of July 12, 1991, as amended
pursuant to that certain Amendment to Revolving Credit Agreement, dated as of
July 11, 1992, and a Second Amendment to Revolving Credit Agreement, dated as
of December 16, 1992 (as so amended, the "Original Credit Agreement"); and
B. The parties hereto wish to amend the Original Credit Agreement
in certain respects, as hereinafter provided, and provide for the issuance of a
replacement promissory note;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained, the parties hereto agree as follows:
Section 1. Definitions. Terms used herein shall, unless otherwise
defined herein or the context otherwise requires, have the meanings assigned to
such terms in the Original Credit Agreement as amended hereby.
Section 2. Amendment to Original Credit Acquirement.
(a) All references in the Original Credit Agreement to
"Continental Bank N.A.", "CBNA" or "Continental" are hereby deleted and
references to "Bank of America Illinois" substituted therefor. All references
in the Original Credit Agreement to "Van Kampen Merritt Prime Rate Income
Trust" are hereby deleted and references to "Van Kampen American Capital Prime
Rate Income Trust" substituted therefor.
(b) The definition of "Termination Date" contained in Section 1.1
of the Original Credit Agreement is amended in its entirety to read as follows:
"Termination Date" means December 11, 1996; provided, however,
that the Termination Date may be extended for successive 364-day
periods upon the Borrower's written request received by the Bank not
less than 30 days prior to the then-applicable Termination Date and
the receipt by the
<PAGE> 77
Company, within 20 days of the then-current Termination Date, of the
Bank's agreement (which shall, in any event, be within the Bank's sole
discretion) to extend the Termination Date.
(c) Section 2.1 of the Agreement is hereby amended as of the date
hereof by deleting the dollar amount "$25,000,000" appearing therein and
substituting the dollar amount "$50,000,000" therefor.
(d) Section 3.1(b) of the Agreement is hereby amended as of the
date hereof by deleting the percentage "2%" appearing therein and substituting
the percentage "0.75%" therefor.
(e) Section 3.2 of the Agreement is hereby amended as of the date
hereof by deleting the percentage "0.25%" appearing therein and substituting
"0.10%" therefor.
(f) As of the date hereof, Exhibits A and E to the Original Credit
Agreement are replaced with Exhibits A and E hereto.
Section 3. Replacement Note. Concurrently herewith, the Borrower will
execute and deliver to the Bank a new promissory note (herein called the
"Replacement Note"), in the form of Exhibit A to this Amendment, dated as of
the date hereof, and payable to the Bank's order. The initial entry on the
schedule attached to Replacement Note shall include all entries theretofore
made by the Bank on the Note issued pursuant to the Original Credit Agreement
(in this Section 3, called the "Prior Note"). The Replacement Note is issued in
extension, renewal and restatement of, and is a substitute and replacement for,
the Prior Note and the continuing indebtedness evidenced thereby, and does not
constitute a payment, prepayment or novation of the Prior Note. After the date
hereof, all references in the Original Credit Agreement as amended by this
Amendment and any documents issued in connection therewith to "Note" shall also
be deemed a reference to the Replacement Note.
Section 4. Conditions to Effectiveness. This Amendment shall become
effective upon the satisfaction of the following conditions:
(a) The Bank shall have received counterparts, duly executed
by each party hereto, of this Amendment.
(b) The Bank shall have received the duly executed Replacement
Note.
(c) The Bank shall have received the signed certificate or
certificates of appropriate officers of the Borrower, dated the date
hereof or such earlier or later
- 2 -
<PAGE> 78
date as to which the parties hereto shall agree (such date may
be referred to hereafter as the "Closing Date"), certifying the
incumbency and Specimen signatures of the officers of the Borrower
authorized to execute this Amendment and the Replacement Note and any
other documents delivered on behalf of the Borrower pursuant to this
Section.
(d) The Bank shall have received a certificate of an
appropriate officer of the Borrower to the effect of the following
paragraphs (e) and (f).
(e) The representations and warranties contained in Section 6
of the Original Credit Agreement as amended hereby shall be true and
correct in all material respects on the Closing Date as though made on
and as of such time.
(f) No Event of Default or Unmatured Event of Default shall
have occurred and be continuing on the Closing Date.
(g) The Bank shall have received an opinion of the Borrower's
counsel in form and substance satisfactory to the Bank and its
counsel.
(h) The Bank shall have received a form FR U-1 of the Board of
Governors of the Federal Reserve System duly executed and completed by
the Borrower.
Section 5. Warranties. To induce the Bank to enter into this
Amendment, the Borrower hereby represents and warrants to the Bank that:
(a) Authorization: No Conflict. The execution and delivery by
the Borrower of this Amendment and the Replacement Note, and the
performance by the Borrower of the Original Credit Agreement as
amended by this Amendment, have been duly authorized by all necessary
action on the part of the Borrower, and do not and will not (i)
violate any provision of any law, rule, regulation, order, writ,
judgment, decree, determination or award presently in effect having
applicability to the Borrower or of the organizational documents of
the Borrower, (ii) result in a breach of or constitute a default under
any indenture or loan or credit agreement, or any other agreement or
instrument, to which the Borrower is a party or by which the Borrower
or its properties may be bound or affected or (iii) result in, or
require, the creation or imposition of any Lien of any nature in, upon
or with respect to any of the properties now owned or hereafter
acquired by the Borrower.
- 3 -
<PAGE> 79
(b) Validity and Binding Nature. Assuming this Amendment
constitutes the binding obligation of each other necessary party
hereto, this Amendment, the Original Credit Agreement as amended by
this Amendment, and the Replacement Note each constitutes the legal,
valid and binding obligation of the Borrower, enforceable against the
Borrower in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles.
(c) Representations and Warranties. Each representation and
warranty of the Borrower set forth in Section 6 of the Original Credit
Agreement as amended hereby is true and correct as of the Closing Date
as though made on and as of such date.
(d) No Default. As of the Closing Date, and as of the date of
the execution and delivery by the Borrower of this Amendment, no Event
of Default or Unmatured Event of Default has occurred and is
continuing.
Section 6. Costs, Expenses, and Taxes. This Amendment constitutes an
amendment to the Original Credit Agreement for purposes of Section 11.3
thereof.
Section 7. Original Credit Agreement to Remain in Full Force and
Effect. The Original Credit Agreement as amended hereby shall remain in full
force and effect and is hereby ratified, adopted and confirmed in all respects.
All references to the Original Credit Agreement in any other agreement or
document shall hereafter be deemed to refer to the Original Credit Agreement as
amended hereby. In addition, each reference in the Original Credit Agreement to
the terms "this Agreement", "hereunder", "hereof" or terms or words of similar
import shall hereafter mean the Original Credit Agreement as amended hereby.
Section 8. Counterparts. This Amendment may be executed in several
counterparts, and each such counterpart shall be deemed to be an original and
shall constitute together with all other counterparts but one and the same
Amendment.
Section 9. Governing Law. This Amendment shall be deemed to be a
contract made under the laws of the State of Illinois and for all purposes
shall be construed in accordance with the laws of said State, without regard to
principles of conflicts of law. All obligations of the Borrower and rights of
the Bank shall be in addition to and not in limitation of those provided by
applicable law.
-4-
<PAGE> 80
Section 10. Trust Disclaimer. As provided for in Section 5.5 of the
Amended and Restated Declaration of Trust, the shareholders, trustees,
officers, employees and other agents of the Borrower shall not personally be
bound by or liable for any indebtedness, liability or obligation hereunder or
under the Replacement Note nor shall resort be had to their private property
for the satisfaction of any obligation or claim hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/ Edward C. Wood III
------------------
Edward C. Wood III
Vice President, Treasurer
and Chief Financial Officer
BANK OF AMERICA ILLINOIS
By___________________________
Title________________________
-5-
<PAGE> 81
EXHIBIT A
PROMISSORY NOTE
$50,000,000.00 Chicago, Illinois: as of December 12, 1995
FOR VALUE RECEIVED, the undersigned, VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST, a Massachusetts business trust (the "Borrower"),
promises to pay to the order of BANK OF AMERICA ILLINOIS, an Illinois
banking corporation (the "Bank"), on the Termination Date (as the term is
defined in the Credit Agreement hereinafter referred to), or such earlier
date as set forth in the Credit Agreement, the principal sum of FIFTY
MILLION AND OO/100 DOLLARS ($50,000,000.00), or if less, the then aggregate
unpaid principal amount of Alternate Reference Rate Loans and Eurodollar
Loans (as such terms are defined in the Credit Agreement referred to below)
as may be borrowed by the Borrower under the Credit Agreement. The Borrower
may borrow, repay and reborrow hereunder in accordance with the provisions
of the Credit Agreement. A11 Alternate Reference Rate Loans and Eurodollar
Loans and all payments of principal shall be Recorded by the holder in its
records or, at its option, on the schedule (or any continuation thereof)
attached to this Note.
The Borrower further promises to pay to the order of the Bank interest
on the aggregate unpaid principal amount hereof from time to time
outstanding from the date hereof until paid in full at the rates per annum
which shall be determined in accordance with the provisions of the Credit
Agreement. Accrued interest shall be payable on the dates specified in the
Credit Agreement.
All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds
at the Bank's office at 231 South LaSalle Street, Chicago, Illinois 60697,
or at such other place as may be designated by the Bank to the Borrower in
writing.
This Note is the Note referred to in, and evidences indebtedness
incurred under, a Revolving Credit Agreement dated as of July 12, 1991 and
amended as of July 11, 1992, as of December 16, 1992 and as of December 12,
1995 (herein, as it may be further amended, modified or supplemented from
time to time, called the "Credit Agreement") between the Borrower and the
Bank, to which Credit Agreement reference is made for a statement of the
terms and provisions thereof, including those under which the Borrower is
permitted and required to make prepayments and repayments of principal of
such indebtedness and under which such indebtedness may be declared to be
immediately due and payable.
<PAGE> 82
This Note is an extension, renewal and restatement of, and is a
substitute and replacement for, a Promissory note dated as of December 16, 1992
in the principal amount of $25,000,000 payable to the Bank's order. The
indebtedness originally evidenced by such promissory note is a continuing
indebtedness now evidenced by this Note and nothing herein contained shall be
construed to deem this Note a payment or prepayment of such promissory note.
All parties hereto, whether as makers, endorsers or otherwise
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
This Note is made under and governed by the internal laws of the State
of Illinois.
Address:
One Parkview Plaza VAN KAMPEN AMERICAN CAPITAL
Oak Brook Terrace, Illinois 60181 PRIME RATE INCOME TRUST
By:_________________________
Title:______________________
-2-
<PAGE> 83
Schedule attached to Promissory Note dated as of December 12, 1995 of VAN
KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST, payable to the order of BANK
OF AMERICA ILLINOIS.
LOANS AND PRINCIPAL PAYMENTS
Type of Loan Interest Amount of Unpaid
Amount of & Applicable Period (if Principal Principal Notation
Date Loan Made Interest Rate Applicable) Repaid Balance Made By
- ---- --------- ------------- ---------- --------- --------- --------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The aggregate unpaid principal amount show on this schedule shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on this Note. The
failure to record the date and amount of any Loan on this schedule shall not,
however, limit or otherwise affect the Borrower's obligations under the Credit
Agreement or this Note to repay the principal amount of the Loans together with
all interest accruing thereon.
<PAGE> 84
EXHIBIT E
SCHEDULE OF INDEBTEDNESS
<PAGE> 1
EXHIBIT (C)(1)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT dated as of October 31, 1996, by and
between VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST (the "Fund"), a
Massachusetts business trust (the "Trust"), and VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP. (the "Advisor"), a Delaware corporation.
1. (A) Retention of Advisor by Fund. The Fund hereby employs the Advisor to
act as the investment adviser for and to manage the investment and reinvestment
of the assets of the Fund in accordance with the Fund's investment objective and
policies and limitations, and to administer its affairs to the extent requested
by, and subject to the review and supervision of, the Board of Trustees of the
Fund for the period and upon the terms herein set forth. The investment of funds
shall be subject to all applicable restrictions of applicable law and of the
Declaration of Trust and By-Laws of the Trust, and resolutions of the Board of
Trustees of the Fund as may from time to time be in force and delivered or made
available to the Advisor.
(B) Advisor's Acceptance of Employment. The Advisor accepts such employment
and agrees during such period to render such services, to supply investment
research and portfolio management (including without limitation the selection of
securities for the Fund to purchase, hold or sell and the selection of brokers
through whom the Fund's portfolio transactions are executed, in accordance with
the policies adopted by the Fund and its Board of Trustees), to administer the
business affairs of the Fund, to furnish offices and necessary facilities and
equipment to the Fund, to provide administrative services for the Fund, to
render periodic reports to the Board of Trustees of the Fund, and to permit any
of its officers or employees to serve without compensation as trustees or
officers of the Fund if elected to such positions.
(C) Independent Contractor. The Advisor shall be deemed to be an
independent contractor under this Agreement and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent the Fund
in any way or otherwise be deemed as agent of the Fund.
(D) Non-Exclusive Agreement. The services of the Advisor to the Fund under
this Agreement are not to be deemed exclusive, and the Advisor shall be free to
render similar services or other services to others so long as its services
hereunder are not impaired thereby.
2. (A) Fee. For the services and facilities described in Section 1, the
Fund will accrue daily and pay to the Advisor at the end of each calendar month
an investment management fee equal to a percentage of the average daily net
assets of the fund as follows:
<TABLE>
<CAPTION>
FEE PERCENT OF
AVERAGE DAILY AVERAGE DAILY
NET ASSETS NET ASSETS
- ------------------- --------------
<S> <C> <C>
First $4.0 billion.................................................... .950 of 1%
Next $3.5 billion..................................................... .900 of 1%
Next $2.5 billion..................................................... .875 of 1%
Over $10 billion...................................................... .850 of 1%
</TABLE>
(b) Determination of Net Asset Value. The net asset value of the Fund shall
be calculated as of the close of the New York Stock Exchange on the last day the
Exchange is open for trading in each calendar week or as of such other time or
times as the trustees may determine in accordance with the provisions of
applicable law and of the Declaration of Trust and By-Laws of the Trust, and
resolutions of the Board of Trustees of the Fund as from time to time in force.
For the purpose of the foregoing computations, on each such day when net asset
value is not calculated, the net asset value of a share of beneficial interest
of the Fund shall be deemed to be the net asset value of such share as of the
close of business of the last day on which such calculation was made.
(c) Proration. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the
Advisor's fee on the basis of the number of days that the Agreement is in effect
during such month and year, respectively.
<PAGE> 2
3. Expenses. In addition to the fee of the Advisor, the Fund shall assume
and pay any expenses for services rendered by a custodian for the safekeeping of
the Fund's securities or other property, for keeping its books of account, for
any other charges of the custodian and for calculating the net asset value of
the Fund as provided above. The Advisor shall not be required to pay, and the
Fund shall assume and pay, the charges and expenses of its operations, including
compensation of the trustees (other than those who are interested persons of the
Advisor), charges and expenses of independent accountants, of legal counsel and
of any transfer or dividend disbursing agent, costs of acquiring and disposing
of portfolio securities, cost of listing shares of the New York Stock Exchange
or other exchange interest (if any) on obligations incurred by the Fund, costs
of share certificates, membership dues in the Investment Company Institute or
any similar organization, costs of reports and notices to shareholders, costs of
registering shares of the Fund under the federal securities laws, miscellaneous
expenses and all taxes and fees to federal, state or other governmental agencies
on account of the registration of securities issued by the Fund, filing of
corporation documents or otherwise. The Fund shall not pay or incur any
obligation for any management or administrative expenses for which the Fund
intends to seek reimbursement from the Advisor without first obtaining the
written approval of the Advisor. The Advisor shall arrange, if desired by the
Fund, for officers or employees of the Advisor to serve, without compensation
from the Fund, as trustees, officers or agents of the Fund if duly elected or
appointed to such positions and subject to their individual consent and to any
limitations imposed by law.
4. Interested Persons. Subject to applicable statutes and regulations, it
is understood that trustees, officers, shareholders and agents of the Fund are
or may be interested in the Advisor as directors, officers, shareholders, agents
or otherwise and that the directors, officers, shareholders and agents of the
Advisor may be interest in the Fund as trustees, officers, shareholders, agents
or otherwise.
5. Liability. The Advisor shall not be liable for any error of judgment or
of law, or for any loss suffered by the Fund in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Advisor in the performance of
its obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
6. (A) Term. This Agreement shall become effective on the date hereof and
shall remain in full force until the second anniversary of the date hereof
unless sooner terminated as hereinafter provided. This Agreement shall continue
in force from year to year thereafter, but only as long as such continuance is
specifically approved at least annually in the manner required by the Investment
Company Act of 1940, as amended.
(B) Termination. This Agreement shall automatically terminate in the event
of its assignment. This Agreement may be terminated at any time without the
payment of any penalty by the Fund or by the Advisor on sixty (60) days written
notice to the other party. The Fund may effect termination by action of the
Board of Trustees or by vote of a majority of the outstanding shares of stock of
the Fund, accompanied by appropriate notice. This Agreement may be terminated at
any time without the payment of any penalty and without advance notice by the
Board of Trustees or by vote of a majority of the outstanding shares of the Fund
in the event that it shall have been established by a court of competent
jurisdiction that the Advisor or any officer or director of the Advisor has
taken any action which results in a breach of the covenants of the advisor set
forth herein.
(C) Payment upon Termination. Termination of this Agreement shall not
affect the right of the Advisor to receive payment on any unpaid balance of the
compensation described in Section 2 earned prior to such termination.
7. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall not
be thereby affected.
8. Notices. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
9. Disclaimer. The Advisor acknowledges and agrees that, as provided by
Section 5.5 of the Declaration of Trust of the Trust, the shareholders,
trustees, officers, employees and other agents of the Trust and the Fund
<PAGE> 3
shall not personally be bound by or liable hereunder, nor shall resort be had to
their private property for the satisfaction of any obligation or claim
hereunder.
IN WITNESS WHEREOF, the Fund and the Advisor have caused this Agreement to
be executed on the day and year first above written.
VAN KAMPEN AMERICAN CAPITAL
INVESTMENT ADVISORY CORP.
By: /s/ DENNIS J. MCDONNELL
------------------------------------
President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ RONALD A. NYBERG
------------------------------------
Secretary
<PAGE> 1
ADMINISTRATION AGREEMENT EXHIBIT (c) (2)
Agreement made as of October 31, 1996 , between VAN KAMPEN AMERICAN
CAPITAL PRIME RATE INCOME TRUST, a Massachusetts business trust (the "Fund"),
and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC., a Delaware corporation (the
"Administrator").
WHEREAS, the Fund intends to operate as a closed-end management investment
company, and is so registered under the Investment Company act of 1940, as
amended ( "1940 Act"); and
WHEREAS, the Fund wishes to retain the Administrator to provide certain
administrative services to the Fund, under the terms and conditions stated
below, and the Administrator is willing to provide such services for the
compensation set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. Appointment. The Fund hereby appoints the Administrator to administer
the Fund, and the Administrator accepts such appointment and agrees that it
will furnish the services set forth in paragraph 2 below.
2. Services and Duties of the Administrator. Subject to the supervision
of the Fund's Board of Trustees (the "Board"), the Administrator will:
(a) Monitor the provisions of the loan agreements and
any agreements with respect to participations and assignments
and be responsible for recordkeeping with respect to senior
loans in the Fund's portfolio;
(b) Prepare all reports required to be sent to Fund
shareholders, and arrange for the printing and dissemination
of such reports to shareholders;
(c) Arrange for the dissemination to shareholders of
the Fund's proxy materials and oversee the tabulation of
proxies by the Fund's transfer agent;
(d) Negotiate the terms and conditions under which
custodian services will be provided to the Fund and the fees
to be paid by the Fund to its custodian (which may or may not
be an affiliate of the Fund's investment adviser), in
connection therewith;
(e) Negotiate the terms and conditions under which
dividend disbursing services will be provided to the Fund, and
the fees to be paid by the Fund in connection therewith;
review the provision of dividend disbursing services to the
Fund;
(f) Determine the amounts available for distribution
as dividends and distributions to be paid by the Fund to its
Shareholders; prepare and arrange for the printing of dividend
notices to Shareholders; and provide the Fund's dividend
disbursing agent and custodian with such information as is
required for such parties to effect the payment of dividends
and distributions and to implement the Fund's dividend
reinvestment plan;
(g) Make such reports and recommendations to the
Board as the Board reasonably requests or deems appropriate;
and
(h) Provide shareholder services to holders or
potential holders of the Fund's securities including but not
limited to responding to shareholder requests for information.
1
<PAGE> 2
3. Public Inquiries. The Fund and the Administrator agree that the
Administrator will not be responsible for replying to questions or requests for
information concerning the Fund from shareholders, brokers or the public. The
Fund will inform the Administrator of the party or parties to whom any such
questions or requests should be directed, and the Administrator will refer such
questions and requests to such party or parties.
4. Compliance with the Fund's Governing Documents and Applicable Law. In
all matters relating to the performance of this Agreement, the Administrator
will act in conformity with the Declaration of Trust, By-Laws and registration
statement of the Fund and with the directions of the Board and Fund executive
officers and will conform to and comply with the requirements of the 1940 Act
and all other applicable federal or state laws and regulations.
5. Services Not Exclusive. The Administrator's services hereunder are not
deemed to be exclusive, and the Administrator is free to render administrative
or other services to other funds or clients so long as the Administrator's
services under this Agreement are not impaired thereby.
6. Compensation. For the services provided and expenses assumed by the
Administrator under this Agreement, the Fund will pay the Administrator a fee,
accrued daily and paid monthly, at the annualized rate of .25% of the Fund's
average weekly managed assets (which, for the purposes of determining such fee,
shall mean the average weekly value of the total assets of the Fund, minus the
sum of the accrued liabilities of the Fund other than the aggregate amount of
any borrowings undertaken by the Fund).
7. Limitation of Liability of the Administrator. The Administrator will
not be liable for any error of judgement or mistake of law or for any loss
suffered by the Fund or its shareholders in connection with the performance of
its duties under this Agreement, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or from reckless disregard by it of its duties under this Agreement.
8. Limitation of Liability of the Trustees and Shareholders of the Fund.
Pursuant to the provisions of Article V, Section 5.5 of the Declaration of
Trust as amended or restated as of the date hereof, this Agreement is entered
into by the Board not individually, but as trustees under such Declaration of
Trust and the obligations of the Fund hereunder are not binding upon any such
trustees or Shareholders of the Fund, but bind only the trust estate.
9. Duration and Termination. This Agreement will become effective upon
the date hereabove written and shall continue in effect thereafter until
terminated without penalty by the Administrator or the Fund upon 30 days'
written notice to the other and shall automatically terminate in the event of
its assignment as that term is defined in the 1940 Act.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
11. Governing Law. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Massachusetts and the 1940 Act. To the extent
that the applicable laws of the Commonwealth of Massachusetts conflict with the
applicable provisions of the 1940 Act, the latter shall control.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Attest: VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
/s/ Weston B. Wetherell By: /s/ Edward C. Wood, III
- ------------------------------ ------------------------------------------
Weston B. Wetherell Edward C. Wood, III, Vice President and
Assistant Secretary Chief Financial Officer
Attest: VAN KAMPEN AMERICAN CAPITAL
DISTRIBUTORS, INC.
/s/ Weston B. Wetherell By: /s/ William R. Molinari
- ------------------------------ ------------------------------------------
Weston B. Wetherell William R. Molinari, President
Assistant Secretary
3
<PAGE> 1
EXHIBIT (c)(3)
OFFERING AGREEMENT
OFFERING AGREEMENT dated October 31, 1996 by and between VAN KAMPEN
AMERICAN CAPITAL PRIME RATE INCOME TRUST (the "Fund"), a Massachusetts business
trust, and VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, 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
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 recapitalization
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.
<PAGE> 2
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 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 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;
(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 qualifications 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.
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<PAGE> 3
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.
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 stated or necessary in order to make the
statements not misleading under the 1933 Act, or any other statute 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 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 entitled 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.
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<PAGE> 4
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, 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 by them. The Principal Underwriter agrees to
notify the Fund promptly 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
4
<PAGE> 5
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.
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 KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By /s/ Dennis J. McDonnell
----------------------------------
Dennis J. McDonnell
President
VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC.
By /s/ William R. Molinari
----------------------------------
William R. Molinari
President
5
