CC DRAFT 11/11/05
Exhibit (h)
5,282,128 Shares of Common Stock
Issuable Upon Exercise of Transferable Rights
to Subscribe for such Shares
DEALER MANAGER AGREEMENT
New York, New York
November 14, 2005
UBS Securities LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
Each of Japan Smaller Capitalization Fund, Inc., a Maryland corporation
(the "Fund"), and Nomura Asset Management U.S.A. Inc., a New York corporation
(the "Manager"), hereby confirms the agreement with and appointment of UBS
Securities LLC to act as dealer manager (the "Dealer Manager") in connection
with the issuance by the Fund to the holders of record (the "Record Date
Stockholders") at the close of business on the record date set forth in the
Prospectus (as defined herein) (the "Record Date") transferable rights
entitling such Record Date Stockholders to subscribe for up to 5,282,128
shares (each a "Share" and, collectively, the "Shares") of common stock, par
value $0.10 per share (the "Common Shares"), of the Fund (the "Offer").
Pursuant to the terms of the Offer, the Fund is issuing each Record Date
Stockholders one transferable right (each a "Right" and, collectively, the
"Rights") for each Common Share held by such Record Date Stockholder on the
Record Date. Such Rights entitle their holders to acquire during the
subscription period set forth in the Prospectus (the "Subscription Period"),
at the price set forth in such Prospectus (the "Subscription Price"), one
Share for each three Rights exercised, on the terms and conditions set forth
in such Prospectus. No fractional shares will be issued. Any Record Date
Stockholder who fully exercises all Rights initially issued to such Record
Date Stockholder (other than those Rights that cannot be exercised because
they represent the right to acquire less than one Share) will be entitled to
subscribe for, subject to allocation, additional Shares (the
"Over-Subscription Privilege") on the terms and conditions set forth in the
Prospectus. The Rights are transferable and are expected to be listed on the
New York Stock Exchange, Inc. under the symbol "JOF.RT".
The Fund has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (Nos. 333-128763 and
811-05992) and a related preliminary prospectus under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations of the
Commission under the Investment Company Act (the "Investment Company Act Rules
and Regulations") and the rules and regulations of the Commission under the
Securities Act (the "Securities Act Rules and Regulations" and, together with
the Investment Company Act Rules and Regulations, the "Rules and
Regulations"), and has filed such amendments to such registration statement on
Form N-2, if any, and such amended preliminary prospectuses as may have been
required to the date hereof. If the registration statement has not become
effective, a further amendment to such registration statement, including forms
of a final prospectus necessary to permit such registration statement to
become effective, will promptly be filed by the Fund with the Commission. If
the registration statement has become effective and any prospectus contained
therein omits certain information at the time of effectiveness pursuant to
Rule 430A
of the Rules and Regulations, a final prospectus containing such omitted
information will promptly be filed by the Fund with the Commission in
accordance with Rule 497(h) of the Rules and Regulations. The term
"Registration Statement" means the registration statement, as amended, at the
time it becomes or became effective, including financial statements and all
exhibits and all documents, if any, incorporated therein by reference, and any
information deemed to be included by Rule 430A. The term "Prospectus" means
(except as otherwise specified herein) the final prospectus in the form filed
with the Commission pursuant to Rule 497(c), (e), (h) or (j) of the Rules and
Regulations, as the case may be, as from time to time amended or supplemented
pursuant to the Securities Act.
The Prospectus and letters to owners of Common Shares of the Fund,
subscription certificates and other forms used to exercise rights, brochures,
wrappers, any letters from the Fund to securities dealers, commercial banks
and other nominees and any newspaper announcements, press releases and other
offering materials and information that the Fund may use, approve, prepare or
authorize for use in connection with the Offer are collectively referred to
hereinafter as the "Offering Materials".
1. Representations and Warranties.
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(a) The Fund and the Manager jointly and severally represent and warrant
to, and agree with, the Dealer Manager as of the date hereof, as of
the date of the commencement of the Offer (such date being
hereinafter referred to as the "Representation Date") and as of the
Expiration Date (as defined below) that:
(i) The Fund meets the requirements for use of Form N-2 under the
Securities Act and the Investment Company Act and the Rules and
Regulations. At the time the Registration Statement became or
becomes effective, the Registration Statement did or will
contain all statements required to be stated therein in
accordance with, and did or will comply in all material
respects with, the requirements of the Securities Act, the
Investment Company Act and the Rules and Regulations and did
not or will not contain an untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading. From the time the Registration Statement became or
becomes effective through the expiration date of the Offer set
forth in the Prospectus, as it may be extended as provided in
the Prospectus (the "Expiration Date"), the Prospectus and the
Offering Materials will not contain an untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not
apply to statements in or omissions from the Registration
Statement, Prospectus or Offering Materials made in reliance
upon and in conformity with information relating to the Dealer
Manager furnished to the Fund in writing by the Dealer Manager
expressly for use in the Registration Statement, Prospectus or
Offering Materials.
(ii) The Fund (i) has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State
of Maryland, (ii) has full corporate power and authority to
own, lease and operate its properties and conduct its business
as described in the Registration Statement and the Prospectus,
(iii) currently maintains all necessary licenses, permits,
consents, orders, approvals, and other authorizations
(collectively, the "Licenses and Permits") necessary to carry
on its business as contemplated in the Prospectus, (iv) is duly
qualified to
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do business as a foreign corporation, (v) has made all
necessary filings required under any federal, state, local or
foreign law, regulation or rule, and (vi) is in good standing
in each jurisdiction wherein it owns or leases real property or
in which the conduct of its business requires such
qualification, except where the failure to obtain or maintain
such Licenses and Permits, to be qualified as a foreign
corporation, to make such filings or be in good standing would
not have a material adverse effect upon the Fund's business,
properties, management, prospects, financial condition or
results of operations. The Fund has no subsidiaries.
(iii) The Fund is duly registered with the Commission under the
Investment Company Act as a closed-end, non-diversified
management investment company, no order of suspension or
revocation of such registration has been issued or proceedings
therefor initiated or, to the best of the Fund's and the
Manager's knowledge, threatened by the Commission, all required
action has been taken by the Fund under the Securities Act and
the Investment Company Act to make the public offering and to
consummate the issuance of the Rights and the issuance and sale
of the Shares by the Fund upon exercise of the Rights, and the
provisions of the Fund's articles of incorporation and by-laws
comply as to form in all material respects with the
requirements of the Investment Company Act and the Investment
Company Act Rules and Regulations.
(iv) Ernst & Young LLP, the independent registered public accounting
firm that certified the financial statements of the Fund set
forth or incorporated by reference in the Registration
Statement and the Prospectus, is an independent registered
public accounting firm as required by the Investment Company
Act, the Securities Act, the Rules and Regulations and by the
rules of the Public Company Accounting Oversight Board.
(v) The financial statements of the Fund, together with the related
notes and schedules thereto, set forth or incorporated by
reference in the Registration Statement and the Prospectus
present fairly in all material respects the financial condition
of the Fund as of the dates or for the periods indicated in
conformity with U.S. generally accepted accounting principles
applied on a consistent basis; and the information set forth in
the Prospectus under the headings "Fund expenses" and
"Financial highlights" presents fairly in all material respects
the information stated therein.
(vi) The Fund has an authorized and outstanding capitalization as
set forth in the Prospectus; the issued and outstanding Common
Shares have been duly authorized and are validly issued, fully
paid and non-assessable and conform in all material respects to
the description thereof in the Prospectus under the heading
"Capital stock"; the Rights have been duly authorized by all
requisite action on the part of the Fund for issuance pursuant
to the Offer; the certificates for the Shares are in due and
proper form; the Shares have been duly authorized by all
requisite action on the part of the Fund for issuance and sale
pursuant to the terms of the Offer and, when issued and
delivered by the Fund pursuant to the terms of the Offer
against payment of the consideration set forth in the
Prospectus, will be validly issued, fully paid and
non-assessable; the Shares and the Rights conform in all
material respects to all statements relating thereto contained
in the Registration Statement, the Prospectus and the other
Offering
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Materials; and the issuance of each of the Rights and the
Shares has been done in compliance with all applicable federal
and state securities laws and is not subject to any preemptive
rights.
(vii) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the
Registration Statement and the Prospectus, (A) the Fund has not
incurred any liabilities or obligations, direct or contingent,
or entered into any transactions, other than in the ordinary
course of business, that are material to the Fund and (B) there
has not been any material change in the Common Shares or
long-term debt of the Fund, or any material adverse change, or,
to the Fund's or the Manager's knowledge, any development
involving a prospective material adverse change, in the
condition (financial or other), business, prospects, net worth
or results of operations of the Fund, (C) there has been no
dividend or distribution declared in respect of the Fund's
capital stock and (D) the Fund has not incurred any long-term
debt.
(viii) Each of this agreement (the "Agreement"); the Subscription
Agency Agreement (the "Subscription Agency Agreement") dated as
of November [ ], 2005 between the Fund and EquiServe Trust
Company, N.A. (the "Subscription Agent"); the Information Agent
Letter Agreement (the "Information Agent Agreement") dated as
of November 7, 2005 between the Fund and The Xxxxxx Group, Inc.
(the "Information Agent"); the Management Agreement dated as of
November 13, 2001 between the Fund and the Manager (the
"Management Agreement"); the Custodian Agreement dated as of
April 26, 2002 between the Fund and Xxxxx Brothers Xxxxxxxx &
Co. (the "Custodian Agreement"); and the Registrar, Transfer
Agency and Service Agreement dated as of [ ], 200[ ] between
the Fund and EquiServe Trust Company, N.A. (the "Transfer
Agency Agreement") (collectively, all the foregoing are
referred to herein as the "Fund Agreements"), has been duly
authorized, executed and delivered by the Fund; each of the
Fund Agreements complies with all applicable provisions of the
Investment Company Act, the Investment Advisers Act of 1940, as
amended (the "Advisers Act"), and the rules and regulations
under such Acts; and, assuming due authorization, execution and
delivery by the other parties thereto, each of the Fund
Agreements constitutes a legal, valid, binding and enforceable
obligation of the Fund, subject to the qualification that the
enforceability of the Fund's obligations thereunder may be
limited by U.S. bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general principles of
equity (regardless of whether enforceability is considered in a
proceeding in equity or at law), except as enforcement of
rights to indemnity and contribution hereunder may be limited
by federal or state securities laws or principles of public
policy.
(ix) Neither the issuance of the Rights, nor the issuance and sale
of the Shares upon the exercise of the Rights, nor the
execution, delivery, performance and consummation by the Fund
of any other of the transactions contemplated in this
Agreement, or to the extent applicable to the Rights or the
Shares in the Fund Agreements, nor the consummation of the
transactions contemplated in this Agreement or in the
Registration Statement nor the fulfillment of the terms thereof
will conflict with or violate the articles of incorporation,
by-laws or similar organizational documents of the Fund, or
conflict with, result in a breach or violation of, or
constitute a default or an event of default under, or result in
the
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creation or imposition of any lien, charge or encumbrance upon
any properties or assets of the Fund under the charter, by-laws
or similar organizational documents of the Fund, or the terms
and provisions of any agreement, indenture, mortgage, loan
agreement, note, insurance or surety agreement, lease or other
instrument to which the Fund is a party or by which it may be
bound or to which any of the property or assets of the Fund is
subject, nor will such action by the Fund result in any
violation of any order, law, rule or regulation of any court or
governmental agency or body having jurisdiction over the Fund
or any of its properties.
(x) Except as set forth in the Registration Statement, there is no
pending or, to the Fund's or the Manager's knowledge,
threatened action, suit, claim, investigation or proceeding
affecting the Fund or to which the Fund is a party before or by
any court or governmental agency, authority or body or any
arbitrator which would result in any material adverse change in
the condition (financial or other), business prospects, net
worth or operations of the Fund, or which would materially and
adversely affect the properties or assets thereof of a
character required to be disclosed in the Registration
Statement or the Prospectus or the consummation of the
transactions contemplated hereby.
(xi) There are no franchises, contracts or other documents of the
Fund required to be described in the Registration Statement or
the Prospectus, or to be filed or incorporated by reference as
exhibits to the Registration Statement which are not described
or filed or incorporated by reference therein as required by
the Securities Act, the Investment Company Act or the Rules and
Regulations.
(xii) No consent, approval, authorization, notification or order of,
or filing with, any federal, state, local or foreign court or
governmental or regulatory agency, commission, board, authority
or body or with any self-regulatory organization or other
non-governmental regulatory authority is required for the
consummation by the Fund of the transactions contemplated by
the Fund Agreements or the Registration Statement, except such
as have been obtained, or if the Registration Statement filed
with respect to the Shares is not effective under the
Securities Act as of the time of execution hereof, such as may
be required (and shall be obtained prior to commencement of the
Offer) under the Investment Company Act, the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(xiii) The Common Shares have been duly listed on the New York Stock
Exchange, Inc. and prior to their issuance the Shares and the
Rights will have been duly approved for listing, subject to
official notice of issuance, on the New York Stock Exchange,
Inc.
(xiv) The Fund (A) has not taken, directly or indirectly, any action
designed to cause or to result in, or that has constituted or
which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of
the Fund to facilitate the issuance of the Rights or the sale
or resale of the Rights and the Shares, (B) has not since the
filing of the Registration Statement sold, bid for or
purchased, or paid anyone any compensation for soliciting
purchases of, Common Shares of the Fund (except for the
solicitation of exercises of the Rights pursuant to this
Agreement) and (C) will not, until the later of the expiration
of the Rights or the completion of the distribution (within the
meaning of the anti-
5
manipulation rules under the Exchange Act) of the Shares, sell,
bid for or purchase, pay or agree to pay to any person any
compensation for soliciting another to purchase any other
securities of the Fund (except for the solicitation of
exercises of the Rights pursuant to this Agreement); provided
that any action in connection with the Fund's Dividend
Reinvestment Plan will not be deemed to be within the terms of
this Section 1.a.xiv.
(xv) The Fund has complied in all previous tax years and intends to
direct the investment of the proceeds of the Offer described in
the Registration Statement and the Prospectus in such a manner
as to continue to comply, with the requirements of Subchapter M
of the Internal Revenue Code of 1986, as amended ("Subchapter M
of the Code"), and is qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of
the Code.
(xvi) The Fund has complied in the last five years, and intends to
direct the investment of the proceeds of the Offer described in
the Registration Statement and the Prospectus in such a manner
as to continue to comply, with the asset coverage requirements
of the Investment Company Act.
(xvii) The Fund has (a) appointed a Chief Compliance Officer and (b)
adopted and implemented written policies and procedures which
the Board of Directors of the Fund has determined are
reasonably designed to prevent violations of the federal
securities laws in a manner required by and consistent with
Rule 38a-1 of the Rules and Regulations under the Investment
Company Act and is in compliance in all material respects with
such Rule.
(xviii) The Prospectus and the Offering Materials complied and
comply with the requirements of the Securities Act and the
Securities Act Rules and Regulations. Other than the Prospectus
and the Offering Materials, the Fund has not, without the
written permission of the Dealer Manager, used, approved,
prepared or authorized any letters to beneficial owners of the
shares of Common Stock of the Fund, forms used to exercise
rights, any letters from the Fund to securities dealers,
commercial banks and other nominees or any newspaper
announcements or other offering materials and information in
connection with the Offer; provided, however, that any use of
transmittal documentation and subscription documentation
independently prepared by the Dealer Manager, broker-dealers,
trustees, nominees or other financial intermediaries shall not
cause a violation of this section (xviii).
(xix) The Fund maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (A)
transactions are executed in accordance with management's
general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial
statements in conformity with U.S. generally accepted
accounting principles and to maintain accountability for
assets; (C) access to assets is permitted only in accordance
with management's general or specific authorization; and (D)
the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(xx) The Fund has established and maintains disclosure controls and
procedures; such disclosure controls and procedures (as such
term is defined in Rule 30a-3 under
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the Investment Company Act) are designed to ensure that
material information relating to the Fund is made known to the
Fund's Chief Executive Officer and its Chief Financial Officer
by others within the Fund, and such disclosure controls and
procedures are effective to perform the functions for which
they were established; the Fund's independent registered public
accounting firm and the Audit Committee of the Board of
Directors of the Fund have been advised of: (A) any significant
deficiencies in the design or operation of internal controls
over financial reporting which could adversely affect the
Fund's ability to record, process, summarize, and report
financial data; and (B) any fraud, whether or not material,
that involves management or other employees who have a role in
the Fund's internal controls over financial reporting; any
material weaknesses in the Fund's internal controls over
financial reporting have been identified for the Fund's
independent registered public accounting firm; and since the
date of the most recent evaluation of such disclosure controls
and procedures, there have been no significant changes in
internal controls over financial reporting or in other factors
that could materially affect internal controls over financial
reporting, including any corrective actions with regard to
significant deficiencies and material weaknesses.
(xxi) The Fund and its officers and directors, in their capacities
as such, are in compliance in all material respects with the
applicable provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the
rules and regulations promulgated thereunder.
(b) The Manager represents and warrants to, and agrees with, the Dealer
Manager as of the date hereof, as of the Representation Date and as
of the Expiration Date that:
(i) Each of the Manager and Nomura Asset Management Co., Ltd., a
Japanese corporation (the "Investment Adviser"), and together
with the Manager, the "Advisers") has been duly incorporated
and is validly existing as a corporation under the laws of the
State of New York, with respect to the Manager, and as a
corporation under the laws of Japan, with respect to the
Investment Adviser, has full power and authority (corporate and
other) to own its properties and conduct its business as
described in the Registration Statement and the Prospectus,
currently maintains all Licenses and Permits material to the
conduct of its business and necessary to enable such Adviser to
continue to supervise investments in securities as contemplated
in the Prospectus.
(ii) Each Adviser is duly registered as an investment adviser under
the Advisers Act, and is not prohibited by the Advisers Act or
the Investment Company Act, or the rules and regulations under
such Acts, from acting as investment adviser for the Fund as
contemplated in the Prospectus and the Management Agreement and
the Investment Advisory Agreement, to which it is a party.
(iii) Each of this Agreement, the Management Agreement and the
Investment Advisory Agreement dated as of November 13, 2001
between the Manager and the Investment Adviser (the "Investment
Advisory Agreement" and, together with this Agreement and the
Management Agreement, the "Adviser Agreements") has been duly
authorized, executed and delivered by each Adviser that is a
party to such Agreement, and complies with all applicable
provisions of the Investment Company Act, the Advisers Act and
the rules and regulations
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under such Acts, and is, assuming due authorization, execution
and delivery by the other parties thereto, a legal, valid,
binding and enforceable obligation of each Adviser that is a
party to such Agreement, subject to the qualification that the
enforceability of the Manager's and/or Investment Adviser's
obligations thereunder may be limited by U.S. bankruptcy,
insolvency, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors'
rights and to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity
or at law), except as enforcement of rights to indemnity and
contribution hereunder may be limited by federal or state
securities laws or principles of public policy.
(iv) Neither the execution, delivery, performance and consummation
by an Adviser of its obligations under this Agreement or any
other Adviser Agreement, to which it is a party, nor the
consummation of the transactions contemplated therein or in the
Registration Statement nor the fulfillment of the terms thereof
will conflict with or violate the articles of incorporation,
by-laws or similar organizational documents of such Adviser, or
conflict with, result in a breach or violation of, or
constitute a default or an event of default under, or result in
the creation or imposition of any lien, charge or encumbrance
upon any properties or assets of such Adviser under the
articles of incorporation, bylaws or similar organizational
document, the terms and provisions of any indenture, mortgage,
loan agreement, note, insurance or surety agreement, or any
other material lease, instrument or agreement to which such
Adviser is a party or by which it may be bound or to which any
of the property or assets of such Adviser is subject, nor will
such action result in any violation of any order, law, rule or
regulation of any court or governmental agency or body having
jurisdiction over such Adviser or any of its properties.
(v) Except as set forth in the Registration Statement, there is no
pending or, to the best of the Manager's knowledge, threatened
action, suit or proceeding affecting either Adviser or to which
either Adviser is a party before or by any court or
governmental agency, authority or body or any arbitrator which
would result in any material adverse change in either Adviser's
condition (financial or other), business prospects, net worth
or operations, or which would materially and adversely affect
the properties or assets thereof of a character required to be
disclosed in the Registration Statement or Prospectus.
(vi) No consent, approval, authorization, notification or order of,
or filing with, any court or governmental agency or body is
required for the consummation by an Adviser of the transactions
contemplated by this Agreement or any other Adviser Agreement,
to which such Adviser is a party, except where the failure to
obtain such consent, approval, authorization, notification or
order, or make such filing would have a material adverse effect
on such Adviser's business, properties, management, prospects,
financial condition or results of operations.
(vii) Each Adviser (A) has not taken, directly or indirectly, any
action designed to cause or to result in, or that has
constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of
any security of the Fund to facilitate the issuance of the
Rights or the sale or resale of the Rights and the Shares, (B)
has not since the filing of the Registration Statement sold,
bid for or purchased, or paid anyone any compensation for
8
soliciting purchases of, Common Shares of the Fund (except for
the solicitation of exercises of the Rights pursuant to this
Agreement) and (C) will not, until the later of the expiration
of the Rights or the completion of the distribution (within the
meaning of the anti-manipulation rules under the Exchange Act)
of the Shares, sell, bid for or purchase, pay or agree to pay
any person any compensation for soliciting another to purchase
any other securities of the Fund (except for the solicitation
of exercises of the Rights pursuant to this Agreement);
provided that any action in connection with the Fund's Dividend
Reinvestment Plan will not be deemed to be within the terms of
this Section 1.b.vii.
(viii) The Manager intends to direct the Investment Adviser with
respect to the investment of the proceeds of the Offer
described in the Registration Statement and the Prospectus in
such a manner as to cause the Fund to comply with the
requirements of Subchapter M of the Code. The Investment
Adviser intends to direct the investment of the proceeds of the
Offer described in the Registration Statement and the
Prospectus in such a manner as to cause the Fund to comply with
the requirements of Subchapter M of the Code.
(c) Any certificate required by this Agreement that is signed by any
officer of the Fund or the Manager and delivered to the Dealer
Manager or counsel for the Dealer Manager shall be deemed a
representation and warranty by the Fund or the Manager, as the case
may be, to the Dealer Manager, as to the matters covered thereby.
2. Agreement to Act as Dealer Manager.
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(a) On the basis of the representations and warranties contained herein,
and subject to the terms and conditions of the Offer:
(i) The Fund hereby appoints the Dealer Manager to solicit the
exercise of Rights and authorizes the Dealer Manager to sell
Shares purchased by the Dealer Manager from the Fund through
the exercise of Rights as described herein in accordance with
the Securities Act, the Investment Company Act and the Exchange
Act; the Fund hereby authorizes the Dealer Manager to form and
manage a group of selling broker-dealers (each a "Selling Group
Member" and collectively the "Selling Group") that enter into a
Selling Group Agreement with the Dealer Manager in the form
attached hereto as Exhibit A to solicit the exercise of Rights
and to sell Shares purchased by the Selling Group Member from
the Dealer Manager as described herein; and the Fund hereby
authorizes other soliciting broker-dealers (each a "Soliciting
Dealer" and collectively the "Soliciting Dealers") that enter
into a Soliciting Dealer Agreement with the Dealer Manager in
the form attached hereto as Exhibit B to solicit the exercise
of Rights. The Dealer Manager hereby agrees to solicit the
exercise of Rights in accordance with its customary practice
subject to the terms and conditions of this Agreement, the
procedures described in the Registration Statement, the
Prospectus and, where applicable, the terms and conditions of
such Selling Group Agreement or Soliciting Dealer Agreement;
and the Dealer Manager hereby agrees to form and manage the
Selling Group to solicit the exercise of Rights and to sell
Shares to the Selling Group purchased by the Dealer Manager
from the Fund through the exercise of Rights as described
herein in accordance with its customary practice subject to the
terms and conditions of this Agreement, the
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procedures described in the Registration Statement, the
Prospectus and, where applicable, the terms and conditions of
the Selling Group Agreement.
(ii) The Fund hereby authorizes the Dealer Manager to buy and
exercise Rights, including unexercised Rights delivered to the
Subscription Agent for resale and Rights of Record Date
Shareholders whose record addresses are outside the United
States held by the Subscription Agent for which no instructions
are received, on the terms and conditions set forth in such
Prospectus, and to sell Shares to the public or to Selling
Group Members at the offering price set by the Dealer Manager
from time to time. Sales of Shares by the Dealer Manager or
Selling Group Members shall not be at a price higher than the
offering price set by the Dealer Manager from time to time.
(b) To the extent permitted by applicable law, the Fund agrees to
furnish, or cause to be furnished, to the Dealer Manager, lists, or
copies of those lists, showing the names and addresses of, and
number of Common Shares held by, Record Date Stockholders as of the
Record Date, and the Dealer Manager agrees to use such information
only in connection with the Offer, and not to furnish the
information to any other person except for securities brokers and
dealers that have been requested by the Dealer Manager to solicit
exercises of Rights.
(c) The Dealer Manager agrees to provide to the Fund, in addition to the
services described in paragraph 2(a), financial advisory and
marketing services in connection with the Offer. No advisory fee,
other than the fees provided for in Section 3 of this Agreement and
the reimbursement of the Dealer Manager's out-of-pocket expenses as
described in Section 5 of this Agreement, will be payable by the
Fund, or any other party hereto, to the Dealer Manager in connection
with the financial advisory and marketing services provided by the
Dealer Manager pursuant to this Section 2(c).
(d) The Fund and the Dealer Manager agree that the Dealer Manager is an
independent contractor with respect to the solicitation of the
exercise of the Rights, and that the Dealer Manager's performance of
financial advisory and marketing services for the Fund is pursuant
to a contractual relationship created solely by this Agreement
entered into on an arm's length basis, and in no event do the
parties intend that the Dealer Manager act or be responsible as a
fiduciary to the Fund, its management, stockholders, creditors or
any other person, including Selling Group Members and Soliciting
Dealers, in connection with any activity that the Dealer Manager may
undertake or has undertaken in furtherance of its engagement
pursuant to this Agreement, either before or after the date hereof.
The Dealer Manager, Selling Group Members and Soliciting Dealers
hereby expressly disclaim any fiduciary or similar obligations to
the Fund, either in connection with the transactions contemplated by
this Agreement or any matters leading up to such transactions, and
the Fund hereby confirms its understanding and agreement to that
effect. The Fund, Dealer Manager, Selling Group Members and
Soliciting Dealers agree that they are each responsible for making
their own independent judgments with respect to any such
transactions, and that any opinions or views expressed by the Dealer
Manager, Selling Group Members or Soliciting Dealers to the Fund
regarding such transactions, including but not limited to any
opinions or views with respect to the subscription price or market
for the Fund's Shares, do not constitute advice or recommendations
to the Fund. The Fund hereby waives and releases, to the fullest
extent permitted by law, any claims that the Fund may have against
the Dealer Manager, Selling Group Members and Soliciting Dealers
with respect to any breach or alleged breach of
10
any fiduciary or similar duty to the Fund in connection with the
transactions contemplated by this Agreement or any matters leading
up to such transactions; provided that this release shall not
protect or purport to protect the Dealer Manager, Selling Group
Members and Soliciting Dealers against any liability to which they
would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence, in the performance of their duties, or by
reason of their reckless disregard of their obligations and duties
under this Agreement.
(e) In rendering the services contemplated by this Agreement, the Dealer
Manager will not be subject to any liability to the Fund or the
Manager or any of their affiliates, for any act or omission on the
part of any soliciting broker or dealer (except with respect to the
Dealer Manager acting in such capacity) or any other person, and the
Dealer Manager will not be liable for acts or omissions in
performing its obligations under this Agreement, except for any
losses, claims, damages, liabilities and expenses that are finally
judicially determined to have resulted primarily from the bad faith,
willful misconduct or gross negligence or reckless disregard of the
Dealer Manager or by reason of the reckless disregard of the
obligations and duties of the Dealer Manager under this Agreement.
3. Dealer Manager Fees. In full payment for the financial advisory,
marketing and soliciting services rendered and to be rendered hereunder
by the Dealer Manager, the Fund agrees to pay the Dealer Manager a fee
(the "Dealer Manager Fee") equal to 3.75% of the aggregate Subscription
Price for the Shares issued pursuant to the exercise of Rights and the
Over-Subscription Privilege. In full payment for the soliciting efforts
to be rendered, the Dealer Manager agrees to reallow selling fees (the
"Selling Fees") to Selling Group Members equal to 2.50% of the
Subscription Price per Share for each Share issued pursuant to either (a)
the exercise of Rights and the Over-Subscription Privilege where such
Selling Group Member is so designated on the subscription form or (b) the
purchase for resale from the Dealer Manager in accordance with the
Selling Group Agreement. In full payment for the soliciting efforts to be
rendered, the Dealer Manager agrees to reallow soliciting fees (the
"Soliciting Fees") to Soliciting Dealers equal to 0.50% of the
Subscription Price per Share for each Share issued pursuant to the
exercise of Rights and the Over-Subscription Privilege where such
Soliciting Dealer is so designated on the subscription form, subject to a
maximum fee based on the number of Common Shares held by such Soliciting
Dealer through The Depository Trust Company ("DTC") on the Record Date.
The Dealer Manager agrees to pay the Selling Fees or Soliciting Fees, as
the case may be, to the broker-dealer designated on the applicable
portion of the form used by the holder to exercise Rights and the
Over-Subscription Privilege, and if no broker-dealer is so designated or
a broker-dealer is otherwise not entitled to receive compensation
pursuant to the terms of the Selling Group Agreement or Soliciting Dealer
Agreement, then the Dealer Manager shall retain such Selling Fee or
Solicitation Fee for Shares issued pursuant to the exercise of Rights and
the Over-Subscription Privilege. Payment to the Dealer Manager by the
Fund will be in the form of a wire transfer of same day funds to an
account or accounts identified by the Dealer Manager. Such payment will
be made on each date on which the Fund issues Shares after the Expiration
Date. Payment to a Selling Group Member or Soliciting Dealer will be made
by the Dealer Manager directly to such Selling Group Member or Soliciting
Dealer by check to an address identified by such broker-dealer. Such
payments shall be made on or before the tenth business day following the
day the Fund issues Shares after the Expiration Date.
11
4. Other Agreements.
-----------------
(a) The Fund covenants with the Dealer Manager as follows:
(i) The Fund will use its best efforts to cause the Registration
Statement to become effective and maintain its effectiveness
under the Securities Act, and will advise the Dealer Manager
promptly as to the time at which the Registration Statement and
any amendments thereto (including any post-effective amendment)
becomes so effective.
(ii) The Fund will notify, and confirm the notice in writing to, the
Dealer Manager immediately (A) of the effectiveness of the
Registration Statement and any amendment thereto (including any
post-effective amendment), (B) of the receipt of any comments
from the Commission, (C) of any request by the Commission for
any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, (D)
of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose and (E) of the
receipt of any written notice regarding the suspension of the
qualification of the Shares or the Rights for offering or sale
in any jurisdiction. The Fund will make every reasonable effort
to prevent the issuance of any stop order described in
subsection (D) hereunder and, if any such stop order is issued,
to obtain the lifting thereof at the earliest possible moment.
(iii) The Fund will give the Dealer Manager notice of its intention
to file any amendment to the Registration Statement (including
any post-effective amendment) or any amendment or supplement to
the Prospectus (including any revised prospectus which the Fund
proposes for use by the Dealer Manager in connection with the
Offer, which differs from the prospectus on file at the
Commission at the time the Registration Statement becomes
effective, whether or not such revised prospectus is required
to be filed pursuant to Rule 497(c), (e) or (h) of the Rules
and Regulations), whether pursuant to the Investment Company
Act, the Securities Act, or otherwise, and will furnish the
Dealer Manager with copies of any such amendment or supplement
a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file any such amendment
or supplement to which the Dealer Manager or counsel for the
Dealer Manager shall reasonably object.
(iv) The Fund will, without charge, deliver to the Dealer Manager,
as soon as practicable, the number of copies (one of which is
manually executed) of the Registration Statement as originally
filed and of each amendment thereto as it may reasonably
request, in each case with the exhibits filed therewith.
(v) The Fund will, without charge, furnish to the Dealer Manager,
from time to time during the period when the Prospectus is
required to be delivered under the Securities Act, such number
of copies of the Prospectus (as amended or supplemented) as the
Dealer Manager may reasonably request for the purposes
contemplated by the Securities Act or the Securities Act Rules
and Regulations.
(vi) If any event shall occur as a result of which it is necessary,
in the reasonable opinion of counsel for the Dealer Manager, to
amend or supplement the
12
Registration Statement or the Prospectus (or the other Offering
Materials) to make the Prospectus (or such other Offering
Materials) not contain an untrue statement of material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the
time it is delivered to a Record Date Stockholder, the Fund
will forthwith amend or supplement the Prospectus by preparing
and filing with the Commission (and furnishing to the Dealer
Manager a reasonable number of copies of) an amendment or
amendments of the Registration Statement or an amendment or
amendments of or a supplement or supplements to the Prospectus
(in form and substance reasonably satisfactory to counsel for
the Dealer Manager), at the Fund's expense, which will amend or
supplement the Registration Statement or the Prospectus (or
otherwise will amend or supplement such other Offering
Materials) so that the Prospectus (or such other Offering
Materials) will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein,
in the light of the circumstances existing at the time the
Prospectus (or such other Offering Materials) is delivered to a
Record Date Stockholder, not misleading.
(vii) The Fund will endeavor, in cooperation with the Dealer Manager
and its counsel, to qualify the Rights and the Shares for
offering and sale under the applicable securities laws of such
states and other jurisdictions of the United States as the
Dealer Manager may designate and maintain such qualifications
in effect for the duration of the Offer; provided, however,
that the Fund will not be obligated to file any general consent
to service of process, or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is
not now so qualified. The Fund will file such statements and
reports as may be required by the laws of each jurisdiction in
which the Rights and the Shares have been qualified as above
provided.
(viii) The Fund will make generally available to its security
holders as soon as practicable, but no later than April 30,
2007, an earnings statement (which need not be audited) (in
form complying with the provisions of Rule 158 of the
Securities Act Rules and Regulations) covering a twelve-month
period beginning not later than the first day of the Fund's
fiscal semi-annual period next following the "effective" date
(as defined in said Rule 158) of the Registration Statement.
(ix) For a period of 180 days from the date of this Agreement, the
Fund will not, without the prior consent of the Dealer Manager,
offer or sell, or enter into any agreement to sell, any equity
or equity related securities of the Fund or securities
convertible into such securities, other than the Rights and the
Shares and the Common Shares issued in reinvestment of
dividends or distributions.
(x) The Fund will use the net proceeds from the Offer to acquire
portfolio securities as set forth under "Use of proceeds" in
the Prospectus.
(xi) The Fund will use its best efforts to cause the Rights and the
Shares to be duly authorized for listing by the New York Stock
Exchange, Inc. prior to the time the Rights and the Shares are
issued, respectively.
13
(xii) The Fund will use its best efforts to maintain its
qualification as a regulated investment company under
Subchapter M of the Code.
(xiii) The Fund will apply the net proceeds from the Offer in such a
manner as to continue to comply with the requirements of the
Prospectus and the Investment Company Act.
(xiv) The Fund will advise or cause the Subscription Agent (A) to
advise the Dealer Manager and, only where specifically noted,
each Selling Group Member who specifically requests, from day
to day during the period of, and promptly after the termination
of, the Offer, as to the names and addresses of all Record Date
Stockholders exercising Rights, the total number of Rights
exercised by each Record Date Stockholder during the
immediately preceding day, indicating the total number of
Rights verified to be in proper form for exercise, rejected for
exercise and being processed and, for the Dealer Manager and
each Selling Group Member, the number of Rights exercised on
subscription certificates indicating the Dealer Manager or such
Selling Group Member, as the case may be, as the broker-dealer
with respect to such exercise, and as to such other information
as the Dealer Manager may reasonably request; and will notify
the Dealer Manager and each Selling Group Member, not later
than 5:00 P.M., New York City time, on the first business day
following the Expiration Date, of the total number of Rights
exercised and Shares related thereto, the total number of
Rights verified to be in proper form for exercise, rejected for
exercise and being processed and, for the Dealer Manager and
each Selling Group Member, the number of Rights exercised on
subscription certificates indicating the Dealer Manager or such
Selling Group Member, as the case may be, as the broker-dealer
with respect to such exercise, and as to such other information
as the Dealer Manager may reasonably request; (B) to sell any
Rights received for resale from Record Date Stockholders
exclusively to or through the Dealer Manager, which may, at its
election, purchase such Rights as principal or act as agent for
the resale thereof; and (C) to issue Shares upon the Dealer
Manager's exercise of Rights no later than the close of
business on the business day following the day that full
payment for such Shares has been received by the Subscription
Agent.
(b) Neither the Fund nor the Manager will take, directly or indirectly,
any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Fund to facilitate the issuance of the Rights or the sale or resale
of the Rights or the Shares; provided that any action in connection
with the Fund's Dividend Reinvestment Plan will not be deemed to be
within the meaning of this Section 4.b.
(c) Except as required by applicable law, the use of any reference to
the Dealer Manager in any Offering Materials or any other document
or communication prepared, approved or authorized by the Fund or the
Manager in connection with the Offer is subject to the prior
approval of the Dealer Manager, provided that if such reference to
the Dealer Manager is required by applicable law, the Fund and the
Manager agree to notify the Dealer Manager within a reasonable time
prior to such use but the Fund and the Manager are nonetheless
permitted to use such reference.
5. Payment of Expenses.
--------------------
14
(a) The Fund will pay all expenses incident to the performance of its
obligations under this Agreement and in connection with the Offer,
including, but not limited to, (i) expenses relating to the printing
and filing of the Registration Statement as originally filed and of
each amendment thereto, (ii) expenses relating to the preparation,
issuance and delivery of the certificates for the Shares and
subscription certificates relating to the Rights, (iii) the fees and
disbursements of the Fund's counsel (including the fees and
disbursements of local counsel) and accountants, (iv) expenses
relating to the qualification of the Rights and the Shares under
securities laws in accordance with the provisions of Section
4.a.vii. of this Agreement, including filing fees, (v) expenses
relating to the printing or other production and delivery to the
Dealer Manager of copies of the Registration Statement as originally
filed and of each amendment thereto and of the Prospectus and any
amendments or supplements thereto, (vi) the fees and expenses
incurred with respect to filing with the NASD, Inc., including the
fees and disbursements of the Dealer Manager's counsel with respect
thereto, (vii) the fees and expenses incurred in connection with the
listing of the Rights and the Shares on the New York Stock Exchange,
Inc., (viii) expenses relating to the printing or other production,
mailing and delivery expenses incurred in connection with Offering
Materials, including all reasonable out-of-pocket fees and expenses,
if any, incurred by the Dealer Manager, Selling Group Members,
Soliciting Dealers and other brokers, dealers and financial
institutions in connection with their customary mailing and handling
of materials related to the Offer to their customers, (ix) the fees
and expenses incurred with respect to the Subscription Agent and the
Information Agent and (x) all other fees and expenses (excluding the
announcement, if any, of the Offer in The Wall Street Journal)
incurred in connection with or relating to the Offer.
(b) In addition to any fees that may be payable to the Dealer Manager
under this Agreement, the Fund agrees to reimburse the Dealer
Manager upon request made from time to time for a portion of its
reasonable expenses incurred in connection with its activities under
this Agreement, including the reasonable fees and disbursements of
its legal counsel (excluding fees and expenses pursuant to Section
5.a.iv which are to be paid directly by the Fund), upon proper
presentation of documentation therefor, in an amount not to exceed
$100,000.
(c) If this Agreement is terminated by the Dealer Manager in accordance
with the provisions of Section 6 or Section 9.a., the Fund agrees to
reimburse the Dealer Manager for all of its reasonable out-of-pocket
expenses incurred in connection with its performance hereunder,
including the reasonable fees and disbursements of counsel for the
Dealer Manager. In the event the transactions contemplated hereunder
are not consummated, the Fund agrees to pay all of the costs and
expenses set forth in paragraphs 5.a. and 5.b. which the Fund would
have paid if such transactions had been consummated.
6. Conditions of the Dealer Manager's Obligations. The obligations of the
Dealer Manager hereunder (including any obligation to pay for Shares
issuable upon exercise of Rights by the Dealer Manager) are subject to
the accuracy of the respective representations and warranties of the Fund
and the Manager contained herein, to the performance by the Fund and the
Manager of their respective obligations hereunder, and to the following
further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M., New York City time, on the Record Date, or at such
later time and date as may be approved by the Dealer Manager; the
Prospectus and any amendment or supplement thereto shall have been
filed with the Commission in the manner and within the time period
required by
15
Rule 497(c), (e), (h) or (j), as the case may be, under the
Securities Act; no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto shall have been
issued, and no proceedings for that purpose shall have been
instituted or threatened or, to the knowledge of the Fund, the
Manager or the Dealer Manager, shall be contemplated by the
Commission; and the Fund shall have complied with any request of the
Commission for additional information (to be included in the
Registration Statement, the Prospectus or otherwise).
16
(b) On the Representation Date and the Expiration Date, the Dealer
Manager shall have received:
(i) The favorable opinion, dated the Representation Date and the
Expiration Date, of Sidley Xxxxxx Xxxxx & Xxxx LLP, counsel for
the Fund, in form and substance satisfactory to counsel for the
Dealer Manager, to the effect that:
(1) The Fund is a corporation duly incorporated and existing
under and by virtue of the laws of the State of Maryland
and is in good standing with the State Department of
Assessments and Taxation, and the Fund has corporate power
to own its properties and assets and to conduct its
business as described in the Registration Statement and
the Prospectus. The Fund is duly qualified to do business
as a foreign corporation in each jurisdiction wherein it
owns or leases material properties or conducts material
business, except where the failure to be so qualified,
considering all such cases in the aggregate would have a
material adverse effect on the Fund.
(2) The Fund is registered with the Commission under the
Investment Company Act as a closed-end, non-diversified
management investment company; to the best of such
counsel's knowledge, no order of suspension or revocation
of such registration has been issued or proceedings
therefor initiated or threatened by the Commission; all
required action has been taken by the Fund under the
Securities Act and the Investment Company Act to make the
Offer and consummate the issuance of the Rights and the
issuance and sale of the Shares upon exercise of the
Rights; and the provisions of the Fund's articles of
incorporation and Bylaws comply as to form in all material
respects with the requirements of the Investment Company
Act and the Investment Company Act Rules and Regulations.
(3) The Fund has the authority to issue the number of Common
Shares set forth in the Prospectus under the caption
"Capital Stock" and the Fund has the number of authorized
shares of stock set forth in the Prospectus under the
caption "Capital Stock;" the authorized stock of the
Company conforms in all material respects as to legal
matters to the description thereof contained in the
Prospectus under the heading "Capital Stock;" the Common
Shares issued and outstanding as of the date hereof
(immediately prior to the issuance of the Rights, as of
the Representation Date and the Shares, as of the
Expiration Date) have been duly authorized and validly
issued and are fully paid and nonassessable; the issuance
of the Rights has been duly authorized and the sale and
issuance of the Shares has been duly authorized and, when
issued and delivered to and paid for by the Dealer Manager
in accordance with the terms of the Offer and the
resolutions of the Board of Directors of the Fund, the
Shares will be validly issued, fully paid and
nonassessable; the form of certificate representing the
Shares complies in all material respects with the
applicable statutory requirements of the Maryland General
Corporation Law (the "MGCL") and with any applicable
requirements of the Certificate of Incorporation (the
"Charter") of the Fund and the Bylaws (the "Bylaws") of
the Fund; and, the Shares are not subject to
17
preemptive or other similar rights under the MGCL, the
Charter or the Bylaws; the Rights and the Shares conform
as to legal matters in all material respects to all
statements relating thereto contained in the Registration
Statement, the Prospectus and the other Offering
Materials.
(4) Each of the Fund Agreements has been duly authorized,
executed and delivered by the Fund; each of the Fund
Agreements complies in all material respects with all
applicable provisions of the Investment Company Act and
the Investment Company Act Rules and Regulations, the
Advisers Act and the rules and regulations under such Act;
and, assuming due authorization, execution and delivery by
the other parties thereto, each of the Fund Agreements
constitutes a legal, valid and legally binding obligation
of the Fund enforceable in accordance with its terms,
subject to the qualification that the enforceability of
the Fund's obligations thereunder may be limited by U.S.
bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or
affecting creditors' rights and to general principles of
equity (regardless of whether enforceability is considered
in a proceeding in equity or at law) and, with respect to
this Agreement, subject to the qualification that the
right to indemnity and contribution hereunder may be
limited by federal or state laws.
(5) Neither the issuance of the Rights, nor the issuance and
sale of the Shares upon exercise of the Rights, nor the
execution, delivery, performance and consummation by the
Fund of any other of the transactions contemplated in this
Agreement, or to the extent relevant to the Rights or the
Shares, in the Fund Agreements, nor the consummation of
the transactions contemplated herein or therein or in the
Registration Statement nor the fulfillment of the terms
thereof will conflict with or violate the charter, bylaws
or similar organizational documents of the Fund, or will
result in a breach or violation of, or constitute a
default or an event of default under, or result in the
creation or imposition of any lien, charge or encumbrance
upon any properties or assets of the Fund under the
charter, bylaws or similar organizational documents of the
Fund, the terms and provisions of any agreement,
indenture, mortgage, loan agreement, note, insurance or
surety agreement, lease or other instrument, known to such
counsel after reasonable inquiry, to which the Fund is a
party or by which it may be bound or to which any of the
property or assets of the Fund is subject, nor, to the
best of such counsel's knowledge, will such action by the
Fund result in any material violation of any order, law,
rule or regulation of any U.S. federal, New York or
Maryland state court or governmental agency or body having
jurisdiction over the Fund or any of its properties or
published rule or regulation of the Maryland General
Corporation Law; provided, however, that solely for
purposes of this paragraph (5) and not for purposes of the
opinions expressed in other paragraphs, such counsel need
express no opinion with respect to the antifraud
provisions of Federal securities laws, state securities
laws, laws governing fiduciary relationships, fraudulent
transfer laws, antitrust laws, the Employee Retirement
Income Security Act of 1974 or laws governing the
solicitation of deposits and provided, further, that
insofar as performance by the Fund of its obligations
under this Agreement and
18
the Fund Agreements is concerned, such counsel need
express no opinion as to U.S. bankruptcy, insolvency,
reorganization, moratorium, and similar laws of general
applicability relating to or affecting creditors' rights.
(6) To the best knowledge of such counsel, there is no pending
or threatened action, suit or proceeding to which the Fund
is a party before or by any court or governmental agency,
authority or body or any arbitrator which might result in
any material adverse change in the condition (financial or
other), business prospects, net worth or operations of the
Fund, or which might materially and adversely affect the
properties or assets thereof of a character required to be
disclosed in the Registration Statement or the Prospectus
which is not adequately disclosed therein and there is no
contract or other document of the Fund of a character
required to be described in the Registration Statement or
the Prospectus, or to be filed or incorporated by
reference as exhibits to the Registration Statement which
are not described or filed or incorporated by reference
therein as required by the Securities Act, the Investment
Company Act or the Rules and Regulations.
(7) No consent, approval, authorization, notification or order
of, or filing with, any court or governmental agency or
body under the laws of New York or U.S. Federal law that
would be normally applicable to transactions of the type
contemplated by this Agreement or the Fund Agreements is
required for the consummation by the Fund of the
transactions contemplated by this Agreement or the Fund
Agreements, except (A) such as have been obtained under
the Securities Act, the Exchange Act, the Investment
Company Act or from the New York Stock Exchange, (B) such
as may be required under the blue sky laws of any
jurisdiction in connection with the transactions
contemplated hereby and (C) such other approvals as have
been obtained or the failure to have obtained will not
have a material adverse effect on the Fund or its ability
to perform its obligations under this Agreement or the
Fund Agreements.
(8) The outstanding Common Shares have been duly listed on the
New York Stock Exchange, Inc. and the Shares and the
Rights have been duly approved for listing, subject to
official notice of issuance, on the New York Stock
Exchange, Inc.
(9) The Registration Statement has become effective under the
Securities Act; any required filing of the Prospectus or
any supplement thereto pursuant to Rule 497(c), (e), (h)
or (j) required to be made prior to the date hereof has
been made in the manner and within the time period
required by Rule 497(c), (e), (h) or (j), as the case may
be; to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for that purpose have
been instituted or threatened; and the Registration
Statement, the Prospectus and each amendment thereof or
supplement thereto (other than the financial statements,
schedules, the notes thereto and the schedules and other
financial data contained or incorporated by reference
therein or omitted therefrom, as to which such counsel
need
19
express no opinion) as of their respective effective or
issue dates complied as to form in all material respects
with the applicable requirements of the Securities Act and
the Investment Company Act and the Rules and Regulations.
(10) The statements in the Prospectus under the headings "The
Offer--Federal income tax consequences of the Offer" and
"Taxation," insofar as such statements describe or
summarize United States tax laws, treaties, doctrines or
practices, provide an accurate description thereof as of
the date of the Prospectus.
In rendering such opinion, such counsel may rely as to matters
of Maryland law on the opinion of Xxxxxxx LLP and as to matters
of fact, to the extent they deem proper, on certificates of
responsible officers of the Fund and public officials.
Such counsel shall also have stated that, while they have not
themselves checked the accuracy and completeness of or
otherwise verified, and are not passing upon and assume no
responsibility for the accuracy or completeness of, the
statements contained in the Registration Statement or the
Prospectus, in the course of their review and discussion of the
contents of the Registration Statement and Prospectus with
certain officers and employees of the Fund and its independent
registered public accounting firm, no facts have come to their
attention which cause them to believe that the Registration
Statement, on the date it became effective, contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements contained therein not misleading or that
the Prospectus, as of its date and on the Representation Date
or the Expiration Date, as the case may be, contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading (except that such
counsel need not express any statement or belief with respect
to the financial statements, schedules or other financial data
included or incorporated by reference in the Registration
Statement or Prospectus or omitted therefrom).
(ii) The favorable opinions, dated the Representation Date and the
Expiration Date, of Sidley Xxxxxx Xxxxx & Xxxx LLP, counsel for
the Manager and the Investment Adviser, in form and substance
satisfactory to counsel for the Dealer Manager to the effect
that:
(1) The Manager is a corporation duly incorporated and validly
existing under the laws of State of New York and, based
solely on a good standing certificate from the Secretary
of State of the State of New York, the Manager is in good
standing under the laws of the State of New York, and the
Manager has the corporate power to own its properties and
assets and conduct its business as described in the
Registration Statement and the Prospectus. To the best
knowledge of such counsel, each Adviser currently
maintains all governmental licenses, permits, consents,
orders, approvals, and other authorizations under New York
or United States law material to the conduct of its
business and necessary to enable such Adviser to continue
to supervise investment in securities as contemplated in
the Adviser Agreements to which such Adviser is a party.
20
The Manager is duly qualified to do business as a foreign
corporation in each jurisdiction wherein it owns or leases
material properties or conducts material business, except
where the failure to be so qualified, considering all such
cases in the aggregate would not have a material adverse
effect on the Manager.
(2) Each Adviser is registered as an investment adviser under
the Advisers Act, and is not prohibited by the Advisers
Act or the Investment Company Act, or the rules and
regulations under such Acts, from acting as a manager or
an investment adviser, as the case may be, for the Fund as
contemplated in the Management Agreement and the
Investment Advisory Agreement, to which such Adviser is a
party.
(3) Each of this Agreement and the Management Agreement has
been duly authorized, executed and delivered by the
Manager and complies in all material respects with all
applicable provisions of the Investment Company Act, the
Advisers Act and the rules and regulations under such
Acts, and is, assuming due authorization, execution and
delivery by the other parties thereto, a legal, valid and
legally binding obligation of the Manager enforceable in
accordance with its terms, subject to the qualification
that the enforceability of the Manager's obligations
thereunder may be limited by U.S. bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights
and to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or
at law) and, with respect to this Agreement, subject to
the qualification that the right to indemnity and
contribution hereunder may be limited by federal and state
laws.
(4) The Investment Advisory Agreement complies in all material
respects with all applicable provisions of the Investment
Company Act, the Advisers Act and the rules and
regulations under such Acts. The Investment Advisory
Agreement has been duly authorized, executed and delivered
by the Manager, and, assuming due authorization, execution
and delivery by the other parties thereto and assuming
that the Investment Advisory Agreement is enforceable
under Japanese law, the Investment Advisory Agreement is a
legal, valid, binding and enforceable obligation of the
Manager and the Investment Adviser in accordance with its
terms, subject to the qualification that the
enforceability of the obligations of the Manager and the
Investment Adviser thereunder may be limited by U.S.
bankruptcy, insolvency, reorganization, moratorium and
similar laws of general applicability relating to or
affecting creditors' rights and to general principles of
equity (regardless of whether enforceability is considered
in a proceeding in equity or at law).
(5) The execution, delivery, performance and consummation by
the Manager of its obligations under this Agreement or any
of the Adviser Agreements will not materially conflict
with or materially violate the charter, by-laws or similar
organizational documents of the Manager, or materially
conflict with, result in a material breach or violation
of, or
21
constitute a material default under, or result in the
creation or imposition of any material lien, charge or
encumbrance upon any properties or assets of the Manager
under the charter, by-laws or similar organizational
documents of the Manager, the terms and provisions of any
material agreement, indenture, mortgage, loan agreement,
note, insurance or surety agreement, lease or other
instrument, known to such counsel after reasonable
inquiry, to which the Manager is a party or by which it
may be bound or to which any of the property or assets of
the Manager is subject, nor will such action result in any
material violation of any U.S. federal law; provided,
however, that solely for purposes of this paragraph (4)
and not for purposes of the opinions expressed in other
paragraphs, such counsel need express no opinion with
respect to the antifraud provisions of the Federal
securities laws, state securities laws, laws governing
fiduciary relationships, fraudulent transfer laws,
antitrust laws, the Employee Retirement Income Security
Act of 1974 or laws governing the solicitation of
deposits; and provided, further, that in so far as
performance by the Manager of its obligations under the
Adviser Agreements is concerned, such counsel need express
no opinion as to U.S. bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights.
(6) To the best of such counsel's knowledge, the consummation
by the Investment Adviser of its obligations under the
Investment Advisory Agreement will not materially conflict
with or materially violate any law, rule or regulation
applicable to the Investment Adviser of any United States
court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over
the Investment Adviser or any its properties.
(7) To the best knowledge of such counsel, there is no pending
or threatened action, suit or proceeding to which the
Manager is a party before or by any court or governmental
agency, authority or body or any arbitrator which would
result in a material adverse effect upon the Fund or upon
the ability of the Manager to perform its obligations
under this Agreement or the Adviser Agreements.
In rendering such opinion, such counsel has relied as to
matters of Maryland law, with the Dealer Manager's consent and
without making any investigation with respect thereto, on the
opinion of Xxxxxxx LLP and as to matters of the Investment
Company Act, the Investment Advisers Act, the Securities Act of
1933 and the rules and regulations under such Acts, on the
opinion of Sidley Xxxxxx Xxxxx & Xxxx LLP pursuant to Section
6.b.i. of this Agreement, and as to matters of fact, to the
extent they deem proper, on certificates of responsible
officers of the Investment Adviser and public officials.
Such counsel shall also have stated that, while they have not
themselves checked the accuracy and completeness of or
otherwise verified, and are not passing upon and assume no
responsibility for the accuracy or completeness of, the
statements contained in the Registration Statement or the
Prospectus, in the course of their review and discussion of the
contents of the Registration Statement and Prospectus with
certain officers and employees of the Manager, no facts have
22
come to their attention which cause them to believe that the
Registration Statement, on the date it became effective,
contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements contained therein not
misleading or that the Prospectus, as of its date and on the
Representation Date or the Expiration Date, as the case may be,
contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading
(except that such counsel need not express any statement or
belief with respect to the financial statements, schedules or
other financial data included or incorporated by reference in
the Registration Statement or Prospectus or omitted therefrom).
(iii) The favorable opinions, dated the Representation Date and the
Expiration Date, of Xxxxx Xxxx, internal counsel for the
Manager, in form and substance satisfactory to counsel for the
Dealer Manager to the effect that:
(1) To the best knowledge of such counsel, there is no pending
or threatened action, suit or proceeding to which the
Investment Adviser is a party before or by any court or
governmental agency, authority or body or any arbitrator
which would result in a material adverse effect upon the
Fund or upon the ability of the Investment Adviser to
perform its obligations under the Investment Advisory
Agreement.
(iv) The favorable opinion, dated the Representation Date and the
Expiration Date, of Mori, Hamada & Matsumoto, Japanese counsel
for the Fund, in form and substance satisfactory to counsel for
the Dealer Manager, to the effect that, under existing Japanese
laws and regulations:
(1) the Investment Adviser has been duly organized and is
validly existing as a corporation under the laws of Japan,
and has full corporate power and authority to own its
properties and conduct its business as described in the
Prospectus;
(2) no consent, approval, authorization or order of any court
or governmental agency or body is required under the laws
of Japan for the issuance of the Rights, the issuance and
sale of the Shares by the Fund outside Japan or for the
consummation by the Fund of the transactions contemplated
in the Fund Agreements based on the representations and
warranties contained herein;
(3) such counsel does not know of any Japanese statutes,
regulations or legal or governmental proceedings
materially affecting the operation of the Fund as
contemplated in the Prospectus and which would be material
to an investor considering an investment in the Fund,
except as are described in the Prospectus;
(4) the statements in the Prospectus, insofar as such
statements describe or summarize Japanese laws, treaties,
legal doctrines or legal practices, provide an accurate
description thereof in all material respects as of the
date of the Prospectus;
23
(5) no taxes or charges of any kind are or will be payable in
or to Japan, or any political subdivision thereof, by the
Dealer Manager with respect to the Fund Agreements or for
the issuance of the Rights and the issuance and sale of
the Shares by the Fund assuming all such agreements are
signed outside of Japan and such issuance of Rights and
the issuance and sale of the Shares are made outside of
Japan;
(6) except as set forth in the Prospectus, to the best
knowledge of such counsel, there is no pending or
threatened action, suit or proceeding in Japan before any
court or governmental agency, authority or body or any
arbitrator involving the Fund, which questions the
validity of the Fund Agreements;
(7) the Investment Advisory Agreement has been duly
authorized, executed and delivered by the Investment
Adviser;
(8) neither the performance by the Investment Adviser of its
obligations under the Investment Advisory Agreement nor
the consummation of the transactions contemplated herein
or therein nor the fulfillment of the terms hereof or
thereof will conflict with, or result in a breach of, or
constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Investment Adviser pursuant to
the constitutive documents of the Investment Adviser or,
to the knowledge of such counsel, the terms of any
material agreement, indenture, mortgage, lease or other
instrument to which the Investment Adviser is a party or
is bound or to which any of its property or assets is
subject, which conflict, breach or default would have a
material adverse effect on the ability of the Investment
Adviser to carry out its obligations under such
agreements, or any Japanese law, order of which such
counsel has knowledge, rule or regulation applicable to
the Investment Adviser of any Japanese court, regulatory
body, administrative agency, governmental body, stock
exchange or securities association having jurisdiction
over the Investment Adviser or its properties or
operations; no consent, approval, authorization or order
of any court or governmental agency or body is required
under the laws of Japan in connection with the execution,
performance and delivery of the Investment Advisory
Agreement by the Investment Adviser; and
(9) the Investment Adviser owns, possesses or has obtained and
currently maintains all material authorizations under
Japanese law as are necessary for the Investment Adviser
to perform its obligation under the Investment Advisory
Agreement as set forth in and contemplated by the
Prospectus.
Such counsel shall also have stated that, while they have not
themselves checked the accuracy and completeness of or
otherwise verified, and are not passing upon and assume no
responsibility for the accuracy or completeness of, the
statements contained in the Registration Statement or the
Prospectus, in the course of their review and discussion of the
contents of the Registration Statement and Prospectus with
certain officers and employees of the Investment Adviser, no
facts relating to Japanese laws, treaties, legal doctrines or
legal practices have come to their attention which cause them
to believe that the Registration
24
Statement, on the date it became effective, contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements contained therein not misleading or that
the Prospectus, as of its date and on the Representation Date
or the Expiration Date, as the case may be, contained any
untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading (except that such
counsel need not express any statement or belief with respect
to the financial statements, schedules or other financial data
included or incorporated by reference in the Registration
Statement or Prospectus).
(c) The Dealer Manager shall have received from Xxxxxxxx Chance US LLP,
counsel for the Dealer Manager, such opinion or opinions, dated the
Representation Date and the Expiration Date, with respect to the
Offer, the Registration Statement, the Prospectus and other related
matters as the Dealer Manager may reasonably require, and the Fund
shall have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass upon
such matters.
(d) The Fund shall have furnished to the Dealer Manager certificates of
the Fund, signed on behalf of the Fund by the President of the Fund,
dated the Representation Date and the Expiration Date, to the effect
that the signer(s) of such certificate carefully examined the
Registration Statement, the Prospectus, any supplement to the
Prospectus and this Agreement and that, to the best of their
knowledge:
(i) the representations and warranties of the Fund in this
Agreement are true and correct in all material respects on and
as of the Representation Date or the Expiration Date, as the
case may be, with the same effect as if made on the
Representation Date or the Expiration Date, as the case may be,
and the Fund has complied with all the agreements and satisfied
all the conditions on its part to be performed or satisfied at
or prior to the Representation Date or the Expiration Date, as
the case may be;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or threatened; and
(iii) since the date of the most recent balance sheet included or
incorporated by reference in the Prospectus, there has been no
material adverse change, or any development involving a
prospective material adverse change, in the condition
(financial or other), business, prospects, net worth or results
of operations of the Fund (excluding fluctuations in the Fund's
net asset value due to investment activities in the ordinary
course of business), except as set forth in or contemplated in
the Prospectus.
(e) Each Adviser shall have furnished to the Dealer Manager certificates
of such Adviser, signed on behalf of the Adviser by the Chairman or
other senior official, dated the Representation Date and the
Expiration Date, to the effect that the signer(s) of such
certificate carefully examined the Registration Statement, the
Prospectus, any supplement to the Prospectus and this Agreement and,
to the best of their knowledge, that the representations and
warranties with respect to such Adviser in this Agreement are true
and correct in all material respects on and as of the Representation
Date or the Expiration
25
Date, as the case may be, with the same effect as if made on the
Representation Date or the Expiration Date, as the case may be.
(f) Ernst & Young LLP shall have furnished to the Dealer Manager
letters, dated the Representation Date and the Expiration Date, in
form and substance satisfactory to the Dealer Manager and Ernst &
Young LLP, stating in effect that:
(i) it is an independent registered public accounting firm with
respect to the Fund within the meaning of the Securities Act
and the applicable Securities Act Rules and Regulations, and
the rules and regulations adopted by the Commission and the
Public Accounting Oversight Board (United States);
(ii) in its opinion, the audited financial statements examined by it
and included or incorporated by reference in the Registration
Statement comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and
the Investment Company Act and the respective Rules and
Regulations with respect to registration statements on Form
N-2;
(iii) it has performed procedures specified by the Public Accounting
Oversight Board for a review of the interim financial
information for the period ended June 30, 2005;
(iv) it has performed specified procedures, not constituting an
audit in accordance with generally accepted auditing standards,
including a reading of the latest available unaudited financial
information of the Fund, a reading of the minute books of the
Fund, and inquiries of officials of the Fund responsible for
financial and accounting matters, and on the basis of such
inquiries and procedures nothing came to its attention that
caused it to believe that at a specified date prior to the
Representation Date or the Expiration Date, as the case may be,
there was any change in the Common Shares, any decrease in net
assets or any increase in long-term debt of the Fund as
compared with amounts shown in the most recent statement of
assets and liabilities included or incorporated by reference in
the Registration Statement, except as the Registration
Statement discloses has occurred or may occur, or they shall
state any specific changes, increases or decreases; and
(v) in addition to the procedures referred to in clause (iii)
above, it has compared certain dollar amounts (or percentages
as derived from such dollar amounts) and other financial
information regarding the operations of the Fund appearing in
the Registration Statement, which have previously been
specified by the Dealer Manager and which shall be specified in
such letter, and have found such items to be in agreement with
the accounting and financial records of the Fund.
(g) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus (excluding an
amendment or supplement subsequent to the Representation Date), (i)
there shall not have been any change, increase or decrease specified
in the letter or letters referred to in paragraph 6(f), (ii) no
material adverse change, or any development involving a prospective
material adverse change, in the business, properties, management,
financial condition or results of operations of the Fund shall have
occurred or become known and (iii) no transaction which is material
and adverse to the Fund shall have been entered into by the Fund.
26
(h) Prior to the Representation Date, the Fund shall have furnished to
the Dealer Manager such further information, certificates and
documents as the Dealer Manager may reasonably request.
(i) If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned
above or elsewhere in this Agreement shall not be reasonably
satisfactory in form and substance to the Dealer Manager and its
counsel, this Agreement and all obligations of the Dealer Manager
hereunder may be canceled at, or at any time prior to, the
Expiration Date by the Dealer Manager. Notice of such cancellation
shall be given to the Fund in writing or by telephone confirmed in
writing.
7. Indemnity and Contribution.
--------------------------
(a) Each of the Fund and the Manager, jointly and severally, agrees to
indemnify, defend and hold harmless the Dealer Manager, each Selling
Group Member and each Soliciting Dealer, and their respective
partners, directors and officers, and any person who controls the
Dealer Manager, a Selling Group Member and or a Soliciting Dealer
within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, and the successors and assigns of all of the
foregoing persons from and against any loss, damage, expense,
liability or claim (including the reasonable cost of investigation)
which, jointly or severally, the Dealer Manager, a Selling Group
Member, a Soliciting Dealer or any such person may incur under the
Securities Act, the Exchange Act, the Investment Company Act, the
Advisers Act, common law or otherwise, insofar as such loss, damage,
expense, liability or claim arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by the
Fund) or in a Prospectus (the term "Prospectus" for the purpose of
this Section 7 being deemed to include any preliminary prospectus,
the Offering Materials, the Prospectus and the Prospectus as amended
or supplemented by the Fund), or arises out of or is based upon any
omission or alleged omission to state a material fact required to be
stated in either such Registration Statement or Prospectus or
necessary to make the statements made therein not misleading, except
insofar as any such loss, damage, expense, liability or claim arises
out of or is based upon any untrue statement or omission or alleged
untrue statement or omission of a material fact contained in and in
conformity with information furnished in writing by or on behalf of
the Dealer Manager to the Fund or the Manager expressly for use with
reference to the Dealer Manager, Selling Group Members or Soliciting
Dealers in such Registration Statement or such Prospectus.
If any action, suit or proceeding (together, a "Proceeding") is
brought against the Dealer Manager, a Selling Group Member, a
Soliciting Dealer or any such person in respect of which indemnity
may be sought against the Fund pursuant to the foregoing paragraph,
the Dealer Manager, a Selling Group Member, a Soliciting Dealer or
such person shall promptly notify the Fund and the Manager in
writing of the institution of such Proceeding and the Fund shall
assume the defense of such Proceeding, including the employment of
counsel reasonably satisfactory to such indemnified party and
payment of all reasonable fees and expenses; provided, however, that
the failure to so notify the Fund and the Manager shall not relieve
the Fund from any liability which the Fund or the Manager may have
to the Dealer Manager, a Selling Group Member, a Soliciting Dealer
or any such person or otherwise, unless such omission results in the
forfeiture of substantive rights or defenses by the indemnifying
party. The Dealer Manager, a Selling Group
27
Member, a Soliciting Dealer or such person shall have the right to
employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the Dealer
Manager, a Selling Group Member, a Soliciting Dealer or of such
person unless the employment of such counsel shall have been
authorized in writing by the Fund in connection with the defense of
such Proceeding or the Fund shall not have, within a reasonable
period of time in light of the circumstances, employed counsel to
have charge of the defense of such Proceeding or such indemnified
party or parties shall have reasonably concluded (based on advice
from counsel) that there may be defenses available to it or them
which are different from, additional to or in conflict with those
available to the Fund (in which case the Fund shall not have the
right to direct the defense of such Proceeding on behalf of the
indemnified party or parties, but the Fund may employ counsel and
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Fund), in any of which
events the reasonable fees and expenses shall be borne by the Fund
and paid as incurred (it being understood, however, that the Fund
shall not be liable for the expenses of more than one separate
counsel (in addition to any local counsel) in any one Proceeding or
series of related Proceedings in the same jurisdiction representing
the indemnified parties who are parties to such Proceeding). The
Fund and the Manager shall not be liable for any settlement of any
Proceeding effected without the Fund's written consent, but if
settled with the written consent of the Fund, the Fund and the
Manager agree to indemnify and hold harmless the Dealer Manager, a
Selling Group Member, a Soliciting Dealer and any such person from
and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement
of any Proceeding effected without its written consent if (i) such
settlement is entered into more than 60 business days after receipt
by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall not have reimbursed the indemnified party
in accordance with such request prior to the date of such settlement
and (iii) such indemnified party shall have given the indemnifying
party at least 30 days' prior notice of its intention to settle. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or
threatened Proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such Proceeding
and does not include an admission of fault, culpability or a failure
to act, by or on behalf of such indemnified party unless such
indemnified party gives written consent to such admission of fault,
culpability or a failure to act.
(b) The Dealer Manager agrees to indemnify, defend and hold harmless the
Fund and the Manager, and their directors and officers, and any
person who controls the Fund or the Manager, within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
and the successors and assigns of all of the foregoing persons to
the same extent as the foregoing indemnity from the Fund or the
Manager to the Dealer Manager, from and against any loss, damage,
expense, liability or claim (including the reasonable cost of
investigation) which, jointly or severally, the Fund, the Manager or
any such person may incur under the Securities Act, the Exchange
Act, the Investment Company Act, the Advisers Act, the common law or
otherwise, insofar as such loss, damage, expense, liability or claim
arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact contained in and in conformity
with information
28
furnished in writing by or on behalf of the Dealer Manager to the
Fund expressly for use with reference to the Dealer Manager in the
Registration Statement (or in the Registration Statement as amended
by any post-effective amendment thereof by the Fund) or in a
Prospectus, or arises out of or is based upon any omission or
alleged omission to state a material fact in connection with such
information required to be stated in such Registration Statement or
such Prospectus or necessary to make such information not misleading
(with respect to the Prospectus, in light of the circumstances under
which they were made).
If any Proceeding is brought against the Fund, the Manager or any
such person in respect of which indemnity may be sought against the
Dealer Manager pursuant to the foregoing paragraph, the Fund, the
Manager or such person shall promptly notify the Dealer Manager in
writing of the institution of such Proceeding and the Dealer Manager
shall assume the defense of such Proceeding, including the
employment of counsel reasonably satisfactory to such indemnified
party and payment of all reasonable fees and expenses; provided,
however, that the omission to so notify the Dealer Manager shall not
relieve the Dealer Manager from any liability which the Dealer
Manager may have to the Fund or any such person or otherwise, unless
such omission results in the forfeiture of substantive rights or
defenses by the indemnifying party. The Fund, the Manager or such
person shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the
expense of the Fund, the Manager or such person, as the case may be,
unless the employment of such counsel shall have been authorized in
writing by the Dealer Manager in connection with the defense of such
Proceeding or such Dealer Manager shall not have, within a
reasonable period of time in light of the circumstances, employed
counsel to have charge of the defense of such Proceeding or such
indemnified party or parties shall have reasonably concluded (based
on advice from counsel) that there may be defenses available to it
or them which are different from or additional to or in conflict
with those available to the Dealer Manager (in which case the Dealer
Manager shall not have the right to direct the defense of such
Proceeding on behalf of the indemnified party or parties, but the
Dealer Manager may employ counsel and participate in the defense
thereof but the fees and expenses of such counsel shall be at the
expense of the Dealer Manager), in any of which events the
reasonable fees and expenses shall be borne by the Dealer Manager
and paid as incurred (it being understood, however, that the Dealer
Manager shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel) in any one
Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such
Proceeding). The Dealer Manager shall not be liable for any
settlement of any such Proceeding effected without the written
consent of the Dealer Manager but if settled with the written
consent of the Dealer Manager, the Dealer Manager agrees to
indemnify and hold harmless the Fund, the Manager and any such
person from and against any loss or liability by reason of such
settlement. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second sentence of this paragraph, then the
indemnifying party agrees that it shall be liable for any settlement
of any Proceeding effected without its written consent if (i) such
settlement is entered into more than 60 business days after receipt
by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall not have reimbursed the indemnified party
in accordance with such request prior to the date of such settlement
and (iii) such indemnified party shall have given the indemnifying
party at least 30 days' prior notice of its intention to settle. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or
29
threatened Proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes
an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such Proceeding
and does not include an admission of fault, culpability or a failure
to act, by or on behalf of such indemnified party unless such
indemnified party gives written consent to such admission of fault,
culpability or a failure to act.
(c) If the indemnification provided for in this Section 7 is unavailable
to an indemnified party under subsections (a) and (b) of this
Section 7 in respect of any losses, damages, expenses, liabilities
or claims referred to therein, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party
as a result of such losses, damages, expenses, liabilities or claims
(i) in such proportion as is appropriate to reflect the relative
benefits received by the Fund or the Manager on the one hand and the
Dealer Manager, Selling Group Member(s) or Soliciting Dealer(s) on
the other hand from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also
the relative fault of the Fund or the Manager on the one hand and of
the Dealer Manager on the other in connection with the statements or
omissions which resulted in such losses, damages, expenses,
liabilities or claims, as well as any other relevant equitable
considerations with respect to the Offer. The relative benefits
received by the Fund or the Manager on the one hand and the Dealer
Manager, Selling Group Member(s) or Soliciting Dealer(s) on the
other shall be deemed to be in the same respective proportions as
the total proceeds from the Offer (net of the Dealer Manager Fee but
before deducting expenses) received by the Fund or the Manager and
the total Dealer Manager Fee received by the Dealer Manager, bear to
the aggregate public offering price of the Shares. The relative
fault of the Fund or the Manager on the one hand and of the Dealer
Manager, Selling Group Member(s) or Soliciting Dealer(s) on the
other shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission relates to information
supplied by the Fund or the Manager or the Dealer Manager and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
amount paid or payable by a party as a result of the losses,
damages, expenses, liabilities and claims referred to in this
subsection shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with
investigating, preparing to defend or defending any Proceeding.
(d) The Fund, the Manager and the Dealer Manager agree that it would not
be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable
considerations referred to in subsection (c) above. Notwithstanding
the provisions of this Section 7, neither the Dealer Manager nor any
Selling Group Member or Soliciting Dealer shall be required to
contribute any amount in excess of the fees received by it. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Notwithstanding any other provisions in this Section 7, no party
shall be entitled to indemnification or contribution under this
Dealer Manager Agreement against any loss, claim, liability, expense
or damage arising by reason of such person's willful
30
misfeasance, or gross negligence in the performance of its duties
hereunder or by reason of such person's reckless disregard of such
person's obligations and duties thereunder. The parties hereto
acknowledge that the foregoing provision shall not be construed to
impose upon any such parties any duties under this Agreement other
than as specifically set forth herein (it being understood that the
Dealer Manager, Selling Group Members and Soliciting Dealers have no
duty hereunder to the Fund, the Manager or the Investment Adviser to
perform any due diligence investigation).
(f) The indemnity and contribution agreements contained in this Section
7 and the covenants, warranties and representations of the Fund and
the Manager contained in this Agreement shall remain in full force
and effect regardless of any investigation made by or on behalf of
the Dealer Manager, a Selling Group Member, a Soliciting Dealer, and
their respective partners, directors or officers or any person
(including each partner, officer or director of such person) who
controls the Dealer Manager, a Selling Group Member or a Soliciting
Dealer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, or by or on behalf of the Fund, the
Manager or the Investment Adviser, its directors or officers or any
person who controls the Fund or the Manager within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act,
and shall survive any termination of this Agreement or the issuance
and delivery of the Rights. The Fund and the Manager and the Dealer
Manager agree promptly to notify each other of the commencement of
any Proceeding against it and, in the case of the Fund or the
Manager against any of their officers or directors in connection
with the issuance of the Rights, or in connection with the
Registration Statement or Prospectus.
(g) The Fund and the Manager acknowledges that the statements under the
caption "Distribution arrangements" in the Prospectus constitute the
only information furnished in writing to the Fund by the Dealer
Manager expressly for use in such document, and the Dealer Manager
confirms that such statements are correct in all material respects.
8. Representations, Warranties and Agreements to Survive Delivery. The
respective agreements, representations, warranties, indemnities and other
statements of the Fund or its officers, of the Manager and of the Dealer
Manager set forth in or made pursuant to this Agreement shall survive the
Expiration Date and will remain in full force and effect, regardless of
any investigation made by or on behalf of Dealer Manager or the Fund or
the Manager or any of their officers, directors or controlling persons
referred to in Section 7 hereof, and will survive delivery of and payment
for the Shares pursuant to the Offer. The provisions of Sections 5 and 7
hereof shall survive the termination or cancellation of this Agreement.
9. Termination of Agreement.
-------------------------
(a) The obligations of the Dealer Manager hereunder shall be subject to
termination in the absolute discretion of the Dealer Manager, by
notice given to the Fund prior to 5:00 p.m., New York time on the
Expiration Date, if (x) since the time of execution of this
Agreement or the earlier respective dates as of which information is
given in the Registration Statement and the Prospectus, there has
been any material adverse change or any development involving a
material adverse change in the business, properties, management,
financial condition or results of operations of the Fund, which
would, in the Dealer Manager's judgment, make it impracticable or
inadvisable to proceed with the Offer on the terms and in the manner
contemplated in the Registration Statement and the Prospectus, or
(y) since the time of execution of this Agreement, there shall have
31
occurred: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange, Inc. ("NYSE"),
the American Stock Exchange or the NASDAQ; (ii) a suspension or
material limitation in trading in the Fund's Common Shares or in the
Rights on the NYSE; (iii) a general moratorium on commercial banking
activities declared by either federal or New York State authorities
or a material disruption in commercial banking or securities
settlement or clearance services in the United States; (iv) an
outbreak or escalation of hostilities or acts of terrorism involving
the United States or Japan or a declaration by the United States or
Japan of a national emergency or war; or (v) any other calamity or
crisis or any change in financial, political, economic, currency,
banking or social conditions in the United States or Japan, if the
effect of any such event specified in clause (iv) or (v) in the
Dealer Manager's judgment makes it impracticable or inadvisable to
proceed with the Offer on the terms and in the manner contemplated
in the Registration Statement and the Prospectus.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other
party except as provided in Section 5 and the Dealer Manager shall
not have any obligation to purchase any Shares upon exercise of
Rights.
10. Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Dealer Manager, will be mailed,
delivered or telegraphed and confirmed to UBS Securities LLC, 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, Attn: Syndicate Department and, if
to the Fund or the Manager, shall be sufficient in all respects if
delivered or sent to the Fund or the Manager at Two World Xxxxxxxxx
Xxxxxx, Xxxxxxxx X, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx Xxxx.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and will inure to
the benefit of the officers and directors and controlling persons
referred to in Section 7 hereof, and no other person will have any right
or obligation hereunder.
12. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York.
13. Submission to Jurisdiction. Except as set forth below, no claim (a
"Claim") which relates to the terms of this Agreement or the transactions
contemplated hereby may be commenced, prosecuted or continued in any
court other than the courts of the State of New York located in the City
and County of New York or in the United States District Court for the
Southern District of New York, which courts shall have jurisdiction over
the adjudication of such matters, and each of the Fund and the Manager
consents to the jurisdiction of such courts and personal service with
respect thereto. Each of the Fund and the Manager hereby consents to
personal jurisdiction, service and venue in any court in which any Claim
arising out of or in any way relating to this Agreement is brought by any
third party against the Dealer Manager or any indemnified party. Each of
the Dealer Manager, the Fund (on its behalf and, to the extent permitted
by applicable law, on behalf of its stockholders and affiliates) and the
Manager (on its behalf and, to the extent permitted by applicable law, on
behalf of its stockholders and affiliates) waives all right to trial by
jury in any action, proceeding or counterclaim (whether based upon
contract, tort or otherwise) in any way arising out of or relating to
this Agreement. Each of the Fund and the Manager agrees that a final
judgment in any such action, proceeding or counterclaim brought in any
such court shall be conclusive and binding upon the Fund or the Manager,
as the case may be, and may be enforced in any other courts in the
jurisdiction of which the Fund or the Manager is or may be subject, by
suit upon such judgment.
32
14. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
33
If the foregoing is in accordance with your understanding of our
agreement, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Fund, the
Manager and the Dealer Manager.
Very truly yours,
JAPAN SMALLER CAPITALIZATION FUND, INC.
By:
-----------------------
Name:
Title:
NOMURA ASSET MANAGEMENT U.S.A. INC.
By:
-----------------------
Name:
Title:
34
The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.
UBS SECURITIES LLC
By:
--------------------------------------------
Name:
Title:
By:
---------------------------------------------
Name:
Title:
35
Exhibit A
JAPAN SMALLER CAPITALIZATION FUND, INC.
5,282,128 Shares of Common Stock
Issuable Upon Exercise of Transferable Rights
to Subscribe for Such Shares
SELLING GROUP AGREEMENT
New York, New York
November [ ], 2005
UBS Securities LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
We understand that Japan Smaller Capitalization Fund, Inc., a Maryland
corporation (the "Fund"), proposes to issue to holders of record (the "Record
Date Stockholders") as of the close of business on the record date set forth
in the Prospectus (as defined herein) (the "Record Date") transferable rights
entitling such Record Date Stockholders to subscribe for up to 5,282,128
shares (each a "Share" and, collectively, the "Shares") of common stock, par
value $0.10 per share (the "Common Shares"), of the Fund (the "Offer").
Pursuant to the terms of the Offer, the Fund is issuing each Record Date
Stockholder one transferable right (each a "Right" and, collectively, the
"Rights") for each Common Share held by such Record Date Stockholder on the
Record Date. Such Rights entitle their holders to acquire during the
subscription period set forth in the Prospectus (the "Subscription Period"),
at the price set forth in such Prospectus (the "Subscription Price"), one
Share for each three Rights, on the terms and conditions set forth in such
Prospectus. No fractional shares will be issued. Any Record Date Stockholder
who fully exercises all Rights initially issued to such Record Date
Stockholder (other than those Rights that cannot be exercised because they
represent the right to acquire less than one Share) will be entitled to
subscribe for, subject to allocation, additional Shares (the
"Over-Subscription Privilege") on the terms and conditions set forth in such
Prospectus. The Rights are transferable and are listed on the New York Stock
Exchange, Inc. under the symbol "JOF.RT".
We further understand that the Fund has appointed UBS Securities LLC to
act as the dealer manager (the "Dealer Manager") in connection with the Offer
and has authorized the Dealer Manager to form and manage a group of
broker-dealers (each a "Selling Group Member" and collectively the "Selling
Group") to solicit the exercise of Rights and to sell Shares purchased by the
Dealer Manager from the Fund through the exercise of Rights.
We hereby express our interest in participating in the Offer as a Selling
Group Member.
We hereby agree with you as follows:
1. We have received and reviewed the Fund's prospectus dated November
14, 2005 (the "Prospectus") relating to the Offer and we understand
that additional copies of the Prospectus (or of the Prospectus as it
may be subsequently supplemented or amended, if applicable) and any
other solicitation materials authorized by the Fund relating to the
Offer ("Offering Materials") will be supplied to us in reasonable
quantities upon our
A-1
request therefor to you. We agree that we will not use any
solicitation material other than the Prospectus (as supplemented or
amended, if applicable) and such Offering Materials and we agree not
to make any representation, oral or written, to any shareholders or
prospective shareholders of the Fund that are not contained in the
Prospectus, unless previously authorized to do so in writing by the
Fund.
2. From time to time during the Subscription Period commencing on
November 21, 2005 and ending at 5:00 p.m., New York City time, on
the Expiration Date (the term "Expiration Date" means December 16,
2005, unless and until the Fund shall, in its sole discretion, have
extended the period for which the Offer is open, in which event the
term "Expiration Date" with respect to the Offer will mean the
latest time and date on which the Offer, as so extended by the Fund,
will expire), we may solicit the exercise of Rights in connection
with the Offer. We will be entitled to receive fees in the amounts
and at the times described in Section 4 of this Selling Group
Agreement with respect to Shares purchased pursuant to the exercise
of Rights and with respect to which Computershares Shareholder
Services, Inc. (the "Subscription Agent") has received, no later
than 5:00 p.m., New York City time, on the Expiration Date, either
(i) a properly completed and executed Subscription Certificate
identifying us as the broker-dealer having been instrumental in the
exercise of such Rights, and full payment for such Shares, or (ii) a
Notice of Guaranteed Delivery guaranteeing to the Subscription Agent
by the close of business of the third business day after the
Expiration Date a properly completed and duly executed Subscription
Certificate, similarly identifying us, and full payment for such
Shares. We understand that we will not be paid these fees with
respect to Shares purchased pursuant to an exercise of Rights for
our own account or for the account of any of our affiliates. We also
understand and agree that we are not entitled to receive any fees in
connection with the solicitation of the exercise of Rights other
than pursuant to the terms of this Selling Group Agreement and, in
particular, that we will not be entitled to receive any fees under
the Fund's Soliciting Dealer Agreement. We agree to solicit the
exercise of Rights in accordance with the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the
Investment Company Act of 1940, as amended, and the rules and
regulations under each such Act, any applicable securities laws of
any state or jurisdiction where such solicitations may be lawfully
made, the applicable rules and regulations of any self-regulatory
organization or registered national securities exchange and
customary practice and subject to the terms of the Subscription
Agent Agreement between the Fund and the Subscription Agent and the
procedures described in the Fund's registration statement on Form
N-2 (File Nos. 333-128763 and 811-05992), as amended (the
"Registration Statement").
3. From time to time during the Subscription Period, we may indicate
interest in purchasing Shares from the Dealer Manager. We understand
that from time to time the Dealer Manager intends to offer Shares
obtained or to be obtained by the Dealer Manager through the
exercise of Rights to Selling Group Members who have so indicated
interest at prices which shall be determined by the Dealer Manager
(the "Offering Price"). We agree that, with respect to any such
Shares purchased by us from the Dealer Manager, the sale of such
Shares to us shall be irrevocable, and we will offer them to the
public at the Offering Price at which we purchase them from the
Dealer Manager. Shares not sold by us at such Offering Price may be
offered by us after the next succeeding Offering Price is set at the
latest Offering Price set by the Dealer Manager. The Dealer Manager
agrees that, if requested by any Selling Group Member, and subject
to applicable law, the Dealer Manager will set a new Offering Price
prior to 4:00 p.m., New York City time, on any business day. We
agree to advise the Dealer Manager from time to time upon request,
A-2
prior to the termination of this Selling Group Agreement, of the
number of Shares remaining unsold which were purchased by us from
the Dealer Manager and, upon the Dealer Manager's request, we will
resell to the Dealer Manager any of such Shares remaining unsold at
the purchase price thereof if in the Dealer Manager's opinion such
Shares are needed to make delivery against sales made to other
Selling Group Members. Any shares purchased hereunder from the
Dealer Manager shall be subject to regular way settlement through
the facilities of The Depository Trust Company.
4. We understand that you will remit to us on or before the tenth
business day following the day the Fund issues Shares after the
Expiration Date, following receipt by you from the Fund of the
Dealer Manager Fee (as defined in the Dealer Manager Agreement,
dated November 14, 2005, among the Fund, the Manager and UBS
Securities LLC as the dealer manager (the "Dealer Manager
Agreement"), a fee (the "Selling Fee") equal to 2.50% of the
Subscription Price per Share for (A) each Share issued pursuant to
the exercise of Rights or the Over-Subscription Privilege pursuant
to each Subscription Certificate upon which we are designated, as
certified to you by the Subscription Agent, as a result of our
solicitation efforts in accordance with Section 2 and (B) each Share
sold by the Dealer Manager to us in accordance with Section 3 less
any Shares resold to the Dealer Manager in accordance with Section
3. Your only obligation with respect to payment of the Selling Fee
to us is to remit to us amounts owing to us and actually received by
you from the Fund. Except as aforesaid, you shall be under no
liability to make any payments to us pursuant to this Selling Group
Agreement. We also understand that the Fund and the Manager have
agreed to indemnify us pursuant to the terms set forth in the Dealer
Manager Agreement.
5. We agree that you, as Dealer Manager, have full authority to take
such action as may seem advisable to you in respect of all matters
pertaining to the Offer. You are authorized to approve on our behalf
any amendments or supplements to the Registration Statement or the
Prospectus.
6. We represent that we are a member in good standing of the NASD and,
in making sales of Shares, agree to comply with all applicable rules
of the NASD including, without limitation, Rule 2740 and Rule 2790
of the NASD's Conduct Rules. We understand that no action has been
taken by you or the Fund to permit the solicitation of the exercise
of Rights or the sale of Shares in any jurisdiction (other than the
United States) where action would be required for such purpose. We
agree that we will not, without your approval in advance, buy, sell,
deal or trade in, on a when-issued basis or otherwise, the Rights or
the Shares or any other option to acquire or sell Shares for our own
account or for the accounts of customers, except as provided in
Sections 2 and 3 hereof and except that we may buy or sell Rights or
Shares in brokerage transactions on unsolicited orders which have
not resulted from activities on our part in connection with the
solicitation of the exercise of Rights and which are executed by us
in the ordinary course of our brokerage business. We will keep an
accurate record of the names and addresses of all persons to whom we
give copies of the Registration Statement, the Prospectus, any
preliminary prospectus (or any amendment or supplement thereto) or
any Offering Materials and, when furnished with any subsequent
amendment to the Registration Statement and any subsequent
prospectus, we will, upon your request, promptly forward copies
thereof to such persons.
7. Nothing contained in this Selling Group Agreement will constitute
the Selling Group Members partners with the Dealer Manager or with
one another or create any association
A-3
between those parties, or will render the Dealer Manager or the Fund
liable for the obligations of any Selling Group Member. The Dealer
Manager will be under no liability to make any payment to any
Selling Group Member other than as provided in Section 4 of this
Selling Group Agreement, and will be subject to no other liabilities
to any Selling Group Member, and no obligations of any sort will be
implied. We agree to indemnify and hold harmless the Fund, the
Manager, you and each other Selling Group Member and each person, if
any, who controls you and any such Selling Group Member within the
meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, against loss or liability caused by any breach by
us of the terms of this Selling Group Agreement.
8. We agree to pay any transfer taxes which may be assessed and paid on
account of any sales or transfers for our account.
9. All communications to you relating to the Offer will be addressed
to: UBS Securities LLC, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000, Attn: Syndicate Department.
10. This Selling Group Agreement will be governed by the internal laws
of the State of New York.
A-4
A signed copy of this Selling Group Agreement will be promptly returned
to the Selling Group Member at the address set forth below.
Very truly yours,
UBS SECURITIES LLC
By: _______________________________________
Name:
Title:
By: _______________________________________
Name:
Title:
PLEASE COMPLETE THE INFORMATION BELOW
Printed Firm Name Address
Contact at Selling Group Member
Authorized Signature Area Code and Telephone
Number
Name and Title Facsimile Number
Dated:
Payment of the Selling Fee shall be mailed
by check to the following address:
A-5
Exhibit B
JAPAN SMALLER CAPITALIZATION FUND, INC.
5,282,128 Shares of Common Stock
Issuable Upon Exercise of Transferable Rights
to Subscribe for Such Shares
SOLICITING DEALER AGREEMENT
THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
DECEMBER 16, 2005, UNLESS EXTENDED
New York, New York
November [ ], 2005
To Securities Dealers and Brokers:
Japan Smaller Capitalization Fund, Inc., a Maryland corporation (the
"Fund"), is issuing to its shareholders of record ("Record Date Stockholders")
as of the close of business on November 21, 2005 (the "Record Date")
transferable rights ("Rights") to subscribe for an aggregate of up to
5,282,128 shares (the "Shares") of common stock, par value $0.10 per share
(the "Common Shares"), of the Fund upon the terms and subject to the
conditions set forth in the Fund's prospectus (the "Prospectus") dated
November 14, 2005 (the "Offer"). Each such Record Date Stockholder is being
issued one Right for each full Common Share owned on the Record Date. Such
Rights entitle their holders to acquire during the Subscription Period (as
hereinafter defined) at the Subscription Price (as hereinafter defined) one
Share for each three Rights, on the terms and conditions set forth in such
Prospectus. No fractional shares will be issued. Any Record Date Stockholder
who fully exercises all Rights initially issued to such Record Date
Stockholder (other than those Rights that cannot be exercised because they
represent the right to acquire less than one Share) will be entitled to
subscribe for, subject to allocation, additional Shares (the
"Over-Subscription Privilege") on the terms and conditions set forth in such
Prospectus. The Rights are transferable and are listed on the New York Stock
Exchange, Inc. (the "NYSE") under the symbol "JOF.RT."
The Subscription Price will be 90% of the average of the last reported
sale prices of a share of the Fund's Common Stock on the NYSE on the
Expiration Date (as hereinafter defined) and the four preceding trading days.
The Subscription Period will commence on November 21, 2005 and end at 5:00
p.m., New York City time on the Expiration Date (the term "Expiration Date"
means December 16, 2005, unless and until the Fund shall, in its sole
discretion, have extended the period for which the Offer is open, in which
event the term "Expiration Date" with respect to the Offer will mean the
latest time and date on which the Offer, as so extended by the Fund, will
expire).
For the duration of the Offer, the Fund has authorized and the Dealer
Manager (as hereinafter defined) has agreed to reallow a fee to any qualified
broker or dealer executing a Soliciting Dealer Agreement who solicits the
exercise of Rights and the Over-Subscription Privilege in connection with the
Offer and who complies with the procedures described below (a "Soliciting
Dealer"). Upon timely delivery to ComputerShares, the Fund's Subscription
Agent for the Offer, of payment for Shares purchased pursuant to the exercise
of Rights and the Over-Subscription Privilege and of properly completed and
executed documentation as set forth in this Soliciting Dealer Agreement, a
Soliciting Dealer will be entitled to receive a fee (the "Soliciting Fee")
equal to 0.50% of the Subscription Price per
B-1
Share so purchased subject to a maximum fee based on the number of Common
Shares held by such Soliciting Dealer through The Depository Trust Company on
the Record Date; provided, however, that no payment shall be due with respect
to the issuance of any Shares until payment therefor is actually received. A
qualified broker or dealer is a broker or dealer which is a member of a
registered national securities exchange in the United States or the NASD or
any foreign broker or dealer not eligible for membership who agrees to conform
to the Rules of Fair Practice of the NASD, including Sections 2730, 2740, 2420
and 2750 thereof, in making solicitations in the United States to the same
extent as if it were a member thereof.
The Fund has authorized and the Dealer Manager has agreed to pay the
Soliciting Fees payable to the undersigned Soliciting Dealer, and the Fund and
the Manager have agreed to indemnify such Soliciting Dealer on the terms set
forth in the Dealer Manager Agreement, dated November 14, 2005, among the
Fund, the Manager and UBS Securities LLC as the dealer manager (the "Dealer
Manager"). Solicitation and other activities by Soliciting Dealers may be
undertaken only in accordance with the applicable rules and regulations of the
Securities and Exchange Commission and only in those states and other
jurisdictions where such solicitations and other activities may lawfully be
undertaken and in accordance with the laws thereof. Compensation will not be
paid for solicitations in any state or other jurisdiction in which, in the
opinion of counsel to the Fund or counsel to the Dealer Manager, such
compensation may not lawfully be paid. No Soliciting Dealer shall be paid
Soliciting Fees with respect to Shares purchased pursuant to an exercise of
Rights and the Over-Subscription Privilege for its own account or for the
account of any affiliate of the Soliciting Dealer. No Soliciting Dealer or any
other person is authorized by the Fund or the Dealer Manager to give any
information or make any representations in connection with the Offer other
than those contained in the Prospectus and other authorized solicitation
material furnished by the Fund through the Dealer Manager. No Soliciting
Dealer is authorized to act as agent of the Fund or the Dealer Manager in any
connection or transaction. In addition, nothing herein contained shall
constitute the Soliciting Dealers partners with the Dealer Manager or with one
another, or agents of the Dealer Manager or of the Fund, or create any
association between such parties, or shall render the Dealer Manager or the
Fund liable for the obligations of any Soliciting Dealer. The Dealer Manager
shall be under no liability to make any payment to any Soliciting Dealer, and
shall be subject to no other liabilities to any Soliciting Dealer, and no
obligations of any sort shall be implied.
In order for a Soliciting Dealer to receive Soliciting Fees, the
Subscription Agent must have received from such Soliciting Dealer no later
than 5:00 p.m., New York City time, on the Expiration Date, either (i) a
properly completed and duly executed Subscription Certificate with respect to
Shares purchased pursuant to the exercise of Rights and the Over-Subscription
Privilege and full payment for such Shares or (ii) a Notice of Guaranteed
Delivery guaranteeing delivery to the Subscription Agent by close of business
on the third business day after the Expiration Date of (a) a properly
completed and duly executed Subscription Certificate with respect to Shares
purchased pursuant to the exercise of Rights and the Over-Subscription
Privilege and (b) full payment for such Shares. Soliciting Fees will only be
paid after receipt by the Subscription Agent of a properly completed and duly
executed Soliciting Dealer Agreement and a Subscription Certificate
designating the Soliciting Dealer in the applicable portion hereof. In the
case of a Notice of Guaranteed Delivery, Soliciting Fees will only be paid
after delivery in accordance with such Notice of Guaranteed Delivery has been
effected. Soliciting Fees will be paid by the Fund (through the Subscription
Agent) to the Soliciting Dealer by check to an address designated by the
Soliciting Dealer below by the tenth business day following the day the Fund
issues Shares after the Expiration Date.
All questions as to the form, validity and eligibility (including time of
receipt) of this Soliciting Dealer Agreement will be determined by the Fund,
in its sole discretion, which determination shall be final and binding. Unless
waived, any irregularities in connection with a Soliciting Dealer Agreement or
B-2
delivery thereof must be cured within such time as the Fund shall determine.
None of the Fund, the Dealer Manager, the Subscription Agent, the Information
Agent for the Offer or any other person will be under any duty to give
notification of any defects or irregularities in any Soliciting Dealer
Agreement or incur any liability for failure to give such notification.
The acceptance of Soliciting Fees from the Fund by the undersigned
Soliciting Dealer shall constitute a representation by such Soliciting Dealer
to the Fund that: (i) it has received and reviewed the Prospectus; (ii) in
soliciting purchases of Shares pursuant to the exercise of the Rights and the
Over-Subscription Privilege, it has complied with the applicable requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
applicable rules and regulations thereunder, any applicable securities laws of
any state or jurisdiction where such solicitations were made, and the
applicable rules and regulations of any self-regulatory organization or
registered national securities exchange; (iii) in soliciting purchases of
Shares pursuant to the exercise of the Rights and the Over-Subscription
Privilege, it has not published, circulated or used any soliciting materials
other than the Prospectus and any other authorized solicitation material
furnished by the Fund through the Dealer Manager; (iv) it has not purported to
act as agent of the Fund or the Dealer Manager in any connection or
transaction relating to the Offer; (v) the information contained in this
Soliciting Dealer Agreement is, to its best knowledge, true and complete; (vi)
it is not affiliated with the Fund; (vii) it will not accept Soliciting Fees
paid by the Fund pursuant to the terms hereof with respect to Shares purchased
by the Soliciting Dealer pursuant to an exercise of Rights and the
Over-Subscription Privilege for its own account or the account of any
affiliates; (viii) it will not remit, directly or indirectly, any part of
Soliciting Fees paid by the Fund pursuant to the terms hereof to any
beneficial owner of Shares purchased pursuant to the Offer; and (ix) it has
agreed to the amount of the Soliciting Fees and the terms and conditions set
forth herein with respect to receiving such Soliciting Fees. By returning a
Soliciting Dealer Agreement and accepting Soliciting Fees, a Soliciting Dealer
will be deemed to have agreed to indemnify the Fund, the Manager and the
Dealer Manager against losses, claims, damages and liabilities to which the
Fund may become subject as a result of the breach of such Soliciting Dealer's
representations made herein and described above. In making the foregoing
representations, Soliciting Dealers are reminded of the possible applicability
of the anti-manipulation rules under the Exchange Act if they have bought,
sold, dealt in or traded in any Shares for their own account since the
commencement of the Offer.
Upon expiration of the Offer, no Soliciting Fees will be payable to
Soliciting Dealers with respect to Shares purchased thereafter.
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Dealer Manager Agreement or, if not defined therein,
in the Prospectus.
This Soliciting Dealer Agreement will be governed by the laws of the
State of New York.
Please execute this Soliciting Dealer Agreement below accepting the terms
and conditions hereof and confirming that you are a member firm of the NASD or
a foreign broker or dealer not eligible for membership who has conformed to
the Rules of Fair Practice of the NASD, including Sections 2730, 2740, 2420
and 2750 thereof, in making solicitations of the type being undertaken
pursuant to the Offer in the United States to the same extent as if you were a
member thereof, and certifying that you have solicited the purchase of the
Shares pursuant to exercise of the Rights and the Over-Subscription Privilege,
all as described above, in accordance with the terms and conditions set forth
in this Soliciting Dealer Agreement. Please forward two executed copies of
this Soliciting Dealer Agreement to: UBS Securities LLC, 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000-0000, Attn: Syndicate Department.
A signed copy of this Soliciting Dealer Agreement will be promptly
returned to the Soliciting Dealer at the address set forth below.
B-3
Very truly yours,
UBS SECURITIES LLC
By:
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Name:
Title:
By:
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Name:
Title:
PLEASE COMPLETE THE INFORMATION BELOW
Printed Firm Name Address
Contact at Soliciting Dealer
Authorized Signature Area Code and Telephone
Number
Name and Title Facsimile Number
Dated:
Payment of the Soliciting Fee shall be mailed by check to
the following address:
B-4
