Exhibit h(a)
2
SOUTHWEST SMALL CAP EQUITY FUND, INC.
SELLING AGREEMENT
SHARES OF COMMON STOCK
_____, 1995
`
XxXXXXX SECURITIES COMPANY, as Lead Co-Manager
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Ladies and Gentlemen:
Southwest Small Cap Equity Fund, Inc., a Delaware corporation (the
"FUND"), is a newly organized, diversified, closed-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"COMPANY ACT"). The Fund proposes to issue and offer through XxXxxxx Securities
Company ("XxXxxxx") and Capital West Securities, Inc. ("Capital West") as
Co-Managers (collectively, except as provided in Section 19, the "DEALER
MANAGER"), acting as agent for the Fund, up to 4,000,000 shares (subject to
increase as provided herein) of common stock, par value $.001 per share, of the
Fund (the "COMMON STOCK") at a price of $10.00 per share (subject to decrease as
provided herein) on the terms set forth herein (the shares of Common Stock so
offered being referred to herein as the "SHARES"). The Fund's offering of the
Shares through the Dealer Manager is referred to herein as the "OFFERING". The
Shares are more fully described in the Registration Statement referred to below.
The Fund and its investment manager, XxXxxxx Management Company (the
"INVESTMENT MANAGER"), hereby confirm their agreement with the Dealer Manager
with regard to the sale of the Shares by the Dealer Manager, on the basis of the
representations, warranties, covenants and agreements herein contained and
subject to the terms and conditions herein set forth.
1. EMPLOYMENT OF THE DEALER MANAGER.
(a) DEALER MANAGER AS AGENT. The Fund employs the Dealer Manager as its
exclusive agent to sell the Shares for the Fund's account, and the Dealer
Manager agrees to use its best efforts as agent for the Fund to sell the Shares
upon and subject to the terms and conditions set forth in this agreement. The
Dealer Manager's agency shall continue until terminated as provided herein.
(b) PUBLIC OFFERING AND PRICE. It is understood that, commencing on the
date when the Registration Statement becomes effective (the "EFFECTIVE DATE"),
the Dealer Manager proposes to offer the Shares for sale to the public on a cash
basis only, at the prices set forth in the Prospectus and in the following
table.
(c) SELLING GROUP. The Dealer Manager shall have the right to associate
with other broker/dealers ("BROKER/DEALERS") as it may determine and shall have
the right to grant to such
persons such concessions out of the commissions to be received by the Dealer
Manager as the Dealer Manager may determine, under and pursuant to a Selected
Dealer Agreement in the form filed as an exhibit to the Registration Statement.
All sales of Shares shall be made as an agent for the Fund.
(d) MINIMUM OFFERING. The Fund and the Dealer Manager agree that unless
at least 2,000,000 of the Shares (the "MINIMUM OFFERING") to be offered
hereunder are sold within 30 days after the Effective Date (which period may be
extended for an additional period not to exceed 30 days by mutual agreement
between the Fund and the Dealer Manager) (such period, whether or not so
extended, being herein referred to as the "OFFERING PERIOD"), the agency between
the Fund and the Dealer Manager will terminate, the full proceeds which have
been paid for the Shares will be returned to the proposed purchasers, and this
Agreement will terminate without further obligation to any of the parties hereto
except as set forth in SECTION 14.
(e) ESCROW OF FUNDS PENDING CLOSING. Prior to consummation of the sale
of Shares offered hereunder, all proceeds received from proposed purchasers of
the Shares will be deposited in an escrow account maintained with Star Bank,
N.A., as Escrow Agent pursuant to an Escrow Agreement among the Fund, the Dealer
Manager and Star Bank, N.A. (the "ESCROW AGENT"), in form satisfactory to the
parties (the "ESCROW AGREEMENT"). The parties mutually agree to faithfully
perform their obligations under the Escrow Agreement. The Dealer Manager will
promptly deliver the funds into the escrow account in accordance with Rule
15(c)2-4 of the Exchange Act (as hereinafter defined). All checks from
prospective purchasers will be made payable to the Escrow Agent and all funds
represented thereby will be held pursuant to the Escrow Agreement pending the
Closing.
2. DELIVERY OF AND PAYMENT FOR SHARES.
(a) TIME OF DELIVERY AND PAYMENT. Delivery of certificates and payment
of the purchase price for the Shares shall be made at the offices of the Fund or
another mutually acceptable location on the third full business day following
the last day of the Offering Period, or at such other time as shall be agreed
upon by the Dealer Manager and the Fund (such date and time referred to herein
as the "CLOSING DATE"), subject to the satisfaction or waiver by the Dealer
Manager of the conditions set forth in Section 10 hereof.
(b) DELIVERY AGAINST PAYMENT; FORM OF CERTIFICATES; EXAMINATION.
Delivery of certificates for the Shares, with any transfer taxes thereon duly
paid by the Fund, shall be made for the benefit of the Purchasers in a manner
mutually agreed upon by the Dealer Manager and the Fund against payment of the
purchase price for the Shares in certified or official bank checks payable to
the order of the Fund in immediately available funds. Certificates for the
Shares shall be registered in such name or names and in such authorized
denominations as the Dealer Manager may request in writing at least two full
business days prior to the Closing Date. The Fund will permit the Dealer Manager
to examine and package such certificates for delivery at least one full business
day prior to the Closing Date.
3. COMPENSATION OF DEALER MANAGER.
(a) COMMISSION. At the Closing, the Fund agrees to pay to the Dealer
Manager for the benefit of the Broker/Dealers a sales commission based upon per
share public offering price
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for each of the Shares sold by the Dealer Manager as representative of the
Broker/Dealers as indicated in the table below. The commission shall be payable
in certified funds upon the release of the funds deposited in the escrow account
by one or more certified or official bank checks issued by the Escrow Agent for
the account of the Fund, and shall be payable as directed by the Dealer Manager.
SHARES PURCHASED PRICE PER SHARE DEALER SALES COMMISSION
---------------- --------------- -----------------------
100 to 29,999 $10.00 .60
25,000 to 49,000 9.90 .50
50,000 to 74,999 9.80 .40
75,000 to 99,000 9.70 .30
100,000 to 499,999 9.60 .20
500,000 or more 9.20 .00
(b) ORIGINATION FEE. At the Closing, the Fund agrees to pay to the
Dealer Manager an origination fee in the amount of $0.10 per share; PROVIDED,
HOWEVER, that no origination fee shall be payable for any shares purchased from
the fund pursuant to a single Subscription Agreement for more than 499,999
shares.
(c) REIMBURSEMENT FOR EXPENSES. At the Closing, the Fund agrees
(without prejudice to the provisions of PARAGRAPH 14(D) hereof) that the Fund
shall reimburse the Dealer Manager for its expenses on a nonaccountable basis in
the amount of $0.10 per share; PROVIDED, HOWEVER, that no such reimbrusement
shall be payable for any shares purchased from the fund pursuant to a single
Subscription Agreement for more than 499,999 shares.
(d) APPLICATION OF EXPENSE ALLOWANCE. The Dealer Manager agrees that it
will pay all costs incurred or to be incurred by the Dealer Manager or by its
personnel in connection with the offering of the Shares out of its
nonaccountable expense allowance, except those to be paid by the Fund as
described in SECTION 14 hereof.
4. REGISTRATION STATEMENT AND PROSPECTUS. The Fund has filed with the
Securities and Exchange Commission (the "COMMISSION") a Notification of
Registration on Form N-8A (the "NOTIFICATION") relating to the registration of
the Fund as an investment company under the Company Act. In addition, the Fund
has prepared and filed with the Commission (i) in accordance with the provisions
of the Securities Act of 1933, as amended, and the published rules and
regulations promulgated thereunder (collectively, the "ACT", with all references
herein to "Rules" and "Regulations", unless otherwise specified, being to the
rules and regulations promulgated by the Commission pursuant to the Act) and
(ii) in accordance with the provisions of the Company Act, a registration
statement on Form N-2 (No. 33-98050), including a prospectus subject to
completion (each prospectus and amendment thereto included in the registration
statement before the registration statement becomes effective under the Act, the
form of prospectus omitting Rule 430A Information included in the Registration
Statement when it becomes effective, if applicable (the "RULE 430A PROSPECTUS"),
any prospectus filed by the Fund with the Dealer Manager's consent pursuant to
Rule 424(a), and such amendments thereof as may have been required prior to the
Effective Date being referred to as a "PRELIMINARY PROSPECTUS").
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The registration statement, as amended, at the time and on the date it
becomes effective (and in the event of any post-effective amendment thereto,
then as amended at the time and on the date such post-effective amendment
becomes effective), including all exhibits, financial statements and schedules
forming a part thereof, and information, if any, contained in a prospectus
subsequently filed with the Commission pursuant to Rule 497(h) and deemed to be
a part of the registration statement pursuant to Rule 430A, is called the
"REGISTRATION Statement." As used herein, the term "PROSPECTUS" means the final
prospectus included as part of the Registration Statement, except that if a
prospectus filed on behalf of the Fund with the Commission pursuant to Rule
424(b) shall differ from such final prospectus, the term "Prospectus" shall mean
the prospectus as filed pursuant to Rule 424(b) from and after the date on which
it shall have first been used.
5. REPRESENTATIONS AND WARRANTIES OF THE FUND. The Fund represents and
warrants to the Dealer Manager that:
(a) ACCURACY OF REGISTRATION STATEMENT, NOTIFICATION AND
PROSPECTUS. When the Registration Statement and any post-effective
amendment thereto shall become effective, at the Closing Date and
during such longer period as the Prospectus may be required to be
delivered pursuant to any Rule by the Dealer Manager or a dealer, the
Registration Statement (and any post-effective amendment thereto), the
Notification, and the Prospectus (and any amendments thereof and
supplement thereto) will comply in all material respects with the
applicable provisions of the Act and the Company Act, will not contain
an untrue statement of a material fact, and will not omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein not misleading; PROVIDED that the Fund
makes no representation or warranty with respect to information
included in the Registration Statement, Notification or Prospectus
provided to the Fund by the Dealer Manager specifically for inclusion
therein. If a Rule 430A prospectus is included in the Registration
Statement at the time it becomes effective, the prospectus filed
pursuant to Rules 430A and 424 will contain all information and all
statements required to be stated therein in accordance with the Act and
Regulations.
When any Preliminary Prospectus was first filed with the
Commission (whether filed as part of the Registration Statement, any
amendment thereto, or pursuant to Rule 424(a)), and when any amendment
thereof or supplement thereto was first filed with the Commission, such
Preliminary Prospectus and any amendments and supplements thereto
complied in all material respects with the Act and the Company Act and
did not contain an untrue statement of a material fact and did not omit
to state any material fact required to be stated therein or necessary
in order to make the statements therein not misleading; PROVIDED that
the Fund makes no representation or warranty with respect to
information included in the Preliminary Prospectus provided to the Fund
by the Dealer Manager specifically for inclusion therein.
Without limiting the foregoing, (i) any contract, agreement,
instrument, lease, license, certification or permit required to be
described in the Registration Statement or the Prospectus has been
properly described therein in all material respects, (ii) any contract,
agreement, instrument, lease, license, certification or permit required
to be filed as an exhibit to the Registration Statement has been filed
with the Commission as an exhibit to the Registration Statement, (iii)
there is no litigation, arbitration, claim,
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governmental or other proceeding (formal or informal), or investigation
pending or, to the Fund's knowledge, threatened (or any basis therefor
known to the Fund) with respect to the Fund or its operations,
businesses, properties or assets, except as properly described in the
Prospectus or except as, individually or in the aggregate, would not
have a material adverse effect upon the operations, business,
properties or assets of the Fund, (iv) the Fund is not in violation of,
or default with respect to, its Certificate of Incorporation or Bylaws,
or any law, rule, regulation, order, judgment or decree of any court,
Federal or state regulatory body, self-regulatory organization, stock
exchange or securities association having jurisdiction over it or its
properties or operations, except as may be properly described in the
Prospectus or except as such violations, individually or in the
aggregate, would not have a material adverse effect upon the
operations, business, properties or assets of the Fund, and (v) the
Fund is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan, agreement, note, lease or other instrument
to which it is a party of by which it or its properties may be bound.
(b) ACCURACY OF FINANCIAL INFORMATION. The statement of assets
and liabilities (including all notes thereto) included in the
Registration Statement and the Prospectus present fairly the financial
position of the Fund as at the date thereof and said statement has been
prepared in conformity with U.S. generally accepted accounting
principles, consistently applied throughout the periods involved, are
correct and complete, and are in accordance with the books and records
of the Fund. Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except
as set forth in the Registration Statement and the Prospectus, there
has not been any material adverse change in the business, prospects,
properties, operations, condition (financial or other) or results of
operations of the Fund, and since such dates the Fund has not incurred
or undertaken any liabilities or obligations, direct or contingent,
which are material to the Fund, except for liabilities or obligations
which were incurred or undertaken in the ordinary course of business or
an reflected in the Registration Statement and the Prospectus.
(c) INDEPENDENT PUBLIC ACCOUNTANTS. Xxxxxx Xxxxxxxx LLP, whose
report is filed with the Commission as a part of the Registration
Statement, are independent public accountants with regard to the Fund
as required by the Act and the Company Act.
(d) ORGANIZATION AND QUALIFICATION. The Fund has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware. The Fund has no subsidiaries
and does not control, directly or indirectly, any corporation,
partnership, joint venture, association or other business organization.
The Fund is duly qualified to do business as a foreign corporation and
is a corporation in good standing in each jurisdiction in which the
nature of its activities or its ownership or leasing of property
requires such qualification, except where the failure to so qualify
would not have a material adverse effect on its business, operations,
or properties. The Fund owns or possesses all material governmental
licenses, permits, consents, orders, approvals or other authorizations
as necessary to own, lease and operate its properties and carry on its
business as contemplated in the Prospectus (except for an order of
effectiveness of the Registration Statement issued by the Commission),
and no such
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governmental licenses, permits, consents, orders, approvals or other
authorization contains any materially burdensome restrictions.
(e) COMPLIANCE OF FUND WITH SECURITIES LAWS. The Fund is
registered with the Commission under the Company Act as a diversified,
closed-end management investment company. The Fund is, and at all times
through the Closing Date will be, in compliance with the terms and
provisions of the Act and the Company Act in all material respects. No
person is acting or serving as an officer or director of, or investment
adviser to, the Fund except in accordance with the provisions of the
Company Act and the rules and regulations of the Commission thereunder,
and the Investment Advisers Act, as amended, and the respective rules
and regulations of the Commission thereunder (the "ADVISERS ACT").
(f) CORPORATE AUTHORITY. The Fund has all requisite corporate
power and authority to conduct its business as described in the
Registration Statement and the Prospectus, and to execute, deliver and
perform this Agreement and each of the Management Agreement dated as of
_____, 1995 (the "MANAGEMENT AGREEMENT") between the Fund and XxXxxxx
Management Company (the "INVESTMENT MANAGER"), the Administration
Agreement dated as of _____, 1995 (the "ADMINISTRATION AGREEMENT")
between the Fund and XxXxxxx & Company I, L.P. (the "FUND
ADMINISTRATOR"), the Custodian Agreement dated as of _____, 1995 (the
"CUSTODIAN AGREEMENT") between the Fund and _____ (the "CUSTODIAN"),
the Dividend Reinvestment Plan and Agreement dated as of _____, 1995,
between the Fund and Star Bank, N.A., (the "Plan Agent"), the Stock
Transfer Agreement dated as of _____, 1995 between the Fund and Star
Bank, N.A., (the "Transfer Agent") and the Escrow Agreement (all of the
foregoing, together with this Agreement, collectively referred to
herein as the "FUND AGREEMENTS"), all of which Fund Agreements have
been filed with the Commission as exhibits to the Registration
Statement.
(g) AUTHORIZATION AND ENFORCEABILITY. The execution, delivery
and performance of each of the Fund Agreements and the consummation of
the transactions contemplated therein are within the corporate power of
the Fund and have been duly and validly authorized by all necessary
corporate action, and each Fund Agreement represents a valid and
binding obligation of the Fund enforceable against the Fund in
accordance with its terms, except to the extent that rights to
indemnity hereunder may be limited by federal or state securities laws
or the public policy underlying such laws.
(h) NO VIOLATION. The execution, delivery and performance of
the Fund Agreements will not violate or conflict with the Fund's
Certificate of Incorporation or Bylaws, or any law, rule, regulation,
order, judgment or decree of any court, Federal or state regulatory
body, self-regulatory organization, stock exchange or securities
association having jurisdiction over it or its properties or
operations, or violate, conflict with, result in the breach of, require
any consent under or result in the creation of any liens on any assets
or properties of the Fund pursuant to, any contract, indenture,
mortgage, loan, agreement, note, lease or other instrument, license or
permit to which it is a party or by which it or its properties may be
bound.
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(i) NO CONSENTS REQUIRED. No consent, approval, authorization,
order, registration, filing, qualification, license or permit of or
with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Fund or any of its properties or assets or
of or with any other person, entity or group is required for the
execution, delivery and performance of the Fund Agreements and the
consummation of the transactions contemplated thereby, including the
issuance, sale and delivery of the Shares to be issued, sold and
delivered by the Fund hereunder, except the registration under the Act
and the Company Act of the offering and sale of the Shares and such
consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under the Act,
the Company Act, the Securities Exchange Act of 1934 (the "EXCHANGE
ACT"), state securities or blue sky laws, or the rules and regulations
of the National Association of Securities Dealers (the "NASD") or The
Chicago Stock Exchange in connection with the issuance, registration,
listing and sale of the Shares.
(j) VALIDITY OF AND TITLE TO SHARES; CAPITALIZATION. All of
the outstanding shares of Common Stock of the Fund are duly and validly
authorized and issued, are fully paid and nonassessable and were not
issued in violation of or subject to any preemptive rights. The Fund
had at _____, 1995 an authorized and outstanding capitalization as set
forth in the Registration Statement. The Shares, when delivered and
sold in accordance with this Agreement, will be duly and validly issued
and outstanding, fully paid and nonassessable, and will not have been
issued in violation of or subject to any preemptive rights. The
purchasers of the Shares will receive good, valid and marketable title
to the Shares purchased by them free and clear of any liens,
agreements, and encumbrances. The Shares conform to the descriptions
thereof contained in the Registration Statement and the Prospectus.
There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant or other right calling for the issuance of,
any share of capital stock of the Fund nor is there outstanding any
security or other instrument which by its terms is convertible into,
exercisable for or exchangeable for capital stock of the Fund, except
as may be properly described in the Registration Statement.
(k) DISCLOSURE OF FUND DOCUMENTS. The Fund Agreements comply
in all material respects with the descriptions thereof in the
Prospectus, and there are no other documents or agreements to which the
Fund is a party which are required under the Act, the Company Act, the
Advisers Act or the Exchange Act to be described in the Prospectus.
(l) COMPLIANCE OF ORGANIZATIONAL DOCUMENTS AND FUND AGREEMENTS
WITH SECURITIES LAWS. The Certificate of Incorporation and the Bylaws
of the Fund and each of the Fund Agreements comply in all material
respects with all applicable provisions of the Company Act, the
Advisers Act and the Exchange Act.
(m) EFFECTIVENESS OF FUND AGREEMENTS; NO DEFAULT. Each of the
Fund Agreements is in full force and effect and neither the Fund, nor
to the Fund's knowledge any other party to any such Fund Agreement, is
in default or breach thereunder, and no event has occurred which with
the passage of time would constitute a default thereunder.
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(n) MATERIAL TRANSACTIONS DISCLOSED. Subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has been no transaction entered
into by the Fund which is material to the Fund other than those
described in or contemplated by the Prospectus and those in the
ordinary course of business, and there has been no dividend or
distribution of any kind declared, paid or made by the Fund on any
class of its capital stock.
(o) LISTING. The Shares have been approved for listing on The
Chicago Stock Exchange, subject to official notice of issuance.
(p) NO ORDERS. Neither the Commission nor the "blue sky" or
securities authority of any jurisdiction has issued any order (a "STOP
ORDER") suspending the effectiveness of the Registration Statement,
preventing or suspending the use of any Preliminary Prospectus, the
Prospectus, the Registration Statement or any amendment or supplement
thereto, refusing to permit the effectiveness of the Registration
Statement or suspending the registration or qualification of the Shares
or the offering and sale of the Shares, nor have any of such
authorities instituted or threatened to institute any proceedings with
respect to a Stop Order.
(q) NO STABILIZATION. Except as described in the Prospectus,
neither the Fund nor any affiliated purchaser (as defined in the
Regulations) has taken or will take, directly or indirectly, prior to
the termination of this Agreement, any action designed to stabilize or
stipulate the price of any security of the Fund, or which has caused or
resulted in, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any
security of the Fund, to facilitate the sale or resale of any of the
Shares.
(r) COMPLIANCE WITH INTERNAL REVENUE CODE. The Fund intends
to, and will, direct the investment of the proceeds of the Offering in
such a manner as to comply with the requirements of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "CODE").
(s) NO FINDERS. Except as may be set forth in the Registration
Statement and as contemplated hereby, the Fund has not incurred any
liability for a fee, commission or other compensation on account of the
employment of a broker or finder in connection with the sale of Shares
contemplated by this Agreement.
(t) NO MATERIAL ADVERSE CHANGE. Subsequent to the date as of
which information is given in the Registration Statement and the
Prospectus and since the date of the statement of assets and
liabilities set forth therein, except as otherwise stated therein,
there has been no material adverse change in the condition (financial
or otherwise) or net assets of the Fund, or in the management, capital
stock, investment objectives, investment policies, earnings,
liabilities, business affairs or business prospects of the Fund,
whether or not arising from transactions arising in the ordinary course
of business.
(u) NO LITIGATION. There is no litigation or governmental or
other proceeding or investigation before any court or before or by any
public body or board pending, or to
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the Fund's best knowledge, threatened against, the Fund which is
reasonably likely to result in any material adverse change in the
condition, financial or otherwise, business affairs or business
prospects of the Fund, or is reasonably likely to materially and
adversely affect the properties or assets of the Fund.
6. REPRESENTATIONS AND WARRANTIES OF THE INVESTMENT MANAGER. The
Investment Manager represents and warrants to the Dealer Manager that:
(a) ORGANIZATION AND QUALIFICATION. The Investment Manager has
been duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware. The Investment
Manager is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the nature of its
activities and the ownership or leasing of property requires such
qualification, except where the failure to so qualify would not have a
material adverse effect on its business, operations, or properties. The
Investment Manager owns or possesses all material governmental
licenses, permits, consents, orders, approvals or other authorizations
as necessary to own, lease and operate its properties and carry on its
business as now being conducted.
(b) REGISTRATION AS INVESTMENT ADVISER. The Investment Manager
is duly registered as an investment adviser under the Advisers Act, and
it is not prohibited by the Advisers Act or the Company Act from acting
under the Management Agreement as an investment adviser to the Fund.
(c) CORPORATE AUTHORITY. The Investment Manager has all
requisite corporate power and authority to conduct its business as
described in the Registration Statement and the Prospectus, and to
execute, deliver and perform this Agreement and the Fund Agreements to
which the Investment Manager is a party.
(d) AUTHORIZATION AND ENFORCEABILITY. The execution, delivery
and performance of the Fund Agreements to which the Investment Manager
is a party and the consummation of the transactions contemplated
therein are within the corporate power of the Investment Manager and
have been duly and validly authorized by all necessary corporate
action, and each of the Fund Agreements to which the Investment Manager
is a party represents a valid and binding obligation of the Investment
Manager enforceable against the Investment Manager in accordance its
terms, except to the extent that rights to indemnity hereunder may be
limited by federal or state securities laws or the public policy
underlying such laws.
(e) NO VIOLATION. The execution, delivery and performance of
the Fund Agreements to which the Investment Manager is a party will not
violate or conflict with the Investment Manager's Certificate of
Incorporation or Bylaws, or any law, rule, regulation, order, judgment
or decree of any court, Federal or state regulatory body,
self-regulatory organization, stock exchange or securities association
having jurisdiction over it or its properties or operations, or
violate, conflict with, result in the breach of, require any consent
under, or result in the creation of any liens on any assets or
properties of the Investment Manager pursuant to, any contract,
indenture, mortgage, loan, agreement, note, lease or other instrument,
license or permit to which it is a party of by which it or
9
its properties may be bound.
(f) NO CONSENTS REQUIRED. No consent, approval, authorization,
order, registration, filing, qualification, license or permit of or
with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Investment Manager or any of its
properties or assets or of or with any other person, entity or group is
required for the execution, delivery and performance of the Fund
Agreements to which the Investment Manager is a party, and the
consummation of the transactions contemplated hereby and thereby,
except such consents, approvals, authorizations, orders, registrations,
filings, qualifications, licenses and permits as may be required under
the Act, the Company Act, the Exchange Act, state securities or blue
sky laws, or the rules and regulations of the NASD or The Chicago Stock
Exchange in connection with the transactions contemplated hereby and
thereby.
(g) EFFECTIVENESS OF FUND AGREEMENTS; NO DEFAULT. Each of the
Fund Agreements to which the Investment Manager is a party is in full
force and effect and neither the Investment Manager, nor to the
Investment Manager's knowledge any other party to any such Fund
Agreement, is in default or breach thereunder, and no event has
occurred which with the passage of time would constitute a default
thereunder.
(h) NO MATERIAL ADVERSE CHANGE. Subsequent to the date as of
which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, there has been no
material adverse change in the condition (financial or otherwise) or
net assets of the Investment Manager, or in the management, capital
stock, investment objective, investment policies, earnings,
liabilities, business affairs or business prospects of the Investment
Manager, whether or not arising from transactions arising in the
ordinary course of business.
(i) NO LITIGATION. There is no litigation or governmental or
other proceeding or investigation before any court or before or by any
public body or board pending, or to the Investment Manager's best
knowledge, threatened against, the Investment Manager which is
reasonably likely to result in any material adverse change in the
condition, financial or otherwise, business affairs or business
prospects of the fund, or is reasonably likely to materially and
adversely affect the properties or assets of the Investment Manager.
7. REPRESENTATIONS AND WARRANTIES OF DEALER MANAGER. The Dealer Manager
represents and warrants to the Fund and to the Investment Manager that:
(a) ORGANIZATION AND QUALIFICATION. The Dealer Manager has
been duly organized and is validly existing as a corporation in good
standing under the laws of the State of Delaware. The Dealer Manager is
duly qualified to do business as a foreign corporation in each
jurisdiction in which the nature of its activities and the ownership or
leasing of property requires such qualification, except where the
failure to so qualify would not have a material adverse effect on its
business, operations, or properties.
(b) REGISTRATION AND COMPLIANCE. The Dealer Manager is duly
registered as a
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broker-dealer under the Securities Exchange Act of 1934, is a member in
good standing of the National Association of Securities Dealers, Inc.,
is in compliance with all rules and regulations under the Securities
and Exchange Act of 1934 and the NASD Rules of Fair Practice, the
violation of which would have a material adverse effect on the Dealer
Manager, and is either registered or exempt from registration under any
state securities laws applicable to any offer and sale of the Shares.
(c) CORPORATE AUTHORITY. The Dealer Manager has all requisite
corporate power and authority to conduct its business as described in
the Registration Statement and the Prospectus, and to execute, deliver
and perform this Agreement and the Fund Agreements to which the Dealer
Manager is a party.
(d) AUTHORIZATION AND ENFORCEABILITY. The execution, delivery
and performance of the Fund Agreements to which the Dealer Manager is a
party and the consummation of the transactions contemplated therein are
within the corporate power of the Dealer Manager and have been duly and
validly authorized by all necessary corporate action, and each of the
Fund Agreements to which the Dealer Manager is a party represents a
valid and binding obligation of the Dealer Manager enforceable against
the Dealer Manager in accordance its terms, except to the extent that
rights to indemnity hereunder may be limited by federal or state
securities laws or the public policy underlying such laws.
(e) NO VIOLATION. The execution, delivery and performance of
the Fund Agreements to which the Dealer Manager is a party will not
violate or conflict with the Dealer Manager's Certificate of
Incorporation or Bylaws, or any law, rule, regulation, order, judgment
or decree of any court, Federal or state regulatory body,
self-regulatory organization, stock exchange or securities association
having jurisdiction over it or its properties or operations, or
violate, conflict with, result in the breach of, require any consent
under, or result in the creation of any liens on any assets or
properties of the fund pursuant to, any contract, indenture, mortgage,
loan, agreement, note, lease or other instrument, license or permit to
which it is a party of by which it or its properties may be bound.
(f) NO CONSENTS REQUIRED. No consent, approval, authorization,
order, registration, filing, qualification, license or permit of or
with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Dealer Manager or any of its properties or
assets or of or with any other person, entity or group is required for
the execution, delivery and performance of the Fund Agreements to which
the Dealer Manager is a party, and the consummation of the transactions
contemplated thereby, except such consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses and permits as
may be required under the Act, the Company Act, the Exchange Act, state
securities or blue sky laws, or the rules and regulations of the NASD
or The Chicago Stock Exchange in connection with the offer and sale of
the Shares.
8. COVENANTS OF THE FUND AND THE INVESTMENT MANAGER. The Fund and the
Investment Manager covenant and agree with the Dealer Manager that:
11
(a) MATTERS REGARDING REGISTRATION STATEMENT, NOTIFICATION,
AND PROSPECTUS. The Fund will use its best efforts to cause the
Registration Statement and any amendment thereof to become effective as
promptly as possible. If the Registration Statement has become or
becomes effective with a form of prospectus omitting Rule 430A
information, or filing of the Prospectus is otherwise required under
Rule 424(b), the Fund will file the Prospectus, properly completed,
pursuant to Rule 424(b) within the time period prescribed and will
provide evidence satisfactory to the Dealer Manager of such timely
filing. The Fund will notify the Dealer Manager immediately (i) when
the Registration Statement and any amendments thereto become effective,
(ii) of any request by the Commission or any "blue sky" authority for
any amendment of or supplement to the Registration Statement or the
Prospectus or for any additional information, (iii) of the issuance of
any Stop Order or of the initiation, or the threatening, of any
proceedings therefor, (iv) of the receipt of any comments from the
Commission or any "blue sky" authority, (v) of the receipt by the Fund
of any notification with respect to the suspension of the qualification
of the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose, (vi) of the institution
of any procedures pursuant to Section 8(e) of the Company Act and (vii)
of the happening of any event during the period described in SECTION 14
which in the judgment of the Fund makes any statement in the
Registration Statement, the Notification or the Prospectus untrue in
any material respect or which requires amendments or changes to the
Registration Statement, Notification or Prospectus in order the make
the statements therein not misleading in any material respect. If any
governmental authority shall propose or enter a Stop Order at any time,
the Fund will make every reasonable effort to prevent the issuance of
any such Stop Order, and if issued, to obtain the lifting of such order
as soon as possible. The Fund will not file any amendment to the
Registration Statement or any amendment of or supplement to the
Prospectus (including any Prospectus required to be filed pursuant to
Rule 424(b)) or any documents filed under the Exchange Act if such
document would be deemed to be incorporated by reference into the
Prospectus, whether before or after the effective date of the
Registration Statement, to which the Dealer Manager shall reasonably
object in writing after being timely furnished in advance a copy
thereof (which the Fund hereby undertakes to do).
(b) REQUIRED AMENDMENTS. If at any time when a prospectus
relating to the Shares is required to be delivered under the Act any
event shall have occurred as a result of which the Prospectus as then
amended or supplemented includes an untrue statement of a material fact
or omits 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, or if it
shall be necessary at any time to amend or supplement the Prospectus,
Registration Statement or Notification to comply with the Act or the
Company Act, the Fund will notify the Dealer Manager promptly and
prepare and file with the Commission an appropriate amendment or
supplement (in form and substance satisfactory to the Dealer Manager)
which will correct such statement or omission or which will effect such
compliance and will use its best efforts to have any such amendment to
the Registration Statement declared effective as soon as possible.
(c) FURNISHING DOCUMENTS. The Fund will promptly deliver to
the Dealer
12
Manager two signed copies of each of the Notification and the
Registration Statement including exhibits, and such number of copies of
any Preliminary Prospectus, the Prospectus, the Notification and the
Registration Statement, and all amendments of and supplements to such
documents, if any, as the Dealer Manager may reasonably request.
(d) BLUE SKY QUALIFICATIONS. The Fund will, in cooperation
with the Dealer Manager, at or prior to the time the Registration
Statement becomes effective, endeavor in good faith to qualify the
Shares for offering and sale under the securities laws relating to the
offering or sale of the Shares in such jurisdictions as the Dealer
Manager may designate and to maintain such qualification in effect for
so long as required for the distribution thereof.
(e) NO SECURITIES TRANSACTIONS. Without the prior written
consent of the Dealer Manager, the Fund will not issue, sell, offer or
agree to sell, or otherwise dispose of, directly or indirectly, any
Common Stock (or any securities convertible into, exercisable for or
exchangeable for Common Stock), and the Fund will obtain the
undertaking of each of its officers and directors and such of its
shareholders as have been heretofore designated by the Dealer Manager
not to engage in any of the aforementioned transactions on their own
behalf, other than the Fund's sale of Shares hereunder.
(f) FURNISHING OF FINANCIAL STATEMENTS. The Fund will make
generally available (within the meaning of Section 11(a) of the Act) to
its security holders and to the Dealer Manager as soon as practicable,
but not later than forty-five (45) days after the end of its fiscal
quarter in which the first anniversary date of the Closing occurs, an
earnings statement (which need not be audited but which shall satisfy
the provisions of Section 11(a) of the Act) covering a period of at
least twelve consecutive months beginning on or after the Closing.
(g) FURNISHING OF REPORTS. During a period of three (3) years
from the effective date of the Registration Statement, the Fund will
furnish to the Dealer Manager copies of (i) all reports to its
shareholders; (ii) all reports, financial statements and proxy or
information statements filed by the Fund with the Commission and The
Chicago Stock Exchange, and (iii) all press releases, articles and
material news items released by the Fund.
(h) USE OF PROCEEDS. The Fund will apply the proceeds from the
sale of the Shares as set forth under "Use of Proceeds" in the
Prospectus, and will comply with all provisions of all undertakings
contained in the Registration Statement.
(i) NO PUBLICITY. The Fund will prior to the Closing Date
issue no press release or other communication directly or indirectly
and hold no press conference with respect to the Fund, its financial
condition, results of operations, business, properties, assets, or
liabilities, or this offering, without the Dealer Manager's prior
written consent, unless such press release or communication is required
by applicable law or the rules of The Chicago Stock Exchange.
(j) INVESTMENT MANAGER ACTIONS. The Investment Manager
covenants and
13
agrees with the Dealer Manager to use its best efforts to cause the
Fund to comply with each of the Fund's covenants and agreements
contained in this SECTION 8.
(k) PAYMENT OF COSTS AND EXPENSES. Whether or not the
transactions contemplated in this Agreement are consummated or this
Agreement is terminated, the Fund and the Investment Manager agree to
pay all costs and expenses incident to the performance of the
obligations of the Fund hereunder, including those in connection with
(i) preparing, printing, duplicating, filing and distributing the
Registration Statement, as originally filed and all amendments thereof
(including all exhibits thereto), any Preliminary Prospectus, the
Prospectus and any amendments thereof or supplements thereto, the
underwriting documents (including this Agreement, the Selected Dealer
Agreement, and all other documents related to the public offering of
the Shares (including those supplied to the Dealer Manager in
quantities as hereinabove stated), (ii) the issuance, transfer and
delivery of the Shares to the Dealer Manager, including any transfer or
other taxes payable thereon, (iii) the qualification of the Shares
under state or foreign securities or Blue Sky laws, including the costs
of printing and mailing a preliminary and final "Blue Sky Survey" and
the fees of counsel for the Dealer Manager ("Dealer Managers' Counsel")
and such counsel's disbursements in relation thereto, (iv) listing the
Shares on The Chicago Stock Exchange, (v) the review of the terms of
the public offering of the Shares by the NASD, and the fees of the
Dealer Manager's Counsel and such counsel's disbursements relating
thereto, and (vi) the filing fees payable to the Commission and the
NASD.
9. COVENANTS OF DEALER MANAGER. The Dealer Manager covenants and agrees
as follows:
(a) CONDUCT OF OFFERING. Neither the Dealer Manager nor any
person acting on its behalf will offer any of the Shares for sale, or
solicit offers to subscribe for or buy any Shares, or otherwise
negotiate with any person with respect to the Shares, on the basis of
any communications or documents except the Prospectus, information of a
factual nature provided by the Fund or the Investment Manager, or any
other documents and communications reasonably satisfactory in form and
substance to the Fund and the Investment Manager.
(b) COMPLIANCE WITH LAWS. In making or soliciting offers, or
negotiating offers and sales, the Dealer Manager will comply with the
provisions of the Securities Act, the Exchange Act, the Company Act,
and the "blue sky" laws of the jurisdictions in which the Dealer
Manager or any person acting on its behalf makes or solicits such
offers or so negotiates.
10. CONDITIONS OF DEALER MANAGER'S OBLIGATIONS. The obligations of the
Dealer Manager to use its best efforts as agent for the Fund to sell the Shares
as provided herein shall be subject to the each of the following conditions:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration
Statement shall have become effective not later than 6:00 p.m.,
Washington, D.C. time, on the date of this Agreement or at such later
time and date as shall have been consented to in writing by the
14
Dealer Manager, and no Stop Order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereof shall
have been issued and no proceedings therefor shall have been initiated
or threatened. Each post-effective amendment to the Registration
Statement, if any, shall have become effective. If the Fund shall have
elected to rely upon Rule 430A under the Act, the 430A information
previously omitted from the effective Registration Statement pursuant
to such Rule 430A shall have been transmitted to the Commission for
filing pursuant to Rule 424(b) within the prescribed time period, and
the Fund shall have provided evidence reasonably satisfactory to the
Dealer Manager of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A.
(b) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each of the Fund and the Investment
Manager herein contained, and each of the representations, warranties,
statements and opinions in any certificates, opinions, written
statements or letters furnished to the Dealer Manager, shall be true
and correct in all material respects as of the date hereof and as of
the Closing Date.
(c) PERFORMANCE OF COVENANTS AND AGREEMENTS. Each of the Fund
and the Investment Manager shall have performed all covenants and
agreements and satisfied all conditions contained herein required to be
performed or satisfied by them on or before the Closing Date.
(d) OPINION OF COUNSEL TO THE FUND. As of the Closing Date,
the Dealer Manager shall have received a letter from Mayor, Day,
Xxxxxxxx & Xxxxxx, L.L.P., counsel for the Fund, dated the Closing
Date, addressed to the Dealer Manager and in form and substance
reasonably satisfactory to the Dealer Manager, confirming its legal
opinions to the effect that:
(i) The Fund has been duly organized and is validly
existing as a corporation in good standing under the State of
Delaware.
(ii) The Fund has authorized and outstanding capital
stock as described in the Registration Statement and
Prospectus, and the Shares to be delivered on the Closing Date
have been duly and validly authorized and, when delivered in
accordance with this Agreement, will be duly and validly
issued, fully paid and nonassessable and will not have been
issued in violation of or subject to any preemptive rights.
The purchasers of the Shares will receive good, valid and
marketable title to the Shares being sold by the Fund in
accordance with this Agreement, free and clear of all liens,
agreements and encumbrances. The Common Stock and the Shares
conform to the descriptions thereof contained in the
Registration Statement and the Prospectus. To the knowledge of
such counsel, there is no commitment, plan or arrangement to
issue, and there is outstanding no option, warrant or other
right calling for the issuance of, any share of capital stock
of the Fund or any security or other instrument which by its
terms is convertible into, exercisable for or exchangeable for
capital stock of the Fund, except as may be properly described
in the Registration Statement.
15
(iii) The Shares are duly authorized for listing on
The Chicago Stock Exchange.
(iv) Each of the Fund Agreements has been duly and
validly authorized, executed and delivered by the Fund and is
a valid and binding obligation of the Fund, enforceable
against the Fund in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally, or by general equitable
principles, and except to the extent that rights to indemnity
hereunder may be limited by federal or state securities laws
or the public policy underlying such laws.
(v) The Certificate of Incorporation and the Bylaws
of the Fund and each of the Fund Agreements complies in all
material respects with all applicable provisions of the Act,
the Company Act, the Advisers Act and the Exchange Act.
(vi) The execution, delivery and performance of the
Fund Agreements will not violate or conflict with the Fund's
Certificate of Incorporation or Bylaws, or, to the knowledge
of such counsel, any law, rule, regulation, order, judgment or
decree of any court, Federal or state regulatory body,
self-regulatory organization, stock exchange or securities
association having jurisdiction over it or its properties or
operations, or, to the knowledge of such counsel, violate,
conflict with, result in the breach of, require any consent
under, or result in the creation of any liens on any assets or
properties of the Fund pursuant to, any contract, indenture,
mortgage, loan, agreement, note, lease or other instrument to
which it is a party or by which it or its properties may be
bound. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or
with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Fund or any of its
properties or assets or of or with any other person, entity or
group is, to the knowledge of such counsel, required for the
execution, delivery and performance of the Fund Agreements,
and the consummation of the transactions contemplated thereby,
including the issuance, sale and delivery of the Shares to be
issued, sold and delivered by the Fund hereunder, except the
registration under the Act and the Company Act of the Shares
and such consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits
as may be required under the Act, the Company Act, the
Exchange Act, state securities or blue sky laws, or the rules
and regulations of the NASD or The Chicago Stock Exchange, in
connection with the purchase and distribution of the Shares by
the Dealer Manager.
(vii) The Registration Statement, the Notification,
and the Prospectus and any amendments thereof or supplements
thereto (other than the financial statements and schedules and
other financial and statistical data included or incorporated
by reference therein, as to which no opinion need be rendered)
comply as to form in all material respects with the
requirements of the Act and the Company Act.
16
(viii) The Registration Statement is effective under
the Act, and, to the knowledge of such counsel, no Stop Order
suspending the effectiveness of the Registration Statement or
any post-effective amendment thereof has been issued and no
proceedings therefor have been initiated or threatened by the
Commission. Any filing of a Prospectus known by such counsel
to be required pursuant to Rule 424(b) under the Act has been
made in accordance with Rule 424(b) and 430A under the Act.
(ix) To such counsel's knowledge, (A) there is no
litigation, arbitration, claim, governmental or other
proceeding (formal or informal) or investigation pending or,
to the Fund's knowledge, threatened (or any basis therefor
known to the Fund) with respect to the Fund or its operations,
businesses, properties or assets, except as may be properly
described in the Prospectus or such as individually or in the
aggregate would not have a material adverse effect upon the
operations, business, properties or assets of the Fund, (B)
the Fund is not, to the knowledge of such counsel, in
violation of, or default with respect to, its Certificate of
Incorporation or Bylaws, or any law, rule, regulation, order,
judgment or decree of any court, Federal or state regulatory
body, self-regulatory organization, stock exchange or
securities association having jurisdiction over it or its
properties or operations, except as may be properly described
in the Prospectus or as such violation in the aggregate would
not have a material adverse effect upon the operations,
business, properties assets of the Fund, (C) the Fund is not,
to the knowledge of such counsel, in default in the
performance or observance of any material obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan, agreement, note, lease or other
instrument to which it is a party of by which it or its
properties may be bound, and (D) to the knowledge of such
counsel, any contract, agreement, instrument, lease or license
required to be described in the Registration Statement,
Notification, or the Prospectus has been properly described
therein and any contract, agreement, instrument, lease or
license required to be filed as an exhibit to the Registration
Statement has been filed with the Commission as an exhibit to
the Registration Statement.
(x) The Fund is registered with the Commission under
the Company Act as a diversified, closed-end management
investment company.
(xi) The statements in the Prospectus under the
captions "Management of the Fund, "Capital Stock", "Dividends"
and "Taxes", and the statements in the Statement of Additional
Information included in the Registration Statement under the
captions "Management and Principal Shareholder", "Tax Status",
and "Persons Controlled by or Under Common Control", insofar
as such statements constitute a summary of legal matters,
documents referred to therein or matters of law, are fair and
accurate summaries of the material provisions thereof in all
material respects.
(xii) On the basis of their examination of the
Registration Statement and the Prospectus, their investigation
made in connection with the preparation of the Registration
Statement and the Prospectus, and their participation in
conferences with the officers and authorized agents of the
Fund and the Investment Manager,
17
they are of the opinion that the Registration Statement, as of
its effective date, and the Prospectus, as of its date,
complied (other than the financial statements or other
financial, economic or statistical data contained therein, as
to which they need not express an opinion) as to form in all
material respects with the requirements of the Act and the
Company Act, and they have no reason to believe that the
Registration Statement, as of its effective date, and the
Prospectus, as of the date thereof (other than the financial
statements or other financial, economic or statistical data
contained therein, as to which they need not express an
opinion) 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 not
misleading.
In addition, the letter from such counsel shall state that no
facts have come to the attention of such counsel that lead such counsel
to believe that either the Registration Statement at the time it became
effective (or any amendment thereof made prior to the Closing Date, as
of the date of such amendment or any document incorporated by
reference) contained an 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 not misleading or that the Prospectus as
of the date thereof (or any amendment thereof or supplement thereto
made prior to the Closing Date, as of the date of such amendment or
supplement) contained an 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 light of the circumstances under
which they were made, not misleading (it being understood that such
counsel need make no statement with respect to the financial statements
and schedules and other financial and statistical data included or
incorporated by reference therein).
In connection with such letter, such counsel may rely (A) as
to matters involving the application of laws other than the laws of the
United States, Texas and the Delaware General Corporation Law, to the
extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to the Dealer Manager) of other counsel
reasonably acceptable to the Dealer Manager, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Fund and
certificates or other written statements of officers of departments of
various jurisdictions having custody or documents respecting the
corporate existence or good standing of the Fund, provided that copies
of any such statements or certificates shall be delivered to the Dealer
Manager. The opinion of such counsel for the Fund shall state that the
opinion of any such other counsel is in form satisfactory to such
counsel and, in their opinion, the Dealer Manager and they are
justified in relying thereon. Any opinion qualified by "knowledge"
shall be to the actual knowledge of such counsel after conducting such
review as is described in such letter. Further, such counsel may state
that they have not independently verified the accuracy, completeness or
fairness of the statements made or included in the Registration
Statement, Notification and Prospectus, and take no responsibility
therefore except and to the extent stated in paragraph (xi) above.
(e) OFFICER'S CERTIFICATE. At the Closing Date, the Dealer
Manager shall have received a certificate of the Chairman of the Board
of the Fund, dated the Closing Date,
18
to the effect that the condition set forth in subsection (a) of this
SECTION 9 has been satisfied, that as of the date hereof and as of the
Closing Date, the representations and warranties of the Fund set forth
in SECTION 5 hereof are accurate, and that as of the Closing Date, the
obligations of the Fund to be performed hereunder on or prior thereto
have been duly performed.
(f) OPINION OF COUNSEL TO INVESTMENT MANAGER. At the Closing
Date, the Dealer Manager shall have received the opinion of Mayor, Day,
Xxxxxxxx & Xxxxxx, L.L.P., counsel for the Investment Manager, dated
the Closing Date, addressed to the Dealer Manager and in form and
substance reasonably satisfactory to the Dealer Manager, to the effect
that:
(i) The Investment Manager has been duly organized
and is validly existing as a corporation in good standing
under the State of Delaware.
(ii) The Investment Manager is duly registered as an
investment adviser under the Advisers Act, and is not
prohibited by the Advisers Act or the Company Act from acting
under the Management Agreement as investment adviser to the
Fund as contemplated by the Prospectus.
(iii) Each of the Fund Agreements to which the
Investment Manager is a party has been duly and validly
authorized, executed and delivered by the Investment Manager,
and is a valid and binding obligation of the Investment
Manager, enforceable against the Investment Manager in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium
or other similar law affecting creditors' rights generally, or
by general equitable principles except to the extent that
rights to indemnity hereunder may be limited by federal or
state securities laws or the public policy underlying such
laws .
(iv) The execution, delivery and performance of the
Fund Agreements to which the Investment Manager is a party
will not violate or conflict with the Investment Manager's
Certificate of Incorporation or Bylaws, or, to the knowledge
of such counsel, any law, rule, regulation, order, judgment or
decree of any court, Federal or state regulatory body,
self-regulatory organization, stock exchange or securities
association having jurisdiction over it or its properties or
operations, or violate, conflict with, result in the breach
of, require any consent under, or result in the creation of
any liens on any assets or properties of the Investment
Manager pursuant to, any contract, indenture, mortgage, loan,
agreement, note, lease or other instrument to which it is a
party of by which it or its properties may be bound. No
consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any
public, governmental or regulatory agency or body having
jurisdiction over the Investment Manager or any of its
properties or assets or of or with any other person, entity or
group is, to the knowledge of such counsel, required for the
execution, delivery and performance of the Fund Agreements to
which the Investment Manager is a party, and the consummation
of the transactions contemplated thereby.
19
In connection with such letter, such counsel may rely (A) as
to matters involving the application of laws other than the laws of the
United States, Texas and the Delaware General Corporation Law, to the
extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to the Dealer Manager) of other counsel
reasonably acceptable to the Dealer Manager, familiar with the
applicable laws; (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Fund and
certificates or other written statements of officers of departments of
various jurisdictions having custody or documents respecting the
corporate existence or good standing of the Fund, provided that copies
of any such statements or certificates shall be delivered to the Dealer
Manager. The opinion of such counsel for the Fund shall state that the
opinion of any such other counsel is in form satisfactory to such
counsel and, in their opinion, the Dealer Manager and they are
justified in relying thereon. Any opinion qualified by "knowledge"
shall be to the actual knowledge of such counsel after conducting such
review as is described in such letter. Further, such counsel may state
that they have not independently verified the accuracy, completeness or
fairness of the statements made or included in the Registration
Statement, Notification and Prospectus, and take no responsibility
therefore except and to the extent stated in paragraph (xi) above.
(g) ACCOUNTANTS' LETTER. At the time this Agreement is
executed and at the Closing Date, the Dealer Manager shall have
received a letter from Xxxxxx Xxxxxxxx LLP, independent public
accountants for the Fund, dated as of the date of this Agreement and as
of the Closing Date, addressed to the Dealer Manager and in form and
substance satisfactory to the Dealer Manager, to the effect that: (i)
they are, and during the periods covered by their reports included in
the Registration Statement and Prospectus they were, independent
certified public accountants with respect to the Fund within the
meaning of the Act; (ii) in their opinion, the statement of assets and
liabilities examined by them and included in the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Company Act; (iii) on the
basis of procedures (but not an examination made in accordance with
generally accepted auditing standards) consisting of a reading of the
latest available statement of assets and liabilities of the Fund (with
an indication of the date of the latest available statement of assets
and liabilities), a reading of the minutes of meetings and consents of
the shareholders and board of directors of the Fund and the committees
thereof subsequent to _____, inquiries of officers and other employees
of the Fund who have responsibility for financial and accounting
matters of the Fund and its subsidiaries with respect to transactions
and events subsequent to _____, and other specified procedures and
inquiries to a date not more than five days prior to the date of such
letter, nothing has come to their attention that would cause them to
believe that: (A) the statement of assets and liabilities of the Fund
does not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Company Act or that such
statement of assets and liabilities is not fairly presented in
conformity with generally accepted accounting principles (except to the
extent certain footnote disclosures have been omitted in accordance
with applicable rules of the Commission); and (B) with respect to the
period subsequent to _____ there were, as of the date of the most
recent available statement of assets and liabilities of the Fund and as
of a specified date not more than five days prior to the date of such
letter, any
20
changes in the capital stock or long-term indebtedness of the Fund or
decrease in the net assets or stockholders' equity of the Fund or that
the Fund has incurred any long-term liabilities, in each case as
compared with the amounts shown in the most recent statement of assets
and liabilities included in the Registration Statement and the
Prospectus, except for changes or decreases which the Registration
Statement and the Prospectus disclose have occurred or may occur or
which are set forth in such letter. The letter from Xxxxxx Xxxxxxxx LLP
shall cover such additional matters as the Dealer Manager may
reasonably request.
(h) CERTAIN EVENTS. At the Closing Date (i) no Stop Order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding therefor shall have
been initiated or threatened; (ii) all requests for additional
information on the part of the Commission shall have been complied with
or such requests shall have been otherwise satisfied; (iii) since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein or
contemplated thereby, there shall not have been any material adverse
change in the condition (financial or otherwise), results of
operations, businesses or properties of the Fund, whether or not
arising in the ordinary course of business, other than as set forth in
or contemplated by the Prospectus, the effect of which is in the Dealer
Manager's reasonable judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares on the terms and in the manner contemplated in
the Prospectus; and (iv) the total number of Shares to be issued and
outstanding upon consummation of the Closing shall be not less than
2,000,000.
(i) NASD REVIEW. The NASD, upon review of the terms of the
public offering of the Shares, shall not have objected to the Dealer
Manager's participation in such offering under such terms.
(j) ADDITIONAL INFORMATION. Prior to the Closing Date, the
Fund and its counsel shall have furnished to the Dealer Manager such
further information, opinions, certificates and documents as the Dealer
Manager may reasonably request.
If any of the conditions specified in this SECTION 10 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to the Dealer
Manager or to Dealer Manager's counsel pursuant to this SECTION 10 shall not be
in all material respects reasonably satisfactory in form and substance to the
Dealer Manager and to Dealer Manager's counsel, all obligations of the Dealer
Manager hereunder may be canceled by the Dealer Manager at, or at any time prior
to, the Closing Date. Notice of such cancellation shall be given to the Fund in
writing, or by telephone, telex or telegraph, confirmed in writing.
11. INDEMNIFICATION.
(a) BY FUND. The Fund agrees to indemnify and hold harmless
the Dealer Manager and each Broker/Dealer and each person, if any, who
controls the Dealer Manager or any Broker/Dealer within the meaning of
Section 15 of the Act or Section
21
20(a) of the Exchange Act, against any and all losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to
attorneys' fees and any and all expense whatsoever incurred in
investigating, preparing or defending against any litigation, commenced
or threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they
or any of them may become subject under the Act, the Exchange Act, or
other Federal or state law or regulation, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) (i) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in or
incorporated by reference in the Registration Statement or Notification
for the registration of the Shares, as originally filed or any
amendment thereof, or any related Preliminary Prospectus or the
Prospectus, or any supplement thereto or amendment thereof, or any
application document executed by the Fund filed or delivered in
connection with the qualifications of the Shares for sale under any
"blue sky law" or the listing of the Shares on any securities exchange,
or (ii) arise out of or are based upon the omission or alleged omission
to state in any of the foregoing a material fact required to be stated
therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that the Fund will not be liable in any such case to
the extent but only to the extent that any such loss, liability, claim,
damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written
information furnished to the Fund by or on behalf of the Dealer Manager
or such Broker/Dealer through the Dealer Manager expressly for use
therein as set forth in SECTION 5. This indemnity agreement will be in
addition to any liability which the Fund may otherwise have including
under this Agreement.
(b) BY DEALER MANAGER. Each of McKennan and Capital West,
severally, agrees to indemnify and hold harmless the Fund, and each of
its directors, each of the officers of the Fund who shall have signed
the Registration Statement, and each other person, if any, who controls
the Fund within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act, against any losses, liabilities, claims, damages
and expenses whatsoever (including but not limited to attorneys' fees
and any and all expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened,
or any claim whatsoever, and any and all amounts paid in settlement of
any claim or litigation), joint or several, to which they or any of
them may become subject under the Act, the Exchange Act, or other
Federal or state securities law, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or
Notification for the registration of the Shares, as originally filed or
any amendment thereof, or any related Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement therein not misleading, in each case to the extent,
but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein
in reliance upon and in conformity with written information furnished
to the Fund by or on behalf of XxXxxxx or Capital West, respectively,
or any Broker/Dealer through the Dealer Manager (whether XxXxxxx or
Capital West) expressly for use therein. This indemnity will be in
addition to any liability which the Dealer Manager may otherwise have
22
including under this Agreement.
(c) NOTIFICATION; OPPORTUNITY TO DEFEND. Promptly after
receipt by an indemnified party under subsection (a) or (b) above of
notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof
(but the failure so to notify an indemnifying party shall not relieve
it from any liability which it may have under this SECTION 11 except to
the extent that it has been prejudiced in any material respect by such
failure or from any liability which it may have otherwise). In case any
such action is brought against any indemnified party, and it notifies
an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and to the extent it may
elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party
or parties 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 such indemnified party or parties unless (i) the
employment of such counsel shall have been authorized in writing by one
of the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel
to have charge of the defense of such action within a reasonable time
after notice of commencement of the action, or (iii) such indemnified
party or parties shall have reasonably concluded that there may be
defenses available to it or them which are different from or additional
to those available to one or all of the indemnifying parties (in which
case the indemnifying parties shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties),
in any of which events such fees and expenses shall be borne by the
indemnifying parties. Anything in this subsection to the contrary
notwithstanding, any indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld.
12. CONTRIBUTION. In order to provide for contribution in circumstances
in which the indemnification provided for in SECTIONS 11(A) or (B) hereof is for
any reason held to be unavailable from the Fund or Dealer Manager or is
insufficient to hold harmless a party indemnified thereunder, the Fund and the
Dealer Manager shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provisions (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Fund or Dealer
Manager, any contribution received by the Fund or Dealer Manager from other
persons who may also be liable for contribution, including persons who control
the Fund within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Fund who signed the Registration Statement and
directors of the Fund) to which the Fund and the Dealer Manager may be subject,
in such proportions as are appropriate to reflect the relative benefits received
by the Fund and the Dealer Manager from the offering of the Shares or, if such
allocation is not permitted by applicable law or indemnification is not
available as a result of the indemnifying party "not having received notice" as
provided in SECTION 11 hereof, in such proportion as is appropriate to reflect
not only the relative benefits
23
referred to above but also the relative fault of the Fund and the Dealer Manager
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Fund and the
Dealer Manager shall be deemed to be in the same proportion as (x) the total
proceeds from the offering (net of underwriting discounts and commissions but
before deducting organization and offering expenses and fees and nonaccountable
expense reimbursements paid to the Dealer Manager) received by the Fund and (y)
the fees and nonaccountable expense reimbursements received by the Dealer
Manager, respectively, in each case as set forth in the table on the cover page
of or elsewhere in the Prospectus. The relative fault of the Fund and of the
Dealer Manager shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Fund or the Dealer Manager and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Fund and the Dealer Manager agree that it would not be just and equitable if
contribution pursuant to this SECTION 12 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above. The Fund shall be liable for the
amounts to be contributed by it pursuant to the provisions of this SECTION 12.
Notwithstanding the provisions of this SECTION 12, (i) in no case shall the
Dealer Manager be liable or responsible for any amount in excess of the fees and
nonaccountable expense reimbursements actually paid to the Dealer Manager
hereunder, and (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11 of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this SECTION 12, each person, if any, who controls the Dealer Manager within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, shall
have the same rights to contribution as the Dealer Manager, and each person, if
any, who controls the Fund within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, each officer of the Fund who shall have
signed the Registration Statement and each director of the Fund shall have the
same rights to contribution as the Fund, subject in each case to clauses (i) and
(ii) of the preceding sentence. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this SECTION 12, notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
SECTION 12 or otherwise. No party shall be liable for contribution with respect
to any action or claim settled without its consent; PROVIDED, HOWEVER, that such
consent was not unreasonably withheld.
13. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations and
warranties, covenants and agreements of the Dealer Manager, the Investment
Manager and the Fund contained in this Agreement, including the agreements
contained in SECTION 8, the indemnity agreements contained in SECTION 11 and the
contribution agreements contained in SECTION 12, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
the Dealer Manager or any controlling person thereof, or by or on behalf of the
Fund or the Investment Manager or any of their respective officers and
directors, or any controlling person thereof, and shall survive delivery of any
payment for the Shares to and by the Dealer Manager.
14. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
24
(a) EFFECTIVE DATE. This Agreement shall become effective at
10:30 A.M., Washington, D.C. time, on the first full business day
following the day on which the Registration Statement becomes effective
or at the time of the public offering by the Dealer Manager of the
Shares, whichever is earlier. As used herein, the "time of the public
offering" shall mean the time, after the Registration Statement becomes
effective, of the release by the Dealer Manager for publication of the
first newspaper advertisement which is subsequently published relating
to the Shares or the time, after the Registration Statement becomes
effective, when the Shares are first released for offering by the
Dealer Manager, whichever shall first occur. Until this Agreement
becomes effective as aforesaid, it may be terminated by the Fund by
notifying the Dealer Manager. Notwithstanding the foregoing, the
provisions of this SECTION 14 and of SECTIONS 1, 5, 11 and 12 hereof
shall at all times be in full force and effect.
(b) TERMINATION UPON CERTAIN EVENTS. The Dealer Manager shall
have the right to terminate this Agreement at any time prior to the
Closing Date if any domestic or international event or act or
occurrence has materially disrupted, or in the Dealer Manager's opinion
will in the immediate future materially disrupt, securities markets; or
if trading on the New York or Chicago Stock Exchanges shall have been
suspended, or minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been
required, on the New York or Chicago Stock Exchanges by the New York or
Chicago Stock Exchanges or by order of the Commission or any other
governmental authority having jurisdiction; or if the United States
shall have become involved in a war or major hostilities; or if a
banking moratorium has been declared by a state or federal authority,
or if a moratorium in foreign exchange trading by major international
banks or persons has been declared; or if any new restriction
materially adversely affecting the distribution of the Shares shall
have become effective; or if there shall have been such change in the
market for the Fund's securities or securities in general or in
political, financial or economic conditions as in the Dealer Manager's
judgment makes it inadvisable to proceed with the offering, sale and
delivery of the Shares on the terms contemplated by the Prospectus.
(c) NOTICE. Any notice of termination pursuant to this SECTION
14 shall be by telephone, telex, or telegraph, confirmed in writing by
letter.
(d) REIMBURSEMENT OF DEALER MANAGER. If this Agreement shall
be terminated pursuant to any of the provisions hereof (otherwise than
pursuant to notification by the Dealer Manager as provided in SECTION
14(B) hereof), or if the sale of the Shares provided for herein is not
consummated because any condition to the obligations of the Dealer
Manager set forth herein is not satisfied or because of any refusal,
inability or failure on the part of the Fund or Investment Manager to
perform any agreement herein or comply with any provision hereof, the
Fund and the Investment Manager agree, subject to demand by the Dealer
Manager, to reimburse the Dealer Manager for all out-of-pocket expenses
(including the fees and expenses of its counsel), incurred by the
Dealer Manager in connection herewith.
15. NOTICE. All communications hereunder, except as may be otherwise
specifically
25
provided herein, shall be in writing and, if sent to any Dealer Manager, shall
be mailed, delivered, or telexed or telegraphed and confirmed in writing, to
such Dealer Manager as follows:
If sent to the Fund, shall be mailed, delivered, or
telegraphed and confirmed in writing, to the Fund (with a copy
to the Investment Manager) as follows:
Southwest Small Cap Equity Fund, Inc.
c/o MGF Service Corp.
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Attn: Xxxx X. Xxxxxx,
Assistant Secretary
If sent to the Investment Manager, shall be mailed, delivered,
or telegraphed and confirmed in writing, to the Investment
Manager as follows:
XxXxxxx Management Company
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
If sent to the Dealer Manager, shall be mailed, delivered, or
telegraphed and confirmed in writing, to the Dealer Manager as
follows:
XxXxxxx Securities Company, as Lead Co-Manager
000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
All notices hereunder shall be effective upon receipt by the party to which it
is addressed.
16. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Dealer Manager, the Fund, and the Investment Manager
and the controlling persons, directors, officers, employees and agents referred
to herein, and their respective successors and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained. The term "successors and assigns" shall not include a purchaser, in
its capacity as such, of Shares.
17. CONSTRUCTION. This Agreement shall be construed in accordance with
the internal laws of the State of Texas, without giving effect to the rules
governing conflicts of laws. Time is of the essence in this agreement.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one instrument.
19. RELATIONSHIP BETWEEN CO-MANAGERS. Notwithstanding anything
contained herein to the contrary, the parties acknowledge that, as between
XxXxxxx and Capital West, XxXxxxx is designated as the Lead Co-Manager and shall
have the exclusive right to excercise all powers of the "Dealer Manager"
conferred hereunder, on behalf of both itself and Capital West; provided,
however, that the rights, powers and liabilities of XxXxxxx and Capital West
under Sections 7, 11 and 12 shall be deemed individual and several, not joint.
Accordingly XxXxxxx is not responsible for the representations and obligations
of Capital West and vice versa.
26
If the foregoing correctly sets forth the understanding between the
Dealer Manager, the Fund, and the Investment Manager please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
SOUTHWEST SMALL CAP EQUITY FUND, INC.
(the "Fund")
By: ________________
Print Name: ________
Title: _____________
XxXXXXX MANAGEMENT COMPANY
(the "Investment Manager")
By: ________________
Print Name: ________
Title: _____________
Accepted as of the date first above written.
XxXXXXX SECURITIES COMPANY
(the "Lead Dealer Manager")
By: ________________
Print Name: ________
Title: _____________
CAPITAL WEST SECURITES, INC.
(together with the Lead Dealer Manager,
the "Dealer Manager")
By: ________________
Name: ______________
Title: _____________
