Exhibit 99.H1
PREFERRED INCOME STRATEGIES FUND, INC.
(a Maryland corporation)
$----------------
Auction Market Preferred Stock
_______ Shares, Series A
_______ Shares, Series B
_______ Shares, Series C
_______ Shares, Series D
_______ Shares, Series E
(Liquidation Preference $25,000 Per Share)
PURCHASE AGREEMENT
, 2003
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:
Preferred Income Strategies Fund, Inc., a Maryland corporation (the
"Fund"), and Fund Asset Management, L.P., a Delaware limited partnership (the
"Adviser"), each confirms its agreement with Xxxxxxx Xxxxx & Co., Xxxxxxx
Lynch, Xxxxxx, Xxxxxx & Xxxxx Incorporated (the "Underwriter" or "Xxxxxxx
Xxxxx"), with respect to the issue and sale by the Fund and the purchase by
the Underwriter of _____ shares of Auction Market Preferred Stock, Series A
("Series A AMPS"), _____ shares of Auction Market Preferred Stock, Series B
("Series B AMPS"), _____ shares of Auction Market Preferred Stock, Series C
("Series C AMPS") _____ shares of Auction Market Preferred Stock, Series D
("Series D AMPS") and _____ shares of Auction Market Preferred Stock,
Series E ("Series E AMPS"), each with a par value of $.10 per share and a
liquidation preference $25,000 per share plus an amount equal to accumulated
but unpaid dividends thereon (whether or not earned or declared), of the Fund
(together, the "Shares").
The Fund understands that the Underwriter proposes to make a public
offering of the Shares as soon as the Underwriter deems advisable after this
Agreement has been executed and delivered.
The Fund has filed with the Securities and Exchange Commission (the
"Commission") a notification on Form N-8A of registration of the Fund as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and a registration statement on Form N-2 (Nos.
333-102712, 811-21286), including the related preliminary prospectus and
preliminary statement of additional information, for the registration of the
Shares under the Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act, and the rules and regulations of the Commission under
the 1933 Act and the Investment Company Act (together, the "Rules and
Regulations"), and has filed such amendments to such registration statement on
Form N-2, if any, and such amended preliminary prospectuses and preliminary
statements of additional information as may have been required to the date
hereof. Promptly after execution and delivery of this Agreement, the Fund will
either (i) prepare and file a prospectus and statement of additional
information in accordance with the provisions of paragraph (c) of Rule 497
("Rule 497(c)") of the rules and regulations of the Commission under the 1933
Act (the "1933 Act Regulations") or a certificate in accordance with the
provisions of paragraph (j) of Rule 497 ("Rule 497(j)") of the 1933 Act
Regulations, (ii) prepare and file a prospectus and statement of additional
information in accordance with the provisions of Rule 430A ("Rule 430A") of
the 1933 Act Regulations and paragraph (h) of Rule 497 ("Rule 497(h)") of the
1933 Act Regulations, or (iii) if the Fund has elected to rely upon Rule 434
("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 497(h).
The information included in any such prospectus and statement of additional
information or in any such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became
effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to
as "Rule 434 Information." Each prospectus and statement of additional
information used before such registration statement became effective, and any
prospectus and statement of additional information that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was
used after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus/statement." Such
registration statement, including the exhibits thereto and schedules thereto,
if any, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final
prospectus and final statement of additional information in the form first
furnished to the Underwriter for use in connection with the offering of the
Shares is herein called the "Prospectus." If Rule 434 is relied on, the term
"Prospectus" shall refer to the preliminary prospectus/statement dated _______
__, 2003, together with the applicable Term Sheet and all references in this
Agreement to the date of such Prospectus shall mean the date of the applicable
Term Sheet. For purposes of this Agreement, all references to the Registration
Statement, any
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preliminary prospectus/statement, the Prospectus, or any Term Sheet or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("XXXXX").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus/statement, or the
Prospectus (or other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information
which is incorporated by reference in the Registration Statement, any
preliminary prospectus or the Prospectus. as the case may be; and all
references in this Agreement to amendments or supplements to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to
mean and include the filing of any document under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), which is incorporated by reference in
the Registration Statement, such preliminary prospectus/statement, or the
Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Fund and the Adviser. The Fund
and the Adviser each severally represents and warrants to the Underwriter as
of the date hereof, as of the Closing Time referred to in Section 2(c) hereof
and as of the Date of Delivery (if any) referred to in Section 2(b) hereof,
and agrees with the Underwriter, as follows:
(i) Compliance with Registration Requirements. The Fund meets the
requirements for use of Form N-2 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Fund or the Adviser, are contemplated by the
Commission, and any request on the part of the Commission for additional
information has been complied with. If required, the Fund has received
any orders exempting the Fund from any provisions of the Investment
Company Act.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time the Registration Statement, the Rule
462(b) Registration Statement and any amendments or supplements thereto
complied and will comply in all material respects with the requirements
of the 1933 Act, the Investment Company Act and the Rules and Regulations
and did not and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Neither the
Prospectus, nor any amendments or supplements thereto, at the time the
Prospectus or any amendments or supplements thereto were issued and at
the Closing Time included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties in this subsection shall not
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apply to statements in or omissions from the Registration Statement or
the Prospectus made in reliance upon and in conformity with information
furnished to the Fund in writing by the Underwriter expressly for use in
the Registration Statement or in the Prospectus. If Rule 434 is used, the
Fund will comply with the requirements of Rule 434 and the Prospectus
shall not be "materially different," as such term is used in Rule 434,
from the prospectus included in the Registration Statement at the time it
became effective.
Each preliminary prospectus/statement and the prospectus and
statement of additional information filed as part of the Registration
Statement as originally filed or as part of any amendment thereto, or
filed pursuant to Rule 497(c) or Rule 497(h) under the 1933 Act, complied
when so filed in all material respects with the Rules and Regulations and
each preliminary prospectus/statement and the Prospectus delivered to the
Underwriter for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to XXXXX, except to the extent permitted by Regulation S-T.
If a Rule 462(b) Registration Statement is required in connection
with the offering and sale of the Shares, the Fund has complied or will
comply with the requirement of Rule 111, under the 1933 Act Regulations
relating to the payment of filing fees thereof.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules, if any, included in the
Registration Statement are independent public accountants as required by
the 1933 Act and the Rules and Regulations.
(iii) Financial Statements. The financial statements, included in
the Registration Statement and Prospectus, together with the related
schedules and notes, present fairly the financial position of the Fund at
the date indicated and said statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the period involved. The supporting
schedules, if any, included in the Registration Statement present fairly,
in accordance with GAAP, the information required to be stated therein.
The information in the Prospectus under the headings "Description of
Capital Stock" and "Portfolio Composition" has been fairly presented.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
in the Prospectus, except as otherwise stated therein, (A) there has been
no material adverse change in the condition, financial or otherwise, or
in the earnings, business affairs or business prospects of the Fund,
whether or not arising in the ordinary course of business (a "Material
Adverse Effect"), (B) there have been no transactions entered into by the
Fund, other than those in the ordinary course of business, which are
material with respect to the Fund and (C) [except for regular monthly
dividends and special year end distributions related to the Fund's
qualification as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended ("Subchapter M of the Code"),
on the outstanding shares of common stock, par value $.10 per share (the
"Common Stock"), of
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the Fund,] there has been no dividend or distribution of any kind
declared, paid or made by the Fund on any class of its capital stock.
(v) Good Standing of the Fund. The Fund has been duly organized and
is validly existing as a corporation in good standing under the laws of
the State of Maryland and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in
the Prospectus and to enter into and perform its obligations under this
Agreement; and the Fund is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure
so to qualify or to be in good standing would not result in a Material
Adverse Effect.
(vi) Subsidiaries. The Fund has no subsidiaries.
(vii) Officers and Directors. No person is serving or acting as an
officer, director or investment adviser of the Fund except in accordance
with the provisions of the Investment Company Act and the Rules and
Regulations and the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and the rules and regulations of the Commission
promulgated under the Advisers Act (the "Advisers Act Rules and
Regulations"). Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement to either of them), no
director of the Fund is an "interested person" (as defined in the
Investment Company Act) of the Fund or an "affiliated person" (as defined
in the Investment Company Act) of the Underwriter.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Fund is as set forth in the Prospectus under the
caption "Description of Capital Stock." All issued and outstanding shares
of Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable, except as provided for in the Fund's
charter, and have been offered and sold or exchanged by the Fund in
compliance with all applicable laws (including without limitation,
federal and state securities laws); none of the outstanding shares of
Common Stock of the Fund was issued in violation of the preemptive or
other similar rights of any securityholder of the Fund.
(ix) Investment Company Act. The Fund is registered with the
Commission under the Investment Company Act as a closed-end, diversified,
management investment company, and no order of suspension or revocation
of such registration has been issued or proceedings therefor initiated,
to the knowledge of the Fund and the Adviser, or threatened by the
Commission.
(x) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Fund.
(xi) Authorization and Description of Shares. The Shares to be
purchased by the Underwriter from the Fund have been duly authorized for
issuance and sale to the Underwriter pursuant to this Agreement, and,
when issued and delivered by the Fund pursuant to this Agreement against
payment of the consideration set forth in this
5
Agreement will be validly issued, fully paid and non-assessable; the
Shares conform to all statements relating thereto contained in the
Prospectus and such description conforms to the rights set forth in the
instruments defining the same; no holder of the Shares will be subject to
personal liability by reason of being such a holder; and the issuance of
the Shares is not subject to the preemptive or other similar rights of
any securityholder of the Fund.
(xii) Absence of Defaults and Conflicts. The Fund is not in
violation of its charter or by-laws or in default in the performance or
observance of any obligation, agreement, covenant or condition contained
in any material contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which
the Fund is a party or by which it or its properties may be bound, or to
which any of the property or assets of the Fund is subject (collectively,
"Agreements and Instruments"), except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement, the Investment Advisory Agreement, the
Custody Agreement, the Auction Agent Agreement and the Letter of
Representations referred to in the Registration Statement (as used
herein, the "Advisory Agreement", the "Custody Agreement," the "Auction
Agreement" and the "Letter of Representations," respectively) and the
consummation of the transactions contemplated in this Agreement and in
the Registration Statement (including the issuance and sale of the Shares
and the use of the proceeds from the sale of the Shares as described in
the Prospectus under the caption "Use of Proceeds") and compliance by the
Fund with its obligations under this Agreement have been duly authorized
by all necessary corporate action and do not and will not, whether with
or without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or a default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Fund pursuant to the
Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or the by-laws of the Fund, or any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Fund or any of its assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness by the Fund.
(xiii) Authorization of Agreements. Each of this Agreement, the
Advisory Agreement and the Custody Agreement has been duly authorized,
executed and delivered by the Fund, and each complies with all applicable
provisions of the Investment Company Act. Each of the Auction Agreement
and the Letter of Representations has been duly authorized for execution
and delivery by the Fund and, when executed and delivered by the Fund,
will constitute a valid and binding obligation of the Fund, enforceable
in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization or other laws relating to or affecting
creditors' rights and to general equitable principles.
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(xiv) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Fund or the Adviser, threatened against or affecting the Fund, which
is required to be disclosed in the Registration Statement (other than as
disclosed therein), or which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets of the Fund or
the consummation of the transactions contemplated in this Agreement or
the performance by the Fund of its obligations hereunder; the aggregate
of all pending legal or governmental proceedings to which the Fund is a
party or of which any of its respective property or assets is the subject
which are not described in the Registration Statement, including ordinary
routine litigation incidental to the business, could not reasonably be
expected to result in a Material Adverse Effect.
(xv) Subchapter M Compliance. The Fund intends to, and will, direct
the investment of the proceeds of the offering described in the
Registration Statement in such a manner as to comply with the
requirements of Subchapter M of the Code, and intends to qualify as a
regulated investment company under Subchapter M of the Code.
(xvi) Distribution of Offering Materials. The Fund has not
distributed and, prior to the later to occur of (A) the Closing Time and
(B) completion of the distribution of the Shares, will not distribute any
offering material in connection with the offering and sale of the Shares
other than the Registration Statement, a preliminary prospectus, the
Prospectus or other materials, if any, permitted by the 1933 Act or the
Investment Company Act or the Rules and Regulations.
(xvii) Accounting Controls. The Fund maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization and with the applicable requirements of the
Investment Company Act, the Rules and Regulations and the Code; (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles
and to maintain accountability for assets and to maintain compliance with
the books and records requirements under the Investment Company Act and
the Rules and Regulations; (C) access to assets is permitted only in
accordance with the 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.
(xviii) Absence of Undisclosed Payments. To the Fund's knowledge,
neither the Fund nor any employee or agent of the Fund has made any
payment of funds of the Fund or received or retained any funds, which
payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.
(xix) Material Agreements. This Agreement, the Advisory Agreement,
the Custody Agreement, the Auction Agent Agreement and the Transfer and
Dividend Disbursing Agency and Registrar Agreement have each been duly
authorized by all requisite action on the part of the Fund and executed
and delivered by the Fund, as of the
7
dates noted therein, and each complies with all applicable provisions of
the Investment Company Act in all material respects. Assuming due
authorization, execution and delivery by the other parties thereto with
respect to the Advisory Agreement, the Custody Agreement, the Auction
Agent Agreement and the Transfer and Dividend Disbursing Agency and
Registrar Agreement, each of the Advisory Agreement, the Custody
Agreement, the Auction Agent Agreement and the Transfer and Dividend
Disbursing Agency and Registrar Agreement constitutes a valid and binding
agreement of the Fund, enforceable in accordance with its terms, except
as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing and except as rights to
indemnification or contribution thereunder may be limited by federal or
state laws.
(xx) Registration Rights. There are no persons with registration
rights or other similar rights to have any securities registered pursuant
to the Registration Statement or otherwise registered by the Fund under
the 1933 Act.
(xxi) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto by the 1933 Act, the
Investment Company Act or the Rules and Regulations which have not been
so described and filed as required.
(xxii) Possession of Intellectual Property. The Fund owns or
possesses, has the right to use or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") necessary to carry on
the business now operated by the Fund, and the Fund has not received any
notice or is not otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property
invalid or inadequate to protect the interest of the Fund therein, and
which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or in
the aggregate, would result in a Material Adverse Effect.
(xxiii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Fund of its
obligations hereunder, in connection with the offering, issuance or sale
of the Shares under this Agreement or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act, the 1934 Act
or the Investment Company Act or the Rules and Regulations and foreign or
state securities laws or under the rules of the NASD (formerly, the
National Association of Securities Dealers, Inc.).
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(xxiv) Possession of Licenses and Permits. The Fund possesses such
permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies necessary
to conduct the business now operated by it; the Fund is in compliance
with the terms and conditions of all such Governmental Licenses, except
where the failure so to comply would not, singly or in the aggregate,
have a Material Adverse Effect; all of the Governmental Licenses are
valid and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to be
in full force and effect would not have a Material Adverse Effect; and
the Fund has not received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(b) Additional Representations of the Adviser. The Adviser represents and
warrants to the Underwriter as of the date hereof and as of the Representation
Date as follows:
(i) Organization and Authority of Adviser. The Adviser has been duly
organized as a limited partnership under the laws of the State of
Delaware, with power and authority to conduct its business as described
in the Registration Statement and the Prospectus.
(ii) Investment Advisers Act. The Adviser is duly registered as an
investment adviser under the Investment Advisers Act of 1940, as amended
(the "Investment Advisers Act"), and is not prohibited by the Investment
Advisers Act or the Investment Company Act, or the rules and regulations
under such acts, from acting under the Advisory Agreement for the Fund as
contemplated by the Registration Statement and the Prospectus.
(iii) Description of Adviser. The description of the Adviser in the
Registration Statement and the Prospectus (and any amendment or
supplement to either of them) complied and complies in all material
respects with the provisions of the 1933 Act, the Investment Company Act,
the Advisers Act, the Rules and Regulations and the Advisers Act Rules
and Regulations and is true and correct and does not contain any 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 light of the circumstances under which they were made, not
misleading.
(iv) Capitalization. The Adviser has the financial resources
available to it necessary for the performance of its services and
obligations as contemplated in the Registration Statement, the
Prospectus, this Agreement and under the Advisory Agreement.
(v) Authorization of Agreements. This Agreement has been duly
authorized, executed and delivered by the Adviser; the Advisory Agreement
has been duly authorized, executed and delivered by the Adviser, and
constitutes a valid and binding obligation of the Adviser, enforceable in
accordance with its terms, subject, as to
9
enforcement, to bankruptcy, insolvency, reorganization or other laws
relating to or affecting creditors' rights and to general equitable
principles; and neither the execution and delivery of this Agreement or
the Advisory Agreement, nor the performance by the Adviser of its
obligations hereunder or thereunder will conflict with, or result in a
breach of any of the terms and provisions of, or constitute, with or
without the giving of notice or the lapse of time or both, a default
under, any agreement or instrument to which the Adviser is a party or by
which it is bound, the certificate of formation, the operating agreement,
or other organizational documents of the Adviser, or the Adviser's
knowledge by any law, order, decree, rule or regulation applicable to it
of any jurisdiction, court, federal or state regulatory body,
administrative agency or other governmental body, stock exchange or
securities association having jurisdiction over the Adviser or its
respective properties or operations; and no consent, approval,
authorization or order of any court or governmental authority or agency
is required for the consummation by the Adviser of the transactions
contemplated by this Agreement and the Advisory Agreement, except as have
been obtained or may be required under the 1933 Act, the Investment
Company Act, the 1934 Act or state securities laws.
(vi) Financial Resources. The Adviser has the financial resources
available to it necessary for the performance of its services and
obligations as contemplated in the Registration Statement and the
Prospectus.
(vii) No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, there has not occurred
any event which should reasonably be expected to have a material adverse
effect on the ability of the Adviser to perform its respective
obligations under this Agreement and the Advisory Agreement.
(viii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Adviser, threatened against or affecting the Adviser or any
"affiliated person" of the Adviser (as such term is defined in the
Investment Company Act) or any partners, trustees, officers or employees
of the foregoing, whether or not arising in the ordinary course of
business, which might reasonably be expected to result in any material
adverse change in the condition, financial or otherwise, or earnings,
business affairs or business prospects of the Adviser, materially and
adversely affect the properties or assets of the Adviser or materially
impair or adversely affect the ability of the Adviser to function as an
investment adviser or perform its obligations under the Advisory
Agreement, or which is required to be disclosed in the Registration
Statement and the Prospectus.
(ix) Absence of Violation or Default. The Adviser is not in
violation of its certificate of formation, its operating agreement or
other organizational documents or in default under any agreement,
indenture or instrument, where such violation or default would reasonably
be expected to have a Material Adverse Effect on the Adviser's ability to
function as an investment adviser or perform its obligations under the
Advisory Agreement.
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(c) Officers' Certificates. Any certificate signed by any officer of the
Fund or any officer of the Adviser delivered to the Underwriter or to counsel
for the Fund and the Underwriter shall be deemed a representation and warranty
by the Fund or the Adviser, as the case may be, to the Underwriter as to the
matters covered thereby.
SECTION 2. Sale and Delivery to the Underwriter; Closing.
(a) Purchase Price. On the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth,
the Fund agrees to sell to the Underwriter and the Underwriter agrees to
purchase from the Fund the Shares at the price per share set forth in Schedule
A.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Shares shall be made at the offices of Xxxxxx Xxxxxx
Xxxxx & Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such
other place as shall be agreed upon by the Underwriter and the Fund, at 9:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day following the date hereof,
or such other time not later than ten business days after such date as shall
be agreed upon by the Underwriter and the Fund (such time and date of payment
and delivery herein being referred to as "Closing Time").
Payment shall be made to the Fund by wire transfer of immediately
available funds to a bank account designated by the Fund, against delivery to
the Underwriter of certificates for the Shares to be purchased by it.
(c) Denominations; Registration. The Shares shall be represented by
certificates registered in the name of Cede & Co., as nominee for The
Depository Trust Company. The certificates for the Shares will be made
available for examination by the Underwriter not later than 10:00 A.M. on the
last business day prior to Closing Time.
SECTION 3. Covenants of the Fund. The Fund covenants with the Underwriter
as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Fund, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Underwriter immediately, and
confirm the notice in writing, (i) if any post-effective amendment to the
Registration Statement shall have become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) 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, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus/statement, or of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceedings for any of such purposes, and
(v) of the issuance by the Commission of an order of suspension or revocation
of the notification on Form N-8A of registration of the Fund as an investment
company under the Investment Company Act or the initiation of any proceeding
for that purpose.
11
The Fund will make every reasonable effort to prevent the issuance of any stop
order described in subsection (iv) hereunder or any order of suspension or
revocation described in subsection (v) hereunder and, if any such stop order
or order of suspension or revocation is issued, to obtain the lifting thereof
at the earliest possible moment. The Fund will promptly effect the filings
necessary pursuant to Rule 497(c), Rule 497(j) or Rule 497(h) and will take
such steps as it deems necessary to ascertain promptly whether the certificate
transmitted for filing under Rule 497(j) or the form of prospectus and
statement of additional information transmitted for filing under Rule 497(c)
or Rule 497(h) was received for filing by the Commission and, in the event
that it was not, it will promptly file such certificate or prospectus and
statement of additional information.
(b) Filing of Amendments. The Fund will give the Underwriter notice of
its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment or filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus or
statement of additional information included in the Registration Statement at
the time it became effective or to the Prospectus, whether pursuant to the
Investment Company Act, the 1933 Act, or otherwise, and will furnish the
Underwriter with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Underwriter or counsel to the Underwriter
and the Fund shall object.
(c) Delivery of Registration Statements. The Fund has furnished or will
deliver to the Underwriter and counsel to the Underwriter and the Fund,
without charge, signed copies of the notification of registration on Form N-8A
and Registration Statement as originally filed and of each amendment thereto,
(including exhibits filed therewith, or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will also
deliver to the Underwriter a conformed copy, without charge, of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for the Underwriter. The copies of the Registration
Statement and each amendment thereto furnished to the Underwriter will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to XXXXX, except to the extent permitted by Regulation
S-T.
(d) Delivery of Prospectus. The Fund has delivered to the Underwriter,
without charge, as many copies of each preliminary prospectus/statement as the
Underwriter reasonably requested, and the Fund hereby consents to the use of
such copies for purposes permitted by the 1933 Act. The Fund will furnish to
the Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act, such number of copies of the
Prospectus (as amended or supplemented) as the Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto furnished to
the Underwriter will be identical to the electronically transmitted copies
thereof field with the Commission pursuant to XXXXX, except to the extent
permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Fund will comply with
the 1933 Act, the Investment Company Act and the Rules and Regulations so as
to permit the completion of the distribution of the Shares as contemplated in
this Agreement and in the Prospectus. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Shares, any event shall occur or condition shall exist as a result of
12
which it is necessary, in the opinion of counsel to the Underwriter and the
Fund, to amend the Registration Statement or amend or supplement any
Prospectus in order that the Prospectus will not include any untrue statements
of material fact or omit to state a material fact 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 purchaser, or if it shall be
necessary, in the opinion of such counsel, at any such time to amend the
Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Fund will promptly prepare and file with the Commission, subject to Section
3(b), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the Prospectus
comply with such requirements, and the Fund will furnish to the Underwriter
such number of copies of such amendment or supplement as the Underwriter may
reasonably request.
(f) Blue Sky Qualifications. The Fund will use its best efforts, in
cooperation with the Underwriter, to qualify the Shares for offering and sale
under the applicable securities laws of such states and other jurisdictions as
the Underwriter may designate and to maintain such qualifications in effect
for a period of not less than one year from the later of the effective date of
the Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Fund shall 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 so qualified or to
subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject. In each jurisdiction in which the Shares
have been so qualified, the Fund will file such statements and reports as may
be required by the laws of such jurisdiction to continue such qualification in
effect for a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Fund will timely file such reports pursuant to the
Investment Company Act as are necessary in order to make generally available
to its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last paragraph
of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Fund will use the net proceeds received by it
from the sale of the Shares in the manner specified in the Prospectus under
"Use of Proceeds."
(i) Subchapter M. The Fund will use its best efforts to maintain its
qualification as a regulated investment company under Subchapter M of the
Code.
(j) Restrictions on Sale of Shares. During a period of 180 days from the
date of the Prospectus, the Fund will not, without your prior written consent,
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of
any senior security of the Fund, as defined in Section 18 of the Investment
Company Act, or file any registration statement under the 1933 Act with
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of senior securities,
whether any such swap or transaction described in clause (i) or (ii) above is
to be settled by delivery of senior securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Shares to be
13
sold hereunder or (B) transactions as contemplated in the Registration
Statement where the Fund has segregated cash, cash equivalents or liquid
securities at the Fund's custodian having a market value at all times at least
equal to the amount of such senior securities.
(k) Reporting Requirements. The Fund, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to
the Investment Company Act and the 1934 Act within the time periods required
by the Investment Company Act and the Rules and Regulations and the 1934 Act
and the rules and regulations of the Commission thereunder, respectively.
(l) Rule 462(b) Registration Statement. If the Fund elects to rely upon
Rule 462(b), the Fund shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C.
time, on the date of this Agreement, and the Fund shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b) Registration
Statement or give irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the 1933 Act.
SECTION 4. Covenants of the Underwriter. The Underwriter covenants and
agrees with the Fund that no later than the second business day succeeding
Closing Time, it will provide the Fund and the Auction Agent (as defined in
the Prospectus) with a listing of Existing Holders (as defined in the
Prospectus) of Shares, the number of shares held by each such Existing Holder
and the number of Shares it is holding as Underwriter as of the date of such
notice.
SECTION 5. Payment of Expenses.
(a) Expenses. The Fund will pay all expenses incident to the performance
of its obligations under this Agreement, including (i) the preparation,
printing and filing of the Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment thereto,
(ii) the preparation, printing and delivery to the Underwriter of this
Agreement and such other documents as may be required in connection with the
offering, purchase, sale, issuance or delivery of the Shares, (iii) the
preparation, issuance and delivery of the certificates for the Shares to the
Underwriter, including any stock or other transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the Shares to the
Underwriter, (iv) the fees and disbursements of the Fund's counsel,
accountants and other advisors, (v) the qualification of the Shares under the
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel to
the Underwriter and the Fund in connection therewith and in connection with
the preparation of the Blue Sky Survey and any supplement thereto, (vi) the
printing and delivery to the Underwriter of copies of each preliminary
prospectus/statement, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the preparation, printing and delivery to the
Underwriter of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the
Shares, and (ix) the fees charged by rating agencies rating the Shares.
(b) Termination of Agreement. If this Agreement is terminated by the
Underwriter in accordance with the provisions of Section 6 or Section 10(a)(i)
hereof, the Fund or the Adviser shall reimburse, or arrange for an affiliate
to reimburse, the Underwriter for all of its out-of-
14
pocket expenses, including the reasonable fees and disbursements of counsel to
the Fund and the Underwriter.
SECTION 6. Conditions of Underwriter's Obligations. The obligations of
the Underwriter hereunder are subject to the accuracy of the representations
and warranties of the Fund and the Adviser contained in Section 1 hereof, or
in the certificates of any officer of the Fund and the Adviser delivered
pursuant to the provisions hereof, to the performance by the Fund and the
Adviser of their respective covenants and obligations hereunder, and to the
following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement
including any Rule 462(b) Registration Statement has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriter and the Fund. Either (i)
a certificate has been filed with the Commission in accordance with Rule
497(j) or a prospectus and statement of additional information have been filed
with the Commission in accordance with Rule 497(c), or (ii) a prospectus and
statement of additional information containing the Rule 430A Information shall
have been filed with the Commission in accordance with Rule 497(h) (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if
the Fund has elected to rely upon Rule 434, a Term Sheet shall have been filed
with the Commission in accordance with Rule 497(h).
(b) Opinion of Counsel for the Fund and the Underwriter. At Closing Time,
the Underwriter shall have received the favorable opinion, dated as of Closing
Time, of Xxxxxx Xxxxxx Xxxxx & Xxxx LLP, counsel to the Fund and the
Underwriter, to the effect set forth in Exhibit A hereto.
(c) Opinion of Senior Attorney of the Adviser. At Closing Time, the
Underwriter shall have received the favorable opinion, dated as of Closing
Time, of Xxxxxxx X. Xxxxxx, Esq., or another senior attorney of the Adviser,
in form and substance satisfactory to counsel to the Underwriter, to the
effect set forth in Exhibit B hereto and to such further effect as counsel to
the Underwriter may reasonably request.
(d) Officers' Certificates. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Fund, whether or not arising in the ordinary course of
business, and the Underwriter shall have received (A) a certificate of the
President or a Vice President of the Fund, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 1(a) hereof are true and correct
with the same force and effect as though expressly made at and as of Closing
Time, (iii) the Fund has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to Closing
Time, and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission and (B) a
certificate
15
of the President or a Vice President of the Adviser, dated as of Closing Time,
to the effect that (i) the representations and warranties in Sections 1(a) and
1(b) hereof are true and correct with the same force and effect as though
expressly made at and as of Closing Time, and (ii) the Adviser has complied
with all agreements and satisfied all conditions on its part to be performed
or satisfied at or prior to Closing Time.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Underwriter shall have received from Ernst & Young LLP a
letter, dated such date, in form and substance satisfactory to the Underwriter
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus, to the effect set forth in Exhibit C hereto and
to such further effect as counsel to the Underwriter may reasonably request.
(f) Bring-down Comfort Letter. At Closing Time, the Underwriter shall
have received from Ernst & Young LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter, furnished
pursuant to subsection (e) of this Section, except that the "specified date"
referred to shall be a date not more than three business days prior to Closing
Time.
(g) Ratings Letters. At Closing Time, Fitch, Inc. ("Fitch") and Xxxxx'x
Investors Services, Inc. ("Moody's") shall have confirmed by letter that the
Shares have been rated AAA and "aaa," respectively, by such agencies.
(h) Additional Documents. At Closing Time, counsel to the Fund and the
Underwriter shall have been furnished with such documents and opinions as it
may require for the purpose of enabling it to pass upon the issuance and sale
of the Shares as herein contemplated, or in order to evidence the accuracy of
any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Fund in
connection with the issuance and sale of the Shares as herein contemplated
shall be satisfactory in form and substance to the Underwriter and counsel to
the Fund and the Underwriter.
(i) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, may be terminated by the Underwriter by notice to the Fund at any
time at or prior to Closing Time and such termination shall be without
liability of any party to any other party except as provided in Section 5 and
except that Sections 1, 7, 8 and 9 shall survive any such termination and
remain in full force and effect.
SECTION 7. Indemnification.
(a) Indemnification of the Underwriter. (1) The Fund and the Adviser
jointly and severally agree to indemnify and hold harmless the Underwriter and
each person, if any, who controls the Underwriter within the meaning of
Section 15 of the 1933 Act or Section 25 of the 1934 Act and any director,
officer, employee or affiliate thereof as follows:
16
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information
and the Rule 434 Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus/statement or the Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, provided
that (subject to Section 7(d) below) any such settlement is effected with
the written consent of the indemnifying party; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Underwriter)
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement
or omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Fund by the
Underwriter expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus/statement or the Prospectus (or any
amendment or supplement thereto).
(2) Insofar as this indemnity agreement may permit indemnification for
liabilities under the 1933 Act of any person who is a partner of the
Underwriter or who controls the Underwriter within the meaning of Section 15
of the 1933 Act and who, at the date of this Agreement, is a director or
officer of the Fund or controls the Fund within the meaning of Section 15 of
the 1933 Act, such indemnity agreement is subject to the undertaking of the
Fund in the Registration Statement under Item 29 thereof.
(b) Indemnification of Fund, Adviser, General Partner, and Directors and
Officers. The Underwriter agrees to indemnify and hold harmless the Fund, the
Adviser, the directors of the Fund, the general partner of the Adviser, each
of the Fund's officers who signed the Registration Statement, and each person,
if any, who controls the Fund or the Adviser within the meaning of Section 15
of the 1933 Act or Section 20 of the 1934 Act, against any and all loss,
17
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in
the Registration Statement (or any amendment thereto) including the Rule 430A
Information and the Rule 434 Information, if applicable, or in any preliminary
prospectus/statement or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Fund by the Underwriter expressly for use in the Registration Statement
(or any amendment thereto), or any preliminary prospectus/statement or the
Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties, Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party
of any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve
such indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
7(a) above, counsel to the indemnified parties shall be selected by the
Underwriter, and, in the case of parties indemnified pursuant to Section 7(b)
above, counsel to the indemnified parties shall be selected by the Fund and
the Adviser. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the
indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for the fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 7 or Section 8 hereof (whether
or not the indemnified parties are actual or potential parties thereto),
unless such settlement, compromise or consent (i) includes an unconditional
release of each indemnified party from all liability arising out of such
litigation, investigation, proceeding or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated
by Section 7(a)(ii) effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party
shall have received notice of the terms of such settlement at least 30 days
prior to such settlement being entered into and (iii) such indemnifying party
shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
SECTION 8. Contribution. If the indemnification provided for in Section 7
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any
18
losses, liabilities, claims, damages or expenses referred to therein, then
each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Fund and the Adviser on the one hand and the
Underwriter on the other hand from the offering of the Shares pursuant to this
Agreement or (ii) if the allocation provided by clause (i) 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 and the Adviser on the one hand and of the Underwriter on the
other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Fund and the Adviser on the one
hand and the Underwriter on the other hand in connection with the offering of
the Shares pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Shares pursuant to this Agreement (before deducting expenses) received by the
Fund, and the total underwriting commission received by the Underwriter, in
each case as set forth on the cover of the Prospectus, or, if Rule 434 is
used, the corresponding location on the Term Sheet, bear to the aggregate
initial public offering price of the Shares as set forth on such cover.
The relative fault of the Fund and the Adviser on the one hand and the
Underwriter on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to
information supplied by the Fund and the Adviser or by the Underwriter and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Fund, the Adviser and the Underwriter agree that it would not be just
and equitable if contribution pursuant to this Section 8 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 in this Section 8.
The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 8, the Underwriter shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which the
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
19
For purposes of this Section 8, each person, if any, who controls the
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as the Underwriter,
and each director of the Fund and the Adviser, respectively, each officer of
the Fund who signed the Registration Statement and each person, if any, who
controls the Fund and the Adviser within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act, shall have the same rights to contribution
as the Fund and the Adviser.
SECTION 9. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Fund or of the Adviser
submitted pursuant hereto, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of the
Underwriter or controlling person, or by or on behalf of the Fund or the
Adviser and shall survive delivery of the Shares to the Underwriter.
SECTION 10. Termination of Agreement.
(a) Termination; General. The Underwriter may terminate this Agreement by
notice to the Fund, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Fund or the Adviser, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or
economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Underwriter, impracticable or inadvisable to market the
Shares or to enforce contracts for the sale of the Shares, or (iii) if trading
in any securities of the Fund has been suspended or materially limited by the
Commission or the New York Stock Exchange or such national securities exchange
upon which the Fund's securities trade, or if trading generally on the New
York Stock Exchange or the American Stock Exchange or in the Nasdaq National
Market System has been suspended or materially limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by any of said exchanges or by such system or
by order of the Commission, the NASD or any other governmental authority, or a
material disruption has occurred in commercial banking or securities
settlement or clearance services in the United States or (iv) if a banking
moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. 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 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full force
and effect.
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriter shall be directed to Xxxxxxx Xxxxx & Co.
20
Inc., Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx & Xxxxx Incorporated at 0 Xxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 10080, Attention: Xxxxxxx Xxxxx, Vice President;
notices to the Fund shall be directed to each of them at 000 Xxxxxxxx Xxxx
Xxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000, Attention: Xxxxx X. Xxxxx, President;
notices to the Adviser shall be directed to 000 Xxxxxxxx Xxxx Xxxx,
Xxxxxxxxxx, Xxx Xxxxxx 00000, Attention: Xxxxxx X. Xxxx, Xx., President.
SECTION 12. Parties. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Fund, the Adviser and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriter, the Fund, the Adviser and their respective successors and the
controlling persons and officers, directors and general partner referred to in
Sections 7 and 8 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the
Underwriter, the Fund and the Adviser and their respective successors, and
said controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Shares from the Underwriter shall be deemed to be a successor
merely by reason of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
21
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Fund a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriter and the Fund and the Adviser in accordance with its
terms.
Very truly yours,
PREFERRED INCOME STRATEGIES
FUND, INC.
By:
------------------------------------
Authorized Officer
FUND ASSET MANAGEMENT, L.P.
By:
------------------------------------
Authorized Officer
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, XXXXXX, XXXXXX & XXXXX
INCORPORATED
By:
-------------------------------------
Authorized Signatory
22
SCHEDULE A
PREFERRED INCOME STRATEGIES FUND, INC.
(a Maryland corporation)
$ ___________________
Auction Market Preferred Stock
___________ Shares, Series A
___________ Shares, Series B
___________ Shares, Series C
___________ Shares, Series D
___________ Shares, Series E
(Liquidation Preference $25,000 per share)
1. The initial public offering price per share for the Shares, determined
as provided in Section 2 hereof shall be $25,000 plus accumulated dividends,
if any, from the date of original issue.
2. The purchase price per share for the Shares to be paid by the
Underwriter shall be $__________ plus accumulated dividends, if any, from the
date of original issue, being an amount equal to the initial offering price
set forth above less $__________ per share.
3. The dividend rate for the Series A AMPS for the initial dividend
period ending ________________shall be ____% , the dividend rate for the
Series B AMPS for the initial dividend period ending ______________ shall be
_____%, the dividend rate for the Series C AMPS for the initial dividend
period ending ________________shall be ____% , the dividend rate for the
Series D AMPS for the initial dividend period ending ______________ shall be
_____% and the dividend rate for the Series E AMPS for the initial dividend
period ending ______________ shall be _____%.
23
SABW Draft
April 7, 2003
Exhibit A
FORM OF OPINION OF FUND'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 6(b)
1. The Fund has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland.
2. The Fund has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under the Purchase Agreement.
3. The Fund is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in good
standing would not result in a material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Fund, whether or not arising in the ordinary course of
business (a "Material Adverse Effect").
4. The authorized, issued and outstanding capital stock of the Fund is as set
forth in the Prospectus under the caption "Description of Capital Stock." The
outstanding shares of Common Stock of the Fund have been duly authorized and
validly issued and are fully paid and nonassessable.
5. The Shares to be purchased by the Underwriter from the Fund have been duly
authorized for issuance and sale to the Underwriter pursuant to the Purchase
Agreement and, when issued and delivered by the Fund pursuant to the Purchase
Agreement against payment of the consideration set forth in the Purchase
Agreement, will be validly issued and fully paid and non-assessable and no
holder of the Shares is or will be subject to personal liability by reason of
being such a holder.
6. The issuance of the Shares is not subject to the preemptive or other
similar rights of any securityholder of the Fund.
7. To the best of our knowledge, the Fund does not have any subsidiaries.
8. The Purchase Agreement has been duly authorized, executed and delivered by
the Fund and complies with all applicable provisions of the Investment Company
Act.
9. The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the certificate pursuant to Rule 497(j) or the Prospectus pursuant to Rule
497(c) or Rule 497(h), as the case may be, has been made in the manner and
within the time period required by Rule 497(j), Rule 497(c) or Rule
24
497(h), as the case may be; and, to the best of our knowledge, no stop order
suspending the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no proceedings
for that purpose have been instituted or are pending or threatened by the
Commission.
10. The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus, and each amendment or supplement to the
Registration Statement and the Prospectus, as of their respective effective or
issue dates (other than the financial statements and supporting schedules
included therein or omitted therefrom, as to which we need express no opinion)
complied as to form in all material respects with the requirements of the 1933
Act, the Investment Company Act and the Rules and Regulations.
11. The form of certificate(s) used to evidence each the Shares complies in
all material respects with all applicable statutory requirements and with any
applicable requirements of the charter and by-laws of the Fund. To the best of
our knowledge, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Fund is a party, or to
which the property of the Fund is subject, before or brought by any court or
governmental agency or body, domestic or foreign, which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely affect the properties or assets thereof
or the consummation of the transactions contemplated in the Purchase Agreement
or the performance by the Fund of its obligations thereunder, other than those
disclosed in the Prospectus.
12. The information in the Prospectus under "Description of AMPS,"
"Description of Capital Stock," "Taxes" and in the Registration Statement
under item 29, to the extent that it constitutes matters of law, summaries of
legal matters, the Fund's charter and bylaws or legal proceedings, or legal
conclusions, has been reviewed by us and is correct in all material respects.
13. To the best of our knowledge, there are no statutes or regulations that
are required to be described in the Prospectus that are not described as
required.
14. All descriptions in the Prospectus of contracts and other documents to
which the Fund is a party are accurate in all material respects; to the best
of our knowledge, there are no franchises, contracts, indentures, mortgages,
loan agreements, notes, leases or other instruments of the Fund required to be
described or referred to in the Registration Statement or to be filed as
exhibits thereto other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto, and the descriptions thereof or
references thereto are correct in all material respects.
15. To the best of our knowledge, the Fund is not in violation of its charter
or by-laws and no default by the Fund exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated by reference
as an exhibit to the Registration Statement.
16. No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority
or agency, domestic or foreign (other than under the 1933 Act, the 1934 Act,
the Investment Company Act, the Rules and Regulations, which have been
obtained or as may be required under the securities or blue sky laws of the
various states, as to which we need express no opinion) is necessary or
required in connection with the due authorization, execution and delivery of
the Purchase Agreement, the Advisory Agreement, the Custody Agreement, the
Auction Agreement and the Letter of Representations or for the offering,
issuance, sale or delivery of the Shares.
17. The Advisory Agreement and the Custody Agreement have each been duly
authorized and approved by the Fund and comply as to form in all material
respects with all applicable provisions of the Investment Company Act, and
each has been duly executed by the Fund.
18. Each of the Auction Agent Agreement and the Letter of Representations has
been duly authorized, executed and delivered by the Fund, and each constitutes
a valid and binding obligation of the Fund, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization
or other laws relating to or affecting creditors' rights and to general
equitable principles.
19. The Fund is registered with the Commission under the Investment Company
Act as a closed-end, non-diversified management investment company, and all
required action has been taken by the Fund under the 1933 Act, the Investment
Company Act and the Rules and Regulations to make the public offering and
consummate the sale of the Shares pursuant to the Purchase Agreement; the
provisions of the charter and the by-laws of the Fund comply as to form in all
material respects with the requirements of the Investment Company Act; and, to
the best of their knowledge and information, no order of suspension or
revocation of such registration under the Investment Company Act, pursuant to
Section 8(e) of the Investment Company Act, has been issued or proceedings
therefor initiated or threatened by the Commission.
20. The execution, delivery and performance of the Purchase Agreement and the
consummation of the transactions contemplated in the Purchase Agreement and in
the Registration Statement (including the issuance and sale of the Shares, and
the use of the proceeds from the sale of the Shares as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the Fund
with its obligations under the Purchase Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined in
Section 1(a)(xi) of the Purchase Agreement) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of
the Fund pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument, known to
us, 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 (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not have a
Material Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws of the Fund, or any applicable law,
statute, rule, regulation, judgment, order, writ or decree, known to us, of
any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Fund or any of its properties, assets or
operations.
Nothing has come to our attention that has caused us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no
statement), at the time such Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectus or any amendment
or supplement thereto (except for financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates and written statements of responsible officers of and accountants
for the Fund and the Adviser and public officials. Such opinion shall not
state that it is to be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
Exhibit B
FORM OF OPINION OF SENIOR ATTORNEY OF THE
INVESTMENT ADVISER TO BE DELIVERED
PURSUANT TO SECTION 6(c)
(1) The Adviser has been duly organized as a limited partnership under
the laws of the State of Delaware, with power and authority to conduct its
business as described in the Registration Statement and in the Prospectus.
(2) The Adviser is duly registered as an investment adviser under the
Investment Advisers Act and is not prohibited by the Investment Advisers Act
or the Investment Company Act, or the rules and regulations under such Acts,
from acting under the Advisory Agreement for the Fund as contemplated by the
Prospectus.
(3) This Agreement and the Advisory Agreement have been duly authorized,
executed and delivered by the Adviser, and the Advisory Agreement constitutes
a valid and binding obligation of the Adviser, enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization or other laws relating to or affecting creditors' rights and to
general equity principles; and, to the best of his knowledge and information,
neither the execution and delivery of this Agreement or the Advisory Agreement
nor the performance by the Adviser of its obligations hereunder or thereunder
will conflict with, or result in a breach of, any of the terms and provisions
of, or constitute, with or without the giving of notice or the lapse of time
or both, a default under, any agreement or instrument to which the Adviser is
a party or by which the Adviser is bound, or any law, order, rule or
regulation applicable to the Adviser of any jurisdiction, court, Federal or
state regulatory body, administrative agency or other governmental body, stock
exchange or securities association having jurisdiction over the Adviser or its
properties or operations.
(4) To the best of his knowledge and information, the description of the
Adviser in the Registration Statement and in the Prospectus does not contain
any 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.
B-1
SABW Draft
April 7, 2003
Exhibit C
FORM OF ACCOUNTANTS'
COMFORT LETTER PURSUANT TO SECTION 6(e)
(1) We are independent public accountants with respect to the Fund within
the meaning of the 1933 Act, Investment Company Act and the applicable rules
and regulations thereunder adopted by the Commission;
(2) In our opinion the financial statements audited by us and included in
the Registration Statement and the Prospectus comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act,
the Investment Company Act and related rules and regulations adopted by the
Commission;
Such accountants shall also state that they have performed specified
procedures, not constituting an audit, including a reading of the latest
available interim financial statements of the Fund, a reading of the minute
books of the Fund, made inquiries of officials of the Fund responsible for
financial accounting matters and such other inquiries and procedures as may be
specified in such letter, and on the basis of such inquiries and procedures
nothing came to their attention that caused them to believe that (A) the
unaudited financial statements included in the Registration Statement do not
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act, the Investment Company Act and of the Rules and
Regulations applicable to unaudited interim financial statements included in
registration statements or are not in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements included in the Registration Statement, and
(B) during the period from the date of the unaudited financial statements
included in the Registration Statement to a specified date not more than three
days prior to the date of the Purchase Agreement, there was any change in the
capital stock or net assets of the Fund (other than by reason of the issuance
of Common Stock in connection with the Fund's dividend reinvestment plan, as
specified in such letter) or any increase in the long-term debt of the Fund,
as compared with amounts shown on the unaudited financial statements included
in the Registration Statement, except for changes which the Registration
Statement discloses have occurred or may occur; and in addition, they have
performed other specified procedures, not constituting an audit, with respect
to certain amounts, percentages, numerical data, financial information and
financial statements appearing in the Registration Statement, which previously
have been specified by such accountants and which shall be specified in such
letter, and have compared certain of such items with, and have found such
items to be in agreement with, the accounting and financial records of the
Fund.
