EXHIBIT (H)(i)
NAIC GROWTH FUND, INC.
5,000,000 SHARES
COMMON STOCK
UNDERWRITING AGREEMENT
__________________, 2002
Broker Dealer Financial Services Corp.
0000 XX 00xx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, Xxxx 00000
Gentlemen:
NAIC Growth Fund, Inc., a Maryland corporation (the "Fund") and Growth
Fund Advisor, Inc., a Michigan corporation (the "Investment Adviser"), each
confirms its agreement (the "Agreement") with Broker Dealer Financial Services
Corp., an Iowa corporation (the "Underwriter"), as follows:
1. Description of Securities. The Fund, proposes to issue and sell
through the Underwriter up to 5,000,000 shares (the "Maximum Amount") of common
stock, par value $0.001 per share (the "Common Shares"), on the terms set forth
in Section 3 hereof.
2. Representations and Warranties of the Fund, the Investment Adviser
and the Underwriter.
(a) The Fund and the Investment Adviser (collectively, the
"Representing Parties") jointly and severally represent and warrant to, and
agree with, the Underwriter as of the date hereof and as of each Closing Date
(as hereinafter defined) (each such date being hereinafter referred to as the
"Representation Date") that:
(i) The Fund has filed with the Securities and
Exchange Commission (the "Commission") a registration
statement on Form N-2 (No. 333-_______) and a related
preliminary prospectus for the registration of the Common
Shares under the Securities Act of 1933, as amended (the "1933
Act"), and the Investment Company Act of 1940, as amended (the
"1940 Act"), and has filed such amendments to such
registration statement on Form N-2, if any, and such amended
preliminary prospectuses as may have been required prior to
each Representation Date. The Fund will prepare and file such
additional amendments thereto and such amended prospectuses as
may hereafter be required. The Fund previously filed a
notification on Form N-8A of registration of the Fund as an
investment company under the 1940 Act and the rules and
regulations of the Commission under the 1940 Act (together
with the rules and regulations under the 1933 Act, the "Rules
and Regulations"). The registration statement, and the
prospectus (including the statement of additional information)
constituting a part
thereof, each as from time to time amended or supplemented
pursuant to the 1933 Act or 1940 Act, are herein referred to
as the "Registration Statement" and the "Prospectus,"
respectively, except that if any revised prospectus shall be
provided to the Underwriter by the Fund for use in connection
with the offer of the Common Shares (the "Offer") that differs
from the Prospectus on file at the Commission at the time the
Registration Statement becomes effective, the term
"Prospectus" shall refer to each such revised prospectus,
including the statement of additional information, from and
after the time it is first provided to the Underwriter for
such use.
(ii) At the time the Registration Statement becomes
effective and at each Representation Date, the Registration
Statement will comply in all material respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and
Regulations 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. From the time the Registration Statement becomes
effective through the termination of this Underwriting
Agreement (the "Termination Date"), the Prospectus (unless the
term "Prospectus" refers to a prospectus that has been
provided to the Underwriter by the Fund for use in connection
with the Offer which differs from the Prospectus on file with
the Commission at the time the Registration Statement becomes
effective, in which case from the time such prospectus is
first provided to the Underwriter for such use) will not
contain an untrue statement of a material fact or 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; provided, however, that
the representations and warranties in this subsection shall
not apply to statements in or omissions from the Registration
Statement or Prospectus made in reliance upon and in
conformity with information relating to the Underwriter
furnished to the Fund by the Underwriter in writing for use in
the Registration Statement or Prospectus.
(iii) The accountants who certified the financial
statements included in the Registration Statement were at the
time of such certification independent public accountants as
required by the 1933 Act, the 1940 Act and the Rules and
Regulations.
(iv) The financial statements included in the
Registration Statement present fairly the financial position
of the Fund as of the dates indicated and the results of its
operations for the periods specified; such financial
statements have been prepared in conformity with generally
accepted accounting principles consistently applied; and the
other financial and statistical information and data included
in the Registration Statement and Prospectus is accurately
presented in all material respects and prepared on a basis
consistent with such financial statements and the books and
records of the Fund.
(v) Since the respective dates as of which
information is given in the Registration Statement and in the
Prospectus, except as otherwise stated therein,
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(A) there has been no material adverse change in the
condition, financial or otherwise, of the Fund, or in the
earnings, business affairs or business prospects of the Fund,
whether or not arising in the ordinary course of business, (B)
there have been no transactions entered into by the Fund that
are material to the Fund other than those in the ordinary
course of business and (C) there has been no dividend or
distribution of any kind declared, paid or made by the Fund on
any class of its shares of capital stock, other than dividends
or distribution made in the ordinary course of business or
made for the purpose of maintaining the Fund's qualification
as a regulated investment company under Subchapter M
("Subchapter M") of the Internal Revenue Code of 1986, as
amended (the "Code").
(vi) The Fund has been duly organized and is validly
existing as a corporation in good standing under the laws of
the State of Maryland with power and authority to own its own
properties and conduct its business as described in the
Registration Statement; the Fund is duly qualified as a
foreign corporation to transact business and is in good
standing in each jurisdiction in which the failure to so
qualify, either individually or in the aggregate, would have a
material adverse effect upon the operations or financial
condition of the Fund; and the Fund has no subsidiaries.
(vii) The Fund is registered with the Commission
under the 1940 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 or, to the knowledge of the Representing Parties,
threatened by the Commission. No person is serving or acting
as an officer of the Fund who is ineligible to serve in such
office under the 1940 Act, and no person is acting or serving
as a director of the Fund except in accordance with the
provisions of the 1940 Act.
(viii) The Fund owns or possesses or has obtained all
material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease or own,
as the case may be, its properties and to carry on its
businesses as contemplated in the Prospectus, and the Fund has
not received any notice of proceedings relating to the
revocation or modification of any such licenses, permits,
covenants, orders, approvals or authorizations.
(ix) The authorized, issued and outstanding Common
Shares as of the date hereof is as set forth in the Prospectus
under the caption "Description of Shares", except for any
Common Shares that may have been issued under the Fund's
Dividend Reinvestment and Cash Purchase Plan (the "Cash
Purchase Plan") or pursuant to this Agreement; the outstanding
Common Shares have been duly authorized by all requisite
corporate action on the part of the Fund and are validly
issued and fully paid and non-assessable by the Fund; the
Common Shares to be sold pursuant to this Agreement have been
duly authorized by all requisite corporate action on the part
of the Fund for issuance pursuant to the terms of this
Agreement and, when issued and delivered by the Fund pursuant
to the terms of this Agreement against payment of
consideration therefor, will be validly issued
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and fully paid and non-assessable by the Fund; the Common
Shares conform in all material respects to the description
thereof set forth in the Prospectus under the caption
"Description of Shares"; and the issuance of each of the
Common Shares is not subject to preemptive rights.
(x) (A) The Fund is not in violation of its Articles
of Incorporation, as amended from time to time (the
"Articles"), or its by-laws as amended from time to time (the
"By-Laws") or 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 or by which it or its properties may be bound; (B) (i)
the execution and delivery of each of this Agreement, the
Investment Advisory Agreement dated October 2, 1989, as
amended (the "Investment Advisory Agreement"), between the
Fund and the Investment Adviser, as successor to the National
Association of Investors Corporation, a Michigan nonprofit
corporation ("NAIC"), the Custodial Agreement dated May 15,
19__ between the Fund and Standard Federal Bank N.A., as
successor to Michigan National Bank (the "Custodian
Agreement"), the Certificate of Appointment of American Stock
Transfer & Trust Company dated November 14, 2001 between the
Fund and American Stock Transfer & Trust Company (the
"Transfer Agency Agreement"), and the Escrow Agreement dated
____________, 2002 among the Fund, the Underwriter and
Standard Federal Bank N.A. (the "Escrow Agreement") (the
Investment Advisory Agreement, Custodian Agreement, Transfer
Agency Agreement, and Escrow Agreement are collectively
referred to herein as the "Fund Agreements") and the
consummation of the transactions contemplated herein and
therein have been duly authorized by all necessary corporate
action of the Fund and will not conflict with or constitute a
breach of, or, with or without giving notice or the lapse of
time or both, a default 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, loan agreement, note, lease or other
instrument to which the Fund is a party or by which it may be
bound or to which any of the property or assets of the Fund is
subject, nor will such action result in any violation of the
provisions of the Articles or By-Laws or any law,
administrative regulation or administrative or court decree
applicable to the Fund, and no consent, approval,
authorization or order of any court or governmental authority
or agency is required for the consummation by the Fund of the
transactions contemplated by this Agreement except such as has
been obtained under the 1940 Act and the 1933 Act or as may be
required under the state securities or Blue Sky laws or
foreign securities laws in connection with the sale of Common
Shares pursuant to this Agreement, (ii) each of this Agreement
and the Fund Agreements complies with all applicable
provisions of the 1940 Act, and (iii) each of this Agreement
and the Fund Agreements is in full force and effect and
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 similar laws relating to or affecting creditors' rights
generally and to general principles of equity.
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(xi) There is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Representing
Parties, threatened against or affecting, the Fund, which
might result in any material adverse change in the condition,
financial or otherwise, business affairs or business prospects
of the Fund, or might materially and adversely affect the
properties or assets of the Fund.
(xii) 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 which have not
been so described and filed as required.
(xiii) The Fund owns or possesses adequate rights
necessary to conduct its business as described in the
Registration Statement, and the Fund has not received any
notice of infringement of or conflict with asserted rights of
others with respect to any trademarks, service marks or trade
names which, singly or in the aggregate, if the subject of a
decision, ruling or finding of infringement by the Fund, would
materially adversely affect the conduct of the business,
operations, financial condition or income of the Fund.
(xiv) Since the date of its incorporation, the Fund
has qualified as a regulated investment company under
Subchapter M of the Code and will continue so to qualify. In
addition, the Fund will invest the proceeds of the Offer in
such a manner as to comply with the requirements of Subchapter
M of the Code.
(xv) The outstanding stock of the Fund is listed on
the Chicago Stock Exchange ("CHX"). The Common Shares have
been approved for listing, subject to official notice of
issuance, on the CHX.
(xvi) The Fund has not, directly or indirectly, (i)
taken any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of
the Fund to facilitate the sale or resale of the Common Shares
or (ii) except for sales pursuant to the Cash Purchase Plan,
since the filing of the Registration Statement, (A) sold, bid
for, purchased, or paid anyone any compensation for soliciting
purchases of, the Common Shares or (B) paid or agreed to pay
to any person any compensation for soliciting another to
purchase any other securities of the Fund (except for the sale
of Common Shares under this Agreement).
(xvii) [Intentionally omitted.]
(xviii) The Fund has not distributed and, prior to
the completion of the distribution of the Common Shares, will
not distribute any offering material in connection with the
offering and sale of the Common Shares other than the
Registration Statement, the Prospectus or other materials, if
any, permitted by the 1933 Act, the 1940 Act, the Rules and
Regulations or the Conduct Rules of the National Association
of Securities Dealers, Inc. (the "NASD").
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(xix) All advertising and other sales literature
(including "prospectus wrappers") approved in writing by the
Fund or the Investment Adviser or prepared by the Fund or the
Investment Adviser for use in connection with the offering and
sale of the Common Shares (collectively, "Sales Material")
comply in all material respects with the applicable
requirements of the 1933 Act, the 1940 Act, the Rules and
Regulations and the rules and written interpretations of the
NASD and no such Sales Material contained or contains an
untrue statement of a material fact or omitted or omits to
state a 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.
(xx) Each of the Fund Agreements and the Fund's
obligations under this Agreement comply, or will comply, in
all material respects with all applicable provisions of the
1933 Act, the 1940 Act, the Rules and Regulations, the
Investment Advisers Act of 1940, as amended (the "Advisers
Act") and the rules and regulations of the Commission under
the Advisers Act (the "Advisers Act Rules and Regulations").
(xxi) Except as disclosed in the Registration
Statement and the Prospectus, no officer or director of the
Fund is an "interested person" (as defined in the 0000 Xxx) of
the Fund or the Investment Adviser or an "affiliated person"
(as defined in the 0000 Xxx) of the Investment Adviser or the
Underwriter.
(xxii) There are, and there will be, no material
restrictions, limitations or regulations with respect to the
ability of the Fund to invest its assets as described in the
Prospectus other than as described therein.
(xxiii) The Fund and, to the Fund's Knowledge, its
Custodian, Dividend Disbursement Agent and Transfer Agent
maintain a system of internal accounting controls sufficient
to provide reasonable assurances that (A) transactions are
executed in accordance with general or specific authorization
by the Investment Adviser or the Board of Directors of the
Fund and with the applicable requirements of the 1940 Act and
the Rules and Regulations thereunder 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 material compliance with the books and
records requirements under the 1940 Act and the Rules and
Regulations thereunder; (C) access to assets is permitted only
in accordance with general or specific authorization by the
Investment Adviser or the Board of Directors of the Fund; and
(iv) the recorded accounts for assets is compared with
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(xxiv) The Fund, subject to the Registration
Statement having been declared effective and the filing of the
Prospectus under Rule 497 under the 1933 Act, if necessary,
has taken or will take all required action under the 1933 Act,
the
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1940 Act and the Rules and Regulations to make the offering
and consummate the sale of the Common Shares as contemplated
by this Agreement.
(xxv) The Fund will timely file the requisite copies
of the Prospectus with the Commission pursuant to Rule 497(c)
or Rule 497(h) under the 1933 Act, whichever is applicable,
or, if applicable, will timely file the certification
permitted by Rule 497(j) under the 1933 Act and will advise
the Underwriter of the time and manner of such filing.
(xxvi) The Fund will use its best efforts to perform
all of the agreements required of it and discharge all
conditions to closing as set forth in this Agreement.
(b) The Representing Parties jointly and severally represent and
warrant to, and agree with, the Underwriter as of the date hereof and as of each
Representation Date as follows:
(i) The Investment Adviser has been duly organized as
a corporation under the laws of the State of Michigan with
corporate power and authority to conduct its business as
described in the Prospectus; the Investment Adviser is duly
qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which the failure to
so qualify, either individually or in the aggregate, would
have a material adverse effect upon the operations or
financial condition of the Investment Adviser.
(ii) The Investment Adviser is duly registered as an
investment adviser under the Advisers Act and is not
prohibited by the Advisers Act or the 1940 Act, or the rules
and regulations under such acts, from acting as Investment
Adviser to the Fund under the terms of the Investment Advisory
Agreement as contemplated by the Prospectus.
(iii) The description of the Investment Adviser in
the Prospectus is true and correct in all material respects
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
not misleading; and there are no pending legal proceedings
that would be required to be described under Item 12 of Form
N-2.
(iv) Each of this Agreement and the Investment
Advisory Agreement has been duly authorized, executed and
delivered by the Investment Adviser; each of this Agreement
and the Investment Advisory Agreement is in full force and
effect and constitutes a valid and binding obligation of the
Investment Adviser, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization or other similar laws relating to or affecting
creditors' rights generally and to general principles of
equity; and neither the execution and delivery of this
Agreement nor the performance by the Investment Adviser of its
obligation hereunder or under the Investment Advisory
Agreement will conflict with, or result in a breach of, any of
the terms and
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provisions of, or constitute, with or without giving notice or
lapse of time or both, a material default under any agreement
or instrument to which the Investment Adviser is a party or by
which the Investment Adviser is bound, or any law, order, 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 Investment Adviser or
its properties or operations.
(v) The Investment Adviser has available to it the
financial, personnel and other resources necessary for the
performance of its services and obligations as contemplated in
the Prospectus.
(vi) The Investment Adviser has not, directly or
indirectly, (i) taken any action designed to cause or result
in, or that has constituted or might reasonably be expected to
constitute, the stabilization or manipulation of the price of
any security of the Fund to facilitate the sale or resale of
the Common Shares or (ii) except for sales pursuant to the
Cash Purchase Plan, since the filing of the Registration
Statement, (A) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of the Common Shares or
(B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the
Fund.
(vii) There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Representing
Parties, threatened or contemplated against or affecting the
Investment Adviser, which might result in any material adverse
change in the condition, financial or otherwise, business
affairs or business prospects of the Investment Adviser or
materially and adversely affect the properties or assets of
the Investment Adviser; and there are no material contracts or
documents of the Investment Adviser that are required to be
disclosed in the Registration Statement by the 1933 Act, the
1940 Act or by the Rules and Regulations that have not been so
disclosed therein.
(viii) Except for the need to have the Commission
declare the Registration Statement effective, no consent,
approval, authorization, notification or order of, or any
filing with, any court or governmental agency or body, whether
foreign or domestic, is required for the consummation by the
Investment Adviser of the transactions contemplated by this
Agreement.
(ix) Except as disclosed in the Registration
Statement and the Prospectus, subsequent to the respective
dates as of which such information is given in the
Registration Statement and the Prospectus, the Investment
Adviser has not incurred any liability or obligation, direct
or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the
Investment Adviser or the Fund and that is required to be
disclosed in the Registration Statement or the Prospectus, and
there has not been any material adverse change, or any
development, either individually or in the aggregate,
8
involving or which may reasonably be expected to have a
material adverse effect upon the operations or financial
condition of the Investment Adviser.
(x) (A) The Investment Adviser owns or possesses all
material governmental licenses, permits, consents, orders,
approvals or other authorizations (collectively, "Adviser
Permits"), whether foreign or domestic, to enable the
Investment Adviser to perform its obligations under the
Investment Advisory Agreement; (B) the Investment Adviser has
fulfilled and performed all its material obligations with
respect to such Adviser Permits and no event has occurred
which allows, or after notice or lapse of time would allow,
revocation or termination thereof or would result in any other
material impairment of the rights of the Investment Adviser
under any such permit, subject in each case to such
qualification as may be set forth in the Registration
Statement and Prospectus; and (C) none of such Adviser Permits
contains any restriction that is materially burdensome to the
Investment Adviser, except where the failure of (A), (B) or
(C) to be accurate would not, individually or in the
aggregate, have a material adverse effect upon the operations
or financial condition of the Investment Adviser or the
Investment Adviser's performance of the Investment Advisory
Agreement.
(xi) The information regarding the Investment Adviser
in the Registration Statement and the Prospectus complies and
will comply in all material respects with the requirements of
Form N-2.
(c) The Underwriter represents and warrants to, and agrees with, the
Fund and the Investment Adviser, as of the date hereof and as of each
Representation Date as follows:
(i) The Underwriter is registered as a broker-dealer
with the Commission and with the Iowa Division of Insurance,
Securities Bureau, and is registered, to the extent
registration is required, with the appropriate governmental
agency in each state in which it will offer or sell the Common
Shares, and is a member of the National Association of
Securities Dealers, Inc., and will use its best efforts to
maintain such registrations and qualifications and memberships
through the term of the Offer.
(ii) No action or proceeding is pending or, to the
knowledge of the Underwriter, threatened, either in any court
of competent jurisdiction, before the Commission or any state
securities administrator, concerning the Underwriter's
activities as a broker or dealer that would affect the Offer
of the Common Shares.
(iii) The Underwriter will offer the Common Shares
only in those states and in the quantities that are identified
in the Blue Sky Memoranda from the Fund's counsel to the
Underwriter that the offering of the Common Shares has been
qualified for sale under the applicable state statutes and
regulations. The Underwriter, however, may offer the Common
Shares in other states if (i) the transaction is exempt from
the registration requirements in that state, (ii) the Fund's
counsel has received notice ten days prior to the proposed
sale, and (iii) the Fund's counsel does not object within said
ten day period.
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(iv) The Underwriter is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Iowa with all requisite power and authority to enter
into this Agreement and to carry out its obligations
hereunder.
(v) This Agreement has been duly authorized, executed
and delivered by the Underwriter and is a valid agreement on
the part of the Underwriter.
(vi) Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will
result in any breach of any of the terms or conditions of, or
constitute a default under, the articles of incorporation or
bylaws of the Underwriter or any indenture, agreement or other
instrument to which the Underwriter is a party or violate any
order directed to the Underwriter of any court or any federal
or state regulatory body or administrative agency having
jurisdiction over the Underwriter or its affiliates.
(d) Any certificate signed by any officer of the Fund or the Investment
Adviser and delivered to the Underwriter or counsel for the Underwriter shall be
deemed a representation and warranty by the Fund or the Investment Adviser, as
the case may be, to the Underwriter, as to the matters covered thereby.
3. Sale and Delivery of Securities. (a) On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Fund agrees to issue and sell through
the Underwriter, as exclusive underwriter for the sale of Common Shares pursuant
to this Agreement or any arrangement similar to that contemplated by this
Agreement, and the Underwriter agrees to sell, as underwriter for the Fund, on a
"best efforts" basis, up to the Maximum Amount of Common Shares during the term
of this Agreement in accordance with the 1933 Act, the 1940 Act, the Securities
Exchange Act of 1934 (the "1934 Act"), the Conduct Rules of the NASD and the
terms set forth herein; provided, however, that the Underwriter shall not be
deemed to be in violation of this sentence if such violation is caused by the
failure of the Fund or the Investment Adviser to comply with its agreements and
representations contained herein. In connection with the performance of its
obligations under this Agreement, the Underwriter may, with the approval of the
Fund, use the services of selected broker-dealers ("Selected Dealers") who are
members of the NASD. The arrangements, if any, between the Underwriter and any
Selected Dealer shall be set forth in a Selected Dealer Agreement in a form
attached hereto as Exhibit A, unless the Fund shall consent to other
arrangements.
(b) The Fund shall calculate the Current Net Asset Value (as such term
is used in Section 23(b) of the 0000 Xxx) per Common Share at the close of
business on Thursday each week or if any Thursday is not a business day the
business day immediately preceding such Thursday (the "Determination Date") and
shall notify the Underwriter of the result of such calculation by 2:00 p.m., New
York City time, on the first business day following the Determination Date each
week. "Sales Price" in this Agreement means the price equal to the Current Net
Asset Value per Common Share as of 5:30 p.m., New York City time, on the
Determination Date of each week, which sales price shall be effective until 5:30
p.m., New York City time, on the following Determination Date.
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(c) The Underwriter, and any Selected Dealer selected by the
Underwriter, may offer Common Shares only pursuant to a properly completed and
executed Subscription Agreement in the form attached hereto as Exhibit B and in
accordance with the terms of the Prospectus. Each person desiring to purchase
Common Shares shall be required to (i) complete, manually execute and mail or
deliver a Subscription Agreement to the Fund in care of the Investment Adviser
and (ii) mail or deliver to the Fund in care of the Investment Adviser a check
payable to Standard Federal Bank N.A., as escrow agent (the "Escrow Agent")
(each, a "Subscription Payment") in an amount of at least the Minimum
Subscription in accordance with the terms of the Prospectus. No later than by
noon of the first business day following receipt of a completed Subscription
Agreement and a Subscription Payment, the Investment Adviser shall (x) forward
an electronic image or copy of such Subscription Agreement to the Underwriter
and (y) deposit any Subscription Payment it receives with the Escrow Agent. The
Investment Adviser will retain all completed and executed subscription
documents. No subscription shall be effective unless and until it is (i)
accepted on behalf of the Fund by the Investment Adviser and (ii) approved by
the Underwriter. The Fund and the Underwriter reserve the right, in their sole
discretion, to refrain from accepting or approving any subscription submitted.
No person subscribing shall have the right to receive a refund of its
Subscription Payment at any time after a Subscription Agreement is received;
provided that, if for any reason a subscription is not accepted by either the
Fund or the Underwriter, then the Fund will promptly instruct the Escrow Agent
to refund such Subscription Payment without interest.
(d) The Fund will issue and sell Common Shares, at the Sales Price, to
each person for whom (i) the Fund has received an executed Subscription
Agreement, (ii) the Subscription Agreement has been accepted on behalf of the
Fund by the Investment Adviser and approved by the Underwriter, and (iii) the
Subscription Payment is held in immediately available funds by the Escrow Agent;
provided, however, that the aggregate number of shares issued and sold under
this Agreement will not exceed the Maximum Amount. The Fund and Investment
Adviser will cooperate with the Underwriter and if applicable, the Selected
Dealers to remedy any incomplete or defective Subscription Agreements.
(e) Sales will be made in the manner and at the times specified in the
Registration Statement and according to procedures agreed upon from time to time
by the Investment Adviser and the Underwriter. Settlement for sales of Common
Shares will occur on the first business day following the date on which such
sales are made (each a "Closing Date"). The amount of proceeds for such sales to
be delivered by the Escrow Agent to the Fund against the receipt of the Common
Shares sold shall be equal to the aggregate sales prices at which such Common
Shares were sold.
(f) Common Shares sold in the Offer will be held by American Stock
Transfer & Trust Company or its successor as the Fund's transfer agent (the
"Transfer Agent") in noncertificated form in the purchaser's name, unless the
purchaser elects otherwise in the Subscription Agreement. If a purchaser elects
to receive a certificate for its Common Shares in the Subscription Agreement,
the Fund will not issue fractional shares to the purchaser and will refund the
portion of the Purchase Price representing the fractional share, without
interest, at the time of delivering the share certificate. Fractional shares
will be issued for shares held by the Transfer Agent in noncertificated form.
Such fractional shares will be aggregated with any other fractional shares held
by the Transfer Agent for the purchaser from time to time and will be paid
11
for by check, at the then-prevailing market price, if the purchaser requests a
certificate for its shares after the acceptance of the purchaser's subscription
in the Offer.
(g) On each Closing Date, the Fund and the Investment Adviser and the
Underwriter shall each be deemed to have affirmed each representation, warranty,
covenant and other agreement contained in this Agreement. At the request of the
Fund, the Investment Adviser or the Underwriter, but not more frequently than
once each month, the Fund, the Investment Adviser and the Underwriter shall each
affirm in writing each representation, warranty, covenant and other agreement
contained in this Agreement. The obligation of the Underwriter to use its
reasonable efforts to sell the Common Shares shall be subject to the continuing
accuracy of the representations and warranties of the Representing Parties
herein, to the performance by the Fund and Investment Adviser of their
obligations hereunder and to the continuing satisfaction of the additional
conditions specified in Section 5 of this Agreement.
(h) In connection with the sale of Common Shares under this Agreement,
the Underwriter is not authorized by the Fund to give any information or to make
any representations in connection with this Agreement other than those contained
in the Registration Statement and the Prospectus, and the Underwriter agrees not
to give any unauthorized information or to make any unauthorized representations
and to cause Selected Dealers to so agree (and use reasonable efforts to enforce
such agreement). Except as specifically provided in this Agreement, the
Underwriter is not authorized to act as an agent for the Fund, and it agrees not
to act or to purport to act as an agent for the Fund.
(i) The Fund shall pay a sales commission to the Underwriter for sales
of Common Shares at a rate of 3.5% of the gross Sales Price per share of the all
Common Shares sold under this Agreement. In the event that the Underwriter
enters into a Selected Dealer Agreement with an unaffiliated Selected Dealer,
such commission rate shall be permanently increased to a fixed commission rate
5.0% of the gross Sales Price per share of all Common Shares sold thereafter.
The compensation payable to the Underwriter for Common Shares sold shall be paid
no later than the close of business on the first business day following each
Closing Date.
(j) The Fund has paid the Underwriter a non-accountable expense
allowance of $15,000, and the Underwriter acknowledges receipt of that amount.
Except for such non-accountable allowance and as provided in Section 4(f),
neither the Fund nor the Investment Adviser shall be responsible for payment or
reimbursement of the fees or expenses of Underwriter's counsel.
(k) The Underwriter and each Selected Dealer shall be an independent
contractor and neither the Underwriter, any Selected Dealer nor any of their
directors, officers or employees as such, is or shall be, solely reason of this
Agreement, an employee of the Fund.
(l) The Underwriter shall have the right, at reasonable times and on
reasonable notice, to inspect the records of the Fund, the Investment Adviser
and the Escrow Agent relating to the Offer and to discuss such records with
appropriate representatives of the Fund, Investment Adviser and Escrow Agent.
12
4. Covenants of the Fund. The Fund covenants and agrees with the
Underwriter that:
(a) The Fund will use its reasonable efforts (i) to cause the
Registration Statement to become effective under the 1933 Act, (ii) if required,
to cause the issuance of any orders exempting the Fund from any provisions of
the 1940 Act, in which case it will advise the Underwriter promptly as to the
time at which any such orders are issued, and (iii) to maintain during the term
of this Agreement the effectiveness of the Registration Statement under the 1933
Act and of the Fund under the 1940 Act.
(b) The Fund will orally notify the Underwriter promptly, and confirm
the notice in writing, of the (i) effectiveness of the Registration Statement
and any amendment thereto (including any post-effective amendment), (ii) receipt
of any comments from the Commission, (iii) request by the Commission for any
amendment to the Registration Statement, any amendment or supplement to the
Prospectus or additional information, (iv) issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (v) 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 1940 Act or the
initiation of any proceeding for that purpose and (vi) suspension of the
qualification of the Common Shares for offering or sale in any jurisdiction. The
Fund will make every reasonable effort to prevent the issuance of any stop order
described in subsection (iv) hereunder or any order of suspension or revocation
described in subsection (v) or subsection (vi) 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.
(c) The Fund will give the Underwriter notice of its intention to file
any amendment to the Registration Statement (including any post-effective
amendment) or any amendment or supplement to the Prospectus (including any
revised prospectus that the Fund proposes for use by the Underwriter, which
differs from the prospectus on file at the Commission at the time the
Registration Statement becomes effective), whether pursuant to the 1940 Act, the
1933 Act, or otherwise, and will furnish the Underwriter and counsel for the
Underwriter with copies of any such amendment or supplement within a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file any such amendment or supplement to which the Underwriter or
counsel for the Underwriter reasonably shall object.
(d) During the period in which a prospectus relating to the Common
Shares is required to be delivered under the 1933 Act, the Fund will prepare and
file with the Commission, promptly upon the Underwriter's request, any
amendments or supplements to the Registration Statement or Prospectus that are
required in connection with the distribution of the Common Shares by the
Underwriter; and it will furnish to the Underwriter and counsel for the
Underwriter at the time of filing thereof a copy of any document that upon
filing is deemed to be incorporated by reference in the Registration Statement
or Prospectus; and the Fund will cause each amendment or supplement to the
Prospectus to be filed with the Commission as required pursuant to the
applicable paragraph of Rule 497 of the Rules and Regulations within the time
period prescribed.
13
(e) Within the time during which a prospectus relating to the Common
Shares is required to be delivered under the 1933 Act, the Fund will comply as
far as it is able with all requirements imposed upon it by the 1933 Act and by
the Rules and Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of or dealings in the Common Shares as
contemplated by the provisions hereof and the Prospectus. If during such period
any event occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances then existing, not misleading, or if during such period it is
necessary to amend or supplement the Registration Statement or Prospectus to
comply with the 1933 Act, the Fund will promptly notify the Underwriter to
suspend the offering of Common Shares during such period and the Fund will amend
or supplement the Registration Statement or Prospectus so as to correct such
statement or omission or effect such compliance.
(f) The Fund will use its reasonable efforts to qualify the Common
Shares for sale under the securities laws of such jurisdictions as the
Underwriter and the Fund mutually agree to continue such qualifications in
effect so long as required for the distribution of the Common Shares. The Fund
will pay all fees and expenses (including attorney fees) in connection with such
qualification.
(g) The Fund will furnish to the Underwriter and its counsel (at the
expense of the Fund) copies of the Registration Statement, the Prospectus and
all amendments and supplements to the Registration Statement or Prospectus that
are filed with the Commission during the period in which a prospectus relating
to the Common Shares is required to be delivered under the 1933 Act, in each
case as soon as available and in such quantities as the Underwriter may from
time to time reasonably request.
(h) The Fund will make generally available to its security holders as
soon as practicable, but in any event not later than 60 days after the close of
the period covered thereby, an earnings statement in form complying with the
provisions of Rule 158 of the Rules and Regulations covering a 12-month period
that satisfies the provisions of Section 11(a) of the Act and Rule 158 of the
Rules and Regulations.
(i) The Fund, whether or not the transactions contemplated hereunder
are consummated or this Agreement is terminated, will pay all expenses incident
to the performance of its obligations hereunder, including, but not limited to,
expenses relating to (i) the printing and filing of the Registration Statement
as originally filed and of each amendment thereto, (ii) the preparation,
issuance and delivery of the Common Shares, (iii) the reasonable fees and
disbursements of the Fund's counsel and accountants, (iv) the qualification of
the Common Shares under securities laws in accordance with the provisions of
Section 4(f) of this Agreement, including filing fees and any reasonable fees or
disbursements of counsel for the Underwriter in connection therewith, (v) the
printing and delivery to the Underwriter and any Selected Dealer of copies of
the preliminary prospectus, of the Prospectus and any amendments or supplements
thereto, and of this Agreement, (vi) the fees and expenses incurred in
connection with the listing of the Common Shares on the CHX, (vii) the filing
fees of the Commission and the National Association of Securities Dealers, Inc.,
and (viii) the fees and expenses of third party marketing assistance firms if
the Fund and the Underwriter agree to use such firms.
14
(j) The Fund will apply the net proceeds from the sale of the Common
Shares as set forth in the Prospectus.
(k) The Fund will not, directly or indirectly, offer or sell any Common
Shares (other than the Common Shares offered pursuant to the provisions of this
Agreement) or securities convertible into or exchangeable for, or any rights to
purchase or acquire, Common Shares during the period from the date of this
Agreement through the final Closing Date for the sale of Shares hereunder
without (a) giving the Underwriter at least ten business days' prior written
notice specifying the nature of the proposed sale and the date of such proposed
sale and (b) suspending sales pursuant to this Agreement for such period of time
as may reasonably be determined by agreement of the Fund and the Underwriter;
provided, however, that no such notice and suspension shall be required in
connection with the Fund's issuance or sale of Common Shares in connection with
the Fund's issuance or sale of Common Shares under the terms of the Cash
Purchase Plan (as in effect on the date hereof).
(l) The Fund will, at any time during the term of this Agreement, as
supplemented from time to time, advise the Underwriter immediately after it
shall have received notice or obtain knowledge thereof, of any information or
fact that would alter or affect any opinion, certificate, letter and other
document provided to the Underwriter pursuant to Section 5 herein.
(m) Each time that the Registration Statement or the Prospectus shall
be amended or supplemented (other than a supplement filed pursuant to Rule
497(h) under the 1933 Act that contains solely information on number of shares
sold, sale prices and dates of sale), the Fund shall furnish or cause to be
furnished to the Underwriter forthwith a certificate dated the date of filing
with the Commission of such amendment or supplement, or the date of
effectiveness of amendment, as the case may be, in form satisfactory to the
Underwriter to the effect that the statements contained in the certificates
referred to in Section 5(f) hereof which were last furnished to the Underwriter
are true and correct at the time of such amendment, supplement, filing, as the
case may be, as though made at and as of such time (except that such statements
shall be deemed to relate to the Registration Statement and the Prospectus as
amended and supplemented to such time) or, in lieu of such certificates,
certificates of the same tenor as the certificates referred to in said Section
5(f), modified as necessary to relate to the Registration Statement and the
Prospectus as amended and supplemented to the time of delivery of such
certificate.
(n) Each time that the Registration Statement or the Prospectus is
amended or supplemented (other than a supplement filed pursuant to Rule 497(h)
under the 1933 Act that contains solely information on number of shares sold,
sale prices and dates of sale), the Fund shall furnish or cause to be furnished
forthwith to the Underwriter and to counsel to the Underwriter a written opinion
of Xxxxxx, Xxxxxxx & Xxxxxxx LLP, counsel to the Fund ("Fund Counsel"), or other
counsel satisfactory to the Underwriter, dated the date of filing with the
Commission of such amendment, supplement or other document and the date of
effectiveness of such amendment, as the case may be, in form and substance
satisfactory to the Underwriter, of the same tenor as the opinion and additional
statement referred to in Section 5(d) hereof, but modified as necessary to
relate to the Registration Statement and the Prospectus as amended and
supplemented to the time of delivery of such opinion.
15
(o) Each time that the Registration Statement or the Prospectus shall
be amended or supplemented to include additional amended financial information
or there is filed with the Commission any document incorporated by reference
into the Prospectus which contains additional amended financial information, the
Fund shall cause Xxxxxx & Xxxxx, LLP or other independent accountants
satisfactory to the Underwriter, forthwith to furnish the Underwriter, with a
copy to counsel to the Underwriter, a letter, dated the date of effectiveness of
such amendment, or the date of filing of such supplement or other document with
the Commission, as the case may be, in form satisfactory to the Underwriter, of
the same tenor as the letter referred to in Section 5(e) hereof but modified to
relate to the Registration Statement and the Prospectus, as amended and
supplemented to the date of such letter; provided, however, that the Underwriter
acknowledges that no such letter shall be required for a supplement filed
pursuant to Rule 497(h) under the 1933 Act that contains solely information on
number of shares sold, sale prices and dates of sale.
(p) The Fund will maintain its qualification as a regulated investment
company entitled to the benefits of Subchapter M of the Code.
(q) The Fund and the Investment Adviser will not, directly or
indirectly, (i) take any action designed to cause or result in, or that
constitutes or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Fund to facilitate the sale or
resale of the Common Shares or (ii) except for sales pursuant to the Cash
Purchase Plan, sell, bid for, purchase, or pay anyone any compensation for
soliciting purchases of the Common Shares or pay or agree to pay any person any
compensation for soliciting another to purchase any other securities of the Fund
(except for the sale of Common Shares under this Agreement).
5. Conditions of Underwriter's Obligations. The obligations of the
Underwriter to use its reasonable efforts to sell the Common Shares as provided
herein shall be subject to the accuracy, as of the date and hereof, and as of
each Closing Date, of the representations and warranties of the Fund and the
Investment Adviser contained herein, to the performance by each of them of their
respective obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceeding for that purpose shall have been instituted or, to the
knowledge of the Fund, the Investment Adviser or the Underwriter, threatened by
the Commission, and any request of the Commission for additional information (to
be included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the Underwriter's satisfaction.
(b) The Underwriter shall not have advised the Fund that the
Registration Statement or Prospectus, or any amendment or supplement thereto,
contains a statement of fact that in the Underwriter's opinion is untrue and is
material, or omits to state a fact that in the Underwriter's opinion is material
and is required to be stated therein or is necessary to make the statements
therein not misleading.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there shall not have
16
been any material change in the capitalization of the Fund (other than sales of
shares pursuant to this Agreement or the Cash Purchase Plan), or any material
adverse change, or any development that may reasonably be expected to cause a
material adverse change, in the condition (financial or other), business,
prospects, net worth or results of operations of the Fund.
(d) The Underwriter shall have received by the first day on which sales
are permitted to be made by the Underwriter hereunder (the "Commencement Date")
and at every other date specified in Section 4(n) hereof, opinions of Fund
Counsel, which opinion may rely, in part as to matters of Maryland law, upon an
opinion from other counsel to the Fund, satisfactory to the Underwriter (and
upon which the Underwriter shall be entitled to rely to the same extent as Fund
Counsel), dated as of the Commencement Date or as of such other date, as
applicable, to the effect that:
(i) The Fund has been duly established and is validly
existing as a corporation in good standing under the laws of
the State of Maryland, the Investment Adviser has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Michigan.
(ii) Each of the Fund and the Investment Adviser has
the corporate power and authority to own, lease and operate
its respective properties, to execute, deliver and perform
this Agreement and the Fund Agreements to which it is a party,
and to conduct its respective business as described in the
Registration Statement and the Prospectus.
(iii) Each of the Fund and the Investment Adviser is
duly qualified as a corporation to transact business and is in
good standing in the jurisdiction of its principal place of
business and is duly qualified to do business in each
jurisdiction where such qualification is required, except
where the failure to so qualify would not have a material
adverse effect on the condition, financial or otherwise, or
the earnings, business affairs or business prospects of the
Fund, the Investment Adviser.
(iv) The Fund has an authorized, issued and
outstanding capitalization as set forth in the Prospectus as
of the dates specified therein. All of the outstanding Common
Shares have been duly authorized by requisite corporate action
on the part of the Fund and validly issued, are fully paid and
non-assessable by the Fund and conform to the description
thereof in the Prospectus.
(v) The Common Shares have been duly and validly
authorized, and, when issued and delivered to and paid for by
the purchasers thereof pursuant to this Agreement, will be
fully paid and nonassessable and conform to the description
thereof in the Prospectus; the issuance of the Common Shares
is not subject to any preemptive or other rights to subscribe
for any of the Common Shares under any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which
the Fund is a party or by which the Fund or any of its
properties are bound, or under the Articles of Incorporation
or By-Laws of the Fund, or under the Maryland General
Corporation Law; all action required to be
17
taken for the authorization, issue and sale of the Common
Shares have been validly and sufficiently taken; the form of
certificate, if any, used to evidence the Common Shares is in
proper form and complies with all applicable statutory
requirements; and the Common Shares are the subject of an
effective registration statement permitting their sale in the
manner contemplated by this Agreement.
(vi) This Agreement has been duly authorized,
executed and delivered by the Fund and the Investment Adviser,
complies with all applicable provisions of the 1933 Act, the
1940 Act, the Advisers Act and the rules and regulations under
such acts and constitutes a valid and binding agreement of the
Fund, the Investment Adviser and NAIC, enforceable in
accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors'
rights and to general equity principles.
(vii) Each of the Fund Agreements have been duly
authorized, executed and delivered by the Fund and the
Investment Adviser, as the case may be, comply as to form in
all material respects with all applicable provisions of the
1933 Act, the 1940 Act, the Advisers Act and the rules and
regulations under such acts and constitute the valid and
binding obligation of each of the Fund and the Investment
Adviser, enforceable in accordance with their terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(viii) The Registration Statement has become
effective under the 1933 Act; to the knowledge of such counsel
after due inquiry, no stop order suspending the effectiveness
of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or threatened
by the Commission.
(ix) The Registration Statement, when it became
effective, and the Prospectus and any amendment or supplement
thereto, on the date of filing thereof with the Commission
(and at each Closing Date on or prior to the date of the
opinion), complied as to form in all material respects with
the requirements of the 1933 Act, the 1940 Act and the Rules
and Regulations.
(x) The description in the Registration Statement and
Prospectus of statutes, legal and governmental proceedings,
contracts and other documents are accurate in all material
respects and fairly present the information required to be
shown; and such counsel do not know of any statutes or legal
or governmental proceedings required to be described in the
Prospectus that are not described as required.
(xi) To the best of such counsel's knowledge and
information, there are no contracts, indentures, mortgages,
loan agreements, notes, leases or other instruments of the
Fund or the Investment Adviser that are required to be
described or referred to in the Registration Statement or to
be filed as exhibits
18
thereto other than those respectively described or referred to
therein or filed as exhibits thereto, the descriptions thereof
and references thereto are correct in all material respects,
and no default exists in the due performance or observance of
any material obligation, agreement, covenant or condition
contained in any contract, indenture, loan agreement, note or
lease so described, referred to or filed.
(xii) No consent, approval, authorization or order of
any court or governmental authority or agency is required in
connection with the sale of the Common Shares pursuant to this
Agreement, except such as has been obtained under the 1933
Act, the 1940 Act or the Rules and Regulations or such as may
be required under state securities laws; and the execution,
delivery and performance of, and the consummation of the
transactions contemplated by, this Agreement and the Fund
Agreements by each of the Fund and Investment Adviser, as
applicable, will not conflict with, or constitute or result in
a breach or violation by the Fund or the Investment Adviser of
or a default under, any of the terms or provisions of, (A) any
contract, indenture, mortgage, loan agreement, note, lease or
other instrument known to such counsel to which the Fund or
the Investment Adviser is a party or by which any of them is
bound or to which any of their property or assets are subject,
(B) the provisions of the Articles of Incorporation or By-Laws
of the Fund, or the articles of incorporation or by-laws of
the Investment Adviser or (C) any statute, or any order, rule
or regulation of any court or governmental agency or body,
applicable to the Fund or the Investment Adviser or any of
their businesses or properties.
(xiii) The Fund is registered with the Commission
under the 1940 Act as a closed-end diversified management
investment company, and all required action has been taken by
the Fund under the 1933 Act, the 1940 Act and the Rules and
Regulations to make and consummate the Offer; the provisions
of the Articles of Incorporation and By-Laws of the Fund
comply in all material respects with the requirements of the
1940 Act and the rules and regulations thereunder; and, to the
best of such counsel's knowledge and information, no order of
suspension or revocation of such registration under the 1940
Act, pursuant to Section 8(e) of the 1940 Act, has been issued
or proceedings therefor initiated or threatened by the
Commission.
(xiv) The information in the Prospectus (and
statement of additional information) under the captions "The
Fund", "Investment Objective and Policies," "The Investment
Adviser," "Description of Shares," "The Offering" and
"Taxation", to the extent that it constitutes matters of law
or legal conclusions thereunder, has been reviewed by such
counsel and is accurate and correct in all material respects.
(xv) The Investment Adviser is duly registered as an
investment adviser under the Advisers Act and is not
prohibited by the Advisers Act or the 1940 Act, or the rules
and regulations under such acts, from acting under the
Investment
19
Advisory Agreement for the Fund as contemplated by the
Registration Statement and the Prospectus.
(xvi) The Fund is a "regulated investment company" as
defined in Section 851 of the Code, and the Fund and its
shareholders are subject to federal income taxation as
provided in Subpart M of the Code.
In addition, such counsel shall state that nothing has come to such
counsel's attention that would lead them to believe that the Registration
Statement (other than the financial statements and other financial information
included therein, as to which no belief need be stated), at the time it
(including any post-effective 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 (other than the financial statements and other financial
information included therein, as to which no belief need be stated), and any
amendments or supplements thereto, on the date of filing thereof with the
Commission and at the Commencement Date and at each Closing Date on or prior to
the date of the opinion included an untrue statement of a material fact or
omitted 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.
(e) At the Commencement Date and at such other dates specified in
Section 4(o) hereof, the Underwriter shall have received a "comfort" letter from
Xxxxxx & Xxxxx, LLP, independent public accountants for the Fund, or other
independent accountants satisfactory to the Underwriter, dated the date of
delivery thereof, with respect to procedures which have been agreed upon by the
Underwriter and the Fund, and otherwise in form and substance satisfactory to
the Underwriter.
(f) The Underwriter shall have received a certificate, or certificates,
signed by the President and Treasurer (which may be one person) or his designee
of each of the Fund and the Investment Adviser, dated as of the Commencement
Date and dated as of the first day of each month (each a "Certificate Date"), to
the effect that, to the best of their knowledge based upon reasonable
investigation:
(i) the representations and warranties of the Fund
and the Investment Adviser in this Agreement are true and
correct, as if made at and as of such Certificate Date, and
the Fund and the Investment Adviser have each complied with
all the agreements and satisfied all the conditions on their
part respectively, to be performed or satisfied at or prior to
the Certificate Date;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceeding
for that purpose has been instituted or, to the knowledge of
such officer after due inquiry, is threatened, by the
Commission;
(iii) the Registration Statement and the Prospectus
contain all statements that are required to be stated therein
in accordance with the 1933 Act, the 1940 Act and the Rules
and Regulations and conform in all material respects
20
to the requirements of the 1933 Act, 1940 Act and the Rules
and Regulations and the Registration Statement and the
Prospectus do not contain any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading, and no action suit or
proceeding of law or in equity is pending or, threatened
against the Fund or the Investment Adviser, that would be
required to be set forth in the Registration Statement and the
Prospectus other than as set forth therein;
(iv) there has not been, since the respective dates
as of which information is given in the Registration Statement
and the Prospectus, any material adverse change in the
condition, financial or otherwise, of the Fund or the
Investment Adviser in their earnings, business affairs or
business prospects, whether or not arising in the ordinary
course of business, from that set forth in the Registration
Statement and Prospectus;
(v) the Investment Adviser has the financial,
personnel and other resources available necessary for the
performance of its services and obligations as contemplated in
the Prospectus; and
(vi) no proceedings are pending or, to the knowledge
of the Fund or the Investment Adviser, threatened against the
Fund or the Investment Adviser, before or by any federal,
state or other commission, board or administrative agency
wherein an unfavorable decision, ruling or finding would
materially and adversely affect the business, property,
financial condition or income of either the Fund or the
Investment Adviser, other than as set forth in the
Registration Statement and the Prospectus.
In addition, on each Certificate Date the certificate shall also state
that the Common Shares to be sold to that date have been duly and validly
authorized by the Fund and that all action required to be taken for the
authorization, issuance and sale of the Common Shares has been validly and
sufficiently taken.
(g) At the Commencement Date and on each Closing Date, the Fund shall
have furnished to the Underwriter such appropriate further information,
certificates and documents as the Underwriter may reasonably request.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Underwriter. The Fund will furnish the Underwriter with such
conformed copies of such opinions, certificates, letters and other documents as
the Underwriter shall reasonably request.
6. Indemnification and Contribution.
(a) Each of the Fund and the Investment Adviser, jointly and severally,
agrees to indemnify and hold harmless the Underwriter, each Selected Dealer, the
directors, officers, employees and agents of the Underwriter and each Selected
Dealer and each person, if any, who controls the Underwriter and each Selected
Dealer within the meaning of Section 15 of the 1933
21
Act or Section 20 of the Exchange Act (collectively the "Underwriter Indemnified
Persons"), from and against any and all losses, claims, liabilities, expenses
and damages (including, but not limited to, any and all investigative, legal and
other expenses reasonably incurred in connection with, and any and all amounts
paid in settlement of, any action, suit or proceeding between any of the
indemnified parties and any indemnifying parties or between any indemnified
party and any third party, or otherwise, or any claim asserted), as and when
incurred, to which the Underwriter Indemnified Persons may become subject under
the 1933 Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on (i) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus, or in
any application or other document executed by or on behalf of the Fund or the
Investment Adviser or based on written information furnished by or on behalf of
the Fund or the Investment Adviser filed in any jurisdiction in order to qualify
the Common Shares under the securities laws thereof or filed with the
Commission, (ii) the omission or alleged omission to state in any such document
a material fact required to be stated in it or necessary to make the statements
in it not misleading or (iii) any breach by any of the indemnifying parties of
any of their respective representations, warranties and agreements contained in
this Agreement; provided that this indemnity agreement shall not apply to the
extent that such loss, claim, liability, expense or damage (1) arises from the
sale of the Common Shares pursuant to this Agreement and is based on an untrue
statement or omission or alleged untrue statement or omission made in reliance
on and in conformity with information relating to the Underwriter furnished in
writing to the Fund by the Underwriter expressly for inclusion in any document
described in clause (a)(i) above, or (2) is found in a final judgment by a court
of competent jurisdiction to have resulted from the bad faith, willful
misconduct or negligence of the Underwriter or any Selected Dealer or the breach
by the Underwriter or any Selected Dealer of its duties and obligations
hereunder. This indemnity agreement will be in addition to any liability that
the Fund or Investment Adviser might otherwise have.
(b) The Underwriter agrees to indemnify and hold harmless the Fund, the
Investment Adviser, each person, if any, who controls the Fund, or the
Investment Adviser within the meaning of Section 15 of the 1933 Act or Section
20 of the Exchange Act, each director of the Fund, and the Investment Adviser
and each officer, employee and agent to the same extent as the foregoing
indemnity from the Fund and the Investment Adviser to the Underwriter, but only
insofar as losses, claims, liabilities, expenses or damages arise out of or are
based on any untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information relating to the
Underwriter furnished in writing to the Fund by the Underwriter expressly for
use in any document described in clause (a)(i) above. This indemnity will be in
addition to any liability that the Underwriter might otherwise have; provided,
however, that in no case shall the Underwriter be liable or responsible for any
amount in excess of the commissions received by the Underwriter hereunder.
(c) Any party that proposes to assert the right to be indemnified under
this Section 6 will, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 6, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve
22
it from (i) any liability that it might have to any indemnified party otherwise
than under this Section 6 and (ii) any liability that it may have to any
indemnified party under the foregoing provisions of this Section 6 unless, and
only to the extent that, such omission results in the forfeiture of substantive
rights or defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies the indemnifying party of such
commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly notified,
to assume the defense of the action, with counsel satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying party
will not be liable to the indemnified party, for any legal or other expenses
except as provided below and except for the reasonable costs of investigation
subsequently incurred by the indemnified party in connection with the defense.
The indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (1) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (2)
the indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(3) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. All such fees, disbursements and other charges
will be reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not be liable for any settlement of any action or claim
effected without its written consent (which consent will not be unreasonably
withheld). No indemnifying party shall, without the prior written consent of
each indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding relating to
the matters contemplated by this Section 6 (whether or not any indemnified party
is a party thereto), unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising or
that may arise out of such claim, action or proceeding. Notwithstanding any
other provision of this Section 6(c), 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 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, and (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.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in
23
accordance with its terms but for any reason is held to be unavailable from the
Fund, the Investment Adviser or the Underwriter (including the Underwriter
Indemnified Persons), the Fund, the Investment Adviser, and the Underwriter will
contribute to the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received
by the Fund, or the Investment Adviser from persons other than the Underwriter,
such as persons who control the Fund within the meaning of the 1933 Act,
officers of the Fund who signed the Registration Statement and directors of the
Fund, who also may be liable for contribution, or any contribution received by
the Underwriter from persons other than the Fund or the Investment Adviser) to
which the indemnified party may be subject in such proportion as shall be
appropriate to reflect the relative benefits received by the Fund and the
Investment Adviser on the one hand and the Underwriter on the other. The
relative benefits received by the Fund and the Investment Adviser, on the one
hand, and the Underwriter, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Fund bear to the total commissions received by the
Underwriter from the sale of the Common Shares on behalf of the Fund. If, but
only if, the allocation provided by the foregoing sentence is not permitted by
applicable law, the allocation of contribution shall be made in such proportion
as is appropriate to reflect not only the relative benefits referred to in the
foregoing sentence but also the relative fault of the Fund and the Investment
Adviser, on the one hand, and the Underwriter, on the other, with respect to the
action, statements or omissions which resulted in such loss, claim, liability,
expense or damage, or action in respect thereof, as well as any other relevant
equitable considerations with respect to such offering. Such relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, or other conduct giving rise to liability, relates to information supplied
by the Fund or the Underwriter, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and the conduct of the parties. The Fund, the Investment
Adviser, and the Underwriter agree that it would not be just and equitable if
contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section 6(d)
shall be deemed to include, for purposes of this Section 6(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), the Underwriter shall not be required to
contribute any amount in excess of the commissions received by it under this
Agreement and no person found guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 0000 Xxx) will be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For purposes
of this Section 6(d), any person who controls a party to this Agreement within
the meaning of the 1933 Act, will have the same rights to contribution as that
party, each officer, director, employee or agent of the Underwriter will have
the same rights to contribution as the Underwriter, each officer, director,
employee or agent of the Investment Adviser will have the same rights to
contribution as that party and each officer, director employee or agent of the
Fund Statement will have the same rights to contribution as the Fund, subject in
each case to the provisions hereof. Any party entitled to contribution, promptly
after receipt of notice of
24
commencement of any action against such party in respect of which a claim for
contribution may be made under this Section 6(d), will notify any such party or
parties from whom contribution may be sought, but the omission to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 6(d). Except for a
settlement entered into pursuant to the last sentence of Section 6(c) hereof, no
party will be liable for contribution with respect to any action or claim
settled without its written consent (which consent will not be unreasonably
withheld).
(e) For purposes of this Agreement, the Fund and the Investment Adviser
agree that the only written information relating to the Underwriter furnished in
writing to the Fund by the Underwriter expressly for inclusion in the
preliminary prospectus, Registration Statement or Prospectus is the address of
the Underwriter set forth in the second paragraph under the caption
"Underwriting" and the identification of counsel to the Underwriter under the
caption "Legal Matters" in the preliminary prospectus and Prospectus.
7. Representations and Agreements to Survive Delivery. The indemnity
and contribution agreements contained in Section 6 and the representations and
warranties of the Fund, the Investment Adviser and the Underwriter contained in
this Agreement shall remain operative and in full force and effect regardless of
(i) any investigation made by or on behalf of the Fund, the Investment Adviser,
or the Underwriter, as applicable, (ii) acceptance of the Common Shares and
payment therefor or (iii) any termination of this Agreement.
8. Termination.
(a) The Underwriter shall have the right by giving written notice as
hereinafter specified at any time to terminate this Agreement if (i) any
material adverse change, or any development that is reasonably expected to cause
material adverse change, in the business, financial condition or results of
operations of the Fund or the Investment Adviser has occurred which, in the
judgment of such Underwriter, materially impairs the investment quality of the
Common Shares, (ii) the Fund or the Investment Adviser shall have failed,
refused or been unable to perform any agreement on its part to be performed
hereunder, (iii) any other condition of the Underwriter's obligations hereunder
is not fulfilled, (iv) any suspension or limitation of trading in the Common
Shares on the CHX shall have occurred, (v) any banking moratorium shall have
been declared by Federal or New York authorities or (vi) an outbreak or material
escalation of major hostilities in which the United States is involved, a
declaration of war by Congress, any other substantial national or international
calamity or any other event or occurrence of a similar character shall have
occurred since the execution of this Agreement that, in the judgment of the
Underwriter, makes it impractical or inadvisable to proceed with the completion
of the sale of and payment for the Common Shares to be sold by the Underwriter
on behalf of the Fund. Any such termination shall be without liability of any
party to any other party except that the provisions of Section 3(i), Section
4(i), Section 6 and Section 7 hereof shall remain in full force and effect
notwithstanding such termination.
(b) The Fund shall have the right, by giving thirty days advance
written notice, to terminate this Agreement in its sole discretion. The Fund
shall further have the right, by giving three days' written notice to the
Underwriter, to terminate this Agreement in the event any action or proceeding
shall be instituted or threatened against the Underwriter, either in any court
of
25
competent jurisdiction, before the Commission, the NASD or any state securities
administrator concerning its activities as a broker or dealer that would prevent
the Underwriter from acting as such, or if a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
of the Underwriter's assets is filed or if the Underwriter makes an assignment
for the benefit of its creditors. Any such termination shall be without
liability of any party to any other party except that the provisions of Section
3(i), Section 4(i), Section 6 and Section 7 hereof shall remain in full force
and effect notwithstanding such termination.
(c) In addition to its rights under Section 8(a), the Underwriter shall
have the right, by giving thirty days advance written notice as hereinafter
specified, to terminate this Agreement in its sole discretion. Any such
termination shall be without liability of any party to any other party except
that the provisions of Section 3(i), Section 4(i), Section 6 and Section 7
hereof shall remain in full force and effect notwithstanding such termination.
(d) This Agreement shall remain in full force and effect unless
terminated pursuant to Sections 8(a), (b) or (c) above or otherwise by mutual
agreement of the parties; provided that any such termination by mutual agreement
shall in all cases be deemed to provide that Section 3(i), Section 4(i), Section
6 and Section 7 shall remain in full force and effect.
(e) Any termination of this Agreement shall be effective on the date
specified in such notice of termination; provided that such termination shall
not be effective until the close of business on the date of receipt of such
notice by the Underwriter or the Fund, as the case may be.
9. Notices. All notices or communications hereunder shall be in writing
and if sent to the Underwriter shall be mailed, delivered, telexed or telecopied
and confirmed to the Underwriter at Broker Dealer Financial Services Corp., 0000
XX 00xx Xxxxxx, X.X. Xxx 0000, Xxxxxxxx, Xxxx 00000-0000, facsimile no. (515)
286-2972, attention: X.X. Xxxxxx, or if sent to the Fund or the Investment
Adviser, shall be mailed, delivered, telexed or telecopied and confirmed to the
Fund or the Investment Adviser at 000 Xxxx Xxxxxxxx Xxxx Xxxx, Xxxxxxx Xxxxxxx,
XX 00000, facsimile no. (000)000-0000, attention: Xxxxxxx X. Xxxxx. Each party
to this Agreement may change such address for notices by sending to the parties
to this Agreement written notice of a new address for such purpose.
10. Parties. This Agreement shall inure to the benefit of and be
binding upon the Fund, the Investment Adviser, and the Underwriter (including,
with respect to Section 6, the Underwriter Indemnified Persons) and their
respective successors and the controlling persons, officers and directors
referred to in Section 6 hereof, and no other person will have any right or
obligation hereunder.
11. Adjustments for Stock Splits, Etc. The parties acknowledge and
agree that all share related numbers contained in this Agreement (including,
without limitation, the Maximum Amount and the Sales Price) shall be adjusted to
take into account any stock split effected or stock dividend with respect to the
Common Shares.
12. Entire Agreement. This Agreement constitutes the entire agreement
and supersedes all other prior and contemporaneous agreements and undertakings,
both written and oral, among the parties hereto with regard to the subject
matter hereof.
26
13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF IOWA WITHOUT REGARD TO ANY
PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Business Days. For purposes of this Agreement, a "business day"
shall refer to any day on which the Investment Adviser and the New York Stock
Exchange are open for business and the Fedwire service of the Federal Reserve
Board is operational.
27
If the foregoing correctly sets forth the understanding between the
Fund, the Investment Adviser, and the Underwriter, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among the Fund, the Investment Adviser, and the Underwriter.
Very truly yours,
NAIC GROWTH FUND, INC.
By:___________________________
Name:_________________________
Title:________________________
GROWTH FUND ADVISOR, INC.
By:___________________________
Name:_________________________
Title:________________________
ACCEPTED as of the date first above written
BROKER DEALER FINANCIAL SERVICES CORP.
By:________________________
Name:_____________________
Title:______________________
28
EXHIBIT A
Form of Selected Dealer Agreement
29
EXHIBIT B
Form of Subscription Agreement
30
