EXHIBIT h (i)
NAIC GROWTH FUND, INC.
5,000,000 SHARES
COMMON STOCK
UNDERWRITING AGREEMENT
__________________, 2003
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.
333-99689) 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,
2
(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
3
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,
1997 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
____________, 2003 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.
4
(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").
5
(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
6
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
7
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.
9
(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, divided by (1 minus the applicable sales commission), and
10
rounded to the nearest xxxxx, which Sales Price shall be effective until 5:30
p.m., New York City time, on the following Determination Date.
(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, as defined in paragraph (m) below, 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
11
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 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 Underwriter shall be paid out of the Subscription Payments a
sales commission 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
12
to the Offer and to discuss such records with appropriate representatives of the
Fund, Investment Adviser and Escrow Agent.
(m) "Minimum Subscription" means $500, inclusive of the applicable
sales commission payable to the Underwriter. The Minimum Subscription may be
increased by the Fund for certain purchases, but may not be decreased.
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
13
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.
(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
14
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.
(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
15
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.
(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.
16
(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 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.
17
(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 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
18
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 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,"
19
"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 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;
20
(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 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
21
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 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
22
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 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
23
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 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
24
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 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
25
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 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.
26
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.
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
