225 Shares
PREFERRED INCOME FUND INCORPORATED
Money Market Cumulative Preferred(TM) Stock
(Liquidation Preference $100,000 Per Share)
UNDERWRITING AGREEMENT
----------------------
___________, 2002
XXXXXX BROTHERS INC.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Ladies and Gentlemen:
Preferred Income Fund Incorporated, a Maryland corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell 225 shares (the "Stock" or "MMP(R)") of its Money Market
Cumulative Preferred(TM) Stock, par value $.01 per share, with a liquidation
preference of $100,000 per share (the "Preferred Stock"). The Stock will be
authorized by, and subject to the terms and conditions of, the Articles
Supplementary Creating and Fixing the Rights of Money Market Cumulative
Preferred(TM) Stock (the "Initial Articles Supplementary") and the Articles
Supplementary for the Stock (the "Subsequent Articles Supplementary"; together
with the Initial Articles Supplementary as amended or supplemented to the date
hereof, the "Articles Supplementary"), such Supplemental Articles Supplementary
in the form filed as an exhibit to the Registration Statement defined in Section
1(a) of this Agreement. Xxxxxxxx & Xxxxxxxx Incorporated, a California
corporation (the "Adviser"), is the Company's investment adviser. This is to
confirm the agreement concerning the purchase of the Stock from the Company by
you.
1. REPRESENTATIONS AND WARRANTIES. (a) The Company represents,
warrants and agrees that:
(i) A registration statement on Form N-2 with respect to
the Stock (A) has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder, the Investment Company Act of 1940, as
amended (the "Investment Company Act", and together with the
Securities Act, the "Acts"), and the rules and regulations of the
Commission thereunder, (B) has been filed with the Commission under
the Acts and (C) has become effective under the Acts. If any
post-effective amendment to such
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registration statement has been filed prior to the execution and
delivery of this Agreement, the most recent such amendment has been
declared effective by the Commission. Copies of such registration
statement as amended to date have been delivered by the Company to
you. A notification of registration on Form N-8A (the
"Notification") has been filed by the Company with the Commission
under the Investment Company Act. As used in this Agreement,
"Effective Time" means the date and time as of which such
registration statement or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission;
"Effective Date" means the date of the "Effective Time";
"Preliminary Prospectus" means each prospectus included in such
registration statement, or amendments thereto, before it became
effective under the Acts and any prospectus filed with the
Commission by the Company with your consent pursuant to Rule 497(a)
of the Rules and Regulations; "Registration Statement" means such
registration statement, as amended at the Effective Time, including
all information deemed to be a part thereof as of the Effective
Time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations; and "Prospectus" means the prospectus relating to the
Stock, as filed pursuant to Rule 497(h) of the Rules and
Regulations ("Rule 497(h)"). If the Company has filed an
abbreviated registration statement to register additional shares of
its Preferred Stock pursuant to Rule 462(b) under the Securities
Act (the "Rule 462 Registration Statement") then any reference
herein to the term "Registration Statement" shall be deemed to
include such Rule 462 Registration Statement. The Commission has
not issued any order preventing or suspending the use of the
Registration Statement, any Preliminary Prospectus or the
Prospectus and the Company has not received any notice from the
Commission pursuant to Section 8(e) of the Investment Company Act
with respect to the Notification or the Registration Statement.
(ii) The Registration Statement contains, and any
post-effective amendment to the Registration Statement filed with
the Commission after the Effective Time, the Prospectus and the
Prospectus as amended or supplemented will contain, all statements
which are required by the Acts and the rules and regulations
thereunder; on the Effective Date, the Registration Statement did
not, and any post-effective amendment to the Registration Statement
filed with the Commission after the Effective Time, the Prospectus
and the Prospectus as amended and supplemented will not, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading; and the Notification
complied in all material respects with the requirements of the
Investment Company Act and the rules and regulations of the
Commission thereunder 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 to make the statements therein not
misleading; provided, however, that the Company makes no
representations, warranties or agreements as to the information
contained in or omitted from the Registration
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Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished
to the Company by you specifically for inclusion therein.
(iii) The Company is not in violation of its corporate
charter, including the Articles Supplementary, or by-laws or in
default under any agreement, indenture or instrument or in breach
or violation of any judgment, decree, order, rule or regulation of
any court or governmental or self-regulatory agency or body, the
effect of which violation or default or breach would be material to
the Company.
(iv) This Agreement, the Investment Advisory Agreement (the
"Advisory Agreement") between the Company and the Adviser, the
Administration Agreement (the "Administration Agreement") between
the Company and PFPC Inc., the Custody Agreement (the "Custody
Agreement") between the Company and PFPC Trust Company and the
Auction Agency Agreement, including the form of Broker-Dealer
Agreement (the "Auction Agency Agreement") between the Company and
Bankers Trust Company (the "Auction Agent") have each been duly
authorized, executed and delivered by the Company; and this
Agreement, the Advisory Agreement, the Administration Agreement,
the Custody Agreement and the Auction Agency Agreement each
constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights and by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law), and enforceability of the
indemnity provisions of this Agreement may be limited by
considerations of public policy. No consent, approval,
authorization or order of any court or governmental agency or body
is required for the execution, delivery and performance of this
Agreement, the Advisory Agreement, the Administration Agreement,
the Custody Agreement or the Auction Agency Agreement by the
Company or the consummation by the Company of the transactions
contemplated hereby or thereby, except such as have been obtained
and such as may be required under the Acts, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or applicable state
securities laws in connection with the purchase and distribution of
the Stock by you. The execution, delivery and performance of this
Agreement, the Advisory Agreement, the Administration Agreement,
the Custody Agreement and the Auction Agency Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby and thereby will not conflict with, result in
the creation or imposition of any lien, charge or encumbrance upon
the assets of the Company pursuant to the terms of, result in a
breach or violation by the Company of any of the terms or
provisions of, or constitute a default by the Company under, any
indenture, mortgage, deed of trust, loan agreement, lease
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or other agreement or instrument to which the Company is a party or
to which it or its property is subject, the corporate charter
(including the Articles Supplementary) or by-laws of the Company,
any statute (including the Acts), or any judgment, decree, order,
rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its property.
(v) Except as described in or contemplated by the
Registration Statement and the Prospectus, (A) there has not been
any material adverse change in, or any adverse development which
materially affects, the business, properties, financial condition,
results of operations or prospects of the Company from the dates as
of which information is given in the Registration Statement and the
Prospectus, (B) there have been no transactions entered into by the
Company which are material to the Company other than those in the
ordinary course of business and (C) the Company has not incurred
any material liabilities or obligations, direct or contingent,
other than those incurred in the ordinary course of business.
(vi) The Company owns or possesses or has obtained all
governmental licenses, permits, consents, orders, approvals and
other authorizations necessary to own its properties and to carry
on its business as contemplated in the Prospectus.
(vii) KPMG LLP, whose report appears in the Prospectus, are
independent public accountants as required by the Acts and the
rules and regulations thereunder.
(viii) The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus. All the
authorized shares of capital stock of the Company, including the
Stock, have been duly authorized, and all the issued and
outstanding shares of common stock, par value $.01 per share, and
the Preferred Stock of the Company are, and all the shares of the
Stock, when issued, delivered and paid for on the Delivery Date (as
hereinafter defined) will be, validly issued and outstanding, fully
paid and nonassessable with no personal liability attaching to the
ownership thereof. None of the shares of the Stock when delivered
will be subject to any lien, claim, encumbrance, preemptive rights
or any other claim of any third party and the Stock will conform in
all material respects to the description thereof contained in the
Registration Statement and the Prospectus.
(ix) The Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of
the State of Maryland, is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in
which its ownership of property or the conduct of its business
requires such qualification, and has all power and authority
necessary to own or hold its properties and to conduct its business
as described in the Prospectus.
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(x) Except as described in the Registration Statement and
the Prospectus, there is no litigation or proceeding pending or, to
the knowledge of the Company, threatened against the Company which
might result in any adverse change in the financial condition,
results of operations, business or prospects of the Company or
which is required to be disclosed in the Registration Statement and
the Prospectus.
(xi) The financial statements, and the related notes
thereto, filed as part of the Registration Statement or included in
any Preliminary Prospectus or the Prospectus present fairly the
financial condition and results of operations of the Company, at
the dates indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent
basis.
(xii) There are no contracts or other documents which are
required to be described in the Prospectus or filed as exhibits to
the Registration Statement by the Acts or by the rules and
regulations thereunder which have not been described in the
Prospectus or filed as exhibits to the Registration Statement or
incorporated therein by reference as permitted by the rules and
regulations.
(xiii) The Company is registered with the Commission under
the Investment Company Act as a closed-end, diversified management
investment company. The Company is, and at all times through the
completion of the transactions contemplated hereby will be, in
compliance in all material respects with the terms and provisions
of the Acts. No person is serving or acting as an officer, director
or investment adviser of the Company except in accordance with the
provisions of the Investment Company Act and the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and the
rules and regulations of the Commission under such acts.
(xiv) At all times since its inception, as required by
Subchapter M of the Internal Revenue Code of 1986, as amended, the
Company has complied with the requirements to qualify as a
regulated investment company under the Code.
(xv) The Company has filed all tax returns required to be
filed and the Company is not in material default in the payment of
any taxes which were shown as payable on said returns or any
assessments with respect thereto.
(xvi) There are no contracts, agreements or understandings
between the Company and any person granting such person the right
to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned
or to be owned, directly or indirectly, by such person.
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(b) The Adviser makes the same representations and warranties as
the Company set forth under Sections 1(a)(i) and (ii) above, and further
represents to, warrants to and agrees with you that:
(i) The Adviser has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of
the State of California, is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in
which its ownership of property or the conduct of its business
requires such qualification (except where the failure to so qualify
would not have a material adverse effect on the Adviser), and has
all corporate power and authority necessary to own or hold its
properties and to conduct its business as described in the
Prospectus.
(ii) The Adviser is duly registered and in good standing
with the Commission under the Advisers Act as an investment
adviser, and there does not exist any proceeding or any facts or
circumstances the existence of which could lead to any proceeding
which could adversely affect the registration or good standing of
the Adviser with the Commission. The Adviser is not prohibited by
the Advisers Act or the Investment Company Act, or the rules and
regulations under such acts, from acting for the Company under the
Advisory Agreement as contemplated by the Prospectus.
(iii) The description of the 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 to make the
statements therein not misleading.
(iv) This Agreement and the Advisory Agreement have each
been duly authorized, executed and delivered by the Adviser, and
each constitutes the valid and binding obligation of the Adviser
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights and by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law), and enforceability of the
indemnity and contribution provisions of this Agreement may be
limited by considerations of public policy. No consent, approval,
authorization or order of any court or governmental agency or body
is required for the execution, delivery and performance of this
Agreement or the Advisory Agreement by the Adviser or the
consummation by the Adviser of the transactions contemplated hereby
or thereby, except such as have been obtained and such as may be
required under the Acts, the Exchange Act, the Advisers Act or
applicable state securities laws in connection with the purchase
and distribution of the Stock by you. The execution, delivery and
performance of this Agreement and the Advisory Agreement by the
Adviser and the consummation by the Adviser of the
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transactions contemplated hereby and thereby will not conflict
with, result in the creation or imposition of any lien, charge or
encumbrance upon the assets of the Adviser pursuant to the terms
of, result in a breach or violation by the Adviser of any of the
terms or provisions of, or constitute a default by the Adviser
under, any material indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which the
Adviser is a party or to which it or its property is subject, the
corporate charter or by-laws of the Adviser, any statute (including
the Acts), or any judgment, decree, order, rule or regulation of
any court or governmental agency or body having jurisdiction over
the Adviser or any of its property.
(v) Except as described in the Registration Statement and
the Prospectus, there is no litigation or proceeding pending or, to
the knowledge of the Adviser, threatened against the Adviser which
might result in any material adverse change in the financial
condition, results of operations, business or prospects of the
Adviser or which is required to be disclosed in the Registration
Statement and the Prospectus.
(vi) The Adviser has the financial resources available to
it necessary for the performance of its services and obligations as
contemplated in the Prospectus.
(vii) The Adviser is not in violation of its corporate
charter or by-laws or in default under any material agreement,
indenture or instrument.
2. PURCHASE OF THE SHARES. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Company agrees to issue and sell 225 shares of the Stock to
you, and you agree to purchase from the Company 225 shares of the Stock. The
price of the Stock shall be $_________ per share. The Company shall not be
obligated to deliver any of the Stock to be delivered on the Delivery Date (as
hereinafter defined), except upon payment for all the Stock to be purchased on
such Delivery Date as provided herein.
3. OFFERING OF STOCK. You propose to offer the Stock for sale upon
the terms and conditions set forth in the Prospectus.
4. DELIVERY OF AND PAYMENT FOR SHARES. Delivery of and payment for
the Stock shall be made at the office of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 A.M., New York City time,
on the first full business day following the date of this Agreement or at such
later date as shall be determined by agreement between you and the Company. This
date and time are referred to herein as the "Delivery Date." On the Delivery
Date the Company shall deliver or cause to be delivered the certificate
representing the Stock to you against payment to or upon the order of the
Company of the purchase price by wire transfer in immediately available funds.
Time shall be of the essence, and delivery at the time and place specified
pursuant to this Agreement is a further condition of your obligation
8
hereunder. Upon delivery, the Stock shall be registered in such names and in
such denominations as you shall request in writing not less than two full
business days prior to the Delivery Date. For purposes of expediting the
checking and packaging of the certificates for the Stock, the Company shall make
the certificates representing the Stock available for inspection by you at the
office of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, not later than 2:00 P.M., New York City time, on the business day prior
to the Delivery Date.
5. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 497(h) not later than Commission's close
of business on the second business day following the execution and
delivery of this Agreement; to make no further amendment or any
supplement to the Registration Statement or to the Prospectus except as
permitted herein; to advise you, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement has
been filed or becomes effective or any supplement to the Prospectus or
any amended Prospectus has been filed and to furnish you copies thereof;
to advise you, promptly after it receives notice thereof, of the issuance
by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, of
the issuance by the Commission of any order pursuant to Section 8(e) of
the Investment Company Act, of the suspension of the qualification of the
Stock for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or of
an order pursuant to Section 8(e) of the Investment Company Act or
suspending any such qualification, to use promptly its best efforts to
obtain its withdrawal;
(b) To furnish promptly to you and your counsel a signed copy of
the Registration Statement as originally filed with the Commission, and
each amendment thereto and any amendment to the Notification filed with
the Commission, including all consents and exhibits filed therewith;
(c) To deliver promptly to you such number of the following
documents as you shall reasonably request: (i) conformed copies of the
Registration Statement as originally filed with the Commission and each
amendment thereto (excluding exhibits other than this Agreement and the
Subsequent Articles Supplementary, and the form of letter of
representation to The Depository Trust Company filed as Exhibit (K)(10)
to the Registration Statement) and (ii) each Preliminary Prospectus, the
Prospectus and any amended or supplemented Prospectus; and, if the
delivery of a prospectus is required at any time after the Effective Time
in connection with the offering or sale of the Stock or any other
securities relating thereto and if at such time any events shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue
9
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary to amend or supplement the Prospectus in order to comply with
the Acts, to notify you and, upon your request, to prepare and furnish
without charge to you and to any dealer in securities as many copies as
you may from time to time reasonably request of an amended or
supplemented Prospectus which will correct such statement or omission or
effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or you, be required
by the Acts or requested by the Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 497 of the Rules and Regulations ("Rule 497"), to
furnish a copy thereof to you and your counsel and obtain your consent to
the filing, which consent shall not be unreasonably withheld or delayed;
(f) As soon as practicable after the Effective Date, to make
generally available to the Company's security holders and to deliver to
you an earnings statement of the Company (which need not be audited),
complying with Section 11(a) of the Securities Act (and, at the option of
the Company, Rule 158 of the Rules and Regulations);
(g) For a period of two years from the Effective Date, to furnish
to you copies of all materials furnished by the Company to its
shareholders and all public reports and all reports and financial
statements furnished by the Company to the New York Stock Exchange, Inc.,
pursuant to requirements of or agreements with such exchange or to the
Commission pursuant to the Exchange Act, the Investment Company Act or
any rule or regulation of the Commission thereunder; provided, however,
that the Company shall not be required to provide to you any such reports
or similar forms that have been filed with the Commission by electronic
transmission pursuant to XXXXX;
(h) Promptly from time to time, to take such action as you may
reasonably request to qualify the Stock for offering and sale under the
securities laws of such jurisdiction as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Stock provided that, in connection therewith, the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(i) To apply the net proceeds from the issuance of the Stock as set
forth under "Use of Proceeds" in the Prospectus;
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(j) For a period of 180 days from the date hereof, not to, directly
or indirectly, announce an offering of, or file a registration statement
with the Commission relating to senior securities (as defined in the
Investment Company Act) of the Company (other than the offering
contemplated by this Agreement) or offer for sale, sell, pledge or
otherwise dispose of any senior securities or sell or grant options,
warrants or rights with respect to any senior securities without your
prior written consent; and
(k) The Company will use its reasonable best efforts to cause the
Stock, prior to the Delivery Date, to be assigned a rating of "Aa1" by
Xxxxx'x Investors Service, Inc. and "AA+" by Fitch, Inc. as of the
Delivery Date.
6. EXPENSES. The Company agrees to pay the following expenses,
whether or not the transactions contemplated by this Agreement are consummated
or this Agreement is terminated:
(a) the cost incident to the authorization, issuance, sale and
delivery of the Stock and any taxes payable in that connection;
(b) the costs incident to the preparation, printing and filing
under the Acts of the Registration Statement, the Prospectus and any
amendments or supplements thereto;
(c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective
amendments thereof (including, exhibits), any Preliminary Prospectus, the
Prospectus and any amendments or supplements to the Prospectus, all as
provided in this Agreement;;
(d) the fees and expenses of qualifying the Stock under the
securities laws of the several jurisdictions as provided in Section 5(h)
and of preparing, printing and distributing a blue sky memorandum
(including related fees and expenses of your counsel);
(e) the printing and delivery of this Agreement, any dealer
agreements or any other documents printed and delivered in connection
with the offering of the Stock;
(f) the fees paid to rating agencies in connection with the rating
of the Stock;
(g) the fees and expenses of the Auction Agent as set forth in the
Auction Agency Agreement;
(h) the fees and expenses of the Company's accountants and the fees
and expenses of counsel for the Company and of the transfer agent; and
(i) all other costs and expenses incident to the performance of the
obligations of the Company under this Agreement
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provided that, except as provided in this Section 6 and in Section 10, you shall
pay your own costs and expenses, including the costs and expenses of your
counsel.
7. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the
Adviser, jointly and severally, shall indemnify and hold harmless you, your
directors, officers, employees and each person, if any, who controls you within
the meaning of the Securities Act from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to
purchases and sales of the Stock), to which you, your directors, officers,
employees or controlling persons may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in (A) the Notification, (B) any Preliminary Prospectus,
the Registration Statement or any amendment or supplement thereto or (C) any
blue sky application or other document prepared or executed by the Company (or
based upon any written information furnished by the Company specifically for use
in such materials) filed in any jurisdiction specifically for the purpose of
qualifying any or all the Stock under the securities laws of any state or other
jurisdiction (such application, document or information being hereinafter called
a "Blue Sky Application") or (ii) the omission or alleged omission to state in
any Preliminary Prospectus, the Registration Statement, the Prospectus, or in
any amendment or supplement thereto, or in any Blue Sky Application any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and shall reimburse you, your directors, officers, employees or
controlling persons for any legal or other expenses reasonably incurred by you,
your directors, officers, employees or controlling persons in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that the Company and the Adviser shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or
is based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or in any such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by you or on
your behalf specifically for inclusion therein which information consists solely
of the information specified in Section 7(e); and provided further that the
Adviser shall be liable to such indemnified party in any such case only to the
extent that the Company fails to indemnify and hold harmless such indemnified
party pursuant to this Section 7(a); and provided further that to the extent the
Adviser has indemnified any such party, the Company shall contribute to the
Adviser a portion of the amount paid by the Adviser to any such indemnified
party as shall be appropriate to reflect the relative benefits received by the
Company and the Adviser in the offering of the Stock and the relative fault of
the Company and the Adviser in causing the omission or misstatement which
resulted in such payment. The foregoing indemnity agreement is in addition to
any liability which the Company or the Adviser may otherwise have to you or to
any of your directors, officers, employees or controlling persons.
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(b) You shall indemnify and hold harmless the Company, the Adviser,
each of their respective directors, officers and employees, and each person, if
any, who controls the Company or the Adviser within the meaning of the
Securities Act from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company, the Adviser or
any such director, officer, employee or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto, or in any Blue Sky Application or (ii) the omission or
alleged omission to state in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or in any amendment or supplement thereto or in any
Blue Sky Application, any material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company or the Adviser by you or on your behalf specifically
for inclusion therein and, with respect to the Preliminary Prospectus, the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, set forth in Section 7(e), and shall reimburse the Company, the Adviser
or any such director, officer, employee or controlling person for any legal or
other expenses reasonably incurred by the Company, the Adviser or any such
director, officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which you may otherwise have
to the Company, the Adviser or any such director, officer, employee or
controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the claim or the commencement of that action, provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 7.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein, and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the indemnified party shall have the right to employ separate counsel to
represent the indemnified party, its officers, directors, employees and
controlling persons who may be subject to liability
13
arising out of any claim in respect of which indemnity may be sought by the
indemnified party against the indemnifying party under this Section 7 if, in the
reasonable judgment of the indemnified party, it is advisable for the
indemnified party, its officers, directors, employees and controlling persons to
be jointly represented by separate counsel, and in that event the fees and
reasonable expenses of such separate counsel shall be paid by the indemnifying
party. No indemnifying party shall (i), without the prior written consent of the
indemnified parties (which consent shall not be unreasonably withheld), settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment in favor of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment to the extent the
indemnifying party is otherwise entitled to indemnification under this Section
7.
(d) If the indemnification provided for in this Section 7 shall for
any reason be unavailable or insufficient to hold harmless an indemnified party
under Sections 7(a) or 7(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, (i) in such proportion
as shall be appropriate to reflect the relative benefits received by the Company
and the Adviser on the one hand and you on the other from the offering of the
Stock or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Adviser on the one hand and you on the other with respect to
the statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Adviser on
the one hand and you on the other with respect to such offering shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Stock purchased under this Agreement (before deducting expenses) received by the
Company on the one hand, and the total underwriting discounts and commissions
received by you with respect to the Stock purchased under this Agreement, on the
other hand, bear to the total gross proceeds from the offering of the Stock
under this Agreement, as set forth in the table on the cover page of the
Prospectus. The 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 relates to information supplied by the Company
or the Adviser on the one hand or you on the other, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Company, the Adviser and you agree
that it would not be just and equitable if contributions pursuant to this
Section 7(d) were to be determined by pro rata
14
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, damage or liability, or
action in respect thereof, referred to above in this Section 7(d) shall be
deemed to include, for purposes of this Section 7(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 7(d), you shall not be required to contribute any
amount in excess of the amount by which the total price at which the Stock
underwritten by you and distributed to the public was offered to the public
exceeds the amount of any damages which you have otherwise paid or become liable
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) You confirm that the statements in paragraph numbers ___ and ___ on the
cover page of the Prospectus, and in paragraph numbers ___ and ___ under the
caption "Underwriting" in the Prospectus are correct and you further confirm,
and the Company and the Adviser acknowledge, that such statements constitute the
only information you furnished in writing to the Company by you or on your
behalf specifically for inclusion in the Registration Statement and the
Prospectus.
8. CONDITIONS OF YOUR OBLIGATIONS. Your obligations hereunder are subject to the
accuracy, when made and on the Delivery Date, of the representations and
warranties of the Company and the Adviser contained herein, to performance by
the Company and the Adviser of their respective obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the Commission
in accordance with Section 5(a); no stop-order suspending the
effectiveness of the Registration Statement or order pursuant to Section
8(e) of the Investment Company Act shall have been issued, and no
stop-order proceeding or proceeding for an order pursuant to Section 8(e)
of the Investment Company Act shall have been initiated or threatened by
the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise shall have been complied with.
(b) You shall not have discovered and disclosed to the Company on
or prior to the Delivery Date that the Registration Statement, the
Prospectus or any amendment or supplement thereto, in the opinion of
Xxxxxxx Xxxxxxx & Xxxxxxxx, your counsel, contains any untrue statement
of any fact which is material or omits to state a fact which is material
and is required to be stated therein or is necessary to make the
statements therein not misleading.
15
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Stock, the
Registration Statement, the Prospectus and all other legal matters
relating to the offering, issuance and sale of the Stock and the
transactions contemplated hereby and thereby shall be satisfactory in all
respects to your counsel, Xxxxxxx Xxxxxxx & Xxxxxxxx; and the Company
shall have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such matters.
(d) Xxxxxxx Xxxx & Xxxxxxxxx, counsel to the Company, shall have
furnished to you its written opinion, as counsel to the Company,
addressed to you and dated the Delivery Date, in the form and substance
reasonably satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of
the State of Maryland and has the full corporate power and
authority necessary to own its properties and conduct the business
in which it is engaged as described in the Prospectus and to issue
and sell the Stock as contemplated in this Agreement. The Company
is duly qualified to do business and in good standing as a foreign
corporation in all jurisdictions in which its ownership of property
or the conduct of its business requires such qualification (except
where the failure to so qualify would not have a material adverse
effect upon the Company);
(ii) All of the authorized shares of capital stock of the
Company, including the Stock, have been duly authorized. All of the
issued and outstanding shares of common stock, par value $.01 per
shares, and of the Preferred Stock, par value $.01 per share, of
the Company are, and all of the Stock, when issued, delivered and
paid for on the Delivery Date will be, validly issued and
outstanding, fully paid and nonassessable, with no personal
liability attaching to the ownership thereof; and the form of
certificate used to evidence the Stock is in due and proper form
and complies with Maryland law.
(iii) There are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or transfer
of, any shares of the Stock pursuant to the Company's corporate
charter (including the Articles Supplementary) or bylaws or any
other agreement or other outstanding instrument known to such
counsel, except for the restrictions on transfer of the shares of
Stock contained in the Auction Agency Agreement and the form of
master purchaser's letter (attached as Exhibit C to the Auction
Agency Agreement) and except for related transfer restrictions as
set forth in the Articles Supplementary;
16
(iv) The shares of Stock conform in all material respects
to the statements concerning them contained in the Prospectus, and
the authorized shares of capital stock of the Company are as set
forth in the Prospectus;
(v) The statements made in the Prospectus under the caption
"Description of Common Stock" insofar as they purport to constitute
summaries of the terms of the Company's common stock, constitute
accurate summaries of the terms of the Company's common stock;
(vi) The Registration Statement is effective under the
Acts; any required filing of the Prospectus pursuant to Rule 497
has been made within the time period required by Rule 497; no
stop-order suspending the effectiveness of the Registration
Statement or order pursuant to Section 8(e) of the Investment
Company Act has been issued, and, to the knowledge of such counsel,
no proceeding for any such purpose is pending or threatened by the
Commission;
(vii) The Notification, the Registration Statement and the
Prospectus (except that no opinion need be expressed as to the
financial statements or other financial and statistical data
contained therein) comply as to form in all material respects with
the requirements of the Acts and the rules and regulations
thereunder;
(viii) The statements made in the Prospectus under the
captions "The Auction," "Description of MMP," "Repurchase of Common
Stock: Conversion to Open-End Fund" and "Certain Provisions of the
Articles of Incorporation," insofar as they purport to summarize
the provisions of documents or agreements specifically referred to
therein, fairly present the information called for with respect
thereto by Form N-2;
(ix) The statements made in the Prospectus under the
captions "Description of Common Stock," "Description of MMP" and
"The Auction," insofar as they purport to constitute summaries of
the Maryland General Corporation Law, constitute accurate summaries
of the Maryland General Corporation Law in all material respects.
(x) Such counsel does not know of any litigation or any
proceeding pending or threatened against the Company which could
affect the subject matter of this Agreement, or is required to be
disclosed in the Prospectus which is not disclosed and correctly
summarized therein;
(xi) Such counsel does not know of any contracts or other
documents which are required to be filed as exhibits to the
Registration Statement by the Acts or by the rules and regulations
thereunder which have not been filed as exhibits to
17
the Registration Statement or incorporated therein by reference as
permitted by the rules and regulations;
(xii) To the best of such counsel's knowledge, the Company
is not in default under any material agreement, indenture or
instrument to which it is a party or by which its property may be
bound or, without regard to the provisions of Maryland law, in
violation of its corporate charter (including the Articles
Supplementary) or by-laws;
(xiii) Each of this Agreement, the Advisory Agreement, the
Administration Agreement, the Custody Agreement and the Auction
Agency Agreement has been duly authorized, executed and delivered
by the Company; and assuming due authorization, execution and
delivery of each of such agreements by the other parties thereto,
(a) each of such agreements complies with all applicable provisions
of the Investment Company Act and the Advisers Act, as applicable
and (b) the Advisory Agreement and the Auction Agency Agreement
each constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except to the extent that enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights and by
general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
the execution, delivery and performance of this Agreement, the
Advisory Agreement, the Administration Agreement, the Custody
Agreement and the Auction Agency Agreement by the Company will not
conflict with, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company
pursuant to the terms of, or constitute a default under, any
agreement, indenture or instrument known to such counsel, to which
the Company is a party or by which its property may be bound, or
result in a violation of the corporate charter (including the
Articles Supplementary) or by-laws of the Company or the Acts, the
Exchange Act or the Advisers Act, any order, rule or regulation of
any court or governmental agency having jurisdiction over the
Company or its property; and no consent, authorization or order of,
or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance of this
Agreement, the Advisory Agreement, the Administration Agreement,
the Custody Agreement or the Auction Agency Agreement by the
Company, except such as has been obtained under the Acts or the
Exchange Act or as may be required by state securities laws;
(xiv) The Company is registered with the Commission under
the Investment Company Act as a closed-end, diversified management
investment company; all required action has been taken by the
Company under the Acts and the Exchange Act to make the public
offering and consummate the sale of the Stock pursuant to this
Agreement; the provisions of the corporate charter
18
(including the Articles Supplementary) and by-laws of the Company
comply as to form in all material respects with the requirements of
the Investment Company Act; the provisions of the corporate charter
(including the Articles Supplementary) and by-laws of the Company
and the investment policies and restrictions described in the
Prospectus under the captions "Investment Objective and Policies"
and "Investment Restrictions" comply in all material respects with
the requirements of the Investment Company Act; and
(xv) The information contained in the Prospectus under the
caption "Tax Matters", to the extent that it constitutes matters of
law or legal conclusions, has been reviewed by them and is correct
in all material respects.
Such opinion shall also contain a statement that in the course of
the preparation by the Company of the Registration Statement and the
Prospectus, such counsel participated in conferences with certain
officers and employees of the Company and the Adviser, and that such
counsel's investigations made in connection with the preparation of the
Registration Statement and the Prospectus and such counsel's
participation in the conferences referred to above did not disclose to
such counsel any information which caused such counsel to believe that
the Registration Statement, as of the Effective Date, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading or that the Prospectus on the Delivery
Date contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. Such opinion shall also contain a statement that such counsel
has no reason to believe that the Notification contains any untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein
not misleading.
In giving such opinion, Xxxxxxx Xxxx & Xxxxxxxxx may rely on the
opinion of Xxxxxxx, Xxxxxxx and Xxxxxx as to matters of Maryland law,
provided that Xxxxxxx Xxxx & Xxxxxxxxx furnish a copy thereof to you and
state that such opinion is satisfactory in form and scope and that you
and your counsel are entitled to rely thereon.
(e) Xxxxxxxx & Xxxxxxxx, counsel to the Adviser, shall have
furnished to you its written opinion, as counsel to the Adviser,
addressed to you and dated the Delivery Date, in form and substance
reasonably satisfactory to you, to the effect that:
(i) The Adviser has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of
the State of California, is duly qualified to do business and in
good standing as a foreign corporation in all jurisdictions in
which its ownership of property or the conduct of its business
requires such qualification (except where the failure to do so
would not have a material adverse effect on the Adviser) and has
all power and authority necessary
19
to own its properties and conduct the business in which it is
engaged as described in the Prospectus;
(ii) This Agreement and the Advisory Agreement have been
duly authorized, executed and delivered by the Adviser; assuming
due execution by the other parties thereto, the Advisory Agreement
constitutes the valid and binding obligation of the Adviser
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights and by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law); the execution, delivery and
performance of this Agreement and the Advisory Agreement by the
Adviser will not conflict with, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the
assets of the Adviser pursuant to the terms of, or constitute a
default under, any material agreement, indenture or instrument
known to such counsel, or result in a violation of the corporate
charter or by-laws of the Adviser or any statute (including the
Acts), any rule or regulation of, or to the knowledge of such
counsel any order of, any court or governmental agency having
jurisdiction over the Adviser or its property; and no consent,
authorization or order of, or filing or registration with, any
court or governmental agency is required for the execution,
delivery and performance of this Agreement or the Advisory
Agreement by the Adviser, except such as has been obtained under
the Acts, the Advisers Act or the Exchange Act or as may be
required by state securities laws;
(iii) The Adviser is duly registered with the Commission
under the Advisers Act as an investment adviser and is not
prohibited by the Advisers Act or the Investment Company Act, or
the rules and regulations under such acts, from acting under the
Advisory Agreement;
(iv) Such counsel does not know of any litigation or any
proceeding pending or threatened against the Adviser which could
affect the subject matter of this Agreement or the Advisory
Agreement or the registration or good standing of the Adviser with
the Commission, or is required to be disclosed in the Prospectus
which is not disclosed and correctly summarized therein; and
(v) To the best of such counsel's knowledge the Adviser is
not in violation of its corporate charter or by-laws, or in default
under any material agreement, indenture or instrument.
Such opinion shall also contain a statement that in the course of
their representation of the Adviser in connection with the offering by
the Company of its Stock, such counsel participated in telephone
conversations with certain directors and officers of the Adviser, and
that although they are not passing upon, and do not assume
20
any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or Prospectus, and
while such counsel has not made any independent check or verification
thereof, on the basis of the foregoing, no facts came to their attention
that led them to believe that the Section of the Prospectus captioned
"Management of the Fund -- Investment Adviser" insofar as it relates to
or describes the Adviser, at the Delivery Date, contains an untrue
statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading..
(f) Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel to you, shall have
furnished to you its written opinion, as counsel to you, addressed to you
and dated the Delivery Date, in form and substance reasonably
satisfactory to you.
(g) The Company shall have furnished to you on the Delivery Date a
certificate, dated the Delivery Date, of its Chairman of the Board, its
President or a Vice President and its Treasurer or an Assistant Treasurer
stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of the date hereof and
as of the Delivery Date; the Company has complied with all its
agreements contained herein prior to or on the Delivery Date; and
the conditions set forth in Section 8(a) have been fulfilled;
(ii) Since the respective dates as of which information is
given in the Prospectus, other than as set forth in or contemplated
by the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement), (A) there has
not occurred any change or any development that might have a
material adverse effect on the business, prospects, financial
condition or results of operations of the Company, (B) there has
not been any change in the capital stock, short-term debt, or
long-term debt of the Company that might have a material adverse
effect on the business, prospects, financial condition or results
of operations of the Company, (C) the Company has not incurred any
material liability or obligation, direct or contingent, (D) there
has not occurred a material loss or interference with the Company's
business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree and (E) the Company has not
declared or paid any dividend on its capital stock, except for
dividends declared in the ordinary course of business and
consistent with past practice, and, except as set forth in or
contemplated by the Prospectus, the Company has not entered into
any transaction (other than purchases and sales of portfolio
transactions) or agreement (other than investment-related
agreements) (whether or not in the ordinary course of business)
material to the Company; and
(iii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion, (A) as of the
Effective Date, the Registration
21
Statement did not contain any 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, (B) as of
its date and the Delivery Date, the Prospectus did not contain any
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 and (C) since the Effective Date,
no event has occurred which should have been set forth in a
supplement to, or amendment of, the Prospectus which has not been
set forth in such a supplement or amendment.
(h) The Adviser shall have furnished to you on the Delivery Date a
certificate, dated the Delivery Date, of its Chairman of the Board, its
President or a Vice President and its Treasurer or an Assistant Treasurer
stating that:
(i) The representations, warranties and agreements of the
Adviser in Section 1 are true and correct as of the date hereof and
as of the Delivery Date, and the Adviser has complied with all its
agreements contained herein; and
(ii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion, (A) as of the
Effective Date, the Registration Statement did not contain any
untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, (B) as of its date and the
Delivery Date, the Prospectus did not contain any 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 and (C) since the Effective Date of the Registration
Statement, no event has occurred which should have been set forth
in a supplement to, or amendment of, the Prospectus which has not
been set forth in such a supplement or amendment.
(i) At the time of execution of this Agreement, you shall have
received from KPMG LLP a letter or letters in form and substance
reasonably satisfactory to you, addressed to you and dated the date
hereof (i) confirming that they are independent public accountants within
the meaning of the Securities Act and are in compliance with the
applicable requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission and (ii) stating, as
of the date hereof (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five
days prior to the date hereof), the conclusions and findings of such firm
with respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to you in connection with
registered public offerings.
(j) If the Delivery Date is not the first full business day
following the date of this Agreement, then with respect to the letter
from KPMG LLP referred to in the preceding paragraph and delivered to you
concurrently with the execution of this Agreement (the
22
"initial comfort letter"), the Company shall have furnished to you a
letter (the "bring-down comfort letter") of such accountants addressed to
you and dated such Delivery Date (i) confirming that they are independent
public accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the qualification
of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii)
stating, as of the date of the bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as
of which specified financial information is given in the Prospectus as of
a date not more than five days prior to the date of the bring-down
letter), the conclusions and findings of such firm with respect to the
financial information and other matters covered by the initial letters
and (iii) confirming in all material respects the conclusions and
findings set forth in the initial letters.
(k) The Company shall not have sustained since the date of the
latest audited financial statements included in the Prospectus (A) any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court of governmental action, order or decree, otherwise
than as described or contemplated in the Prospectus or (B) since such
date there shall not have been any change in the capital stock,
short-term debt or long-term debt of the Company or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, financial position, prospects, stockholders' equity
or results of operations of the Company, otherwise than as described or
contemplated in the Prospectus, the effect of which, in any such case
described in clause (A) or (B), is, in your judgment, so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Stock being delivered on the
Delivery Date on the terms and in the manner contemplated in the
Prospectus and in this Agreement.
(l) The Company shall have furnished to you a report showing
compliance with the asset coverage requirements of the Investment Company
Act and the Eligible Asset Coverage (as defined in the Articles
Supplementary), each dated the Delivery Date and in form and substance
satisfactory to you. Each such report shall assume the receipt of the net
proceeds from the sale of the Stock and may use portfolio holdings and
valuations as of the close of business of any day not more than six
business days preceding the Delivery Date, provided, however, that the
Company represents in such report that its total net assets as of the
Delivery Date have not declined by 5% or more from such valuation date.
(m) The Company shall have delivered and you shall have received
evidence satisfactory to you that the shares of Stock are rated at least
"Aa1" by Xxxxx'x Investors Service, Inc. and "AA+" by Fitch, Inc. as of
the Delivery Date, and subsequent to the execution and delivery of this
Agreement, (i) no downgrading shall have occurred in the rating accorded
the Company's Preferred Stock by any "nationally recognized
23
statistical rating organization" as that term is defined by the
Commission for purposes of Rule 436(g)(2) of the Rules and Regulations
and (ii) no such organization shall have publicly announced that it has
under surveillance or review, with possible negative implications, its
rating of any of the Company's Preferred Stock.
(n) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, Inc. or the American
Stock Exchange or the Nasdaq National Market or in the over-the-counter
market, or trading in any securities of the Company on any exchange or in
the over-the-counter market, shall have been suspended or the settlement
of such trading generally shall have been materially disrupted or minimum
prices shall have been established on any such exchange or such market by
the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium
shall have been declared by Federal or state authorities of the United
States, (iii) the United States shall have become engaged in hostilities,
there shall have been a significant escalation in hostilities involving
the United States or there shall have been a declaration of a national
emergency or war by the United States or (iv) there shall have occurred
such a material adverse change in general domestic or international
economic, political or financial conditions, including without limitation
as a result of terrorist activities, or the effect of international
conditions on the financial markets in the United States shall be such,
as to make it, in your judgment, impracticable or inadvisable to proceed
with the public offering or delivery of the Stock being delivered on the
Delivery Date on the terms and in the manner contemplated in the
Prospectus.
The Company shall have furnished to you such further information,
certificates and documents as you may reasonably request to evidence compliance
with conditions set forth in this Section 8. All opinions, letters, evidence and
certificates mentioned above or elsewhere in this Agreement shall be deemed to
be in compliance with the provisions hereof only if they are in form and
substance reasonably satisfactory to your counsel, Xxxxxxx Xxxxxxx & Xxxxxxxx.
9. TERMINATION. Your obligations hereunder may be terminated by you
by notice given to and received by the Company prior to delivery of and payment
for the Stock if, prior to that time, any of the events described in Sections
8(k), 8(m) and 8(n) shall have occurred or if you shall decline to purchase the
Stock for any reason permitted under this Agreement.
10. REIMBURSEMENT OF YOUR EXPENSE. If (a) the Company fails to
tender the Stock for delivery to you by reason of any failure, refusal or
inability on the part of the Company or the Adviser to perform any agreement on
its part to be performed, or because any other condition of your obligations
hereunder required to be fulfilled by the Company is not fulfilled or (b) you
decline to purchase the Stock because of a failure by the Company or the Adviser
to perform their respective obligations under this Agreement, the Company shall
reimburse you for all reasonable out-of-pocket expenses (including fees and
disbursements of counsel) incurred by you in connection with this Agreement and
the proposed purchase of the Stock, and upon demand the Company will pay the
full amount thereof to you.
24
11. NOTICES. All Statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to you, shall be delivered or sent by mail, telex or
facsimile transmission to Xxxxxx Brothers Inc., 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Syndicate Department (Fax:
000-000-0000), with a copy, in the case of any notice pursuant to Section
7(c), to the Director of Litigation, Office of the General Counsel,
Xxxxxx Brothers, Inc., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; and
with a copy to Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, 00000, Attention: Xxxxx Xxxxx, Esq. (Fax: 000-000-0000,
Telephone: (000) 000-0000);
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the Company at 000 X. Xxxxxxxx Xxxxxxxxx, Xxxxx
000, Xxxxxxxx, Xxxxxxxxxx 00000, Attention: _________ (Fax: ___-___-___,
Telephone: ___-___-___);
Any statements, requests, notices or agreements shall take effect at the time of
receipt thereof. The Company shall be entitled to act and rely upon any request,
consent, notice or agreement given or made by you.
12. SUBSTITUTE RATING AGENCIES. The Company agrees with you that it
shall select, subject to your approval, a nationally recognized statistical
rating organization (as that term is used in the rules and regulations of the
Commission under the Exchange Act) to act as substitute rating agency in
accordance with the definition of "Rate Multiple" in Section 1 of Part II of the
Articles Supplementary. The provisions of this Section 12 shall survive the
delivery of the Stock and shall remain in full force and effect.
13. PERSONS ENTITLED TO BENEFIT OF THIS AGREEMENT. This Agreement
shall inure to the benefit of and be binding upon you, the Company, the Adviser,
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (a) the
representations, warranties, indemnities and agreements of the Company and the
Adviser contained in this Agreement shall also be deemed to be for the benefit
of your directors, officers and employees and the person or persons, if any, who
control you within the meaning of Section 15 of the Securities Act and (b) your
indemnity agreement contained in Section 7(b) of this Agreement will be deemed
to be for the benefit of directors, officers and employees of the Company and
the Adviser and any person controlling the Company or the Adviser within the
meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person other than the persons
referred to in this Section 13 any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
14. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company, the Adviser and you contained in this
Agreement or made by or on
25
behalf of them, respectively, pursuant to this Agreement, will survive the
delivery of any payment for the Stock and will remain in full force and effect,
regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any of them or any person controlling any
of them.
15. DEFINITION OF "BUSINESS DAY." For purposes of this Agreement,
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading.
16. TRADEMARKS. Xxxxxx Brothers Inc. hereby licenses the Company,
on a non-exclusive basis, to use its trademarks "Money Market Cumulative
Preferred" and "MMP" in connection with the Stock. The Company agrees that,
other than in connection with and in reference to the Stock, it will make no use
of such trademarks without the prior written consent of Xxxxxx Brothers Inc. The
provisions of this Section 16 shall survive the delivery of the Stock and shall
remain in full force and effect.
17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
19. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be a part of, or to affect the meaning or
interpretation of, this Agreement.
26
If the foregoing correctly sets forth the agreement among the
Company, the Adviser and you, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
PREFERRED INCOME FUND
INCORPORATED
By
----------------------------------------------
Name:
Title:
XXXXXXXX & XXXXXXXX INCORPORATED
By
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Name:
Title:
Accepted:
XXXXXX BROTHERS INC.
By
--------------------------------
Xxxx X. Xxxxxx
Authorized Representative
