Exhibit (h)(2)
Xxxxxxxx & Xxxxxxxx/Claymore Total Return Fund Incorporated
(a Maryland corporation)
Auction Market Preferred Shares ("AMPS")
Shares [ ]% AMPS, Series
Shares [ ]% AMPS, Series
Liquidation Preference $25,000 per share
FORM OF PURCHASE AGREEMENT
, 2003
Xxxxxxx Xxxxx & Co.
Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx & Xxxxx
Incorporated
[other underwriters]
c/x Xxxxxxx Lynch, Xxxxxx, Xxxxxx & Xxxxx
Incorporated
4 World Financial Center
New York, New York 10080
Ladies and Gentlemen:
Xxxxxxxx & Xxxxxxxx/Claymore Total Return Fund Incorporated, a Maryland
corporation (the "Fund"), proposes, upon the terms and conditions set forth
herein, to issue and sell an aggregate of [ ] Shares of its Auction Market
Preferred Shares, Series [ ] and [ ] Shares of its Auction Market
Preferred Shares, Series [ ] (the "AMPS"). The AMPS will be authorized by,
and subject to the terms and conditions of, the Articles of Incorporation of the
Fund, including the Articles Supplementary, as amended through [ ], 2003
(the "Charter"), in the form filed as an exhibit to the Registration Statement
referred to in the second following paragraph to this Agreement, as the Charter
may be amended from time to time. The Fund and the Fund's investment adviser,
Xxxxxxxx & Xxxxxxxx Incorporated, a California corporation (the "Adviser"), each
confirms its agreement with Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch, Pierce, Xxxxxx &
Xxxxx Incorporated ("Xxxxxxx Xxxxx") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Xxxxxxx Xxxxx is acting as representative (in such capacity,
the "Representative"), with respect to the issue and sale by the Fund and the
purchase by the Underwriters, acting severally and not jointly, of the
respective number of AMPS set forth in said SCHEDULE A.
The Fund understands that the Underwriters propose to make a public
offering of the AMPS as soon as the Representative deems advisable after this
Agreement has been executed and delivered.
The Fund has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (No. 333-109001 and No.
811-21380) covering the registration of the AMPS under the Securities Act of
1933, as amended (the "1933 Act"), including the related preliminary prospectus
or prospectuses, and has previously filed a notification on Form N-8A of
registration (the "1940 Act Notification") of the Fund as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and the
rules and regulations of the Commission under the 1933 Act and the 1940 Act (the
"Rules and Regulations"). Promptly after execution and delivery of this
Agreement, the Fund will either (i) prepare and file a prospectus in accordance
with the provisions of Rule 430A ("Rule 430A") of the Rules and Regulations and
paragraph (c) or (h) of Rule 497 ("Rule 497") of the
Rules and Regulations or (ii) if the Fund has elected to rely upon Rule 434
("Rule 434") of the Rules and Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 497. The
information included in any such prospectus that was omitted from such
registration statement at the time it became effective but that is deemed to be
part of such registration statement at the time it became effective, if
applicable, (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule
430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each prospectus used before such registration statement
became effective, and any prospectus that omitted, as applicable, the Rule 430A
Information or the Rule 434 Information, that was used after such effectiveness
and prior to the execution and delivery of this Agreement, including in each
case any statement of additional information incorporated therein by reference,
is herein called a "preliminary prospectus." Such registration statement,
including the exhibits thereto and schedules thereto at the time it became
effective and including the Rule 430A Information or the Rule 434 Information,
as applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the Rules and Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus in the form first furnished to the Underwriters
for use in connection with the offering of the AMPS, including the statement of
additional information incorporated therein by reference, is herein called the
"Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to the
preliminary prospectus dated [ ], 2003 together with the Term Sheet and all
references in this Agreement to the date of the Prospectus shall mean the date
of the Term Sheet. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any Term
Sheet or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("XXXXX").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) REPRESENTATIONS AND WARRANTIES BY THE FUND AND THE ADVISER. The Fund
and the Adviser jointly and severally represent and warrant to each Underwriter
as of the date hereof, as of the Closing Time referred to in Section 2(c)
hereof, and agree with each Underwriter, as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act, or order of suspension or
revocation of registration pursuant to Section 8(e) of the 1940 Act, and no
proceedings for any such purpose have been instituted or are pending or, to
the knowledge of the Fund or the Adviser, are contemplated by the
Commission, and any request on the part of the Commission for additional
information has been complied with.
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At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time, the Registration Statement, the Rule
462(b) Registration Statement, the notification on Form N-8A and any
amendments and supplements thereto complied and will comply in all material
respects with the requirements of the 1933 Act, the 1940 Act and the Rules
and Regulations and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. Neither
the Prospectus nor any amendments or supplements thereto, at the time the
Prospectus or any such amendment or supplement was issued and at the
Closing Time, included or will include an untrue statement of a material
fact or omitted or will omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. If Rule 434 is used, the Fund will comply
with the requirements of Rule 434 and the Prospectus shall not be
"materially different", as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time it became
effective. 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
furnished to the Fund in writing by any Underwriter through Xxxxxxx Xxxxx
expressly for use in the Registration Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 497 under the 1933 Act, complied when so
filed in all material respects with the Rules and Regulations and each
preliminary prospectus and the Prospectus delivered to the Underwriters for
use in connection with this offering was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to XXXXX,
except to the extent permitted by Regulation S-T.
If a Rule 462(b) Registration Statement is required in connection with
the offering and sale of the AMPS, the Fund has complied or will comply
with the requirements of Rule 111 under the 1933 Act Regulations relating
to the payment of filing fees thereof.
(ii) INDEPENDENT ACCOUNTANTS. The accountants who certified the
statement of assets and liabilities included in the Registration Statement
are independent public accountants as required by the 1933 Act and the
Rules and Regulations.
(iii) FINANCIAL STATEMENTS. The statement of assets and liabilities
dated [ ], 2003 included in the Registration Statement and the Prospectus,
together with the related notes, presents fairly in accordance with
generally accepted accounting principles ("GAAP") in all material respects
the financial position of the Fund at the date indicated; said statement
has been prepared in conformity with GAAP.
(iv) EXPENSE SUMMARY. The information set forth in the Prospectus
in the Fee Table has been prepared in accordance in all material respects
with the requirements of Form N-2 and to the extent estimated or projected,
such estimates or projections are reasonably believed to be attainable and
reasonably based.
(v) NO MATERIAL ADVERSE CHANGE. Since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Fund, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into
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by the Fund, other than those in the ordinary course of business, which are
material with respect to the Fund, and (C) there has been no dividend or
distribution of any kind declared, paid or made by the Fund on any class of
its capital stock, except for the dividend on the Fund's common stock
declared on [ ] to be paid on [ ] and the regular monthly
dividend declared on the Fund's common stock for subsequent months.
(vi) GOOD STANDING OF THE FUND. The Fund has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Maryland and has the corporate power and authority to own,
lease and operate its properties and to conduct its business as described
in the Prospectus and to enter into and perform its obligations under this
Agreement; and the Fund is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
(vii) NO SUBSIDIARIES. The Fund has no subsidiaries.
(viii) INVESTMENT COMPANY STATUS. The Fund is duly 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 Fund and the Adviser, threatened by the Commission.
(ix) OFFICERS AND DIRECTORS. No person is serving or acting as an
officer, director or investment adviser of the Fund except in accordance
with the provisions of the 1940 Act and the Rules and Regulations and no
person is serving as an investment adviser of the Fund except in accordance
with the Investment Advisers Act of 1940, as amended (the "Advisers Act"),
and the rules and regulations of the Commission promulgated under the
Advisers Act (the "Advisers Act Rules and Regulations"). Except as
disclosed in the Registration Statement and the Prospectus (or any
amendment or supplement to either of them), to the knowledge of the Fund or
the Adviser after due inquiry, no director of the Fund is an "interested
person" (as defined in the 1940 Act) of the Fund or an "affiliated person"
(as defined in the 1940 Act) of any Underwriter.
(x) CAPITALIZATION. The authorized, issued and outstanding shares
of common stock of the Fund are as set forth in the Prospectus as of the
date thereof under the caption "Description of Capital Structure." All
issued and outstanding shares of common stock of the Fund have been duly
authorized and validly issued and are fully paid and non-assessable, and
have been offered and sold or exchanged by the Fund in compliance with all
applicable laws (including, without limitation, federal and state
securities laws); none of the outstanding shares of common stock of the
Fund were issued in violation of the preemptive or other similar rights of
any securityholder of the Fund.
(xi) AUTHORIZATION AND DESCRIPTION OF AMPS. The AMPS to be
purchased by the Underwriters from the Fund have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Fund pursuant to this Agreement against payment
of the consideration set forth herein, will be validly issued and fully
paid and non-assessable. The AMPS conform in all material respects to all
statements relating thereto contained in the Prospectus and such
description conforms in all material respects to the rights of holders of
AMPS set forth in the Charter; no holder of the AMPS will be subject to
personal liability by reason of being such a holder; and the issuance of
the AMPS is not subject to the preemptive or other similar rights of any
securityholder of the Fund.
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(xii) ABSENCE OF DEFAULTS AND CONFLICTS. The Fund is not in
violation of its Charter or by-laws, or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which it is a party or by
which it may be bound, or to which any of the property or assets of the
Fund is subject (collectively, "Agreements and Instruments") except for
such violations or defaults that would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement, the
Advisory Agreement, the Auction Agency Agreement and the Administration
Agreement referred to in the Registration Statement, the Custodian Services
Agreement, dated as of August 26, 2003 between the Fund and PFPC Trust
Company, and the Transfer and Dividend Disbursing Agent and Registrar
Agreement, dated as of August 26, 2003 between the Fund and PFPC, Inc., (as
used herein, the "Advisory Agreement," the "Auction Agency Agreement," the
"Administration Agreement," the "Custodian Services Agreement," and the
"Transfer Agency And Registrar Agreement," respectively) and the
consummation of the transactions contemplated herein and in the
Registration Statement (including the issuance and sale of the AMPS and the
use of the proceeds from the sale of the AMPS as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the Fund
with its obligations hereunder have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Fund pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of
the Charter or by-laws of the Fund, nor will such action result in any
violation of any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Fund or any of its
assets, properties or operations, except for such violations that would not
result in a Material Adverse Effect. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by the Fund.
(xiii) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Fund or the Adviser, threatened, against or affecting the Fund, which
is required to be disclosed in the Registration Statement (other than as
disclosed therein), or which would reasonably be expected to result in a
Material Adverse Effect, or which would reasonably be expected to
materially and adversely affect the properties or assets of the Fund or the
consummation of the transactions contemplated in this Agreement or the
performance by the Fund of its obligations hereunder. The aggregate of all
pending legal or governmental proceedings to which the Fund is a party or
of which any of its property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, would not reasonably be expected to
result in a Material Adverse Effect.
(xiv) ACCURACY OF EXHIBITS. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto by the 1933 Act, the 1940 Act
or by the Rules and Regulations which have not been so described and filed
as required.
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(xv) POSSESSION OF INTELLECTUAL PROPERTY. The Fund owns or
possesses, has the right to use or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by the Fund, and the Fund has not received any notice or is
not otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Fund therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.
(xvi) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Fund of its obligations
hereunder, in connection with the offering, issuance or sale of the AMPS
hereunder or the consummation of the transactions contemplated by this
Agreement, except such as have been already obtained or as may be required
under the 1933 Act, the 1940 Act, the 1934 Act, or under the rules of the
NASD, Inc. ("NASD") or state securities laws.
(xvii) POSSESSION OF LICENSES AND PERMITS. The Fund possesses such
permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to operate
its properties and to conduct the business as contemplated in the
Prospectus; the Fund is in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and the Fund has not received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xviii) SUBCHAPTER M. The Fund intends to direct the investment of the
proceeds of the offering described in the Registration Statement in such a
manner as to comply with the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended ("Subchapter M of the Code" and the
"Code," respectively), and intends to qualify as a regulated investment
company under Subchapter M of the Code.
(xix) DISTRIBUTION OF OFFERING OF OTHER MATERIALS. The Fund has not
distributed or made available, or permitted any other person to distribute
or make available, and, prior to the later to occur of (A) the Closing Time
and (B) completion of the distribution of the AMPS, the Fund will not, nor
will it permit any other person to, distribute or make available any
material (including, without limitation, any material distributed or made
available by mail, radio, television, printed publication or internet) to
the public in connection with the offering and sale of the AMPS or
otherwise having the effect to condition the market for the offer of the
AMPS, other than the Registration Statement, a preliminary prospectus, the
Prospectus or other material, if any, permitted by the 1933 Act or the 1940
Act or the Rules and Regulations.
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(xx) ACCOUNTING CONTROLS. The Fund has established a system of
internal accounting controls sufficient to provide reasonable assurances
that (A) transactions will be executed in accordance with management's
general or specific authorization and with the applicable requirements of
the 1940 Act, the Rules and Regulations and the Code; (B) transactions will
be recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets and to maintain compliance with the books and
records requirements under the 1940 Act and the Rules and Regulations; (C)
access to assets will be permitted only in accordance with the management's
general or specific authorization; and (D) the recorded accountability for
assets will be compared with existing assets at reasonable intervals and
appropriate action will be taken with respect to any differences.
(xxi) ABSENCE OF UNDISCLOSED PAYMENTS. To the Fund's and the
Adviser's knowledge, neither the Fund nor any employee or agent of the Fund
has made any payment of funds of the Fund or received or retained any
funds, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus.
(xxii) MATERIAL AGREEMENTS. This Agreement, the Advisory Agreement,
the Administration Agreement, the Custodian Services Agreement, the
Transfer Agency And Registrar Agreement, and the Auction Agency Agreement
have each been duly authorized by all requisite action on the part of the
Fund and executed and delivered by the Fund, as of the dates noted therein,
and each complies with all applicable provisions of the 1940 Act. Assuming
due authorization, execution and delivery by the other parties thereto with
respect to the Advisory Agreement, the Administration Agreement, the
Custodian Services Agreement, the Transfer Agency And Registrar Agreement,
and the Auction Agency Agreement, each of the Advisory Agreement, the
Administration Agreement, the Custodian Services Agreement, the Transfer
Agency And Registrar Agreement, and the Auction Agency Agreement
constitutes a valid and binding agreement of the Fund, enforceable against
it in accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law or an implied covenant of good faith and fair dealing).
(xxiii) REGISTRATION RIGHTS. There are no persons with registration
rights or other similar rights to have any securities registered pursuant
to the Registration Statement or otherwise registered by the Fund under the
1933 Act.
(xxiv) RATINGS. The AMPS have been, or prior to the Closing Time will
be, assigned a rating of "Aaa" by Xxxxx'x Investors Service, Inc.
("Moody's") and "AAA" by Fitch Ratings ("Fitch").
(xxv) LEVERAGE. The Fund has no liability for borrowed money,
including under any reverse repurchase agreement.
(b) REPRESENTATIONS AND WARRANTIES BY THE ADVISER. The Adviser represents
and warrants to each Underwriter as of the date hereof, and as of the Closing
Time referred to in Section 2(c) hereof as follows:
(i) GOOD STANDING OF THE ADVISER. The Adviser has been duly
organized and is validly existing and in good standing as a corporation
under the laws of the State of California with full corporate power and
authority to own, lease and operate its properties and to conduct its
7
business as described in the Prospectus and is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required.
(ii) INVESTMENT ADVISER STATUS. The Adviser is duly registered and
in good standing with the Commission 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 Advisory
Agreement for the Fund as contemplated by the Prospectus.
(iii) DESCRIPTION OF ADVISER. The description of the Adviser in the
Registration Statement and the Prospectus (and any amendment or supplement
to either of them) complied and comply in all material respects with the
provisions of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and
Regulations and the Advisers Act Rules and Regulations and is true and
correct and does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(iv) CAPITALIZATION. The Adviser has the financial resources
available to it necessary for the performance of its services and
obligations as contemplated in the Prospectus, this Agreement and under the
Advisory Agreement to which it is a party.
(v) AUTHORIZATION OF AGREEMENTS; ABSENCE OF DEFAULTS AND
CONFLICTS. This Agreement and the Advisory Agreement have each been duly
authorized, executed and delivered by the Adviser, and (assuming due
authorization, execution and delivery by each of the other parties thereto)
the Advisory Agreement constitutes a valid and binding obligation of the
Adviser, enforceable against it in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally and general equitable principles (whether considered in a
proceeding in equity or at law) and except as any rights to indemnity or
contribution may be limited by federal and state securities laws and public
policy considerations; and neither the execution and delivery of this
Agreement or the Advisory Agreement nor the performance by the Adviser of
its obligations hereunder or thereunder will conflict with, or result in a
breach of any of the terms and provisions of, or constitute, with or
without the giving of notice or lapse of time or both, a default under, (i)
any agreement or instrument to which the Adviser is a party or by which it
is bound, (ii) the certificate of incorporation, the by-laws or other
organizational documents of the Adviser, or (iii) to the Adviser's
knowledge, by any law, order, decree, rule or regulation applicable to it
of any jurisdiction, court, federal or state regulatory body,
administrative agency or other governmental body, stock exchange or
securities association having jurisdiction over the Adviser or its
properties or operations other than, with respect to clauses (i) and (iii),
any conflict, breach or default that would not, individually or in the
aggregate, be expected to cause an Adviser Material Adverse Effect; and no
consent, approval, authorization or order of any court or governmental
authority or agency is required for the consummation by the Adviser of the
transactions contemplated by this Agreement or the Advisory Agreement,
except as have been obtained or will have been obtained prior to the
Closing Time or may be required under the 1933 Act, the 1940 Act, the 1934
Act or state securities laws.
(vi) NO MATERIAL ADVERSE CHANGE. Since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, there has not occurred any
event which would reasonably be expected to have a material adverse effect
on the ability of the Adviser to perform its respective obligations under
this Agreement and the Advisory Agreement to which it is a party.
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(vii) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Adviser, threatened against or affecting the Adviser or any "affiliated
person" of the Adviser (as such term is defined in the 1940 Act) or any
partners, directors, officers or employees of the foregoing, whether or not
arising in the ordinary course of business, which would reasonably be
expected to result in any material adverse change in the condition,
financial or otherwise, or earnings, business affairs or business prospects
of the Adviser, materially and adversely affect the properties or assets of
the Adviser or materially impair or adversely affect the ability of the
Adviser to function as an investment adviser or perform its obligations
under the Advisory Agreement, or which is required to be disclosed in the
Registration Statement and the Prospectus.
(viii) ABSENCE OF VIOLATION OR DEFAULT. The Adviser is not in
violation of its certificate of incorporation, by-laws or other
organizational documents or in default under any agreement, indenture or
instrument, except for such violations or defaults that would not have a
material adverse effect on the ability of the Adviser to perform its
respective obligations under this Agreement and the Advisory Agreement.
(c) OFFICER'S CERTIFICATES. Any certificate signed by any officer of the
Fund or the Adviser delivered to the Representative or to counsel for the
Underwriters shall be deemed a representation and warranty by the Fund or the
Adviser, as the case may be, to each Underwriter as to the matters covered
thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) AMPS. On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Fund
agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Fund, at the
price per share set forth in SCHEDULE B, the number of AMPS set forth in
SCHEDULE A opposite the name of such Underwriter, plus any additional number of
AMPS which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof.
(b) COMMISSION. The Fund agrees to pay to the Underwriters a commission
set forth in Schedule B as compensation to the Underwriters for their
commitments under this Agreement.
(c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, AMPS shall be made at the offices of Clifford Chance US LLP,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or at such other place as shall be
agreed upon by the Representative and the Fund, at 10:00 A.M. (Eastern time) on
the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any
given day) business day after the date hereof (unless postponed in accordance
with the provisions of Section 10), or such other time not later than ten
business days after such date as shall be agreed upon by the Representative and
the Fund (such time and date of payment and delivery being herein called
"Closing Time").
Payment shall be made to the Fund by wire transfer of immediately available
funds to a bank account designated by the Fund, against delivery to the
Representative for the respective accounts of the Underwriters of certificates
for the AMPS to be purchased by them. It is understood that each Underwriter has
authorized the Representative, for its account, to accept delivery of, receipt
for, and make payment of the purchase price for, the AMPS that it has agreed to
purchase. Xxxxxxx Xxxxx, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the AMPS to be purchased by any Underwriter whose funds have not been
received by the Closing Time, but such payment shall not relieve such
Underwriter from its obligations hereunder.
9
(d) DENOMINATIONS; REGISTRATION. Certificates for AMPS shall be in such
denominations and registered in such names as the Representative may request in
writing at least one full business day before the Closing Time. The certificates
for the AMPS will be made available for examination and packaging by the
Representative in the City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time.
SECTION 3. Covenants.
(a) The Fund, and so long as it is the investment adviser for the Fund,
the Adviser, jointly and severally, covenant with each Underwriter as follows:
(i) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION
REQUESTS. The Fund, subject to Section 3(a)(ii), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify the
Representative immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become
effective, or any supplement to the Prospectus or any amended Prospectus
shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or
for additional information, and (iv) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement
or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the AMPS for
offering or sale in any jurisdiction, or of the initiation or threatening
of any proceedings for any of such purposes. The Fund will promptly effect
the filings necessary pursuant to Rule 497 and will take such steps as it
deems necessary to ascertain promptly whether the form of prospectus
transmitted for filing under Rule 497 was received for filing by the
Commission and, in the event that it was not, it will promptly file such
prospectus. The Fund will make every reasonable effort to prevent the
issuance of any stop order, or order of suspension or revocation of
registration pursuant to Section 8(e) of the 1940 Act, and, if any such
stop order or order of suspension or revocation of registration is issued,
to obtain the lifting thereof at the earliest possible moment.
(ii) FILING OF AMENDMENTS. The Fund will give the
Representative notice of its intention to file or prepare any amendment to
the Registration Statement (including any filing under Rule 462(b)), any
Term Sheet or any amendment, supplement or revision to either the
prospectus included in the Registration Statement at the time it became
effective or to the Prospectus, will furnish the Representative with copies
of any such documents a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file or use any such
document to which the Representative or counsel for the Underwriters shall
reasonably object.
(iii) DELIVERY OF REGISTRATION STATEMENTS. The Fund has
furnished or will deliver to the Representative and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
as originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representative, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the Underwriters. The copies of the Registration
Statement and each amendment thereto furnished to the Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to XXXXX, except to the extent permitted by
Regulation S-T.
10
(iv) DELIVERY OF PROSPECTUSES. The Fund has delivered to
each Underwriter, without charge, as many copies of each preliminary
prospectus as such Underwriter reasonably requested, and the Fund hereby
consents to the use of such copies for purposes permitted by the 1933 Act.
The Fund will furnish to each Underwriter, without charge, during the
period when the Prospectus is required to be delivered under the 1933 Act
or the 1934 Act, such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request. The Prospectus
and any amendments or supplements thereto furnished to the Underwriters
will be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to XXXXX, except to the extent permitted by
Regulation S-T.
(v) CONTINUED COMPLIANCE WITH SECURITIES LAWS. If at any
time when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the AMPS, any event shall occur or condition shall
exist as a result of which it is necessary, in the opinion of counsel for
the Underwriters or for the Fund, to amend the Registration Statement or
amend or supplement the Prospectus in order that the Prospectus will not
include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of
such counsel, at any such time to amend the Registration Statement or amend
or supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the Rules and Regulations, the Fund will promptly prepare
and file with the Commission, subject to Section 3(a)(ii), such amendment
or supplement as may be necessary to correct such statement or omission or
to make the Registration Statement or the Prospectus comply with such
requirements, and the Fund will furnish to the Underwriters such number of
copies of such amendment or supplement as the Underwriters may reasonably
request.
(vi) BLUE SKY QUALIFICATIONS. The Fund will cooperate with
the Underwriters, to qualify the AMPS for offering and sale under the
applicable securities laws of such states and other jurisdictions of the
United States as the Representative may designate and to maintain such
qualifications in effect for so long as required for the distribution of
the AMPS; provided, however, that the Fund shall not be obligated to file
any general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is
not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(vii) RULE 158. The Fund will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders as soon as practicable an earnings
statement for the purposes of, and to provide the benefits contemplated by,
the last paragraph of Section 11(a) of the 1933 Act.
(viii) USE OF PROCEEDS. The Fund will use the net proceeds
received by it from the sale of the AMPS in the manner specified in the
Prospectus under "Use of Proceeds".
(ix) REPORTING REQUIREMENTS. The Fund, during the period
when the Prospectus is required to be delivered under the 1933 Act or the
1934 Act, will file all documents required to be filed with the Commission
pursuant to the 1940 Act and the 1934 Act within the time periods required
by the 1940 Act and the Rules and Regulations and the 1934 Act and the
rules and regulations of the Commission thereunder, respectively.
(x) SUBCHAPTER M. The Fund will use its best efforts to
maintain its qualification as a regulated investment company under
Subchapter M of the Code.
11
(xi) NO MANIPULATION OF MARKET FOR AMPS. Except for the
authorization of actions permitted to be taken by the Underwriters as
contemplated herein or in the Prospectus, the Fund will not (a) take,
directly or indirectly, any action designed to cause or to result in, or
that would 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 AMPS, and (b) until the Closing Time, (i) sell, bid
for or purchase the AMPS or pay any person any compensation for soliciting
purchases of the AMPS or (ii) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of the
Fund.
(xii) PREFERRED SHARES BASIC MAINTENANCE AMOUNT CERTIFICATE.
The Fund will furnish to you a certificate, dated the Closing Time, showing
compliance with the Preferred Shares Basic Maintenance Amount and assuming
the issuance of the AMPS. The certificate may use portfolio holdings and
valuations as of the close of business of any day not more than six
business days preceding the Closing Time, provided, however, that the Fund
represents in such certificate that its total net assets as of the Closing
Time have not declined by 5% or more from such valuation date.
(xiii) RULE 462(b) REGISTRATION STATEMENT. If the Fund elects
to rely upon Rule 462(b), the Fund shall file a Rule 462(b) Registration
Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement, and the Fund shall at
the time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the 1933 Act.
(xiv) ACCOUNTANT'S CONFIRMATION. The Fund will furnish to the
Underwriters, on the date on which delivery is made to the Rating Agencies,
the Accountant's Confirmation (as defined in the Charter) corresponding to
the Preferred Shares Basic Maintenance Report (as defined in the Charter)
for the first Quarterly Valuation Date (as defined in the Charter)
following the Closing Time.
(b) Except as provided in this Agreement, the Fund will not sell, contract
to sell or otherwise dispose of any of its shares of preferred stock of the same
series as the AMPS or any securities convertible into or exercisable or
exchangeable for its shares of preferred stock of the same series as the AMPS,
or grant any options or warrants to purchase its shares of preferred stock of
the same series as the AMPS, for a period of 180 days after the date of the
Prospectus, without the prior written consent of Xxxxxxx Xxxxx, which consent
shall not be unreasonably withheld.
SECTION 4. Payment of Expenses.
(a) EXPENSES. The Fund will pay all expenses incident to the performance
of its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery of the AMPS,
(iii) the preparation, issuance and delivery of the certificates for the AMPS to
the Underwriters, including any stock or other transfer taxes and any stamp or
other duties payable upon the sale, issuance or delivery of the AMPS to the
Underwriters, (iv) the fees and disbursements of the Fund's counsel, accountants
and other advisers, (v) the qualification of the AMPS under securities laws in
accordance with the provisions of Section 3(a)(vi) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith, (vi) the printing and delivery to the Underwriters of
copies of each preliminary prospectus, Prospectus
12
and any amendments or supplements thereto, (vii) to the extent necessary, the
preparation, printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (viii) the fees and expenses of any transfer
agent or registrar for the AMPS, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the AMPS, and (x) the
printing of any sales material.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Fund agrees that it shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Fund and the Adviser
contained in Section 1 hereof or in certificates of any officer of the Fund or
the Adviser delivered pursuant to the provisions hereof, to the performance by
the Fund and the Adviser of their respective covenants and other obligations
hereunder, and to the following further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act, no notice or order pursuant
to Section 8(e) of the 1940 Act shall have been issued, and no proceedings with
respect to either shall have been initiated or threatened by the Commission, and
any request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. A prospectus containing the Rule 430A Information shall have been
filed with the Commission in accordance with Rule 497 (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A) or, if the Fund has
elected to rely on upon Rule 434, a Term Sheet shall have been filed with the
Commission in accordance with Rule 497.
(b) OPINIONS OF COUNSEL FOR THE FUND AND THE ADVISER. At Closing Time, the
Representative shall have received the favorable opinions, dated as of Closing
Time, of Xxxxxxx Xxxx & Xxxxxxxxx LLP, counsel for the Fund, and Xxxxxxxx &
Sterling LLP, counsel for the Adviser, in form and substance satisfactory to
counsel for the Underwriters, together with signed or reproduced copies of such
letters for each of the other Underwriters as set forth in EXHIBIT A hereto. In
giving such opinion such counsel may rely, as to all matters governed by the
laws of jurisdictions other than the law of the State of New York and the
federal law of the United States, upon the opinions of counsel satisfactory to
the Representative. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Fund and certificates of public officials.
(c) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time, the
Representative shall have received the favorable opinion, dated as of Closing
Time, of Clifford Chance US LLP, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses (A) (i), (ii), (vi), (vii)
(solely as to preemptive or other similar rights arising by operation of law or
under the charter or by-laws of the Fund), (viii) through (x), inclusive, (xv)
(solely as to the information in the Prospectus under "Description of AMPS") and
the last paragraph of EXHIBIT A hereto. In giving such opinion such counsel may
rely, as to all matters governed by the laws of jurisdictions other than the law
of the State of New York and the federal law of the United States, upon the
opinions of counsel satisfactory to the Representative. Such counsel may also
state that,
13
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Fund and
certificates of public officials.
(d) OFFICERS' CERTIFICATES. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Fund, whether or not arising in the ordinary course of business, and the
Representative shall have received a certificate of a duly authorized officer of
the Fund and of the chief financial or chief accounting officer of the Fund and
of the President or a Vice President or Managing Director of the Adviser, dated
as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Sections 1(a) and (b)
hereof are true and correct with the same force and effect as though expressly
made at and as of Closing Time, (iii) each of the Fund and the Adviser,
respectively, has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to Closing Time, and (iv) no
stop order suspending the effectiveness of the Registration Statement, or order
of suspension or revocation of registration pursuant to Section 8(e) of the 1940
Act, has been issued and no proceedings for any such purpose have been
instituted, or, to the knowledge of the Fund or the Adviser, are pending or are
contemplated by the Commission.
(e) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of this
Agreement, the Representative shall have received from KPMG, LLP a letter dated
such date, in form and substance satisfactory to the Representative, together
with signed or reproduced copies of such letter for each of the other
Underwriters containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(f) BRING-DOWN COMFORT LETTER. At Closing Time, the Representative shall
have received from KPMG, LLP a letter, dated as of Closing Time, to the effect
that they reaffirm the statements made in the letter furnished pursuant to
subsection (e) of this Section, except that the specified date referred to shall
be a date not more than three business days prior to Closing Time.
(g) RATING. The Fund shall have delivered and the Representative shall
have received evidence satisfactory to the Representative that the AMPS are
rated `Aaa' by Xxxxx'x and `AAA' by Fitch as of the Closing Time, and there
shall not have been given any notice of any intended or potential downgrading,
or of any review for a potential downgrading, in the rating accorded to the AMPS
or any other securities of the Fund issued by Xxxxx'x or by Fitch.
(h) ASSET COVERAGE. As of the Closing Time and assuming the receipt of the
net proceeds from the sale of the AMPS, the 1940 Act Preferred Shares Asset
Coverage and the Preferred Shares Basic Maintenance Amount (each as defined in
the Charter) each will be met.
(i) ADDITIONAL DOCUMENTS. At Closing Time, counsel for the Underwriters
shall have been furnished with such documents as they may reasonably require for
the purpose of enabling them to pass upon the issuance and sale of the AMPS as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Fund and the Adviser in
connection with the organization and registration of the Fund under the 1940 Act
and the issuance and sale of the AMPS as herein contemplated shall be reasonably
satisfactory in form and substance to the Representative and counsel for the
Underwriters.
(j) TERMINATION OF AGREEMENT. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representative by notice to the Fund at any
time at or prior to Closing Time and such termination shall be without liability
14
of any party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7, 8 and 14 shall survive any such termination and remain in full
force and effect.
SECTION 6. Indemnification.
(a) INDEMNIFICATION OF UNDERWRITERS. The Fund and the Adviser, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, and any director, officer, employee
or affiliate thereof as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information
and the Rule 434 Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus filed as part of the Registration
Statement or the Prospectus (or any amendment or supplement thereto), or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(e) below) any such settlement is effected with the prior written consent
of the Fund and the Adviser; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Xxxxxxx Xxxxx),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or (ii)
above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Fund or the
Adviser by any Underwriter through Xxxxxxx Xxxxx expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto); and
provided further that the Fund or the Adviser will not be liable to any
Underwriter with respect to any Prospectus to the extent that the Fund or the
Adviser shall sustain the burden of proving that any such loss, liability,
claim, damage or expense resulted from the fact that such Underwriter, in
contravention of a requirement of this Agreement or applicable law, sold AMPS to
a person to whom such Underwriter failed to send or give, at or prior to the
Closing Time, a copy of the final Prospectus, as then amended or supplemented
if: (i) the Fund has previously furnished copies thereof (sufficiently in
advance of the Closing Time to allow for distribution by the Closing Time) to
the Underwriter and the loss, liability, claim, damage or expense of such
Underwriter resulted from an untrue statement or omission of a material fact
contained in or omitted from the preliminary Prospectus which was corrected in
the final Prospectus as, if applicable, amended or supplemented prior to the
Closing Time and such final Prospectus was required by law to be
15
delivered at or prior to the written confirmation of sale to such person and
(ii) such failure to give or send such final Prospectus by the Closing Time to
the party or parties asserting such loss, liability, claim, damage or expense
would have constituted a defense to the claim asserted by such person; and
provided, further, that the Adviser shall be liable to any party to be
indemnified under this Section 6(a) in any case only to the extent that the Fund
fails to indemnify and hold harmless such indemnified party.
(b) INDEMNIFICATION OF FUND, ADVISER, DIRECTORS AND OFFICERS. Each
Underwriter severally agrees to indemnify and hold harmless the Fund and the
Adviser, their respective directors and officers, each of the Fund's officers
who signed the Registration Statement, and each person, if any, who controls the
Fund or the Adviser within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Fund or the Adviser by such Underwriter
through Xxxxxxx Xxxxx expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Xxxxxxx Xxxxx, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Fund and the Adviser. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for fees
and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement; provided that an
16
indemnifying party shall not be liable for any such settlement effected without
its consent if such indemnifying party, prior to the date of such settlement,
(1) reimburses such indemnified party in accordance with such request for the
amount of such fees and expenses of counsel as the indemnifying party believes
in good faith to be reasonable, and (2) provides written notice to the
indemnified party that the indemnifying party disputes in good faith the
reasonableness of the unpaid balance of such fees and expenses.
(e) INDEMNIFICATION OR CONTRIBUTION BY THE FUND. Any indemnification or
contribution by the Fund shall be subject to the requirements and limitations of
Section 17(i) of the 1940 Act.
SECTION 7. Contribution.
If the indemnification provided for in Section 6 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Fund and the Adviser on the one hand and the
Underwriters on the other hand from the offering of the AMPS pursuant to this
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Fund and the Adviser on the one hand and of the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Fund and the Adviser on the one hand
and the Underwriters on the other hand in connection with the offering of the
AMPS pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the AMPS pursuant to
this Agreement (before deducting expenses) received by the Fund and the total
underwriting discount received by the Underwriters (whether from the Fund or
otherwise), in each case as set forth on the cover of the Prospectus or, if Rule
434 is used, the corresponding location on the Term Sheet, bear to the aggregate
initial public offering price of the AMPS as set forth on such cover.
The relative fault of the Fund and the Adviser on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Fund or the Adviser or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Fund, the Adviser and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the AMPS underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
17
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Fund and each director of the Adviser, respectively, each
officer of the Fund who signed the Registration Statement, and each person, if
any, who controls the Fund or the Adviser, within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Fund and the Adviser, respectively. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of AMPS set forth opposite their respective names in
SCHEDULE A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery.
All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Fund or the Adviser submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Fund or the Adviser, and shall survive delivery of the
AMPS to the Underwriters.
SECTION 9. Termination of Agreement.
(a) TERMINATION; GENERAL. The Representative may terminate this Agreement,
by notice to the Fund, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Fund or the Adviser, whether or not arising
in the ordinary course of business, or (ii) if there has occurred any material
adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representative, impracticable or inadvisable to market the AMPS
or to enforce contracts for the sale of the AMPS, or (iii) if trading in the
shares of common stock of the Fund has been suspended or materially limited by
the Commission or the NYSE, or if trading generally on the NYSE or the American
Stock Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the NASD or any other governmental authority, or
a material disruption has occurred in commercial banking or securities
settlement or clearance services in the United States, or (iv) if a banking
moratorium has been declared by either Federal or New York authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7, 8 and 14 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters.
If one or more of the Underwriters shall fail at Closing Time to purchase
the AMPS which it or they are obligated to purchase under this Agreement (the
"Defaulted AMPS"), the Representative shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
18
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted AMPS in such amounts as may be agreed upon and upon the terms
herein set forth; if, however, the Representative shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted AMPS does not exceed 10% of the number of
AMPS to be purchased on such date, each of the non-defaulting Underwriters shall
be obligated, severally and not jointly, to purchase the full amount thereof in
the proportions that their respective underwriting obligations hereunder bear to
the underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted AMPS exceeds 10% of the number of AMPS to
be purchased on such date, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement either the Representative or the Fund shall have the right to
postpone Closing Time for a period not exceeding seven days in order to effect
any required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "Underwriter" includes any
person substituted for an Underwriter under this Section 10.
SECTION 11. Tax Disclosure.
Notwithstanding any other provision of this Agreement, from the
commencement of discussions with respect to the transactions contemplated
hereby, the Fund and the Adviser (and each employee, representative or other
agent of the Fund) may disclose to any and all persons, without limitation of
any kind, the tax treatment and tax structure (as such terms are used in
Sections 6011, 6111 and 6112 of the U.S. Code and the Treasury Regulations
promulgated thereunder) of the transactions contemplated by this Agreement and
all materials of any kind (including opinions or other tax analyses) that are
provided relating to such tax treatment and tax structure.
SECTION 12. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to the
Representative, Xxxxxxx Xxxxx & Co., 4 World Financial Center, New York, New
York 10080, attention of Equity Capital Markets; and notices to the Fund or the
Adviser shall be directed to the office of Xxxxxxxx & Xxxxxxxx Incorporated, 000
Xxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000, xxxxxxxxx of
Xxxxxx Xxxxxxxx.
SECTION 13. Parties.
This Agreement shall each inure to the benefit of and be binding upon the
Underwriters, the Fund, the Adviser and their respective partners and
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters, the Fund, the Adviser and their respective successors and the
controlling persons and officers, directors and directors referred to in
Sections 6 and 7 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Fund, the Adviser and their respective partners and
successors, and said controlling persons and officers, trustees and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of AMPS from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
19
SECTION 14. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SAID STATE. UNLESS OTHERWISE EXPLICITLY PROVIDED, SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings.
The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.
20
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the
Underwriters, the Fund and the Adviser in accordance with its terms.
Very truly yours,
XXXXXXXX & XXXXXXXX/CLAYMORE TOTAL
RETURN FUND INCORPORATED
By:
------------------------------------
Name:
Title:
XXXXXXXX & XXXXXXXX INCORPORATED
By:
------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXXX XXXXX & CO.
XXXXXXX XXXXX, XXXXXX, XXXXXX & XXXXX
INCORPORATED
[other underwriters]
By: Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx & Xxxxx
Incorporated
By:
------------------------------------------
Authorized Signatory
For itself and as
Representative of the
other Underwriters named
in SCHEDULE A hereto.
21
SCHEDULE A
NAME OF UNDERWRITER SERIES SERIES
------------------- ------ ------
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Total
=================================
Sch A-1
Xxxxxxxx & Xxxxxxxx/Claymore Total Return Fund Incorporated
Auction Market Preferred Shares, Series
Auction Market Preferred Shares, Series
Liquidation Preference $25,000 per Share
1. The initial public offering price per share for the AMPS,
determined as provided in said Section 2, shall be $25,000.
2. The purchase price per share for the AMPS to be paid by the
several Underwriters shall be $[24,750], such discount from the initial public
offering price representing the commission to be paid to the Underwriters for
their commitment hereunder of $[250].
3. The initial dividend rate of the AMPS, Series [ ] shall be
[ ]% per annum.
4. The initial dividend rate of the AMPS, Series [ ] shall be
[ ]% per annum.
Sch B-1
Exhibit A
FORM OF OPINION OF FUND'S
COUNSEL TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(A) With respect to the Fund:
(i) The Fund has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Maryland.
(ii) The Fund has the corporate power and authority to own,
lease and operate its properties and to conduct its business as described
in the Prospectus and to enter into and perform its obligations under the
Purchase Agreement.
(iii) The Fund is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
(iv) To our knowledge, the Fund does not have any
subsidiaries.
(v) The authorized shares of common stock of the Fund are
as set forth in the Prospectus under the caption "Description of Capital
Structure." The authorized number of shares of preferred stock of the Fund
are as set forth in the Prospectus under the caption "Description of AMPS,"
and the authorized number of AMPS are as set forth in the Prospectus under
the caption "Description of Capital Structure." All issued and outstanding
shares of Common Stock of the Fund have been duly authorized and validly
issued and are fully paid and non-assessable. The Common Shares conform in
all material respects as to legal matters to all statements relating
thereto contained in the Prospectus under the caption "Description of
Capital Structure," and, to our knowledge, none of the outstanding shares
of Common Stock of the Fund were issued in violation of the preemptive or
other similar rights of any stockholder of the Fund. The AMPS conform in
all material respects as to legal matters and to all statements relating
thereto contained in the Prospectus under the captions "Description of
AMPS" and "Description of Capital Structure."
(vi) The AMPS to be purchased by the Underwriters from the
Fund pursuant to the Purchase Agreement have been duly authorized for
issuance and sale to the Underwriters pursuant to the Purchase Agreement
and, when issued and delivered by the Fund pursuant to the Purchase
Agreement against payment of the consideration set forth in the Purchase
Agreement, will be validly issued and fully paid and non-assessable, and no
holder of the AMPS is or will be subject to personal liability solely by
reason of being such a holder.
(vii) The issuance of the AMPS is not subject to preemptive
or other similar rights of any stockholder of the Fund under the Charter or
Bylaws of the Fund or the Maryland General Corporation Law or, to our
knowledge, otherwise.
(viii) The Purchase Agreement has been duly authorized,
executed and delivered by the Fund.
(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act and
the 1940 Act; any required filing of the
A-1
Prospectus pursuant to Rule 497(c) or Rule 497(h) has been made in the
manner and within the time period required by Rule 497; and, to our
knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under
the 1933 Act, and, to our knowledge, no order of suspension or revocation
of registration pursuant to Section 8(e) of the 1940 Act has been issued,
and no proceedings for any such purpose have been instituted or are pending
or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectus and each amendment or supplement
to the Registration Statement and Prospectus as of their respective
effective or issue dates (other than the financial statements, related
notes thereto and supporting schedules included therein or omitted
therefrom, as to which we need express no opinion), and the notification on
Form N-8A complied as to form in all material respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and Regulations.
(xi) The form of stock certificate used to evidence the AMPS
complies in all material respects with all applicable statutory
requirements and with the Charter and by-laws of the Fund.
(xii) To our knowledge, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Fund
is a party, or to which the property of the Fund is subject, before or
brought by any United States, New York or Maryland court or governmental
agency or body, which might reasonably be expected to result in a Material
Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets of the Fund or the consummation
of the transactions contemplated in the Purchase Agreement or the
performance by the Fund of its obligations thereunder.
(xiii) The information in the Prospectus under "Description of
AMPS" and "Taxation" and in the Registration Statement under Item 29
(Indemnification), to the extent that it constitutes summaries of legal
matters, the Fund's Charter and by-laws or legal proceedings, or legal
conclusions, has been reviewed by us and is correct in all material
respects.
(xiv) Each of the Advisory Agreement, the Administration
Agreement, the Custodian Services Agreement, the Transfer Agency And
Registrar Agreement, the Auction Agency Agrement and the Purchase Agreement
comply in all material respects with all applicable provisions of the 1940
Act, the Advisers Act, the Rules and Regulations and the Advisers Act Rules
and Regulations.
(xv) The Fund is duly registered with the Commission under
the 1940 Act as a closed-end diversified management investment company;
and, to our knowledge, no order of suspension or revocation of such
registration has been issued or proceedings therefor initiated or
threatened by the Commission.
(xvi) To our knowledge, except as set forth in the
Registration Statement, no director of the Fund is an "interested person"
(as defined in the 1940 Act) of the Fund or an "affiliated person" (as
defined in the 1940 Act) of an Underwriter.
(xvii) To our knowledge, there are no United States federal
statutes or regulations that are required to be described in the Prospectus
that are not described as required.
(xviii) All descriptions in the Registration Statement of
contracts and other documents to which the Fund is a party and which are
included as exhibits to the Registration Statement are
A-2
accurate in all material respects. To our knowledge, after due inquiry,
there are no franchises, contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be described or referred to
in the Registration Statement or to be filed as exhibits thereto other than
those described or referred to therein or filed or incorporated by
reference as exhibits thereto, and the descriptions thereof or references
thereto are correct in all material respects.
(xix) To our knowledge, no filing with, or authorization,
approval, consent, license, order, registration, qualification or decree
of, any United States, New York or Maryland court or governmental authority
or agency (other than under the 1933 Act, the 1934 Act, the 1940 Act and
the Rules and Regulations, which have been obtained, or as may be required
under the securities or blue sky laws of the various states, as to which we
need express no opinion) is necessary or required in connection with the
due authorization, execution and delivery by the Fund of the Purchase
Agreement or for the offering, issuance or sale of the AMPS or the
consummation by the Fund of the transactions contemplated by this
Agreement.
(xx) The execution, delivery and performance by the Fund of
the Purchase Agreement and the consummation of the transactions
contemplated in the Purchase Agreement and in the Registration Statement
(including the issuance and sale of the AMPS by the Fund and the use of the
proceeds from the sale of the AMPS as described in the Prospectus under the
caption "Use of Proceeds") and compliance by the Fund with its obligations
under the Purchase Agreement do not and will not, whether with or without
the giving of notice or lapse of time or both, conflict with or constitute
a breach of, or default or Repayment Event (as defined in Section 1(a)(xii)
of the Purchase Agreement) under or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Fund
pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument, known
to us, to which the Fund is a party or by which it may be bound, or to
which any of the property or assets of the Fund is subject, nor will such
action result in any violation of the provisions of the Charter or by-laws
of the Fund, or any applicable law, statute, rule, regulation, judgment,
order, writ or decree, known to us and that is normally applicable to
transactions of the type contemplated by the Purchase Agreement, of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Fund or any of its properties, assets or
operations.
(xxi) The Purchase Agreement, the Advisory Agreement, the
Administration Agreement, the Custodian Services Agreement, the Auction
Agency Agreement and the Transfer Agency And Registrar Agreement have each
been duly authorized by all requisite action on the part of the Fund,
executed and delivered by the Fund, as of the dates noted therein. Assuming
due authorization, execution and delivery by the other parties thereto with
respect to the Advisory Agreement, Administration Agreement, Custodian
Services Agreement, the Auction Agency Agreement and the Transfer Agency
And Registrar Agreement, each of the Advisory Agreement, the Administration
Agreement, the Custodian Services Agreement, the Auction Agency Agreement
and the Transfer Agency And Registrar Agreement constitutes a valid and
binding agreement of the Fund, enforceable against it in accordance with
its terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
In addition, we have participated in the preparation of the Registration
Statement and the Prospectus and participated in discussions with certain
officers, directors and employees of the Fund, representatives of KPMG,
LLP, the independent accountants who examined the statement
A-3
of assets and liabilities of the Fund dated [ ], 2003 included or
incorporated by reference in the Registration Statement and the Prospectus,
and you and your representatives and we have reviewed certain Fund records
and documents. While we have not independently verified and are not passing
upon, and do not assume any responsibility for, the accuracy, completeness
or fairness of the information contained in the Registration Statement and
the Prospectus, except to the extent necessary to enable us to give the
opinions with respect to the Fund in paragraphs (v), (xiv) and (xix), on
the basis of such participation and review, nothing has come to our
attention that would lead us to believe that the Registration Statement
(except for financial statements, related notes thereto and schedules and
other financial data included therein or omitted therefrom, as to which we
do not express any belief), at the time such Registration Statement 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 (except for
financial statements, related notes thereto and schedules and other
financial data included therein or omitted therefrom, as to which we do not
express any belief), at the time the Prospectus was issued, or at the
Closing Time, included or includes an untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
A-4
FORM OF OPINION OF ADVISER'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
[ ], 2003
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
As Representative of the several Underwriters
named in Schedule A to the Purchase Agreement
c/x Xxxxxxx Xxxxx & Co.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
4 World Financial Center
New York, New York 10080
XXXXXXXX & XXXXXXXX INCORPORATED
Ladies and Gentlemen:
We have acted as special counsel to Xxxxxxxx & Xxxxxxxx Incorporated, a
California corporation (the "Adviser"), the investment adviser to Xxxxxxxx &
Xxxxxxxx/Claymore Total Return Fund Incorporated, a Maryland corporation (the
"Fund"), in connection with the issue and sale to you by the Fund of an
aggregate of [ ] Shares of its Auction Market Preferred Shares, Series
[ ] and [ ] Shares of its Auction Market Preferred Shares, Series
[ ], liquidation preference of $25,000 per share (the "AMPS"), subject to
the terms and conditions set forth in the Purchase Agreement, dated [ ],
2003 (the "Purchase Agreement"), among you, the Fund and the Adviser.
In such capacity, we have examined executed copies of the Purchase
Agreement, the Advisory Agreement dated [ ], 2003 (the "Advisory
Agreement") between the Fund and the Adviser, and copies of the registration
statement on Form N-2 (Registration Nos. 333-109001 and 811-21380), filed by the
Fund under the Securities Act of 1933, as amended (the "Securities Act"), and
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), with the Securities and Exchange Commission (the "Commission") on
[ ], 2003, and of the amendment thereto filed by the Fund with the
Commission on [ ], 2003, and copies of the related prospectus (the
registration statement as amended at the time when it became effective,
including the information deemed to be part thereof at the time of effectiveness
pursuant to Rule 497(a) of the rules and regulations of the Commission under the
Securities Act, and also including the exhibits thereto and documents
incorporated by reference therein, being hereinafter referred to as the
"Registration Statement," and the final prospectus dated [ ], 2003 in the
form in which it was filed with the Commission pursuant to Rule 497(h) under the
Securities Act being hereinafter referred to as the "Prospectus"). The
Registration Statement and the Prospectus were prepared and filed by the Fund
without our participation.
We have also examined originals of copies identified to our satisfaction of
such corporate records of the Adviser, certificates of public officials,
officers and employees of the Adviser and other persons, and such other
documents, agreements or instruments as we have deemed necessary or appropriate
as the
A-5
basis for the opinions hereinafter expressed. In our examinations, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity with the originals of all
documents submitted to us as copies. In rendering our opinion, we have relied as
to factual matters, to the extent we deem proper, upon the representations and
warranties of the Adviser and the Fund contained in or made pursuant to the
Purchase Agreement, the Advisory Agreement, certificates of officers of the
Adviser and certificates of public officials.
Our opinions set forth below are limited to the laws of the States of New
York and California and the federal laws of the United States, and we do not
express any opinion herein concerning any other laws.
Based upon and subject to the foregoing, we are of the opinion that:
(i) The Adviser is a corporation duly incorporated and validly
existing in good standing as a corporation under the laws of the State of
California with corporate power and authority under such laws to own its
properties and conduct its business as described in the Prospectus and to enter
into and perform its obligations under the Purchase Agreement. To our knowledge,
the Adviser is not qualified to do business as a foreign corporation in any
jurisdiction;
(ii) The Purchase Agreement has been duly authorized, executed and
delivered by the Adviser;
(iii) The Advisory Agreement has been duly authorized, executed
and delivered by the Adviser and, assuming due execution by the Fund, the
Advisory Agreement constitutes the valid and binding obligation of the Adviser,
enforceable against the Adviser in accordance with its terms, except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally (including, without limitation, all laws relating to fraudulent
transfers) and (y) the enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law);
(iv) The execution, delivery and performance of the Purchase Agreement
(other than performance of the Adviser's indemnification and contribution
obligations thereunder, as to which we express no opinion) and the Advisory
Agreement by the Adviser will not result in a breach or violation of any of the
terms and provisions of, 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 agreement, indenture or instrument
known to us to be material to the Adviser, or result in a violation of the
corporate charter or by-laws of the Adviser or the Securities Act, the
Investment Company Act, the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act" and, together with the Securities Act, the Investment Company
Act, and the Advisers Act, being referred to herein, collectively, as the
"Acts"), or any other applicable statute, any rule or regulation known to us of,
or to our knowledge, any order of, any court or governmental agency having
jurisdiction over the Adviser or its property or operations, except for such
breaches, violations, liens or defaults that would not, singly or in the
aggregate, reasonably be expected to have a material adverse effect on the
Adviser;
(v) To our knowledge, no consent, authorization or order of, or
filing or registration with, any court or governmental agency having
jurisdiction over the Adviser, or over its property or operations, is required
for the execution, delivery and performance of the Purchase Agreement or the
Advisory Agreement by the Adviser, except (x) such as has been obtained under
the Acts or (y) such as may be required under state or other securities or Blue
Sky laws in connection with the purchase and the distribution of the AMPS by
you;
A-6
(vi) 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 as the investment adviser to the Fund under the Advisory Agreement;
(vii) To our knowledge, there is no litigation or any proceeding
pending or threatened to which the Adviser is a party, or to which the property
or assets of the Adviser are subject, which might reasonably be expected to have
a material adverse effect on the Adviser, or which might reasonably be expected
to materially and adversely affect the property or assets thereof, the
consummation of the transactions contemplated in the Purchase Agreement or the
Advisory Agreement, the performance by the Adviser of its obligations thereunder
or the registration or good standing of the Adviser with the Commission, or
which is required to be disclosed in the Prospectus by the Securities Act which
is not disclosed and correctly summarized therein; and
(viii) To our knowledge, the Adviser is not in violation of its
corporate charter or by-laws.
This letter is being furnished to you solely for your benefit in connection
with your purchase of the AMPS, and is not to be used, circulated, quoted or
otherwise referred to for any other purpose.
Very truly yours,
A-7
[ ], 2003
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
As Representative of the several Underwriters
named in Schedule A to the Purchase Agreement
c/x Xxxxxxx Xxxxx & Co.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
4 World Financial Center
New York, New York 10080
XXXXXXXX & XXXXXXXX INCORPORATED
Ladies and Gentlemen:
We have acted as special counsel to Xxxxxxxx & Xxxxxxxx Incorporated, a
California corporation (the "Adviser"), the investment adviser to Xxxxxxxx &
Xxxxxxxx/Claymore Total Return Fund Incorporated, a Maryland corporation (the
"Fund"), in connection with the issue and sale to you by the Fund of an
aggregate of [ ] Shares of its Auction Market Preferred Shares, Series
[ ] and [ ] Shares of its Auction Market Preferred Shares, Series
[ ], liquidation preference of $25,000 per share (the "AMPS"), subject to
the terms and conditions set forth in the Purchase Agreement, dated [ ],
2003 (the "Purchase Agreement"), among you, the Fund and the Adviser.
In such capacity, we have examined executed copies of the Purchase
Agreement, the Investment Advisory Agreement dated [ ], 2003 (the
"Advisory Agreement") between the Fund and the Adviser and copies of the
registration statement on Form N-2 (Registration Nos. 333-109001 and 811-21380),
filed by the Fund under the Securities Act of 1933, as amended (the "Securities
Act"), and under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), with the Securities and Exchange Commission (the "Commission") on
[ ], 2003, and of the amendment thereto filed by the Fund with the
Commission on [ ], 2003, and copies of the related prospectus (the
registration statement as amended at the time when it became effective,
including the information deemed to be part thereof at the time of effectiveness
pursuant to Rule 497(a) of the rules and regulations of the Commission under the
Securities Act, and also including the exhibits thereto and documents
incorporated by reference therein, being hereinafter referred to as the
"Registration Statement," and the final prospectus dated [ ], 2003 in the
form in which it was filed with the Commission pursuant to Rule 497(h) under the
Securities Act being hereinafter referred to as the "Prospectus"). The
Registration Statement and the Prospectus were prepared and filed by the Fund
without our participation.
In the course of our representation of the Adviser in connection with the
offering by the Fund of the AMPS, we also participated in discussions with
certain officers and employees of the Adviser regarding statements relating to
or describing the Adviser in the sections of the Registration Statement and the
Prospectus captioned "Prospectus Summary - Adviser and Servicing Agent" and
"Management of the Fund - Adviser." We have not independently checked or
verified the accuracy, completeness or fairness of the information contained in
the Registration Statement and the Prospectus and the limitations inherent in
the independent verification of factual matters and in the role of the outside
counsel are such,
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however, that we cannot and do not assume any responsibility for the accuracy,
completeness or fairness of any of the statements made in the Registration
Statement and the Prospectus.
Subject to the limitations set forth in the immediately preceding
paragraph, we advise you that, on the basis of the information we gained in the
course of performing the services referred to above, no facts came to our
attention which gave us reason to believe that (i) the sections of the
Registration Statement captioned "Prospectus Summary - Adviser and Servicing
Agent" and "Management of the Fund - Adviser" (other than the financial
statements and other financial data contained therein or omitted therefrom, as
to which we have not been requested to comment) insofar as such sections relate
to or describe the Adviser, as of the date hereof, contain an untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein not misleading or (ii) the sections of the Prospectus
captioned "Prospectus Summary - Adviser and Servicing Agent" and "Management of
the Fund - Adviser" (other than the financial statements and other financial
data contained therein or omitted therefrom, as to which we have not been
requested to comment) insofar as such sections relate to or describe the
Adviser, as of the date hereof, contain an untrue 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, not
misleading.
This letter is being furnished to you solely for your benefit in connection
with your purchase of the AMPS, and is not to be used, circulated, quoted or
otherwise referred to for any other purpose.
Very truly yours,
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