24,000,000 SHARES
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ REALTY
INCOME FUND INC.
COMMON STOCK
UNDERWRITING AGREEMENT
April 24, 2003
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇
& ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated
BB&T Capital Markets, a division of
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Incorporated
J.J.B. ▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated
McDonald Investments Inc.,
a KeyCorp Company
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.
RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc.
As Representatives of the Several Underwriters
c/o ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
The undersigned, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Realty Income Fund Inc., a Maryland
corporation (the "Fund"), ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Management Inc., a New York
corporation (the "Adviser"), and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, LLC, a Delaware limited
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liability company (the "Sub-Adviser"), address you as Underwriters and as the
Representatives (the "Representatives") of each of the other persons, firms and
corporations, if any, listed in Schedule I hereto (herein collectively called
"Underwriters"). The Fund proposes to issue and sell an aggregate of 24,000,000
shares of common stock, $0.0001 par value per share (the "Firm Shares"), of the
Fund to the several Underwriters. The Fund also proposes to sell upon the terms
and conditions contained in Section 2 hereof, up to 3,600,000 additional common
shares (the "Additional Shares" which together with the Firm Shares are
hereinafter collectively referred to as the "Shares").
The Fund, the Adviser and the Sub-Adviser wish to confirm as follows their
agreements with you and the other several Underwriters on whose behalf you are
acting in connection with the several purchases of the Shares by the
Underwriters.
The Fund has entered into an investment management agreement with the
Adviser dated April 24, 2003 (the "Management Agreement"), an administration
agreement with the Adviser dated April 24, 2003 (the "Administration
Agreement"), a Custodian Contract with State Street Bank and Trust Company
("State Street") dated April 24, 2003 (the "Custodian Contract"), and a Transfer
Agency Agreement with The Bank of New York dated April 24, 2003 (the "Transfer
Agency Agreement"). In addition, the Fund has adopted a dividend reinvestment
plan (the "Dividend Reinvestment Plan"), pursuant to which holders of Shares
shall have their dividends automatically reinvested in additional common shares
of the Fund unless they elect to receive such dividends in cash. Collectively,
the Management Agreement, Administration Agreement, Custodian Contract and
Transfer Agency Agreement are herein referred to as the "Fund Agreements." The
Adviser has entered into a Sub-Advisory Agreement with the Sub-Adviser dated
April 24, 2003 (the "Sub-Advisory Agreement"). Collectively the Management
Agreement, Administration Agreement and Sub-Advisory Agreement are herein
referred to as the "Adviser Agreements." This Underwriting Agreement is herein
referred to as the "Agreement."
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1. REGISTRATION STATEMENT AND PROSPECTUS. The Fund has prepared and filed
with the Securities and Exchange Commission (the "Commission") in accordance
with the provisions of the Securities Act of 1933, as amended (the "1933 Act"),
the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules
and regulations of the Commission under the 1933 Act (the "1933 Act Rules and
Regulations") and the 1940 Act (the "1940 Act Rules and Regulations" and
together with the 1933 Act Rules and Regulations, the "Rules and Regulations") a
registration statement on Form N-2 (File No. 333-103594 under the 1933 Act) (the
"registration statement"), including a prospectus and statement of additional
information relating to the Shares, and a notification of registration of the
Fund as an investment company under the 1940 Act on Form N-8A (File No.
811-21315 under the 1940 Act, the "1940 Act Notification"), and may pursuant to
the Rules and Regulations prepare and file an additional registration statement
relating to a portion of the Shares pursuant to Rule 462(b) of the 1933 Act
Rules and Regulations (a "Rule 462 registration statement"). The term
"Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective under the 1933 Act or, if the registration statement
became effective under the 1933 Act prior to the execution of this Agreement, as
amended or supplemented thereto, prior to the execution of this Agreement and
includes any information deemed to be included by Rule 430A under the 1933 Act
Rules and Regulations. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will be
filed under the 1933 Act and must be declared effective before the offering of
Shares may commence, the term "Registration Statement" as used in this Agreement
means the Registration Statement as amended by said post-effective amendment. If
the Fund has filed a Rule 462 registration statement, then the reference herein
to the term "Registration Statement" shall include such Rule 462 registration
statement. The term "Prospectus" as used in this Agreement means the prospectus
and statement of additional information in the forms included in the
Registration Statement or, if the prospectus and statement of additional
information included in the Registration Statement omit information in reliance
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on Rule 430A under the 1933 Act Rules and Regulations and such information is
included in a prospectus and statement of additional information filed with the
Commission pursuant to Rule 497(h) under the 1933 Act Rules and Regulations, the
term "Prospectus" as used in this Agreement means the prospectus and statement
of additional information in the forms included in the Registration Statement as
supplemented by the addition of the information contained in the prospectus
(including the statement of additional information) filed with the Commission
pursuant to Rule 497(h). The term "Prepricing Prospectus" as used in this
Agreement means the prospectus and statement of additional information subject
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission and as such
prospectus and statement of additional information shall have been amended from
time to time prior to the date of the Prospectus, together with any other
prospectus (including any other statement of additional information) relating to
the Fund other than the Prospectus. The terms "Registration Statement,"
"Prospectus" and "Prepricing Prospectus" shall also include any financial
statements and other information included or incorporated by reference therein.
The Fund has furnished the Representatives with copies of such Registration
Statement, each amendment to such Registration Statement filed with the
Commission and each Prepricing Prospectus.
2. AGREEMENTS TO SELL AND PURCHASE. The Fund hereby agrees, subject to all
the terms and conditions set forth herein, to issue and to sell to each
Underwriter and, upon the basis of the representations, warranties and
agreements of the Fund, the Adviser and the Sub-Adviser herein contained and
subject to all of the other terms and conditions set forth herein, each
Underwriter agrees, severally and not jointly, to purchase from the Fund at a
purchase price of $14.325 per Share (the "Price per Share"), the number of
Shares set forth opposite the name of such Underwriter in Schedule I hereto.
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The Fund also agrees, subject to all the terms and conditions set forth
herein, to issue and to sell to the Underwriters and, upon the basis of the
representations, warranties and agreements of the Fund, the Adviser and the
Sub-Adviser herein contained and subject to all the terms and conditions set
forth herein, the Underwriters shall have the right to purchase from the Fund,
at the Price per Share, pursuant to an option (the "over-allotment option"),
Additional Shares. The over-allotment option may be exercised, in whole or in
part, once by the Managing Representative (as defined below) on behalf of the
Underwriters, (or twice as mutually agreed by the Fund and the Managing
Representative) at any time prior to 9:00 A.M., New York City time, on or before
the 45th day after the date of the Prospectus (or if such 45th day shall be a
Saturday or a Sunday or a holiday, on the next business day thereafter when the
New York Stock Exchange (the "NYSE") is open for trading). Additional Shares may
be purchased solely for the purpose of covering over-allotments made in
connection with the offering of the Shares. Upon any exercise in whole or in
part of the over-allotment option, upon the basis of the representations,
warranties and agreements of the Fund, the Adviser and the Sub-Adviser, herein
contained and subject to all of the other terms and conditions set forth herein,
each Underwriter agrees, severally and not jointly, to purchase from the Fund
the number of Additional Shares as to which the option is being exercised
(subject to such adjustments as you may determine to avoid fractional shares)
which bears the same proportion to the aggregate number of Additional Shares to
be purchased by the Underwriters as the number of Firm Shares set forth opposite
the name of such Underwriter in Schedule I (or such number of Firm Shares
increased as set forth in Section 11 hereof) bears to the aggregate number of
Firm Shares.
3. TERMS OF PUBLIC OFFERING. The Fund and the Adviser have been advised by
you that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable and initially
to offer the Shares upon the terms set forth in the Prospectus.
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4. DELIVERY OF SHARES AND PAYMENTS THEREFOR.
(a) Payment of the purchase price for the Firm Shares shall be made to
the Fund by Federal Funds wire transfer, against delivery of the certificates,
if any, (or, if no certificates, against notification of electronic delivery)
for the Firm Shares to the Representatives through the facilities of the
Depository Trust Company ("DTC") for the respective accounts of the
Underwriters. Delivery to the Underwriters of and payment to the Fund for the
Firm Shares and compensation of the Underwriters with respect thereto shall be
made at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 9:00 a.m. New York City time on April 29, 2003 (the
"Closing Date"). The place of closing for the Firm Shares and the Closing Date
may be varied by agreement between the Fund and ▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc., as
the managing representative (the "Managing Representative") of the Underwriters.
(b) Delivery to the Underwriters of and payment to the Fund for any
Additional Shares to be purchased by the Underwriters and compensation of the
Underwriters with respect thereto shall be made in the same manner and at the
same office as for the Firm Shares at such time on such date (an "Option Closing
Date"), which may be the same as the Closing Date, but shall in no event be
earlier than the Closing Date nor earlier than two nor later than seven business
days after the giving of the notice hereinafter referred to, as shall be
specified in a written notice from you on behalf of the Underwriters to the Fund
of the Underwriters' determination to purchase a number, specified in said
notice, of Additional Shares. The place of closing for any Additional Shares and
the Option Closing Date for such Additional Shares may be varied by agreement
between you and the Fund.
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(c) The Shares shall be registered in such names and in such
denominations as the Underwriters shall request prior to 1:00 P.M., New York
City time (or such other time as the parties agree), (i) with respect to the
Firm Shares, on the first business day preceding the Closing Date (ii) with
respect to the Additional Shares, on the day of the giving of the written notice
in respect of such Additional Shares. Certificates for shares, if any, will be
made available to you in New York City for inspection and packaging not later
than 9:00 A.M., New York City time, on the business day next preceding the
Closing Date or any Option Closing Date, as the case may be. The certificates,
if any, evidencing the Firm Shares and any Additional Shares to be purchased
hereunder shall be delivered to you on the Closing Date or the Option Closing
Date, as the case may be, against payment of the purchase price therefor in
immediately available funds in the manner described above.
5. AGREEMENTS OF THE FUND, THE ADVISER AND THE SUB-ADVISER. The Fund, the
Adviser and the Sub-Adviser, jointly and severally, agree with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective under the 1933 Act before the offering of the Shares
may commence, the Fund will use its best efforts to cause the Registration
Statement or such post-effective amendment to become effective under the 1933
Act as soon as possible. If the Registration Statement has become effective and
the Prospectus contained therein omits certain information at the time of
effectiveness pursuant to Rule 430A of the 1933 Act Rules and Regulations, the
Fund will file a prospectus including such information pursuant to Rule 497(h)
of the 1933 Act Rules and Regulations, as promptly as practicable, but no later
than the second business day following the earlier of the date of the
determination of the offering price of the Shares or the date the Prospectus is
first used after the effective date of the Registration Statement. If the
Registration Statement has become effective and the Prospectus contained therein
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does not so omit such information, the Fund will file a Prospectus or
certification pursuant to Rule 497(c) or (j), as the case may be, of the 1933
Act Rules and Regulations as promptly as practicable, but no later than the
fifth business day following the date of the later of the effective date of the
Registration Statement or the commencement of the public offering of the Shares
after the effective date of the Registration Statement. The Fund will advise you
promptly and, if requested by you, will confirm such advice in writing (i) when
the Registration Statement or such post-effective amendment has become
effective, (ii) when the Prospectus has been timely filed pursuant to Rule
497(c) or Rule 497(h) of the 1933 Act Rules and Regulations or (iii) when the
certification permitted pursuant to Rule 497(j) of the 1933 Act Rules and
Regulations has been timely filed, whichever is applicable.
(b) The Fund, and (in the case of (iii)(B) below with respect to
communications received by the Adviser or the Sub-Adviser) the Adviser or the
Sub-Adviser, will advise you promptly and, if requested by you, will confirm
such advice in writing: (i) of any request made by the Commission for amendment
of or a supplement to the Registration Statement, the Prospectus or any
Prepricing Prospectus (or any amendment or supplement to any of the foregoing)
or for additional information, (ii) of the issuance by the Commission, any state
securities commission, any national securities exchange, any arbitrator, any
court or any other governmental, regulatory, self-regulatory or administrative
agency or any official of any order suspending the effectiveness of the
Registration Statement, prohibiting or suspending the use of the Prospectus, any
Prepricing Prospectus or any sales material (as hereinafter defined), of any
notice pursuant to Section 8(e) of the 1940 Act, of the suspension of
qualification of the Shares for offering or sale in any jurisdiction, or the
initiation or contemplated initiation of any proceeding for any such purposes,
(iii) of receipt by (A) the Fund, any affiliate of the Fund or attorney of the
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Fund of any other material communication from the Commission, or (B) the Fund,
the Adviser, the Sub-Adviser, any affiliate of the Fund, the Adviser or the
Sub-Adviser or attorney of the Fund, the Adviser or the Sub-Adviser of any other
material communication from the Commission, any state securities commission, any
national securities exchange, any arbitrator, any court or any other
governmental, regulatory, self-regulatory or administrative agency or any
official relating, in the case of either clause (A) or (B), to the Fund (if such
communication relating to the Fund is received by such person within three years
after the date of this Agreement), the Registration Statement, the 1940 Act
Notification, the Prospectus, any Prepricing Prospectus, any Sales Material (as
hereinafter defined) (or any amendment or supplement to any of the foregoing) or
this Agreement, any of the Fund Agreements or the Adviser Agreements and (iv)
within the period of time referred to in paragraph (f) below, of any material,
adverse change in the condition (financial or other), business, business
prospects, properties, net assets or results of operations of the Fund (other
than as a result of changes in market conditions generally or the market for
real estate securities generally) or any event which has or would reasonably be
expected to have a material adverse effect on the ability of the Adviser or the
Sub-Adviser to perform their respective obligations under this Agreement, the
Advisory Agreement or the Sub-Advisory Agreement, as the case may be, or of the
happening of any event (but as to each of the Fund, the Adviser and the
Sub-Adviser, an event known to that respective entity) which makes any statement
of a material fact made in the Registration Statement, the Prospectus, any
Prepricing Prospectus or any Sales Material (or any amendment or supplement to
any of the foregoing) untrue or which requires the making of any additions to or
changes in the Registration Statement, the Prospectus, any Prepricing Prospectus
or any Sales Material (or any amendment or supplement to any of the foregoing)
in order to state a material fact required by the 1933 Act, the 1940 Act or the
Rules and Regulations to be stated therein or necessary in order to make the
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statements therein (in the case of a prospectus or any sales material, in light
of the circumstances under which they were made) not misleading or of the
necessity to amend or supplement the Registration Statement, the Prospectus, any
Prepricing Prospectus or any Sales Material (or any amendment or supplement to
any of the foregoing) to comply with the 1933 Act, the 1940 Act, the Rules and
Regulations or any other law or order of any court or regulatory body. If at any
time the Commission shall issue any order suspending the effectiveness of the
Registration Statement, prohibiting or suspending the use of the Prospectus or
any Sales Material (or any amendment or supplement to any of the foregoing) or
suspending the qualification of the Shares for offering or sale in any
jurisdiction, the Fund, the Adviser and the Sub-Adviser will use their best
efforts to obtain the withdrawal of such order at the earliest possible time. If
at any time any national securities exchange, any state securities commission,
any arbitrator, any court or any other governmental, regulatory, self-regulatory
or administrative agency or any official shall issue any order suspending the
effectiveness of the Registration Statement, prohibiting or suspending the use
of the Prospectus or any Sales Material (or any amendment or supplement to any
of the foregoing) or suspending the qualification of the Shares for offering or
sale in any jurisdiction, the Fund, the Adviser and the Sub-Adviser will use
their respective best efforts to obtain the withdrawal of such order at the
earliest possible time.
(c) The Fund will furnish to you, without charge, one signed copy of
the registration statement and the 1940 Act Notification as originally filed
with the Commission and of each amendment thereto, including financial
statements and all exhibits thereto and will also furnish to you, without
charge, such number of conformed copies of the registration statement as
originally filed and of each amendment thereto, but without exhibits, as you may
reasonably request.
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(d) Within five years from the date hereof, the Fund will not (i) file
any amendment (except any post-effective amendment required by Rule 8b-16 of the
1940 Act which is filed with the Commission after the later of (x) one year from
the date of this Agreement or (y) the date on which the distribution of the
Shares is completed) to the registration statement or the Registration Statement
or make any amendment or supplement to the Prospectus, any Prepricing Prospectus
or any Sales Material (or any amendment or supplement to any of the foregoing)
of which you shall not previously have been advised or (with respect to
amendments filed within two years from the date hereof) to which you shall
reasonably object within two business days after being so advised or (ii) so
long as, in the opinion of counsel for the Underwriters, a Prospectus is
required to be delivered in connection with sales of Shares by any Underwriter
or dealer, file any information, documents or reports pursuant to the 1933 Act,
the 1940 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), without delivering a copy of such information, documents or reports to
you, as Representatives of the Underwriters, prior to or concurrently with such
filing.
(e) Prior to the execution and delivery of this Agreement, the Fund
has delivered to you, without charge, in such quantities as you have reasonably
requested, copies of each form of any Prepricing Prospectus. The Fund consents
to the use, in accordance with the provisions of the 1933 Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Fund.
(f) As soon after the execution and delivery of this Agreement as
reasonably possible and thereafter from time to time, for such period as in the
opinion of counsel for the Underwriters a prospectus is required by the 1933 Act
to be delivered in connection with sales of Shares by any Underwriter or dealer,
the Fund will expeditiously deliver to each Underwriter and each dealer, without
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charge, as many copies of the Prospectus (and of any amendment or supplement
thereto) as you may reasonably request. The Fund consents to the use of the
Prospectus (and of any amendments or supplements thereto) in accordance with the
provisions of the 1933 Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares are offered by the several Underwriters and by
all dealers to whom Shares may be sold, both in connection with the offering or
sale of the Shares and for such period of time thereafter as the Prospectus is
required by law to be delivered in connection with sales of Shares by any
Underwriter or dealer. If during such period of time any event shall occur that
in the judgment of the Fund or in the opinion of counsel for the Underwriters is
required to be set forth in the Registration Statement or the Prospectus (as
then amended or supplemented) or should be set forth therein in order to make
the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading or if it is necessary
to supplement or amend the Registration Statement or the Prospectus to comply
with the 1933 Act, the 1940 Act, the Rules and Regulations or any other
applicable law, rule or regulation, the Fund will forthwith notify you of such
event, prepare and, subject to the provisions of paragraph (d) above, promptly
file with the Commission an appropriate amendment or supplement thereto and will
furnish as promptly as reasonably possible to the Underwriters and dealers,
without charge, such number of copies thereof as they may reasonably request;
PROVIDED, however, that if such amendment or supplement is required solely as a
result of a material misstatement in or material omission from the information
furnished in writing by or on behalf of an Underwriter to the Fund, the Adviser
or the Sub-Adviser expressly for use in the Registration Statement or the
Prospectus (such information, as described in Section 9(h) of this Agreement,
being referred to herein as the "Underwriter Information"), then the Fund shall
deliver such amendment or supplement at cost.
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(g) The Fund will cooperate with you and with counsel for the
Underwriters in connection with any registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers as may be
required under the applicable securities or Blue Sky laws of such jurisdictions
as you may designate and will file such consents to service of process or other
documents necessary or appropriate in order to effect such registration or
qualification; PROVIDED, HOWEVER, that the foregoing shall not apply to the
extent that the Shares are "covered securities" that are exempt from state
regulation of securities offerings pursuant to Section 18 of the 1933 Act.
(h) As soon as practicable, but in no event later than the last day of
the 18th full calendar month following the calendar quarter in which the
effective date of the Registration Statement falls, the Fund will make generally
available to its security holders an earnings statement, which need not be
audited, which earnings statement shall satisfy the provisions of Section 11(a)
of the 1933 Act and Rule 158 of the 1933 Act Rules and Regulations.
(i) The Fund will comply with the undertaking set forth in sub-item 6
of Item 33 of Part C of the Registration Statement.
(j) During the period of three years hereafter, the Fund will furnish
or will have furnished to you as soon as available, a copy of each report of the
Fund mailed to shareholders or filed with the Commission (other than reports on
Form N-SAR) or furnished to the NYSE.
(k) If this Agreement shall terminate or be terminated after execution
pursuant to any provisions hereof (other than pursuant to the second paragraph
of Section 11 hereof or by notice given by you terminating this Agreement
pursuant to Section 12 hereof) or if this Agreement shall be terminated by the
Underwriters because of any inability, failure or refusal on the part of the
Fund, the Adviser or the Sub-Adviser to comply with any material terms in this
13
Agreement or because any of the conditions in Section 10 of this Agreement
required to be complied with or fulfilled by them are not satisfied, then the
Fund, the Adviser and the Sub-Adviser, jointly and severally, agree to reimburse
the Representatives for all out-of-pocket expenses not to exceed the amounts set
forth in Section 13 of this Agreement (including reasonable fees and expenses of
counsel for the Underwriters) incurred by you in connection herewith.
(l) The Fund will direct the investment of the net proceeds of the
offering of the Shares (i) in accordance with the description set forth in the
Prospectus and (ii) in such a manner as to comply with the investment
objectives, policies and restrictions of the Fund as described in the
Prospectus.
(m) The Fund will file the requisite copies of the Prospectus with the
Commission in a timely fashion pursuant to Rule 497(c) or Rule 497(h) of the
1933 Act Rules and Regulations, whichever is applicable or, if applicable, will
file in a timely fashion the certification permitted by Rule 497(j) of the 1933
Act Rules and Regulations and will advise you of the time and manner of such
filing.
(n) The Fund will use its best efforts to have the Shares listed,
subject to notice of issuance, on the NYSE concurrently with the effectiveness
of the Registration Statement and to comply with the rules or regulations of
such exchange.
(o) Except as provided in this Agreement or pursuant to any dividend
reinvestment plan of the Fund, the Fund will not sell, contract to sell or
otherwise dispose of, any common stock of the Fund or any securities convertible
into or exercisable or exchangeable for common stock of the Fund or grant any
options or warrants to purchase common stock of the Fund, for a period of 180
days after the date of the Prospectus, without the prior written consent of the
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Representatives.
(p) Except as stated in this Agreement and in the Prospectus, none of
the Fund, the Adviser or the Sub-Adviser will take, directly or indirectly, any
action designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Shares in violation of federal
securities laws.
(q) The Fund will direct the investment of the proceeds of the
offering of the Shares so as to comply with the requirements of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), to qualify as a
regulated investment company under the Code.
6. REPRESENTATIONS AND WARRANTIES OF THE FUND, THE ADVISER AND THE
SUB-ADVISER. The Fund, the Adviser and the Sub-Adviser, jointly and severally,
represent and warrant to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement thereto
or filed pursuant to Rule 497 of the 1933 Act Rules and Regulations, complied
when so filed in all material respects with the provisions of the 1933 Act, the
1940 Act and the Rules and Regulations (except that this representation and
warranty does not apply to statements in or omissions from the Prepricing
Prospectus (and any amendment or supplement thereto) made in reliance upon and
in conformity with the Underwriter Information) and the Commission has not
issued any order preventing or suspending the use of the Prepricing Prospectus.
(b) The registration statement, in the form in which it was originally
filed, in the form in which it became or becomes effective and also in such form
as it may be when any post-effective amendment thereto shall become effective,
the Prospectus and any amendment or supplement thereto when filed with the
15
Commission under Rule 497 of the 1933 Act Rules and Regulations and the 1940 Act
Notification when originally filed with the Commission and any amendment or
supplement thereto when filed with the Commission complied or will comply in all
material respects with the provisions of the 1933 Act, the 1940 Act and the
Rules and Regulations and each of the Registration Statement and the Prospectus
(or any supplement or amendment to either of them) did not or will not at any
such times 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 (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading; except that this representation and
warranty does not apply to statements in or omissions from the Registration
Statement and the Prospectus (and any amendment or supplement to either of them)
made in reliance upon and in conformity with the Underwriter Information.
(c) All the outstanding shares of capital stock of the Fund have been
duly authorized and validly issued, are fully paid and nonassessable and are
free of any preemptive or similar rights; the Shares have been duly authorized
and, when issued and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights; and the capital
stock of the Fund conforms in all material respects to the description thereof
in the Registration Statement or the Prospectus (or any amendment or supplement
to either of them). Except for the Shares and the shares of common stock issued
in accordance with Section 14(a) of the 1940 Act, no other shares of capital
stock are issued or outstanding and the capitalization of the Fund conforms in
all material respects to the description thereof in the Registration Statement
and the Prospectus (or any amendment or supplement to either of them).
(d) The Fund has been duly formed and is validly existing in good
16
standing as a corporation under the laws of the State of Maryland, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them) and is duly
registered and qualified to conduct business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or to qualify does not or would not have a material, adverse
effect on the condition (financial or other), business, business prospects,
properties, net assets or results of operations of (a "Material Adverse Effect")
the Fund. The Fund has no subsidiaries.
(e) There are no legal or governmental proceedings pending or, to the
knowledge of the Fund, threatened, against the Fund, or to which the Fund or any
of its properties is subject, that are required to be described in the
Registration Statement or the Prospectus (and any amendment or supplement to
either of them) but are not described therein and there are no agreements,
contracts, indentures, leases or other instruments that are required to be
described in the Registration Statement or the Prospectus (or any amendment or
supplement to either of them) or to be filed as an exhibit to the Registration
Statement that are not described therein or filed as an exhibit thereto as
required by the 1933 Act, the 1940 Act or the Rules and Regulations.
(f) The Fund is not (i) in violation of its Articles of Incorporation
("Articles"), by-laws or other organizational documents, (ii) in violation of
any law, ordinance, administrative or governmental rule or regulation applicable
to the Fund or of any decree of the Commission, any state securities commission,
any national securities exchange, any arbitrator, any court or any other
governmental, regulatory, self-regulatory or administrative agency or any other
agency or any body or official having jurisdiction over the Fund or (iii) in
17
breach or default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any agreement, indenture, lease or other instrument to which the Fund is a
party or by which it or any of its properties may be bound, except, in the case
of (ii) and (iii) above, for violations, breaches or defaults that do not or
would not have, either individually or in the aggregate, a Material Adverse
Effect on the Fund.
(g) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement or any of the Fund Agreements by the
Fund, nor the consummation by the Fund of the transactions contemplated hereby
or thereby (i) requires any consent, approval, authorization or order of or
registration or filing with the Commission, any state securities commission, any
national securities exchange, any arbitrator, any court, regulatory body,
administrative agency or other governmental body, agency or official having
jurisdiction over the Fund (except (A) such as have been obtained or made prior
to the date of this Agreement, (B) for compliance with the securities or Blue
Sky laws of various jurisdictions which have been or will be effected in
accordance with this Agreement and (C) for compliance with the filing
requirements of the NASD Division of Corporate Finance) or conflicts or will
conflict with or constitutes or will constitute a breach of the Articles,
bylaws, or other organizational documents of the Fund or (ii) (A) conflicts or
will conflict with or constitutes or will constitute a breach of or a default
under any agreement, indenture, lease or other instrument to which the Fund is a
party or by which it or any of its properties may be bound or (B) violates or
will violate any statute, law, regulation or filing or judgment, injunction,
order or decree applicable to the Fund or any of its properties or will result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Fund pursuant to the terms of any agreement or
instrument to which it is a party or by which it may be bound or to which any of
18
the property or assets of the Fund is subject except, in the case of (ii) above,
for conflicts, breaches, defaults, violations or encumbrances that do not or
would not have, either individually or in the aggregate, a Material Adverse
Effect on the Fund.. As of the date hereof, the Fund is not subject to any order
of any court or of any arbitrator, governmental authority or administrative
agency that has or would have, either individually or in the aggregate, a
Material Adverse Effect on the Fund.
(h) Since the date as of which information is given in the
Registration Statement and the Prospectus (and any amendment or supplement to
either of them), except as otherwise stated therein, (i) there has been no
change that has or would have a Material Adverse Effect on the Fund (other than
those in the ordinary course of business as described in the Prospectus); (ii)
there have been no transactions entered into by the Fund other than those in the
ordinary course of its business or as described in the Prospectus (and any
amendment or supplement thereto); and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Fund on any class of its
common stock.
(i) Ernst & Young LLP, who have audited the Statement of Assets and
Liabilities included in, and whose report appears in, the Registration Statement
and the Prospectus (and any amendment or supplement to either of them), are
independent public accountants with respect to the Fund as required by the 1933
Act, the 1940 Act and the Rules and Regulations.
(j) The financial statements, together with related schedules and
notes, included or incorporated by reference in the Registration Statement or
the Prospectus (or any amendment or supplement to either of them) present fairly
the financial position of the Fund on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
19
accordance with generally accepted accounting principles consistently applied
throughout the periods involved except as disclosed therein; and the other
financial and statistical information and data included in the Registration
Statement or the Prospectus (or any amendment or supplement thereto) are
accurately derived from such financial statements and the books and records of
the Fund.
(k) The Fund, subject to the Registration Statement having been
declared effective and the filing of the Prospectus under Rule 497 under the
1933 Act Rules and Regulations, has taken all action required to be taken by it
under the 1933 Act, the 1940 Act and the Rules and Regulations to make the
public offering and consummate the sale of the Shares as contemplated by this
Agreement.
(l) The execution and delivery of and the performance by the Fund of
its obligations under this Agreement and the Fund Agreements have been duly and
validly authorized by the Fund and this Agreement and each of the Fund
Agreements have been duly executed and delivered by the Fund and (assuming due
and valid authorization, execution and delivery by the other parties hereto and
thereto) this Agreement and each Fund Agreement constitutes the valid and
legally binding agreement of the Fund, enforceable against the Fund in
accordance with its terms, except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws and subject to the
qualification that the enforceability of the Fund's obligations hereunder and
thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equitable principles (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(m) Except as disclosed in or contemplated by the Registration
Statement or the Prospectus (or any amendment or supplement to either of them),
subsequent to the respective dates as of which such information is given in the
20
Registration Statement and the Prospectus (and any amendment or supplement to
either of them), the Fund has not incurred any debt, liability or obligation,
direct or contingent, and there has not been any change in the capital stock or
capitalization of the Fund.
(n) The Fund has not distributed and, prior to the later to occur of
(i) the Closing Date and (ii) completion of the distribution of the Shares, will
not distribute to the public any offering material in connection with the
offering and sale of the Shares other than the Registration Statement, the
Prepricing Prospectus included in Pre-Effective Amendment No. 1 to the
registration statement (the "Red ▇▇▇▇▇▇▇ Preliminary Prospectus"), the
Prospectus and the Sales Material (or any other material, if any, permitted by
the 1933 Act, the 1940 Act or the Rules and Regulations).
(o) (i) The Fund has such licenses, permits, and authorizations of
governmental or regulatory authorities ("permits") as are necessary to own its
property and to conduct its business in the manner described in the Prospectus
(and any amendment or supplement thereto); (ii) the Fund has fulfilled and
performed all its obligations with respect to such permits and no event has
occurred which allows or, after notice or lapse of time, would allow, revocation
or termination thereof or results in any other impairment of the rights of the
Fund under any such permit, subject in each case to such qualification as may be
set forth in the Prospectus (and any amendment or supplement thereto); and,
(iii) except as described in the Prospectus (and any amendment or supplement
thereto), none of such permits contains any restriction that is materially
burdensome to the Fund; except where the failure to obtain or perform its
obligations with respect to such permits, or the restrictions set forth in such
permits, as set forth in clauses (i), (ii) and (iii), either individually or in
the aggregate, does or would not have a Material Adverse Effect on the Fund.
21
(p) The Fund will maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with the Board of Directors' general or specific authorization and
with the investment policies and restrictions of the Fund and the applicable
requirements of the 1940 Act, the 1940 Act Rules and Regulations and the
Internal Revenue Code of 1986, as amended (the "Code"); (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles, to calculate net asset
value and fee accruals, to maintain accountability for assets and to maintain
compliance with the books and records requirements under the 1940 Act and the
1940 Act Rules and Regulations; (iii) access to assets is permitted only in
accordance with the Board of Directors' general or specific authorization; and
(iv) the recorded account for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(q) The conduct by the Fund of its business (as described in the
Prospectus) does not require it to be the owner, possessor, licensee of, or
otherwise require it to have the right to use, any patents, patent licenses,
trademarks, service marks or trade names (collectively, "Intellectual Property")
which it does not own, possess, license or otherwise have the right to use,
except where the failure to own, possess, license or otherwise have the right to
use such Intellectual Property, individually or in the aggregate, does or would
not have a Material Adverse Effect on the Fund.
(r) Except as stated in this Agreement and in the Prospectus (and any
amendment or supplement thereto), the Fund has not taken and will not take,
directly or indirectly, any action designed to or which could cause or result in
or which will constitute stabilization or manipulation of the price of the
Shares in violation of federal securities laws and, to the Fund's knowledge, no
22
such action has been, or will be, taken by any affiliates of the Fund.
(s) The Fund is duly registered under the 1940 Act and the Rules and
Regulations as a closed-end, non-diversified management investment company and
the 1940 Act Notification has been duly filed with the Commission and, at the
time of filing thereof and at all times through the date hereof the 1940 Act
Notification conformed in all material respects with all applicable provisions
of the 1940 Act and the Rules and Regulations; no order of suspension or
revocation of such registration under the 1940 Act and the Rules and Regulations
has been issued or proceedings therefor initiated or, to the knowledge of the
Fund, threatened by the Commission. The provisions of the Articles, and the
investment policies and restrictions described in each of the Registration
Statement and the Prospectus, comply in all material respects with the
requirements of the 1940 Act and the Rules and Regulations.
(t) All advertising, sales literature, "prospecting letters,"
"prospectus wrappers," envelopes, prospectuses omitted from the Registration
Statement pursuant to the 1933 Act Rules and Regulations or other promotional
material prepared or authorized in writing by the Fund or the Adviser for use or
distribution to the public for use in connection with the offering and sale of
the Shares (including the client brochure and the broker flyer each filed with
the NASD on March 17, 2003) (collectively, "Sales Material") complied and comply
in all respects with the applicable requirements of the 1933 Act, the 1933 Act
Rules and Regulations and the rules and interpretations of the NASD and no Sales
Material contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (except that this representation and warranty does not
apply to statements in or omissions from the Sales Material
23
made in reliance upon and in conformity with the Underwriter Information).
(u) Each of the Fund Agreements complies in all material respects with
all applicable provisions of the 1933 Act, the 1940 Act, the Rules and
Regulations, the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), and the rules and regulations of the Commission promulgated under the
Advisers Act (the "Advisers Act Rules and Regulations").
(v) No holder of any security of the Fund has any right to require
registration of any Shares, capital stock or any other security of the Fund
because of the filing of the registration statement or consummation of the
transactions contemplated by this Agreement.
(w) The Fund, the Adviser and the Sub-Adviser intend to direct the
investment of the proceeds of the offering of the Shares in such a manner as to
comply with the requirements of Subchapter M of the Code.
(x) None of the promotional material for use by brokers in connection
with the marketing of the Shares (including any "broker kits," "road show
slides," "road show scripts," "broker post-cards" and "broker reference cards"
authorized in writing by or prepared by the Fund or the Adviser for use in
connection with the offering and sale of the Shares (collectively, "Broker
Material") when read together with the Prospectus, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (except
that this representation and warranty does not apply to statements in or
omissions from the Broker Material made in reliance upon and in conformity with
the Underwriter Information) and no Broker Material was or has been made
available by the Fund, the Adviser or the Sub-Adviser by means of an Internet
web site or similar electronic means.
24
(y) The Commission has not issued any order preventing or suspending
the use of any Prepricing Prospectus or the Prospectus.
(z) Except as disclosed in the Registration Statement or the
Prospectus (or any amendment or supplement to either of them), to the Fund's
knowledge, after due inquiry, no director of the Fund is an "interested person"
(as defined in the ▇▇▇▇ ▇▇▇) of the Fund or an "affiliated person" (as defined
in the ▇▇▇▇ ▇▇▇) of any Underwriter listed in Schedule I hereto.
(aa) The Shares have been approved for listing on the NYSE, subject to
official notice of issuance, and that the Fund's registration statement on Form
8-A under the 1934 Act has become effective.
7. REPRESENTATIONS AND WARRANTIES OF THE ADVISER. The Adviser represents
and warrants to each Underwriter as follows:
(a) The Adviser is a corporation duly organized and validly existing
in good standing under the laws of the State of New York, with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in each of the Registration Statement and the Prospectus
(or any amendment or supplement to either of them) and is duly registered and
qualified to conduct business and is in good standing in each jurisdiction or
place where the nature of its properties or conduct of its business requires
such registration or qualification, except where the failure so to register or
to qualify does or would not have a Material Adverse Effect on the Adviser.
(b) The Adviser is duly registered with the Commission as an
investment adviser under the Advisers Act and is not prohibited by the Advisers
Act, the 1940 Act, the Advisers Act Rules and Regulations or the 1940 Act Rules
and Regulations from acting under the Management Agreement for the Fund as
25
contemplated by the Registration Statement or the Prospectus (or any amendment
or supplement to either of them). There does not exist any proceeding which, if
determined adversely with respect to the Adviser, does or would have a material
and adverse effect on the registration of the Adviser with the Commission.
(c) There are no legal or governmental proceedings pending or, to the
knowledge of the Adviser, threatened against the Adviser that are required to be
described in the Registration Statement or the Prospectus (or any amendment or
supplement to either of them) but are not described as required or that, if
determined adversely with respect to the Adviser, does or would have a Material
Adverse Effect on the Adviser or does or would have a material and adverse
effect on the ability of the Adviser to perform its obligations under this
Agreement or any of the Adviser Agreements.
(d) Neither the execution, delivery or performance of this Agreement
or any of the Adviser Agreements, nor the consummation by the Adviser of the
transactions contemplated hereby or thereby (i) requires the Adviser to obtain
any consent, approval, authorization or other order of, or registration or
filing with, the Commission, any state securities commission, any national
securities exchange, any arbitrator, any court, regulatory body, administrative
agency or other governmental body, agency or official having jurisdiction over
the Adviser or conflicts or will conflict with or constitutes or will constitute
a breach of or a default under, the certificate of incorporation or bylaws, or
other organizational documents of the Adviser or (ii) conflicts or will conflict
with or constitutes or will constitute a breach of or a default under, any
agreement, indenture, lease or other instrument to which the Adviser is a party
or by which the Adviser or any of its properties may be bound, or violates or
will violate any statute, law, regulation or judgment, injunction, order or
decree applicable to the Adviser or any of its properties or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
26
assets of the Adviser pursuant to the terms of any 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 Adviser is subject, except in any case under clause (i) or (ii)
as does or would not have a Material Adverse Effect on the Adviser or does or
would have a material and adverse effect on the ability of the Adviser to
perform its obligations under this Agreement or any of the Adviser Agreements.
The Adviser is not subject to any order of any court or of any arbitrator,
regulatory body, administrative agency or other governmental body, agency or
official that would have a Material Adverse Effect on the Adviser or does or
would have a material and adverse effect on the ability of the Adviser to
perform its obligations under this Agreement or any of the Adviser Agreements.
(e) The Adviser has full power and authority to enter into this
Agreement and each of the Adviser Agreements; the execution and delivery of and
the performance by the Adviser of its obligations under this Agreement and the
Adviser Agreements have been duly and validly authorized by the Adviser; and
this Agreement and each of the Adviser Agreements have been duly executed and
delivered by the Adviser and (assuming due and valid authorization, execution
and delivery by the other parties hereto and thereto) this Agreement and each
Adviser Agreement constitutes the valid and legally binding agreement of the
Adviser, enforceable against the Adviser in accordance with its terms, except as
rights to indemnity and contribution hereunder may be limited by federal or
state securities laws and subject to the qualification that the enforceability
of the Adviser's obligations hereunder and thereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and by general
equitable principles (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(f) The Adviser has the financial resources necessary for the
performance of its services and obligations as contemplated in the Registration
27
Statement and the Prospectus (or any amendment or supplement to either of them)
or under this Agreement or any of the Adviser Agreements.
(g) The description of the Adviser in the Registration Statement and
the Prospectus (or 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 such description and the statements attributable to the Adviser
in the Registration Statement and the Prospectus (or any amendment or supplement
to either of them) 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 (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading.
(h) Since the date as of which information is given in the
Registration Statement or the Prospectus (or any amendment or supplement to
either of them), except as otherwise stated therein, there has been no material
adverse change in the condition (financial or other), business, properties, net
assets or results of operations or business prospects of the Adviser, whether or
not arising from the ordinary course of business that does or would have a
Material Adverse Effect on the Adviser or does or would have a material and
adverse effect on the ability of the Adviser to perform its obligations under
this Agreement or any of the Adviser Agreements.
(i) (i) The Adviser has such licenses, permits, and authorizations of
governmental or regulatory authorities ("permits") as are necessary to own its
property and to conduct its business in the manner described in the Prospectus
(and any amendment or supplement thereto); (ii) the Adviser has fulfilled and
performed all its obligations with respect to such permits and no event has
occurred which allows or, after notice or lapse of time, would allow, revocation
28
or termination thereof or results in any other impairment of the rights of the
Adviser under any such permit, subject in each case to such qualification as may
be set forth in the Prospectus (and any amendment or supplement thereto); and,
(iii) except as described in the Prospectus (and any amendment or supplement
thereto), none of such permits contains any restriction that is materially
burdensome to the Adviser; except where the failure to obtain or perform its
obligations with respect to such permits, or the restrictions set forth in such
permits, as set forth in clauses (i), (ii) and (iii), either individually or in
the aggregate, does or would have a Material Adverse Effect on the Adviser or
does or would have a material and adverse effect on the ability of the Adviser
to perform its obligations under this Agreement or any of the Adviser
Agreements.
(j) Each of the Adviser Agreements comply in all material respects
with the applicable provisions of the 1940 Act, the 1940 Act Rules and
Regulations, the Advisers Act and the Advisers Act Rules and Regulations.
(k) Except as stated in this Agreement and in the Prospectus (and any
amendment or supplement thereto), the Adviser has not taken and will not take,
directly or indirectly, any action designed to or which could cause or result in
or which will constitute stabilization or manipulation of the price of the
Shares in violation of federal securities laws and, to the Adviser's knowledge,
no such action has been, or will be, taken by any affiliates of the Adviser.
8. REPRESENTATIONS AND WARRANTIES OF THE SUB-ADVISER. The Sub-Adviser
represents and warrants to each Underwriter as follows:
(a) The Sub-Adviser is a limited liability company duly formed and
validly existing in good standing under the laws of the State of Delaware, with
full limited liability company power and authority to own, lease and operate its
properties and to conduct its business as described in each of the Registration
29
Statement and the Prospectus (or any amendment or supplement to either of them)
and is duly registered and qualified to conduct business and is in good standing
in each jurisdiction or place where the nature of its properties or conduct of
its business requires such registration or qualification, except where the
failure so to register or to qualify does or would not have a Material Adverse
Effect on the Sub-Adviser.
(b) The Sub-Adviser is duly registered with the Commission as an
investment adviser under the Advisers Act and is not prohibited by the Advisers
Act, the 1940 Act, the Advisers Act Rules and Regulations or the 1940 Act Rules
and Regulations from acting under this Agreement or the Sub-Advisory Agreement
for the Fund as contemplated by the Registration Statement or the Prospectus (or
any amendment or supplement to either of them). There does not exist any
proceeding which, if determined adversely with respect to the Sub-Adviser, does
or would have a material and adverse effect on the registration of the
Sub-Adviser with the Commission.
(c) There are no legal or governmental proceedings pending or, to the
knowledge of the Sub-Adviser, threatened against the Sub-Adviser that are
required to be described in the Registration Statement or the Prospectus (or any
amendment or supplement to either of them) but are not described as required or
that, if determined adversely with respect to the Sub-Adviser, does or would
have a Material Adverse Effect on the Sub-Adviser or does or would have a
material and adverse effect on the ability of the Sub-Adviser to perform its
obligations under this Agreement or the Sub-Advisory Agreement.
(d) Neither the execution, delivery or performance of this Agreement
or the Sub-Advisory Agreement, nor the consummation by the Sub-Adviser of the
transactions contemplated hereby or thereby (i) requires the Sub-Adviser to
obtain any consent, approval, authorization or other order of, or registration
or filing with, the Commission, any state securities commission, any national
securities exchange, any arbitrator, any court, regulatory body, administrative
30
agency or other governmental body, agency or official having jurisdiction over
the Sub-Adviser or conflicts or will conflict with or constitutes or will
constitute a breach of or a default under, the certificate of incorporation or
bylaws, or other organizational documents of the Sub-Adviser or (ii) conflicts
or will conflict with or constitutes or will constitute a breach of or a default
under, any agreement, indenture, lease or other instrument to which the
Sub-Adviser is a party or by which the Sub-Adviser or any of its properties may
be bound, or violates or will violate any statute, law, regulation or judgment,
injunction, order or decree applicable to the Sub-Adviser or any of its
properties or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Sub-Adviser pursuant to the terms
of any 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 Sub-Adviser is subject,
except in any case under clause (i) or (ii) as would not have a Material Adverse
Effect on the Sub-Adviser or on the ability of the Sub-Adviser to perform its
obligations under this Agreement or the Sub-Advisory Agreement. The Sub-Adviser
is not subject to any order of any court or of any arbitrator, regulatory body,
administrative agency or other governmental body, agency or official that does
or would have a Material Adverse Effect on the Sub-Adviser or does or would have
a material and adverse effect on the ability of the Sub-Adviser to perform its
obligations under this Agreement or the Sub-Advisory Agreement.
(e) The Sub-Adviser has full power and authority to enter into this
Agreement and the Sub-Advisory Agreement; the execution and delivery of and the
performance by the Sub-Adviser of its obligations under this Agreement and the
Sub-Advisory Agreement have been duly and validly authorized by the Sub-Adviser;
and this Agreement and the Sub-Advisory Agreement have been duly executed and
delivered by the Sub-Adviser and (assuming due and valid authorization,
31
execution and delivery by the other parties hereto and thereto) this Agreement
and the Sub-Advisory Agreement constitutes the valid and legally binding
agreement of the Sub-Adviser, enforceable against the Sub-Adviser in accordance
with its terms, except as rights to indemnity and contribution hereunder may be
limited by federal or state securities laws and subject to the qualification
that the enforceability of the Sub-Adviser's obligations hereunder and
thereunder may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors'
rights generally and by general equitable principles (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(f) The Sub-Adviser has the financial resources necessary for the
performance of its services and obligations as contemplated in the Registration
Statement and the Prospectus (or any amendment or supplement to either of them)
or under this Agreement and the Sub-Advisory Agreement.
(g) The description of the Sub-Adviser in the Registration Statement
and the Prospectus (or 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 such description and the statements attributable to the
Sub-Adviser in the Registration Statement and the Prospectus (or any amendment
or supplement to either of them) 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 (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading.
(h) Since the date as of which information is given in the
Registration Statement or the Prospectus (or any amendment or supplement to
either of them), except as otherwise stated therein, there has been no material
32
adverse change in the condition (financial or other), business, properties, net
assets or results of operations or business prospects of the Sub-Adviser,
whether or not arising from the ordinary course of business that does or would
have a Material Adverse Effect on the Sub-Adviser or does or would have a
material and adverse effect on the ability of the Sub-Adviser to perform its
obligations under this Agreement or the Sub-Advisory Agreement.
(i) (i) The Sub-Adviser has such licenses, permits, and authorizations
of governmental or regulatory authorities ("permits") as are necessary to own
its property and to conduct its business in the manner described in the
Prospectus (and any amendment or supplement thereto); (ii) the Sub-Adviser has
fulfilled and performed all its obligations with respect to such permits and no
event has occurred which allows or, after notice or lapse of time, would allow,
revocation or termination thereof or results in any other impairment of the
rights of the Sub-Adviser under any such permit, subject in each case to such
qualification as may be set forth in the Prospectus (and any amendment or
supplement thereto); and, (iii) except as described in the Prospectus (and any
amendment or supplement thereto), none of such permits contains any restriction
that is materially burdensome to the Sub-Adviser; except where the failure to
obtain or perform its obligations with respect to such permits, or the
restrictions set forth in such permits, as set forth in clauses (i), (ii) and
(iii), either individually or in the aggregate, does or would have a Material
Adverse Effect on the Sub-Adviser or does or would have a material and adverse
effect on the ability of the Sub-Adviser to perform its obligations under this
Agreement or the Sub-Advisory Agreement.
(j) The Sub-Advisory Agreement complies in all material respects with
the applicable provisions of the 1940 Act, the 1940 Act Rules and Regulations,
the Advisers Act and the Advisers Act Rules and Regulations.
33
(k) Except as stated in this Agreement and in the Prospectus (and any
amendment or supplement thereto), the Sub-Adviser has not taken and will not
take, directly or indirectly, any action designed to or which could cause or
result in or which will constitute stabilization or manipulation of the price of
the Shares in violation of federal securities laws and, to the Sub-Adviser's
knowledge, no such action has been, or will be, taken by any affiliates of the
Sub-Adviser.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) The Fund, the Adviser and the Sub-Adviser, jointly and severally,
agree to indemnify and hold harmless each of you and each other 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, from and against any and all
losses, claims, damages, liabilities and expenses, joint or several (including
reasonable costs of investigation), arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, any Prepricing Prospectus, any Sales
Material (or any amendment or supplement to any of the foregoing) or arising out
of or based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in the case of a prospectus, in light of the circumstances under which they
were made) not misleading, (except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the Underwriter
Information); PROVIDED, however, that the foregoing indemnification contained in
this paragraph (a) with respect to the Red ▇▇▇▇▇▇▇ Preliminary Prospectus (or
any amendment or supplement thereto) shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) on
account of any such loss, claim, damage, liability or expense arising from the
34
sale of the Shares by such Underwriter to any person if it is shown that a copy
of any such amendment or supplement to the Red ▇▇▇▇▇▇▇ Preliminary Prospectus or
of the Prospectus (which term as used in this proviso shall not include any
statement of additional information unless specifically requested by such
person) was not delivered or sent to such person within the time required by the
1933 Act and the 1933 Act Rules and Regulations and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in the Red ▇▇▇▇▇▇▇ Preliminary Prospectus was corrected in the
supplement or amendment to the Red ▇▇▇▇▇▇▇ Preliminary Prospectus or in the
Prospectus, provided that the Fund has delivered such supplements or amendments
or the Prospectus to the several Underwriters in requisite quantity on a timely
basis to permit proper delivery or sending. The foregoing indemnity agreement
shall be in addition to any liability which the Fund, the Adviser or the
Sub-Adviser may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Fund, the Adviser or the Sub-Adviser, such
Underwriter or such controlling person shall promptly notify the Fund, the
Adviser or the Sub-Adviser and the Fund, the Adviser or the Sub-Adviser shall
assume the defense thereof, including the employment of counsel and the payment
of all fees and expenses. Such Underwriter or any such controlling person shall
have the right to employ separate counsel in any such action, suit or proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or controlling person unless
(i) the Fund, the Adviser or the Sub-Adviser have agreed in writing to pay such
fees and expenses, (ii) the Fund, the Adviser or the Sub-Adviser have failed
within a reasonable time to assume the defense and employ counsel or (iii) the
named parties to any such action, suit or proceeding (including any impleaded
parties) include both such Underwriter or such controlling person and the Fund,
the Adviser or the Sub-Adviser and such Underwriter or such controlling person
35
shall have been advised by its counsel that representation of such indemnified
party and the Fund, the Adviser or the Sub-Adviser by the same counsel would be
inappropriate under applicable standards of professional conduct (whether or not
such representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the Fund, the Adviser
and the Sub-Adviser shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such Underwriter or such controlling
person). It is understood, however, that the Fund, the Adviser and the
Sub-Adviser shall, in connection with any one such action, suit or proceeding or
separate but substantially similar or related actions, suits or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel if there is any
action, suit or proceeding in more than one jurisdiction) at any time for all
such Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by the Representatives and that, subject to the requirements of 1940
Act Release No. 11330 and Section 17(i) of the 1940 Act, all such fees and
expenses shall be reimbursed promptly as they are incurred. The Fund, the
Adviser and the Sub-Adviser shall not be liable for any settlement of any such
action, suit or proceeding effected without the written consent of the Fund, the
Adviser or the Sub-Adviser (whether or not the fund, the Adviser or the
Sub-Adviser are actual or potential parties to such action, suit or proceeding),
but if settled with such written consent or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the Fund, the Adviser and the
Sub-Adviser agree to indemnify and hold harmless any Underwriter, to the extent
provided in the preceding paragraph and any such controlling person from and
against any loss, liability, damage or expense by reason by such settlement or
judgment.
36
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Fund, the Adviser and the Sub-Adviser, their directors,
members or managers, any officers of the Fund who sign the Registration
Statement and any person who controls the Fund, the Adviser or the Sub-Adviser
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act,
to the same extent as the foregoing indemnity from the Fund, the Adviser and the
Sub-Adviser to each Underwriter, but only with respect to the Underwriter
Information relating to such Underwriter. If any action, suit or proceeding
shall be brought against the Fund, the Adviser or the Sub-Adviser, any of their
directors, members or managers, any such officer or any such controlling person,
based on the Registration Statement, the Prospectus or any Prepricing Prospectus
(or any amendment or supplement thereto) and in respect of which indemnity may
be sought against any Underwriter pursuant to this paragraph (c), such
Underwriter shall have the rights and duties given to each of the Fund, the
Adviser and the Sub-Adviser by paragraph (b) above (except that if the Fund, the
Adviser or the Sub-Adviser shall have assumed the defense thereof such
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such Underwriter's expense) and the Fund, the Adviser
and the Sub-Adviser, their directors, managers or members, any such officer and
any such controlling person shall have the rights and duties given to the
Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be
in addition to any liability which the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
37
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Fund, the Adviser and the Sub-Adviser on the one hand (treated jointly for this
purpose as one person) and the Underwriters on the other from the offering of
the Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Fund, the Adviser and the Sub-Adviser on the one hand (treated
jointly for this purpose as one person) and of the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Fund, the
Adviser and the Sub-Adviser on the one hand (treated jointly for this purpose as
one person) and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Fund bear to the total underwriting discounts and
commissions received by the Underwriters, in each case, as set forth in the
table on the cover page of the Prospectus. The relative fault of the Fund, the
Adviser and the Sub-Adviser on the one hand (treated jointly for this purpose as
one person) and of the Underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Fund, the Adviser and the Sub-Adviser on
the one hand (treated jointly for this purpose as one person) or by the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The Fund, the Adviser, the Sub-Adviser and the Underwriters agree
38
that it would not be just and equitable if contribution pursuant to this Section
9 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 that does
not take account of the equitable considerations referred to in paragraph (d)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of 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 ▇▇▇▇ ▇▇▇) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 9 are several
in proportion to the respective number of Shares set forth opposite their names
in Schedule I (or such number of Shares increased as set forth in Section 11
hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability from claimants on claims that are the
subject matter of such action, suit or proceeding.
39
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall, subject to the requirements of Release No. 11330 and Section
17(i) of the 1940 Act, be paid by the indemnifying party to the indemnified
party as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of each of the Fund, the Adviser and the
Sub-Adviser set forth in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, the Fund, the Adviser,
the Sub-Adviser or their directors, managers, members, officers or any person
controlling the Fund, the Adviser or the Sub-Adviser, (ii) acceptance of any
Shares and payment therefor hereunder and (iii) any termination of this
Agreement. A successor to any Underwriter or to the Fund, the Adviser or the
Sub-Adviser or their directors, managers, members, officers or any person
controlling the Fund, the Adviser or the Sub-Adviser shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 9.
(h) The Fund, the Adviser and the Sub-Adviser each acknowledge that
the information referenced in that certain letter from ▇.▇. ▇▇▇▇▇▇▇ & Sons,
Inc., on behalf of the several Underwriters, addressed to the Fund, the Adviser
and the Sub-Adviser, dated the date hereof, contains the only Underwriter
Information.
(i) The indemnification provisions of this Section 9 that are
applicable to the Fund are subject to any applicable limitations and provisions
of Section 17(i) of the 1940 Act.
10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the
Underwriters to purchase the Shares hereunder are subject to the accuracy of and
compliance with the representations, warranties and agreements of and by each of
the Fund, the Adviser and the Sub-Adviser contained herein on and as of the date
40
on which the Registration Statement becomes or became effective, the date of the
Prospectus (and of any amendment or supplement thereto) and the Closing Date
and, with respect to any Additional Shares, any Option Closing Date (each, a
"Condition Compliance Date" and collectively, the "Condition Compliance Dates");
to the accuracy and completeness of all statements made by the Fund, the
Adviser, the Sub-Adviser or any of their respective officers in any certificate
delivered to the Representatives or their counsel pursuant to this Agreement on
any Condition Compliance Date, and to the following conditions (each of which
shall be satisfied as of each of the Condition Compliance Dates):
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Registration Statement or such post-effective amendment shall have become
effective not later than 5:30 p.m., New York City time, on the date hereof or at
such later date and time as shall be consented to in writing by you and all
filings, if any, required by Rules 497 and 430A under the 1933 Act and the 1933
Act Rules and Regulations shall have been timely made; no order pursuant to
Section 8(e) of the 1940 Act shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the Fund, the Adviser
or any Underwriter, threatened by the Commission and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to your
satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change or any development involving a prospective
change that does or would have a Material Adverse Effect on the Fund, the
Adviser or the Sub-Adviser (in each case not contemplated by the Prospectus) or
41
(ii) any event or development relating to or involving the Fund, the Adviser or
the Sub-Adviser which makes any statement made in the Prospectus untrue or
which, in the opinion of the Fund and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in the Prospectus in
order to state a material fact required by the 1933 Act, the 1940 Act or the
Rules and Regulations or any other law to be stated therein or necessary in
order to make the statements therein not misleading, if amending or
supplementing the Prospectus to reflect such event or development would, in your
opinion, make it impracticable or inadvisable to continue with the offering of
the Shares.
(c) That you shall have received on the Closing Date an opinion of
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the Fund, dated the Closing Date and
addressed to you, as the Representatives of the several Underwriters, in
substantially the form attached hereto as Exhibit A.
(d) That you shall have received on the Closing Date an opinion of
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for the Adviser, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, in
substantially the form attached hereto as Exhibit B.
(e) That you shall have received on the Closing Date an Opinion of
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel for the Sub-Adviser, dated the Closing Date
and addressed to you, as the Representatives of the several Underwriters, in
substantially the form attached hereto as Exhibit C.
(f) That you shall have received on the Closing Date (i) an opinion of
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois), and (ii) a letter from Cleary,
Gottleib, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, each dated the Closing Date and addressed to you, as
the Representatives of the several Underwriters, with respect to such matters as
you may require, and the Fund, the Adviser, the Sub-Adviser and their respective
counsel shall have furnished to such counsel such documents as they may request
for the purpose of enabling them to pass upon such matters.
42
(g) That you shall have received letters addressed to you, as the
Representatives of the several Underwriters and dated each of the date hereof
and the Closing Date, from Ernst & Young LLP, independent auditors,
substantially in the forms attached hereto as Exhibit D. You also must receive
on each Closing Date a signed letter from such accountants, dated as of such
Closing Date, confirming on the basis of a review in accordance with the
procedures set forth in their letter that nothing has come to their attention
during the period from a date not more than five business days before the date
of this Underwriting Agreement, specified in the letter, to a date not more than
five business days before such Closing Date, that would require any change in
their letter referred to in the foregoing sentence.
(h) (i) No stop order suspending the effectiveness of the Registration
Statement or prohibiting or suspending the use of the Prospectus (or any
amendment or supplement to any of the foregoing) or any Prepricing Prospectus or
any Sales Material shall have been issued and no proceedings for such purpose or
for the purpose of commencing an enforcement action against the Fund, the
Adviser or the Sub-Adviser or, with respect to the transactions contemplated by
the Prospectus (or any amendment or supplement thereto) and this Agreement, may
be pending before or, to the knowledge of the Fund, the Adviser, the Sub-Adviser
or any Underwriter or in the reasonable view of counsel to the Underwriters,
shall be threatened or contemplated by the Commission at or prior to the Closing
Date and that any request for additional information on the part of the
Commission (to be included in the Registration Statement, the Prospectus or
otherwise) be complied with to the satisfaction of the Representatives, (ii)
there shall not have been any change in the capital stock of the Fund nor any
increase in debt of the Fund from that set forth in the Registration Statement
or the Prospectus (or any amendment or supplement to either of them) and the
Fund shall not have sustained any material liabilities or obligations, direct or
contingent, other than those reflected in or contemplated by the Registration
43
Statement or the Prospectus (or any amendment or supplement to either of them),
(iii) since the date of the Prospectus, there shall not have been any material,
adverse change in the condition (financial or other) business, business
prospects, properties, net assets or results of operations of the Fund, the
Adviser or the Sub-Adviser, (iv) none of the Fund, the Adviser or the
Sub-Adviser shall have sustained any material loss or interference with their
businesses from any court or from legislative or other governmental action,
order or decree or from any other occurrence not described in the Registration
Statement or the Prospectus (or any amendment or supplement to either of them),
and (v) all of the representations and warranties of each of the Fund, the
Adviser or the Sub-Adviser contained in this Agreement shall be true and correct
on and as of the date hereof and as of the respective Condition Compliance Date
as if made on and as of such Condition Compliance Date.
(i) That none of the Fund, the Adviser, or the Sub-Adviser shall have
failed at or prior to the respective Condition Compliance Date to have performed
or complied with any of the agreements herein contained and required to be
performed or complied with by them at or prior to the such Condition Compliance
Date.
(j) That you shall have received on the Closing Date a certificate,
dated such date, of each of the chief executive officer and chief financial
officer of the Fund, and of the President (or a Vice President) and Treasurer
(or an Assistant Treasurer) of each of the Adviser and the Sub-Adviser
certifying that (i) the signers have carefully examined the Registration
Statement, the Prospectus (and any amendments or supplements to either of them)
and this Agreement, (ii) the representations and warranties of the Fund (with
respect to the certificates from such Fund officers), the representations and
warranties of the Adviser (with respect to the certificates from such officers
of the Adviser), and the representations and warranties of the Sub-Adviser (with
respect to the certificates from such officers of the Sub-Adviser) in this
Agreement are true and correct on and as of the date of the certificate as if
made on such date, (iii) since the date of the Prospectus (and any amendment or
supplement thereto) there has not been any change that does or would have a
Material Adverse Effect on the Fund (with respect to the certificates from such
44
Fund officers) or the Adviser (with respect to the certificates from such
officers of the Adviser) or the Sub-Adviser (with respect to the certificates
from such officers of the Sub-Adviser), (iv) to the knowledge of such officers
after reasonable investigation, no order suspending the effectiveness of the
Registration Statement or prohibiting the sale of any of the Shares or having a
Material Adverse Effect on the Fund (with respect to the certificates from such
Fund officers) or the Adviser (with respect to the certificates from such
officers of the Adviser) or the Sub-Adviser (with respect to the certificates
from such officers of the Sub-Adviser) has been issued and no proceedings for
any such purpose are pending before or, to the knowledge of such officers,
threatened by the Commission or any court or other regulatory body, any state
securities commission, any national securities exchange, any arbitrator, any
court or any other governmental, regulatory, self-regulatory or administrative
agency or any official, (v) each of the Fund (with respect to certificates from
such Fund officers), the Adviser (with respect to certificates from such
officers of the Adviser) and the Sub-Adviser(with respect to the certificates
from such officers of the Sub-Adviser) has performed and complied with all
agreements that this Agreement require it to perform by such Closing Date and
(vi) with respect to the certificate from such officers of the Fund, there has
not been any change in the capital stock of the Fund nor any increase in the
debt of the Fund from that set forth in the Prospectus (or any amendment or
supplement thereto) and the Fund has not sustained any material liabilities or
obligations, direct or contingent, other than those reflected in the Prospectus
(or any amendment or supplement thereto).
45
(k) That the Fund, the Adviser and the Sub-Adviser shall have
furnished to you such further certificates and documents as you shall reasonably
request.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you and your counsel acting in good faith.
Any certificate or document signed by any officer of the Fund, the Adviser
or the Sub-Adviser and delivered to you, as the Representatives of the
Underwriters or to Underwriters' counsel, shall be deemed a representation and
warranty by the Fund, the Adviser or the Sub-Adviser to each Underwriter as to
the statements made therein.
The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to (i) the accuracy of and compliance with the
representations and warranties of the Fund, the Adviser and the Sub-Adviser
contained herein on and as of the Option Closing Date as though made on any
Option Closing Date, (ii) satisfaction on and as of any Option Closing Date of
the conditions set forth in this Section 10 except that, if any Option Closing
Date is other than the Closing Date, the certificates, opinions and letters
referred to in Sections 10 (c), (d), (e), (f), (g) and (k) and this paragraph
shall be dated the Option Closing Date in question and the opinions called for
by Sections 10 (c), (d), (e), (f) and (g) shall be revised to reflect the sale
of Additional Shares and (iii) the absence of circumstances on or prior to the
Option Closing Date which would permit termination of this Agreement pursuant to
Section 12 hereof if they existed on or prior to the Closing Date.
11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective: (i)
upon the execution and delivery hereof by the parties hereto; or (ii) if, at the
time this Agreement is executed and delivered, it is necessary for the
Registration Statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when the Registration
46
Statement or such post-effective amendment has become effective. Until such time
as this Agreement shall have become effective, it may be terminated by the Fund
by notifying you, or by you by notifying the Fund.
If any one or more of the Underwriters shall fail or refuse to purchase
Shares which it or they have agreed to purchase hereunder and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares, each non-defaulting Underwriter shall be obligated, severally, in
the proportion which the aggregate number of Shares set forth opposite its name
in Schedule I hereby bears to the aggregate number of Shares set forth opposite
the names of all non-defaulting Underwriters or in such other proportion as you
may specify in accordance with Section 7 of the ▇.▇. ▇▇▇▇▇▇▇ Master Agreement
Among Underwriters, to purchase Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase. If any Underwriter or
Underwriters shall fail or refuse to purchase Shares and the aggregate number of
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares and arrangements satisfactory to you and the Fund for
the purchase of such Shares by one or more non-defaulting Underwriters or other
party or parties approved by you and the Fund are not made within 36 hours after
such default, this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Fund. In any such case which does not result
in termination of this Agreement, either you or the Fund shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and the
Prospectus or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect to any such default of any such Underwriter under this
Agreement. The term "Underwriter" as used in this Agreement includes, for all
purposes of this Agreement, any party not listed in Schedule I hereto who, with
your approval and the approval of the Fund, purchases Shares which a defaulting
Underwriter agreed, but failed or refused, to purchase.
47
Any notice under this Section 11 may be made by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
12. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Fund or the Adviser by notice to the Fund or the Adviser if
at any time at or prior to the Closing Date or any Option Closing Date (if
different from the Closing Date and then only as to the Additional Shares), as
the case may be, (i) trading in any securities of the Fund has been suspended or
materially limited by the Commission or the New York Stock Exchange or such
other national securities exchange upon which the Fund's securities trade or
trading in securities generally on the New York Stock Exchange, American Stock
Exchange, Nasdaq National Market or the Nasdaq Stock Market shall have been
suspended or limited or minimum or maximum prices shall have been established or
required by such exchanges, the Commission, NASD or other governmental
authority, (ii) additional governmental restrictions not in force on the date of
this Agreement have been imposed upon trading in securities generally or a
general moratorium on commercial banking activities shall have been declared by
Federal or any state's authorities or (iii) there has occurred any outbreak or
material escalation of hostilities or other international or domestic calamity,
crisis or change or development in political, financial, economic, legal or
regulatory conditions or markets, the effect of which is such as to make it, in
your judgment, impracticable or inadvisable to commence or continue the offering
of the Shares at the offering price to the public set forth on the cover page of
the Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters. Notice of such termination may be given to the Fund, the Adviser
or the Sub-Adviser by telegram, telecopy or telephone but shall be subsequently
confirmed by letter.
48
13. EXPENSES. The Fund agrees to pay the following costs and expenses and
all other costs and expenses incident to the performance by the Fund of its
obligations hereunder: (a) the preparation, printing or reproduction, filing
(including, without limitation, the filing or registration fees prescribed by
the 1933 Act, the 1934 Act, the 1940 Act and the Rules and Regulations) and
distribution of the Registration Statement (including exhibits thereto), the
Prospectus, each Prepricing Prospectus and the 1940 Act Notification and all
amendments or supplements to any of them, (b) the printing (or reproduction) and
delivery to the Underwriters (including postage, air freight charges and charges
for counting and packaging) of such copies of the Registration Statement, the
Prospectus, each Prepricing Prospectus, any Sales Material (and all amendments
or supplements to any of them, except as provided in Section 5(f) of this
Agreement) as may be reasonably requested for use in connection with the
offering and sale of the Shares, (c) the preparation, printing, authentication,
issuance and delivery of certificates (if any) for the Shares, including any
stamp taxes and transfer agent and registrar fees payable in connection with the
original issuance and sale of such Shares, (d) the registrations or
qualifications of the Shares for offer and sale thereof, if any, as are required
under the securities or Blue Sky laws of the several states as provided in
Section 5(g) hereof (including the reasonable fees, expenses and disbursements
of counsel for the Underwriters relating to the preparation, printing or
reproduction and delivery of the preliminary and supplemental Blue Sky Memoranda
and such registration and qualification), (e) the fees and expenses of the
Fund's independent accountants, counsel for the Fund and of the transfer agent,
(f) the printing (or reproduction) and delivery of this Agreement, any dealer
agreements, the preliminary and supplemental Blue Sky Memoranda (if any) and all
other company-authorized agreements or other documents printed (or reproduced)
and delivered in connection with the offering of the Shares, (g) the filing fees
and the fees and expenses of counsel for the Underwriters in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc. (the "NASD") and incurred with respect to the review of the offering of the
Shares and the use of any Sales Materials by the NASD, which fees and expenses
49
of counsel, together with the fees, expenses and disbursements of counsel set
forth in paragraph (d) of this Section 13 above, shall not exceed $15,000,
exclusive of NASD and state filing fees, (h) the transportation, lodging,
graphics and other expenses of the Fund and its officers related to the
preparation for and participation by the Fund and its officers in the roadshow,
(i) the listing of the Shares on the NYSE and (j) an amount equal to the greater
of (1) $50,000 and (2) $.005 per Share payable on the Closing Date to the
Representatives in partial reimbursement of their expenses (but not including
reimbursement for the cost of one tombstone advertisement in a newspaper that is
one-quarter of a newspaper page or less in size) in connection with the
offering.
Notwithstanding the foregoing, in the event that the sale of the Shares is
not consummated pursuant to Section 2 hereof, the Adviser or the Sub-Adviser
will pay the costs and expenses of the Fund set forth above in this Section
13(a) through (i), and reimbursements of Underwriter expenses in connection with
the offering shall be made in accordance with Section 5(k) hereof.
14. MISCELLANEOUS. Except as otherwise provided in Sections 5, 11 and 12
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (a) if to the Fund, the Adviser or the
Sub-Adviser, c/o Neuberger ▇▇▇▇▇▇ LLC, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇; Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq., with a copy to ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, Attention Art
Delibert (b) if to you, as Representatives of the Underwriters, at the office of
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, with a copy to Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois), ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Fund, the Adviser, the Sub-Adviser, their directors, officers,
50
managers, members and the other controlling persons referred to in Section 9
hereof and their respective successors and assigns, to the extent provided
herein and no other person shall acquire or have any right under or by virtue of
this Agreement. Neither the term "successor" nor the term "successors and
assigns" as used in this Agreement shall include a purchaser from any
Underwriter of any of the Shares in his status as such purchaser.
15. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
51
Please confirm that the foregoing correctly sets forth the agreement among
the Fund, the Adviser, the Sub-Adviser and the several Underwriters.
Very truly yours,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ REALTY INCOME FUND INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ MANAGEMENT INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Senior Vice President
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, LLC
By: /s/ ▇. ▇. ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Senior Vice President
52
Confirmed as of the date
first above written on
behalf of themselves and
the other several Under-
writers named in Schedule
I hereto.
AS REPRESENTATIVE OF THE SEVERAL UNDERWRITERS
▇.▇. ▇▇▇▇▇▇▇ & SONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Director
53
SCHEDULE I
Underwriter Number of Shares
----------- ----------------
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. 6,140,000
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated 4,100,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated 1,000,000
BB&T Capital Markets, a division of 1,000,000
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Incorporated 1,000,000
J.J.B. ▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, Inc. 1,000,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ LLC 1,000,000
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated 1,000,000
McDonald Investments Inc.,
a KeyCorp Company 1,000,000
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc. 2,500,000
RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated 1,000,000
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Company, Incorporated 1,000,000
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. 1,000,000
Prudential Securities Incorporated 120,000
Wachovia Securities, Inc. 120,000
Advest, Inc. 60,000
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co. 60,000
▇▇▇▇▇▇▇▇▇ & Company LLC 60,000
▇.▇. ▇▇▇▇▇▇▇▇ & Co. Inc. 60,000
▇▇▇▇▇▇▇▇▇▇ & Co. Inc. 60,000
First Southwest Company 60,000
▇▇▇▇▇▇▇▇, Lemon & Co. Incorporated 60,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc. 60,000
▇▇▇▇▇▇/▇▇▇▇▇▇ Incorporated 60,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 60,000
▇▇▇▇▇▇▇▇ Inc. 60,000
Sterne, Agee & ▇▇▇▇▇, Inc. 60,000
SunTrust Capital Markets, Inc. 60,000
Southwest Securities, Inc. 60,000
TD Waterhouse Investor Services, Inc. 60,000
Wedbush ▇▇▇▇▇▇ Securities Inc. 60,000
▇▇▇▇▇ Fargo Securities, LLC 60,000
Total 24,000,000
54
EXHIBIT A
FORM OF ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ OPINION
1. The Fund is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Maryland and is
qualified to do business as a foreign corporation in the State of New
York, which such counsel has been advised by an officer of the Fund
is the only state in which the Fund maintains an office for the
conduct of its business.
2. The Fund has the corporate power and authority to: (i) own its
properties and conduct its business as described in the Registration
Statement and the Prospectus; and (ii) execute, deliver, and perform
its obligations under the Underwriting Agreement and the Fund
Agreements.
3. To such counsel's knowledge, the Fund does not have any subsidiaries.
4. The common shares of the Fund, par value $.0001 per share (the
"Common Shares"), conform in all material respects as to all
statements as to legal matters relating thereto contained in the
Prospectus. No person is entitled to any preemptive or other similar
rights with respect to the Common Shares.
5. The number of authorized Common Shares is as set forth in the
Prospectus under the caption "Description of Shares -- Common
Shares." All Common Shares that to such counsel's knowledge have been
issued and are outstanding prior to the issuance of the Firm Shares:
(i) have been duly authorized, validly issued and are fully paid and
non-assessable; and (ii) have been offered and sold by the Fund in
compliance with applicable law.
6. The Shares have been duly authorized for issuance and sale to the
Underwriters pursuant to the Underwriting Agreement and, when issued
and delivered by the Fund pursuant to the Underwriting Agreement
against payment of the consideration set forth in the Underwriting
55
Agreement, will be validly issued and fully paid and non-assessable.
7. The Registration Statement, including any Rule 462(b) Registration
Statement, has become effective under the 1933 Act, any required
filing of the 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 such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or of any Rule 462(b)
Registration Statement has been issued, or proceedings therefor
threatened by the Commission, under the 1933 Act.
8. The Fund is duly registered with the Commission under the 1940 Act as
a closed-end diversified management investment company.
9. Other than with respect to financial statements and related notes and
schedules and any other financial, accounting and statistical
information that is included or incorporated by reference in, or
omitted from, the following documents, as to which such counsel need
express no opinion: (i) the Registration Statement, including any
Rule 462(b) Registration Statement and any Rule 430A Information, the
Prospectus and any amendment or supplement thereto through the date
hereof complied as to form in all material respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and
Regulations thereunder; and (ii) the Fund's notification of
registration on Form N-8A complied as to form in all material
respects with the requirements of the 1940 Act and the Rules and
Regulations thereunder.
10. Insofar as the statements in the Prospectus under the captions
"Description of Shares - Common Shares," "Tax Matters - General;
Taxation of the Fund" and "Tax Matters - Taxation of the Fund's
Shareholders" and in the Registration Statement under Item 29
(Indemnification) constitute summaries of legal matters, provisions
of the Fund's articles of incorporation or by-laws or legal
proceedings or legal conclusions referred to therein, those
statements fairly present the information called for with respect to
56
those legal matters, documents, proceedings or conclusions.
11. To such counsel's knowledge, there is no action, suit, proceeding,
inquiry or investigation by or before any court or governmental
agency that is pending against the Fund or to which any of its
properties are subject or that is threatened against the Fund, which
may reasonably be expected to result in a Material Adverse Effect or
to materially and adversely affect the properties or assets of the
Fund, the consummation by the Fund of the transactions contemplated
in the Underwriting Agreement or the performance by the Fund of its
obligations thereunder.
12. The terms of the Underwriting Agreement and each of the Fund
Agreements do not violate in any material respect any applicable
provision of 1940 Act, the Rules and Regulations thereunder, the
Advisers Act or the Advisers Act Rules and Regulations.
13. Neither the execution and delivery by the Fund of, and the
performance by the Fund of its obligations under, the Underwriting
Agreement or the Fund Agreements, nor the issuance and sale of the
Shares to the Underwriters and the use by the Fund of the proceeds
thereof as provided by the Underwriting Agreement and as described in
the Prospectus under the caption "Use of Proceeds": (i) violate the
Fund's articles of incorporation or bylaws; (ii) violate, breach or
constitute a default or event of default under the terms of any
agreement or instrument that is filed as an exhibit to the
Registration Statement and to which the Fund is a party or by which
its property may be bound, except for violations, breaches or
defaults that would not have a Material Adverse Effect; (iii) violate
the laws of the United States, the States of Maryland and New York
and The Commonwealth of Massachusetts that are, in such counsel's
experience, applicable to the transactions of the types covered by
the Underwriting Agreement and the Fund Agreements (the "Covered
Laws"); (iv) violates the terms of any order of any court,
governmental instrumentality, securities exchange or association or
arbitrator specifically naming the Fund and known to such counsel or
57
(v) to such counsel's knowledge, require the Fund to obtain any
consent or approval by, or make any filing with, any court, or any
regulatory body, administrative or other governmental body, agency or
official under any statute, rule, or regulation of the State of
Maryland or of the United States, other than consents, approvals and
filings previously obtained or made and in full force and effect.
14. The execution and delivery of, and performance of the Fund's
obligations under, the Underwriting Agreement and each of the Fund
Agreements have been duly authorized by all necessary action of the
Fund, and the Fund has duly executed and delivered the Underwriting
Agreement and each of the Fund Agreements.
15. Each of the Fund Agreements constitutes the legal, valid and binding
obligation of the Fund, enforceable against it in accordance with its
terms, except as the enforceability thereof may be limited by the
effect of bankruptcy, insolvency, fraudulent transfer,
reorganization, receivership, moratorium, and other, similar laws
affecting the rights and remedies of creditors generally and by
general principles of equity (whether applied by a court of law or
equity), and except as rights to indemnity thereunder may be limited
by federal or state securities laws.
Such counsel shall also state that they have been informed that the Shares
have been approved for listing on the New York Stock Exchange, subject to
official notice of issuance, and the Fund's Registration Statement on Form 8-A
under the 1934 Act is effective.
In addition, such counsel shall state that they are not opining as to
factual matters, and the character of determinations involved in the
registration process is such that such counsel are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
information included in the Registration Statement and the Prospectus or in any
amendment or supplement thereto. Such counsel may assume the correctness and
completeness of the information included therein, and such counsel need have
made no independent investigation or verification of that information. However,
58
such counsel shall state that they have participated in the preparation of the
Registration Statement and the Prospectus and in discussions with certain
officers and directors of the Fund, certain officers and employees of the
Advisers and your representatives, and such counsel shall have reviewed certain
Fund records and documents relative to the Fund, the Adviser and the
Sub-Adviser. Based on that participation and review, such counsel shall advise
you that nothing has come to such counsel's attention that causes such counsel
to believe that the Registration Statement, including any Rule 462(b)
Registration Statement and any Rule 430A Information, at the time it became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus or any amendment or
supplement thereto, at the time that the Prospectus was issued or at the Closing
Date, included an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. This paragraph
does not address, and such counsel need express no opinion with respect to, the
financial statements and related notes and schedules, and other financial,
accounting, and statistical information, included in, incorporated by reference
in, or omitted from the Registration Statement, the Prospectus, or any amendment
or supplement to either of them. Such counsel need also express no opinion with
respect to any matter relating to compliance with financial covenants or
financial requirements.
59
EXHIBIT B
FORM OF ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ ADVISER OPINION
i. The Adviser is validly existing as a corporation under the laws of the State
of New York with full corporate power and authority to own or lease all of the
assets owned or leased by it and to conduct its business as described in the
Registration Statement and Prospectus and to enter into and perform its
obligations under the Underwriting Agreement and the Adviser Agreements.
ii. The Adviser is duly registered as an investment adviser under the Advisers
Act and is not prohibited by the Advisers Act or the Investment Company Act from
acting as investment adviser for the Fund under the Advisory Agreement as
contemplated by the Registration Statement and the Prospectus.
iii. The Underwriting Agreement and each Adviser Agreement has been duly and
validly authorized, executed and delivered by the Adviser; each Adviser
Agreement complies in all material respects with all provisions of the
Investment Company Act and the Advisers Act; and assuming due authorization,
execution and delivery by each of the other parties thereto, each Adviser
Agreement constitutes a legal, valid and binding obligation of the Adviser,
enforceable against the Adviser in accordance with its terms, (1) subject, as to
enforcement, to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and to general equitable principles (regardless of whether enforcement
is sought in a proceeding in equity or at law) and (2) except as rights to
indemnity thereunder may be limited by public policy or federal or state
securities laws (except that counsel may state that it expresses no opinion as
to the reasonableness or fairness of compensation payable under the Advisory
Agreement or the Sub-Advisory Agreement).
iv. Neither (A) the execution and delivery by the Adviser of the Underwriting
Agreement or of any Adviser Agreement nor (B) the consummation by the Adviser of
the transactions contemplated by, or the performance of its obligations under,
the Underwriting Agreement or any Adviser Agreement conflicts or will conflict
with, or results or will result in a breach of, (i) the charter or by-laws of
the Adviser, (ii) any agreement or instrument listed on an Annex to such opinion
(which the Adviser, in an officer's certificate accompanying such opinion or
60
otherwise delivered to the Underwriters on the Closing Date, shall have
identified as the only material agreements or instruments to which the Adviser
is a party or by which the Adviser is bound) or (iii) any applicable United
States federal or New York law, rule or regulation (other than state securities
or "blue sky" laws, as to which such counsel need express no opinion), or order
of any New York or United States federal court, governmental instrumentality,
securities exchange or association or arbitrator, (or any other orders of any
court, governmental instrumentality, securities exchange or association or
arbitrator, whether foreign or domestic, in any other jurisdiction, as set forth
on an Annex to such opinion (which the Adviser, in an officer's certificate
accompanying such opinion or otherwise delivered to the Underwriters on the
Closing Date, shall have identified as the only orders that are material to the
Adviser) in each case specifically naming the Adviser and (in the case of New
York or United States federal orders) known to such counsel, except in the case
of each of clauses (ii) and (iii) for such conflicts or breaches which do not,
either alone or in the aggregate, have a material adverse effect on the
Adviser's ability to perform its obligations under the Underwriting Agreement or
the Adviser Agreements.
v. To such counsel's knowledge, no consent, approval, authorization or order of
any New York or United States federal court, governmental agency or body or
securities exchange or association is required for the consummation of the
transactions contemplated in, or the performance by the Adviser of its
obligations under, the Underwriting Agreement or any Adviser Agreement, except
(i) such as have been obtained under the United States federal securities laws
and (ii) may be required by the New York Stock Exchange or under state
securities or "blue sky" laws, in connection with the purchase and distribution
of the Shares by the Underwriters pursuant to the Underwriting Agreement.
vii. To such counsel's knowledge, there is no legal or governmental proceeding
pending or threatened against the Adviser that is either (i) required to be
described in the Registration Statement or Prospectus that is not described
therein or (ii) which would, under Section 9 of the Investment Company Act, make
the Adviser ineligible to act as the Fund's investment adviser.
61
EXHIBIT C
FORM OF ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ SUB-ADVISER OPINION
i. The Sub-Adviser is validly existing as a limited liability company under the
laws of the State of Delaware with full power and authority to own or lease all
of the assets owned or leased by it and to conduct its business as described in
the Registration Statement and Prospectus and to enter into and perform its
obligations under the Underwriting Agreement and Sub-Advisory Agreement.
ii. The Sub-Adviser is duly registered as an investment adviser under the
Advisers Act and is not prohibited by the Advisers Act or the Investment Company
Act from acting as investment adviser for the Fund under the Sub-Advisory
Agreement as contemplated by the Registration Statement and the Prospectus.
iii. Each of the Underwriting Agreement and the Sub-Advisory Agreement has been
duly and validly authorized, executed and delivered by the Sub-Adviser; the
Sub-Advisory Agreement complies in all material respects with all provisions of
the Investment Company Act and the Advisers Act; and assuming due authorization,
execution and delivery by each of the other parties thereto, the Sub-Advisory
Agreement constitutes a legal, valid and binding obligation of the Sub-Adviser,
enforceable against the Sub-Adviser in accordance with its terms, (1) subject,
as to enforcement, to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other similar laws affecting creditors' rights
generally and to general equitable principles (regardless of whether enforcement
is sought in a proceeding in equity or at law) and (2) except as rights to
indemnity thereunder may be limited by public policy or federal or state
securities laws (except that counsel my state that it expresses no opinion as to
the reasonableness or fairness of compensation payable under the Sub-Advisory
Agreement).
iv. Neither (A) the execution and delivery by the Sub-Adviser of the
Underwriting Agreement or the Sub-Advisory Agreement nor (B) the consummation by
the Sub-Adviser of the transactions contemplated by, or the performance of its
obligations under, the Underwriting Agreement or the Sub-Advisory Agreement
conflicts or will conflict with, or results or will result in a breach of, (i)
62
the organizational documents of the Sub-Adviser, (ii) any agreement or
instrument listed on an Annex to such opinion (which the Sub-Adviser, in an
officer's certificate accompanying such opinion or otherwise delivered to the
Underwriters on the Closing Date, shall have identified as the only material
agreements or instruments to which the Adviser is a party or by which the
Sub-Adviser is bound) or (iii) any applicable United States federal or Delaware
law, rule or regulation (other than state securities or "blue sky" laws, as to
which such counsel need express no opinion), or order of any Delaware or United
States federal court, governmental instrumentality, securities exchange or
association or arbitrator, (or any other orders of any court, governmental
instrumentality, securities exchange or association or arbitrator, whether
foreign or domestic, in any other jurisdiction, as set forth on an Annex to such
opinion (which the Sub-Adviser, in an officer's certificate accompanying such
opinion or otherwise delivered to the Underwriters on the Closing Date, shall
have identified as the only orders that are material to the Sub-Adviser) in each
case specifically naming the Sub-Adviser and (in the case of Delaware or United
States federal orders) known to such counsel, except in the case of each of
clauses (ii) and (iii) for such conflicts or breaches which do not, either alone
or in the aggregate, have a material adverse effect on the Sub-Adviser's ability
to perform its obligations under the Underwriting Agreement or the Sub-Advisory
Agreement.
v. To such counsel's knowledge, no consent, approval, authorization or order of
any New York or United States federal court, governmental agency or body or
securities exchange or association is required for the consummation of the
transactions contemplated in, or the performance by the Sub-Adviser of its
obligations under, the Underwriting Agreement or the Sub-Advisory Agreement,
except (i) such as have been obtained under the United States federal securities
laws and (ii) may be required by the New York Stock Exchange or under state
securities or "blue sky" laws, in connection with the purchase and distribution
of the Shares by the Underwriters pursuant to the Underwriting Agreement.
vii. To such counsel's knowledge, there is no legal or governmental proceeding
pending or threatened against the Sub-Adviser that is either (i) required to be
described in the Registration Statement or Prospectus that is not described
63
therein or (ii) which would, under Section 9 of the Investment Company Act, make
the Sub-Adviser ineligible to act as the Fund's investment adviser.
64
EXHIBIT D
FORM OF ERNST & YOUNG LLP COMFORT LETTER
April 24, 2003
The Board of Directors of
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Realty Income Fund Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
as Managing Representative of the Underwriters
Ladies and Gentlemen:
We have audited the statement of assets and liabilities of ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ Realty Income Fund Inc. (the "Fund") as of [ ], 2003 (the "financial
statement") included in Pre-effective Amendment No. 2 to the Registration
Statement on Form N-2 filed by the Fund under the Securities Act of 1933 (the "
1933 Act") (File No. 333- ) and under the Investment Company Act of 1940 (the
"1940 Act," collectively, the 1933 Act and the 1940 Act, the "Acts") (File No.
811-21315); such statement and our report with respect to such statement are
included in the Registration Statement.
In connection with the Registration Statement:
1. We are independent auditors with respect to the Fund within the
meaning of the Acts and the applicable rules and regulations adopted
thereunder by the Securities and Exchange Commission (the "SEC").
2. In our opinion, the financial statement audited by us and included
in the Registration Statement complies as to form in all respects with the
applicable accounting requirements of the Acts and the related rules and
regulations thereunder adopted by the SEC.
3. For purposes of this letter we have read the minutes of all
meetings of the Shareholders, the Board of Directors and all Committees of
the Board of Directors of the Fund as set forth in the minute books at the
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offices of the Fund, officials of the Fund having advised us that the
minutes of all such meetings through [ ], 2003, were set forth therein.
4. Fund officials have advised us that no financial statements as of
any date subsequent to [ ], 2003, are available. We have made inquiries of
certain officials of the Fund who have responsibility for financial and
accounting matters regarding whether there was any change at [ ], 2003, in
the capital shares or net assets of the Fund as compared with amounts
shown in the [ ], 2003, statement of assets and liabilities included in
the Registration Statement, except for changes that the Registration
Statement discloses have occurred or may occur. On the basis of our
inquiries and our reading of the minutes as described in Paragraph 3,
nothing came to our attention that caused us to believe that there were
any such changes.
5. In addition to the procedures referred to in clauses 3 and 4
about, we have performed other specified procedures, not constituting and
audit, with respect to certain amounts, percentages, numerical data and
financial information appearing in the Registration Statement, which have
previously been specified by the Managing Representative and which shall
be specified in this letter, and have compared such items with, and have
found such items to be in agreement with, the accounting and financial
records of the Fund.
The foregoing procedures do not constitute an audit made in accordance
with generally accepted auditing standards. Accordingly, we make no
representations as to the sufficiency of the foregoing procedures for your
purposes.
This letter is solely for the information of the addressees and to assist
the underwriters in conducting and documenting their investigation of the
affairs of the Fund in connection with the offering of the securities covered by
the Registration Statement, and is not to be used, circulated, quoted or
otherwise referred to within or without the underwriting group for any other
purpose, including but not limited to the registration, purchase or sale of
securities, nor is it to be filed with or referred to in whole or in part in the
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Registration Statement or any other document, except that reference may be made
to it in the underwriting agreement or in any list of closing documents
pertaining to the offering of the securities covered by the Registration
Statement.
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