▇▇▇▇ ▇▇▇▇▇▇▇ Preferred Income Fund II
Auction Preferred Shares
No Par Value
UNDERWRITING AGREEMENT
January [ ], 2003
UNDERWRITING AGREEMENT
January [ ], 2003
UBS Warburg LLC
as Managing Representative
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
▇▇▇▇ ▇▇▇▇▇▇▇ Preferred Income Fund II, a voluntary association
with transferable shares organized and existing under and by virtue of the laws
of The Commonwealth of Massachusetts (commonly referred to as a Massachusetts
business trust) (the "Fund"), proposes to issue and sell to the underwriters
named in Schedule A annexed hereto (the "Underwriters") an aggregate of [ ]
preferred shares of beneficial interest of the Fund, no par value, designated
Series M Auction Preferred Shares of the Fund, [ ] preferred shares of
beneficial interest of the Fund, no par value, designated Series T Auction
Preferred Shares of the Fund, [ ] preferred shares of beneficial interest of the
Fund, no par value, designated Series W Auction Preferred Shares of the Fund, [
] preferred shares of beneficial interest of the Fund, no par value, designated
Series TH Auction Preferred Shares of the Fund, and [ ] preferred shares of
beneficial interest of the Fund, no par value, designated Series F Auction
Preferred Shares of the Fund, each with a liquidation preference of $25,000 per
share (the "Shares"). The Shares are described in the Prospectus which is
referred to below.
The Fund has filed, in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively called the "Act"), and with the provisions of the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder
(collectively called the "Investment Company Act"), with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form N-2
(File Nos. 333-101956 and 811-21202), including a prospectus and a statement of
additional information, relating to the Shares. The Fund has furnished to you,
for use by the Underwriters and by dealers, copies of one or more preliminary
prospectuses (including a preliminary statement of additional information) (each
thereof, including such preliminary statement of additional information, being
herein called a "Preliminary Prospectus") relating to the Shares. Except where
the context otherwise requires, the Registration Statement, as amended when it
becomes effective (the "Effective Date"), including all documents filed as a
part thereof or incorporated by reference therein, and including any information
contained in a prospectus subsequently filed with the Commission pursuant to
Rule 497 under the Act and deemed to be part of the Registration Statement at
the time of effectiveness pursuant to Rule 430A under the Act is herein called
the Registration Statement, and the prospectus (including the statement of
additional information), in the form filed by the Fund with the Commission
pursuant to Rule 497 under the Act or, if no such filing is required, the form
of final prospectus (including the form of final statement of additional
information) included in the "Registration Statement" at the time it became
effective, is herein called the "Prospectus." In addition, the Fund has filed a
Notification of Registration on Form N-8A (the "Notification") pursuant to
Section 8 of the Investment Company Act.
▇▇▇▇ ▇▇▇▇▇▇▇ Advisers, LLC ("▇▇▇▇ ▇▇▇▇▇▇▇ Advisers" or the
"Investment Adviser") acts as the Fund's investment adviser pursuant to an
Investment Advisory Agreement by and between the Fund and the Investment
Adviser, dated as of November 29, 2002 (the "Investment Advisory Agreement").
The Bank of New York acts as the custodian (the "Custodian") of the Fund's cash
and portfolio assets pursuant to a Custody Agreement, dated as of November 29,
2002 (the "Custody Agreement"). Mellon Investor Services, LLC acts as the Fund's
transfer agent and dividend disbursing agent with respect to the common shares
of the Fund (the "Transfer Agent") pursuant to a transfer agency agreement,
dated as of November 29, 2002 (the "Transfer Agency Agreement"). Deutsche Bank
Trust Company Americas will act as the Fund's auction agent (the "Auction
Agent") for the Shares pursuant to an Auction Agency Agreement, dated as of
January [ ], 2003 (the "Auction Agency Agreement"). The Fund has entered into a
Letter Agreement, dated as of January [ ], 2003, with the Depository Trust
Company (the "DTC Agreement"). The Investment Adviser and UBS Warburg (the
"Managing Representative") have entered into a Shareholder Servicing Agreement
dated November 29, 2002 (the "Shareholder Servicing Agreement") and an
Additional Compensation Agreement dated November 25, 2002 (the "Additional
Compensation Agreement").
The Fund, the Investment Adviser and the Underwriters agree as
follows:
1. Sale and Purchase. Upon the basis of the warranties and
representations and subject to the terms and conditions herein set
forth, the Fund agrees to sell to the respective Underwriters and each
of the Underwriters, severally and not jointly, agrees to purchase
from the Fund the aggregate number of Shares set forth opposite the
name of such Underwriter in Schedule A attached hereto in each case at
a purchase price of $24,750 per Share. The Fund is advised that the
Underwriters intend (i) to make a public offering of their respective
portions of the Shares as soon after the effective date of the
Registration Statement as is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus. The Underwriters
may from time to time increase or decrease the public offering price
after the initial public offering to such extent as they may
determine.
2. Payment and Delivery. Payment of the purchase price for the Shares
shall be made by the Underwriters to the Fund by Federal Funds wire
transfer, against delivery of the certificates for the Shares to you
through the facilities of the Depository Trust Company ("DTC") for the
respective accounts of the Underwriters. Such payment and delivery
shall be made at 10:00 A.M., New York City time on the third business
day following the date of this Underwriting Agreement (unless another
date or time shall be agreed to by you and the Fund). The time at which
such payment and delivery are actually made is hereinafter sometimes
called the "Time of Purchase" or the "Closing Date."
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A certificate in definitive form representing the Shares
registered in the name of Cede & Co., as nominee for DTC, shall be
delivered by or on behalf of the Fund to DTC for the account of the
Underwriters. For the purpose of expediting the checking of the
certificates for the Shares by you, the Fund agrees to make such
certificates available to you for such purpose at least one full
business day preceding the Time of Purchase.
3. Representations and Warranties of the Fund and the Investment
Adviser. Each of the Fund and the Investment Adviser jointly and
severally represents and warrants to each Underwriter as follows:
(a) On (A) the Effective Date and the date on which the
Prospectus is first filed with the Commission pursuant to Rule
497(b), (h) or (j) under the Act, as the case may be, (B) the
date on which any post-effective amendment to the Registration
Statement (except any post-effective amendment which is filed
with the Commission after the later of (x) one year from the date
of this Underwriting Agreement or (y) the date on which the
distribution of the Shares is completed) became or becomes
effective or any amendment or supplement to the Prospectus was or
is filed with the Commission and (C) the Closing Dates, the
Registration Statement, the Prospectus and any such amendment or
supplement thereto and the Notification complied or will comply
in all material respects with the requirements of the Act and the
Investment Company Act, as the case may be. On the Effective Date
and on the date that any post-effective amendment to the
Registration Statement (except any post-effective amendment which
is filed with the Commission after the later of (x) one year from
the date of this Underwriting Agreement or (y) the date on which
the distribution of the Shares is completed) became or becomes
effective, neither the Registration Statement nor any such
amendment did or will contain any untrue statement of a material
fact or omit to state a material fact required to be stated in it
or necessary to make the statements in it not misleading. At the
Effective Date and, if applicable, the date the Prospectus or any
amendment or supplement to the Prospectus was or is filed with
the Commission and at the Closing Dates, the Prospectus did not
or will not, as the case may be, contain any untrue statement of
a material fact or omit to state a material fact required to be
stated in it or necessary to make the statements in it, in light
of the circumstances under which they were made, not misleading.
The foregoing representations in this Section 3(a) do not apply
to statements or omissions relating to the Underwriters made in
reliance on and in conformity with information furnished in
writing to the Fund by you expressly for use in the Registration
Statement, the Prospectus, or any amendments or supplements
thereto, as described in Section 9(f) hereof.
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(b) The Fund has been duly formed, is validly existing as a
Massachusetts business trust, with full power and authority to
conduct its business as described in the Registration Statement
and Prospectus, and the Fund is duly licensed and qualified to do
business and in good standing in each jurisdiction in which its
ownership or leasing of property or its conducting of business
requires such qualification, except where the failure to be so
licensed and qualified, either alone or in the aggregate, would
not result in a Material Adverse Effect (as defined below in
Section 3(m)) and the Fund owns, possesses or has obtained and
currently maintains all governmental licenses, permits, consents,
orders, approvals and other authorizations, whether foreign or
domestic, necessary to carry on its business as contemplated in
the Prospectus, except such licenses, permits, consents, orders,
approvals and other authorizations of the Fund to obtain, either
alone or in the aggregate, would not result in a Material Adverse
Effect (as defined below in Section 3(m)). The Fund has no
subsidiaries.
(c) The capitalization of the Fund is as set forth in the
Registration Statement and the Prospectus. The common shares of
beneficial interest of the Fund (the "Common Shares") and the
Shares conform to the description of them in the Prospectus. All
the outstanding Common Shares have been duly authorized and are
validly issued, fully paid and, except to the extent set forth in
the Prospectus, nonassessable. The Shares to be issued and
delivered to and paid for by the Underwriters in accordance with
this Underwriting Agreement against payment therefor as provided
by this Underwriting Agreement have been duly authorized and when
issued and delivered to the Underwriters will have been validly
issued and will be fully paid and, except to the extent set forth
in the Prospectus, nonassessable. No person is entitled to any
preemptive or other similar rights with respect to the Shares.
(d) The Fund is duly registered with the Commission under the
Investment Company Act as a diversified, closed-end management
investment company, and, subject to the filing of a final
amendment to the Registration Statement, or any required filing
under Rule 430A or Rule 497 under the Act (the "Final
Amendment"), if not already filed, all action under the Act and
the Investment Company Act, as the case may be, necessary under
the federal securities laws on the part of the Fund to make the
public offering and consummate the sale of the Shares as provided
in this Underwriting Agreement has or will have been taken by the
Fund.
(e) The Fund has full power and authority to enter into each of
this Underwriting Agreement, the Investment Advisory Agreement,
the Custody Agreement, the Transfer Agency Agreement, the Auction
Agency Agreement and the DTC Agreement (collectively, the "Fund
Agreements") and to perform all of the terms and provisions
hereof and thereof to be carried out by it and (i) each Fund
Agreement has been duly and validly authorized, executed and
delivered by or on behalf of the Fund, (ii) each Fund Agreement
does not violate in any material respect any of the applicable
provisions of the Investment Company Act or the Investment
Advisers Act of 1940, as amended, and the rules and regulations
thereunder (collectively called the "Advisers Act"), as the case
may be, and (iii) assuming due authorization, execution and
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delivery by the other parties thereto, each Fund Agreement
constitutes the legal, valid and binding obligation of the Fund
enforceable in accordance with its terms, (A) subject, as to
enforcement, to applicable bankruptcy, insolvency and 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 (B) except as rights to
indemnity thereunder may be limited by federal or state
securities laws.
(f) None of (i) the execution and delivery by the Fund of the
Fund Agreements, (ii) the issue and sale by the Fund of the
Shares as contemplated by this Underwriting Agreement and (iii)
the performance by the Fund of its obligations under any of the
Fund Agreements or consummation by the Fund of the other
transactions contemplated by the Fund Agreements conflicts with
or will conflict with, or results or will result in a breach of,
the Declaration of Trust of the Fund, as amended through the date
hereof (the "Declaration of Trust"), the Amended and Restated
Bylaws of the Fund, adopted in connection with the issuance of
the Shares and as amended through the date hereof (the "Amended
Bylaws") or any agreement or instrument to which the Fund is a
party or by which the Fund is bound, or any law, rule or
regulation, or order of any court, governmental instrumentality,
securities exchange or association or arbitrator, whether foreign
or domestic, applicable to the Fund, other than state securities
or "blue sky" laws applicable in connection with the purchase and
distribution of the Shares by the Underwriters pursuant to this
Underwriting Agreement.
(g) The Fund is not currently in breach of, or in default under,
any written agreement or instrument to which it is a party or by
which it or its property is bound or affected, except for such
breaches or defaults that do not, either alone or in the
aggregate, have a Material Adverse Effect (as defined below in
Section 3(m)).
(h) No person has any right to the registration of any securities
of the Fund because of the filing of the Registration Statement.
(i) No consent, approval, authorization or order of any court or
governmental agency or body or securities exchange or
association, whether foreign or domestic, is required to be
obtained by the Fund prior to the Closing Date for the
consummation by the Fund of the transactions to be performed by
the Fund or the performance by the Fund of all the terms and
provisions to be performed by or on behalf of it in each case as
contemplated in the Fund Agreements, except such as (i) have been
obtained under the Act, the Investment Company Act or the
Advisers Act, and (ii) may be required under state securities or
"blue sky" laws, in connection with the purchase and distribution
of the Shares by the Underwriters pursuant to this Underwriting
Agreement.
5
(j) Deloitte & Touche LLP, whose report appears in the
Prospectus, are independent public accountants with respect to
the Fund as required by the Act and the Investment Company Act.
(k) The statement of assets and liabilities included in the
Registration Statement and the Prospectus presents fairly in all
material respects, in accordance with generally accepted
accounting principles in the United States applied on a
consistent basis, the financial position of the Fund as of the
date indicated.
(l) The Fund will maintain a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general
or specific authorization; (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with existing assets through an asset
reconciliation procedure or otherwise at reasonable intervals and
appropriate action is taken with respect to any differences.
(m) Since the date as of which information is given in the
Registration Statement and the Prospectus, except as otherwise
stated therein, (i) there has been no material adverse change in
the condition, financial or otherwise, business affairs or
business of the Fund, whether or not arising in the ordinary
course of business (a "Material Adverse Effect"), (ii) there have
been no transactions entered into by the Fund other than those in
the ordinary course of its business and (iii) there has been no
dividend or distribution of any kind declared, paid or made on
any class of its capital shares.
(n) There is no action, suit or proceeding before or by any
court, commission, regulatory body, administrative agency or
other governmental agency or body, foreign or domestic, now
pending, or, to the knowledge of the Fund, threatened against or
affecting the Fund, which (i) might result in any material
adverse change in the condition, financial or otherwise, business
affairs or business prospects of the Fund or might materially
adversely affect the properties or assets of the Fund or (ii) is
of a character required to be described in the Registration
Statement or the Prospectus; and there are no contracts,
franchises or other documents that are of a character required to
be described in, or that are required to be filed as exhibits to,
the Registration Statement that have not been described or filed
as required.
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(o) The Fund intends 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 Internal Revenue Code of
1986, as amended (the "Code").
(p) The Common Shares are listed on the New York Stock Exchange.
(q) The Shares have been, or prior to the Closing Date will be,
assigned a rating of "Aaa" by ▇▇▇▇▇'▇ Investors Service, Inc.
(r) No advertising, sales literature or other promotional
materials (excluding road show slides or road show tapes) were
authorized or prepared by or on behalf of the Fund or the
Investment Adviser or any representative thereof for use in
connection with the public offering or sale of the Shares
(collectively referred to as the "sales materials"); any road
show slides or road show tapes complied and comply in all
material respects with the applicable requirements of the Act and
the rules and interpretations of the NASD; and no broker kits,
road show slides, road show tapes or sales materials authorized
or prepared by the Fund or authorized or prepared on behalf of
the Fund by the Investment Adviser or any representative thereof
for use in connection with the public offering or sale of the
Shares contained or contains any untrue statement of a material
fact or omitted or omits to state any material fact required to
be stated therein or necessary in order to make the statements
therein not misleading.
4. Representations and Warranties of the Investment Adviser. The Investment
Adviser represents to each Underwriter as follows:
(a) The Investment Adviser has been duly formed, is validly
existing as a limited liability company under the laws of
Delaware with full power and authority to perform its obligations
under this Agreement, the Shareholder Servicing Agreement, the
Investment Advisory Agreement and the Additional Compensation
Agreement, and the Investment Adviser is duly licensed and
qualified to do business and in good standing in each
jurisdiction in which it is required to be so qualified in order
to perform its obligations under this Agreement, the Shareholder
Servicing Agreement the Investment Advisory Agreement and the
Additional Compensation Agreement; and the Investment Adviser
owns, possesses or has obtained and currently maintains all
governmental licenses, permits, consents, orders, approvals and
other authorizations, whether foreign or domestic, necessary to
perform its obligations under this Agreement, the Shareholder
Servicing Agreement, the Investment Advisory Agreement and the
Additional Compensation Agreement.
7
(b) The Investment Adviser is (i) registered as an investment
adviser under the Advisers Act and (ii) not prohibited by the
Advisers Act or the Investment Company Act from acting as the
investment adviser for the Fund as contemplated by the Investment
Advisory Agreement, the Registration Statement and the
Prospectus.
(c) The Investment Adviser has, or at the relevant time had, full
power and authority to enter into each of this Underwriting
Agreement, the Shareholder Servicing Agreement, the Investment
Advisory Agreement and the Additional Compensation Agreement
(collectively, this Underwriting Agreement, the Shareholder
Servicing Agreement, the Investment Advisory Agreement and the
Additional Compensation Agreement being referred to as the
"Investment Adviser Agreements") and to carry out all the terms
and provisions hereof and thereof to be carried out by it; and
each Investment Adviser Agreement has been duly and validly
authorized, executed and delivered by the Investment Adviser;
none of the Investment Adviser Agreements violate any of the
applicable provisions of the Investment Company Act or the
Advisers Act; and assuming due authorization, execution and
delivery by the other parties thereto, each Investment Adviser
Agreement constitutes a legal, valid and binding obligation of
the Investment Adviser, enforceable in accordance with its terms,
(i) subject, as to enforcement, to applicable bankruptcy,
insolvency and 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
(ii) except as rights to indemnity thereunder may be limited by
federal or state securities laws.
(d) Neither (i) the execution and delivery by the Investment
Adviser of any Investment Adviser Agreement nor (ii) the
consummation by the Investment Adviser of the transactions
contemplated by, or the performance of its obligations under any
Investment Adviser Agreement conflicts or will conflict with, or
results or will result in a breach of, the limited liability
company agreement or other organizational documents of the
Investment Adviser or any agreement or instrument to which the
Investment Adviser is a party or by which the Investment Adviser
is bound, or any law, rule or regulation, or order of any court,
governmental instrumentality, securities exchange or association
or arbitrator, whether foreign or domestic, applicable to the
Investment Adviser, except in each case for such conflicts or
breaches which do not, either alone or in the aggregate, have a
material adverse effect upon the Investment Adviser's ability to
perform its obligations under the Investment Adviser Agreements.
(e) No consent, approval, authorization or order of any court,
governmental agency or body or securities exchange or
association, whether foreign or domestic, is required to be
obtained by the Investment Adviser on or prior to the Closing
Date for the consummation of the transactions contemplated in, or
the performance by the Investment Adviser of its obligations
under, any Investment Adviser Agreement, as the case may be,
except such as (i) have been obtained under the Act, the
Investment Company Act or the Advisers Act, 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 this
Underwriting Agreement.
8
(f) The description of the Investment Adviser and its business,
and the statements attributable to the Investment Adviser, in the
Registration Statement and the Prospectus comply in all material
respects with the requirements of the Act and the Investment
Company Act and do not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading (and, solely with respect to the Prospectus, in the
light of the circumstances under which they were made).
(g) There is no action, suit or proceeding before or by any
court, commission, regulatory body, administrative agency or
other governmental agency or body, foreign or domestic, now
pending or, to the knowledge of the Investment Adviser,
threatened against or affecting the Investment Adviser of a
nature required to be disclosed in the Registration Statement or
Prospectus.
(h) The Investment Adviser has not made available any promotional
materials intended for use only by qualified broker-dealers and
registered representatives thereof by means of an Internet web
site or similar electronic means.
5. Agreements of the Parties.
(a) If the Registration Statement relating to the Shares has not
yet become effective, the Fund will promptly file the Final
Amendment, if not previously filed, with the Commission, and will
use its best efforts to cause such Registration Statement to
become effective and, as soon as the Fund is advised, will advise
the Managing Representative when the Registration Statement or
any amendment thereto has become effective. If the Registration
Statement has become effective and the Prospectus contained
therein omits certain information at the time of effectiveness
pursuant to Rule 430A under the Act, the Fund will file a 430A
Prospectus pursuant to Rule 497(h) under the Act 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. If the Registration Statement has
become effective and the Prospectus contained therein does not so
omit such information, the Fund will file a Prospectus pursuant
to Rule 497(b) or (j) under the Act as promptly as practicable,
but no later than the fifth business day following the date of
9
the later of the Effective Date or the commencement of the public
offering of the Shares after the Effective Date. In either case,
the Fund will provide you satisfactory evidence of the filing.
The Fund will not file with the Commission any Prospectus or any
other amendment (except any post-effective amendment which is
filed with the Commission after the later of (x) one year from
the date of this Underwriting Agreement or (y) the date on which
distribution of the Shares is completed) or supplement to the
Registration Statement or the Prospectus unless a copy has first
been submitted to the Managing Representative a reasonable time
before its filing and the Managing Representative has not
objected to it in writing within a reasonable time after
receiving the copy.
(b) For the period of three years from the date hereof, the Fund
will advise the Managing Representative promptly (1) of the
issuance by the Commission of any order in respect of the Fund or
the Investment Adviser or which relates to the offering of the
Shares, (2) of the initiation or threatening of any proceedings
for, or receipt by the Fund of any notice with respect to, the
suspension of the qualification of the Shares for sale in any
jurisdiction or the issuance of any order by the Commission
suspending the effectiveness of the Registration Statement, (3)
of receipt by the Fund, or any representative or attorney of the
Fund, of any other communication from the Commission relating to
the offering of the Shares, the Registration Statement, the
Notification, any Preliminary Prospectus, the Prospectus or to
the transactions contemplated by this Underwriting Agreement and
(4) the issuance by any court, regulatory body, administrative
agency or other governmental agency or body, whether foreign or
domestic, of any order, ruling or decree, or the threat to
initiate any proceedings with respect thereto, regarding the
offering of the Shares by the Fund. The Fund will make every
reasonable effort to prevent the issuance of any order suspending
the effectiveness of the Registration Statement and, if any such
order is issued, to obtain its lifting as soon as possible.
(c) If not delivered prior to the date of this Underwriting
Agreement, the Fund will deliver to the Managing Representative,
without charge, a signed copy of the Registration Statement and
the Notification and of any amendments (except any post-effective
amendment which is filed with the Commission after the later of
(x) one year from the date of this Underwriting Agreement or (y)
the date on which the distribution of the Shares is completed) to
either the Registration Statement or the Notification (including
all exhibits filed with any such document) and as many conformed
copies of the Registration Statement and any amendments thereto
(except any post-effective amendment which is filed with the
Commission after the later of (x) one year from the date of this
Underwriting Agreement or (y) the date on which the distribution
of the Shares is completed) (excluding exhibits) as the Managing
Representative may reasonably request.
10
(d) During such period as a prospectus is required by law to be
delivered by an underwriter or a dealer, the Fund will deliver,
without charge, to you, the Underwriters and any dealers, at such
office or offices as you may designate, as many copies of the
Prospectus as you may reasonably request, and, if any event
occurs during such period as a result of which it is necessary to
amend or supplement the Prospectus, in order to make the
statements therein, in light of the circumstances existing when
such Prospectus is delivered to a purchaser of Shares, not
misleading in any material respect, or if during such period it
is necessary to amend or supplement the Prospectus to comply with
the Act or the Investment Company Act, the Fund promptly will
prepare, submit to the Managing Representative, file with the
Commission and deliver, without charge, to the Underwriters and
to dealers (whose names and addresses the Managing Representative
will furnish to the Fund) to whom Shares may have been sold by
the Underwriters, and to other dealers on request, amendments or
supplements to the Prospectus so that the statements in such
Prospectus, as so amended or supplemented, will not, in light of
the circumstances existing when such Prospectus is delivered to a
purchaser, be misleading in any material respect and will comply
with the Act and the Investment Company Act. Delivery by the
Underwriters of any such amendments or supplements to the
Prospectus will not constitute a waiver of any of the conditions
in Section 6 hereof.
(e) The Fund will make generally available to holders of the
Fund's securities, 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 falls, an earnings
statement, if applicable, satisfying the provisions of Section
11(a) of the Act and, at the option of the Fund, Rule 158 under
the Act.
(f) The Fund will take such actions as the Managing
Representative reasonably requests in order to qualify the Shares
for offer and sale under the securities or "blue sky" laws of
such jurisdictions as the Managing Representative reasonably
designates; provided that the Fund shall not be required in
connection therewith or as a condition thereof to qualify as a
foreign corporation or to execute a general consent to service of
process in any jurisdiction.
(g) The Fund will pay or cause to be paid the following: (i) the
fees, disbursements and expenses of the Fund's counsel and
accountants in connection with the registration of the Shares and
all other expenses in connection with the preparation, printing
and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or
reproducing this Underwriting Agreement and any other documents
in connection with the offering, purchase, sale and delivery of
the Shares (including advertising expenses of the Underwriters,
if any); (iii) the cost of preparing share certificates; (iv) the
expenses (including, but not limited to, travel, hotels and other
accommodations) incurred by the Fund's directors, officers,
employees and other personnel in connection with meetings held
11
with registered brokers in connection with the offering of the
Shares, the preparing to market and the marketing of the Shares;
(v) any fees charged by securities rating services for rating the
Shares; (vi) the fees and expenses of the DTC and its nominee,
the Custodian and the Auction Agent; and (vii) all other costs
and expenses incident to the performance of its obligations
hereunder which are not otherwise specifically provided for. It
is understood, however, that, except as provided in this Section
5 and Section 7 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees of their counsel and
stock transfer taxes, if any, on resale of any of the Shares by
them, except any advertising expenses connected with any offers
they may make.
(h) If the transactions contemplated by this Underwriting
Agreement are not consummated, except as otherwise provided
herein, no party will be under any liability to any other party,
except that (i) if this Underwriting Agreement is terminated by
(A) the Fund or the Investment Adviser pursuant to any of the
provisions hereof (otherwise than pursuant to Section 8 hereof)
or (B) by you or the Underwriters because of any inability,
failure or refusal on the part of the Fund or the Investment
Adviser to comply with any material terms or because any of the
conditions in Section 6 are not satisfied, ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers
or an affiliate and the Fund, jointly and severally, will
reimburse the Underwriters for all out-of-pocket expenses
(including the reasonable fees, disbursements and other charges
of their counsel) reasonably incurred by them in connection with
the proposed purchase and sale of the Shares and (ii) no
Underwriter who has failed or refused to purchase the Shares
agreed to be purchased by it under this Underwriting Agreement,
in breach of its obligations pursuant to this Underwriting
Agreement, will be relieved of liability to the Fund and the
Investment Adviser and the other Underwriters for damages
occasioned by its default.
(i) Without the prior written consent of the Managing
Representative, the Fund will not offer, sell or register with
the Commission, or announce an offering of, any equity securities
of the Fund, within 180 days after the Effective Date, except for
the Shares as described in the Prospectus and any issuances of
Common Shares pursuant to the dividend reinvestment plan
established by the Fund.
12
(j) The Fund will direct the investment of the net proceeds of
the offering of the Shares in such a manner as to comply with the
investment objective and policies of the Fund as described in the
Prospectus.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters to purchase the Shares are subject to the accuracy on the
date of this Underwriting Agreement, and on the Closing Date, of the
representations of the Fund and the Investment Adviser in this
Underwriting Agreement, to the accuracy and completeness of all
statements made by the Fund, the Investment Adviser or any of their
respective officers in any certificate delivered to the Managing
Representative or its counsel pursuant to this Underwriting Agreement,
to performance by the Fund and the Investment Adviser of their
respective obligations under this Underwriting Agreement and to each
of the following additional conditions:
(a) The Registration Statement must have become effective by 5:30
p.m., New York City time, on the date of this Underwriting
Agreement or such later date and time as the Managing
Representative consents to in writing. The Prospectus must have
been filed in accordance with Rule 497(b), (h) or (j), as the
case may be, under the Act.
(b) No order suspending the effectiveness of the Registration
Statement may be in effect and no proceedings for such purpose
may be pending before or, to the knowledge of counsel to the
Underwriters, threatened by the Commission, and any requests for
additional information on the part of the Commission (to be
included in the Registration Statement or the Prospectus or
otherwise) must be complied with or waived to the reasonable
satisfaction of the Managing Representative.
(c) Since the dates as of which information is given in the
Registration Statement and the Prospectus, (i) there must not
have been any material adverse change in the number of
outstanding Common Shares or liabilities of the Fund except as
set forth in or contemplated by the Prospectus (provided that a
change in the Fund's net asset value, liabilities or portfolio
securities arising in the course of its normal investment
operations shall not be deemed to be a material adverse change);
(ii) there must not have been any material adverse change in the
general affairs, prospects, management, business, financial
condition or results of operations of the Fund or the Investment
Adviser whether or not arising from transactions in the ordinary
course of business as set forth in or contemplated by the
Prospectus (provided that a change in the Fund's net asset value,
liabilities or portfolio securities arising in the course of its
normal investment operations shall not be deemed to be a material
adverse change); (iii) the Fund must not have sustained any
material interference with its business from any court or from
13
legislative or other governmental action, order or decree,
whether foreign or domestic, not described in the Registration
Statement and Prospectus; and (iv) there must not have occurred
any event that makes untrue or incorrect in any material respect
any statement or information contained in the Registration
Statement or Prospectus or that is not reflected in the
Registration Statement or Prospectus but should be reflected
therein in order to make the statements or information therein
(in the case of the Prospectus, in light of the circumstances in
which they were made) not misleading in any material respect; if,
in the judgment of the Managing Representative, any such
development referred to in clause (i), (ii), (iii) or (iv) of
this paragraph (c) makes it impracticable or inadvisable to
consummate the sale and delivery of the Shares pursuant to this
Underwriting Agreement by the Underwriters, at the initial public
offering price of the Shares.
(d) The Managing Representative must have received on the Closing
Date a certificate, dated such date, of the President or a
Vice-President and the chief financial or accounting officer of
each of the Fund and the Investment Adviser certifying in their
capacity as such officers that (i) the signers have examined the
Registration Statement, the Prospectus, and this Underwriting
Agreement, (ii) the representations of the Fund (with respect to
the certificates from such Fund officers) and the representations
of the Investment Adviser (with respect to the certificates from
such officers of the Investment Adviser) in this Underwriting
Agreement are accurate on and as of the date of the certificate,
(iii) there has not been any material adverse change in the
general affairs, prospects, management, business, financial
condition or results of operations of the Fund (with respect to
the certificates from such Fund officers) or the Investment
Adviser (with respect to the certificates from such officers of
the Investment Adviser), which change would materially and
adversely affect the ability of the Fund or the Investment
Adviser, as the case may be, to fulfill its obligations under
this Underwriting Agreement or the Investment Advisory Agreement,
whether or not arising from transactions in the ordinary course
of business, (iv) with respect to the Fund only, no order
suspending the effectiveness of the Registration Statement, or
prohibiting the sale of any of the Shares has been issued and no
proceedings for any such purpose are pending before or threatened
by the Commission or any other regulatory body, whether foreign
or domestic, (v) no order having a material adverse effect on the
ability of the Investment Adviser to fulfill its obligations
under this Underwriting Agreement, the Shareholder Servicing
Agreement, the Investment Advisory Agreement or the Additional
Compensation Agreement, as the case may be, has been issued and
no proceedings for any such purpose are pending before or
threatened by the Commission or any other regulatory body,
whether foreign or domestic, and (vi) each of the Fund (with
respect to the certificates from such Fund officers) and the
Investment Adviser (with respect to the certificates from such
officers of the Investment Adviser) has performed all of its
respective agreements that this Underwriting Agreement requires
it to perform by the Closing Date (to the extent not waived in
writing by the Managing Representative).
14
(e) You must receive on the Closing Date the opinions dated such
Closing Date substantially in the form of Schedules B and C to
this Underwriting Agreement from the counsel identified in each
such Schedules.
(f) You must receive on the Closing Date from Skadden, Arps,
Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP or its affiliated entities an opinion
dated the Closing Date with respect to the Fund, the Shares, the
Registration Statement and the Prospectus, this Underwriting
Agreement and the form and sufficiency of all proceedings taken
in connection with the sale and delivery of the Shares. Such
opinion and proceedings shall fulfill the requirements of this
Section 6(f) only if such opinion and proceedings are
satisfactory in all respects to the Managing Representative. The
Fund and the Investment Adviser must have furnished to such
counsel such documents as counsel may reasonably request for the
purpose of enabling them to render such opinion.
(g) The Managing Representative must receive on the date this
Underwriting Agreement is signed and delivered by you a signed
letter, dated such date, substantially in the form of Schedule D
to this Underwriting Agreement from the firm of accountants
designated in such Schedule. The Managing Representative also
must receive on the Closing Date a signed letter from such
accountants, dated as of the Closing Date, confirming on the
basis of a review in accordance with the procedures set forth in
their earlier 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 the
Closing Date, that would require any change in their letter
referred to in the foregoing sentence.
(h) The Shares shall have been accorded a rating of "Aaa" by
▇▇▇▇▇'▇ Investors Service, Inc. and a letter to such effect,
dated on or before the Closing Date, shall have been delivered to
the Managing Representative.
(i) As of the Closing Date, and assuming the receipt of the net
proceeds from the sale of the Shares, the 1940 Act Fund Preferred
Shares Asset Coverage and the Fund Preferred Shares Basic
Maintenance Amount (each as defined in the Prospectus) each will
be met.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Underwriting Agreement will comply only if
they are in form and scope reasonably satisfactory to counsel for the
Underwriters, provided that any such documents, forms of which are
annexed hereto, shall be deemed satisfactory to such counsel if
substantially in such form.
15
7. Termination. This Underwriting Agreement may be terminated by the
Managing Representative by notifying the Fund at any time:
(a) before the later of the effectiveness of the Registration
Statement and the time when any of the Shares are first generally
offered pursuant to this Underwriting Agreement by the Managing
Representative to dealers by letter or telegram;
(b) at or before the Closing Date if, in the sole judgment of the
Managing Representative, payment for and delivery of any Shares
is rendered impracticable or inadvisable because (i) trading in
the equity securities of the Fund is suspended by the Commission
or by the principal exchange that lists the Common Shares, (ii)
trading in securities generally on the New York Stock Exchange or
the Nasdaq Stock Market shall have been suspended or limited or
minimum or maximum prices shall have been generally established
on such exchange or over-the-counter market, (iii) additional
material governmental restrictions, not in force on the date of
this Underwriting Agreement, have been imposed upon trading in
securities or trading has been suspended on any U.S. securities
exchange, (iv) a general banking moratorium has been established
by U.S. federal or New York authorities or (v) any material
adverse change in the financial or securities markets in the
United States or in political, financial or economic conditions
in the United States or any outbreak or material escalation of
hostilities or declaration by the United States of a national
emergency or war or other calamity or crisis shall have occurred
the effect of any of which is such as to make it, in the sole
judgment of the Managing Representative, impracticable or
inadvisable to market the Shares on the terms and in the manner
contemplated by the Prospectus; or
(c) at or before the Closing Date, if any of the conditions
specified in Section 6 have not been fulfilled when and as
required by this Underwriting Agreement.
8. Substitution of Underwriters. If one or more of the Underwriters
fails (other than for a reason sufficient to justify the termination
of this Underwriting Agreement) to purchase on the Closing Date the
Shares agreed to be purchased on the Closing Date by such Underwriter
or Underwriters, the Managing Representative may find one or more
substitute underwriters to purchase such Shares or make such other
arrangements as the Managing Representative deems advisable, or one or
more of the remaining Underwriters may agree to purchase such Shares
in such proportions as may be approved by the Managing Representative,
in each case upon the terms set forth in this Underwriting Agreement.
If no such arrangements have been made within 36 hours after the
Closing Date, and
(a) the number of Shares to be purchased by the defaulting
Underwriters on the Closing Date does not exceed 10% of the
Shares that the Underwriters are obligated to purchase on such
Closing Date, each of the nondefaulting Underwriters will be
obligated to purchase such Shares on the terms set forth in this
Underwriting Agreement in proportion to their respective
obligations under this Underwriting Agreement, or
16
(b) the number of Shares to be purchased by the defaulting
Underwriters on the Closing Date exceeds 10% of the Shares to be
purchased by all the Underwriters on the Closing Date, the Fund
will be entitled to an additional period of 24 hours within which
to find one or more substitute underwriters reasonably
satisfactory to the Managing Representative to purchase such
Shares on the terms set forth in this Underwriting Agreement.
In any such case, either the Managing Representative or the
Fund will have the right to postpone the Closing Date for not more than
five business days in order that necessary changes and arrangements
(including any necessary amendments or supplements to the Registration
Statement or the Prospectus) may be effected by the Managing
Representative and the Fund. If the number of Shares to be purchased on
the Closing Date by such defaulting Underwriter or Underwriters exceeds
10% of the Shares that the Underwriters are obligated to purchase on
the Closing Date, and none of the nondefaulting Underwriters or the
Fund makes arrangements pursuant to this Section within the period
stated for the purchase of the Shares that the defaulting Underwriters
agreed to purchase, this Underwriting Agreement will terminate without
liability on the part of any nondefaulting Underwriter, the Fund or the
Investment Adviser, except as provided in Sections 6(h) and 9 hereof.
This Section will not affect the liability of any defaulting
Underwriter to the Fund or the nondefaulting Underwriters arising out
of such default. A substitute underwriter will become a Underwriter for
all purposes of this Underwriting Agreement.
9. Indemnity and Contribution.
(a) Each of the Fund and the Investment Adviser, jointly and
severally, agrees to indemnify, defend and hold harmless each
Underwriter, its partners, directors and officers, and any person
who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, and the successors and
assigns of all of the foregoing persons from and against any
loss, damage, expense, liability or claim (including the
reasonable cost of investigation) which, jointly or severally,
any such Underwriter or any such person may incur under the Act,
the Exchange Act, the Investment Company Act, the Advisers Act,
the common law or otherwise, insofar as such loss, damage,
expense, liability or claim arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by
the Fund) or in a Prospectus (the term "Prospectus" for the
purpose of this Section 9 being deemed to include any Preliminary
Prospectus, any sales materials prepared or authorized by the
Fund, the Prospectus and the Prospectus as amended or
17
supplemented by the Fund), or arises out of or is based upon any
omission or alleged omission to state a material fact required to
be stated in either such Registration Statement or Prospectus or
necessary to make the statements made therein not misleading,
except insofar as any such loss, damage, expense, liability or
claim arises out of or is based upon any untrue statement or
alleged untrue statement of a material fact contained in and in
conformity with information furnished in writing by or on behalf
of any Underwriter through you to the Fund or the Investment
Adviser expressly for use with reference to such Underwriter in
such Registration Statement or such Prospectus or arises out of
or is based upon any omission or alleged omission to state a
material fact in connection with such information required to be
stated in such Registration Statement or such Prospectus or
necessary to make such information not misleading, provided,
however, that the indemnity agreement contained in this
subsection (a) with respect to any Preliminary Prospectus or
amended Preliminary Prospectus shall not inure to the benefit of
any Underwriter (or to the benefit of any person controlling such
Underwriter) from whom the person asserting any such loss,
damage, expense, liability or claim purchased the Shares which is
the subject thereof if the Prospectus corrected any such alleged
untrue statement or omission and if such Underwriter failed to
send or give a copy of the Prospectus to such person at or prior
to the written confirmation of the sale of such Shares to such
person, unless the failure is the result of noncompliance by the
Fund with Section 5(d) hereof.
If any action, suit or proceeding (together, a "Proceeding")
is brought against an Underwriter or any such person in respect
of which indemnity may be sought against the Fund or the
Investment Adviser pursuant to the foregoing paragraph, such
Underwriter or such person shall promptly notify the Fund or the
Investment Adviser, as the case may be, in writing of the
institution of such Proceeding and the Fund or the Investment
Adviser shall assume the defense of such Proceeding, including
the employment of counsel reasonably satisfactory to such
indemnified party and payment of all fees and expenses; provided,
however, that the omission to so notify the Fund or the
Investment Adviser shall not relieve the Fund or the Investment
Adviser from any liability which the Fund or the Investment
Adviser may have to any Underwriter or any such person or
otherwise and, unless only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by
the indemnifying party. Such Underwriter or such person shall
have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or of such person unless the
employment of such counsel shall have been authorized in writing
by the Fund or the Investment Adviser, as the case may be, in
connection with the defense of such Proceeding or the Fund or the
18
Investment Adviser shall not have, within a reasonable period of
time in light of the circumstances, employed counsel to have
charge of the defense of such Proceeding or such indemnified
party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from,
additional to or in conflict with those available to the Fund or
the Investment Adviser (in which case the Fund or the Investment
Adviser shall not have the right to direct the defense of such
Proceeding on behalf of the indemnified party or parties), in any
of which events such fees and expenses shall be borne by the Fund
or the Investment Adviser and paid as incurred (it being
understood, however, that the Fund or the Investment Adviser
shall not be liable for the expenses of more than one separate
counsel (in addition to any local counsel) in any one Proceeding
or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such
Proceeding). None of the Fund or the Investment Adviser shall be
liable for any settlement of any Proceeding effected without its
written consent but if settled with the written consent of the
Fund or the Investment Adviser, the Fund or the Investment
Adviser, as the case may be, agrees to indemnify and hold
harmless any Underwriter and any such person from and against any
loss or liability by reason of such settlement. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall
have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the
second sentence of this paragraph, then the indemnifying party
agrees that it shall be liable for any settlement of any
Proceeding effected without its written consent if (i) such
settlement is entered into more than 60 business days after
receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall not have reimbursed the indemnified
party in accordance with such request prior to the date of such
settlement and (iii) such indemnified party shall have given the
indemnifying party at least 30 days' prior notice of its
intention to settle. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any
settlement of any pending or threatened 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 on claims that are
the subject matter of such Proceeding and does not include an
admission of fault, culpability or a failure to act, by or on
behalf of such indemnified party.
(b) Each Underwriter severally agrees to indemnify, defend and
hold harmless the Fund and the Investment Adviser, its directors
and officers, and any person who controls the Fund or the
Investment Adviser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and the successors and assigns of
all of the foregoing persons from and against any loss, damage,
expense, liability or claim (including the reasonable cost of
investigation) which, jointly or severally, the Fund or the
Investment Adviser or any such person may incur under the Act,
the Exchange Act, the Investment Company Act, the Advisers Act,
the common law or otherwise, insofar as such loss, damage,
expense, liability or claim arises out of or is based upon any
19
untrue statement or alleged untrue statement of a material fact
contained in and in conformity with information furnished in
writing by or on behalf of such Underwriter through you to the
Fund or the Investment Adviser expressly for use with reference
to such Underwriter in the Registration Statement (or in the
Registration Statement as amended by any post-effective amendment
thereof by the Fund) or in a Prospectus, or arises out of or is
based upon any omission or alleged omission to state a material
fact in connection with such information required to be stated in
such Registration Statement or such Prospectus or necessary to
make such information not misleading.
If any Proceeding is brought against the Fund, the
Investment Adviser, or any such person in respect of which
indemnity may be sought against any Underwriter pursuant to the
foregoing paragraph, the Fund or the Investment Adviser or such
person shall promptly notify such Underwriter in writing of the
institution of such Proceeding and such Underwriter shall assume
the defense of such Proceeding, including the employment of
counsel reasonably satisfactory to such indemnified party and
payment of all fees and expenses; provided, however, that the
omission to so notify such Underwriter shall not relieve such
Underwriter from any liability which such Underwriter may have to
the Fund, the Investment Adviser, or any such person or
otherwise. The Fund, the Investment Adviser, or such person shall
have the right to employ its own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of
the Fund, the Investment Adviser, or such person, as the case may
be, unless the employment of such counsel shall have been
authorized in writing by such Underwriter in connection with the
defense of such Proceeding or such Underwriter shall not have,
within a reasonable period of time in light of the circumstances,
employed counsel to have charge of the defense of such Proceeding
or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them
which are different from or additional to or in conflict with
those available to such Underwriter (in which case such
Underwriter shall not have the right to direct the defense of
such Proceeding on behalf of the indemnified party or parties,
20
but such Underwriter may employ counsel and participate in the
defense thereof but the fees and expenses of such counsel shall
be at the expense of such Underwriter), in any of which events
such fees and expenses shall be borne by such Underwriter and
paid as incurred (it being understood, however, that such
Underwriter shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel) in any one
Proceeding or series of related Proceedings in the same
jurisdiction representing the indemnified parties who are parties
to such Proceeding). No Underwriter shall be liable for any
settlement of any such Proceeding effected without the written
consent of such Underwriter but if settled with the written
consent of such Underwriter, such Underwriter agrees to indemnify
and hold harmless the Fund or the Investment Adviser and any such
person from and against any loss or liability by reason of such
settlement. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested an indemnifying
party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second sentence of this paragraph,
then the indemnifying party agrees that it shall be liable for
any settlement of any Proceeding effected without its written
consent if (i) such settlement is entered into more than 60
business days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request
prior to the date of such settlement and (iii) such indemnified
party shall have given the indemnifying party at least 30 days'
prior notice of its intention to settle. No indemnifying party
shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened
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 on claims that are the subject matter of such
Proceeding.
(c) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under subsections (a) and (b)
of this Section 9 in respect of any losses, damages, expenses,
liabilities or claims referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, damages, expenses,
liabilities or claims (i) in such proportion as is appropriate to
reflect the relative benefits received by the Fund and the
Investment Adviser on the one hand and the Underwriters on the
other hand 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 and the Investment
Adviser on the one hand and of the Underwriters on the other in
connection with the statements or omissions which resulted in
such losses, damages, expenses, liabilities or claims, as well as
any other relevant equitable considerations. The relative
benefits received by the Fund or the Investment Adviser on the
one hand and the Underwriters on the other shall be deemed to be
in the same respective proportions as the total proceeds from the
offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Fund and the total
underwriting discounts and commissions received by the
Underwriters, bear to the aggregate public offering price of the
Shares. The relative fault of the Fund and the Investment Adviser
on the one hand and of the Underwriters on the other shall be
determined by reference to, among other things, whether the
21
untrue statement or alleged untrue statement of a material fact
or omission or alleged omission relates to information supplied
by the Fund or the Investment Adviser or by the Underwriters and
the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses,
damages, expenses, liabilities and claims referred to in this
subsection shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with
investigating, preparing to defend or defending any Proceeding.
(d) The Fund and the Investment Adviser and the Underwriters
agree 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 subsection
(c) above. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess
of the fees and commissions received by such Underwriter. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) 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 their
respective underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained in this
Section 9 and the covenants, warranties and representations of
the Fund contained in this Agreement shall remain in full force
and effect regardless of any investigation made by or on behalf
of any Underwriter, its partners, directors or officers or any
person (including each partner, officer or director of such
person) who controls any Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, or by or
on behalf of the Fund, the Investment Adviser, its directors or
officers or any person who controls the Fund, the Investment
Adviser within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, and shall survive any termination of this
Agreement or the issuance and delivery of the Shares. The Fund or
the Investment Adviser and each Underwriter agree promptly to
notify each other of the commencement of any Proceeding against
it and, in the case of the Fund, the Investment Adviser, against
any of the Fund's, the Investment Adviser's officers or directors
in connection with the issuance and sale of the Shares, or in
connection with the Registration Statement or Prospectus.
(f) The Fund and the Investment Adviser each acknowledge that the
statements with respect to (1) the public offering of the Shares
as set forth on the cover page of and (2) the statements relating
to stabilization, to selling concessions and reallowances of
selling concessions and with respect to discretionary accounts
under the caption "Underwriting" in the Prospectus constitute the
only information furnished in writing to the Fund by the Managing
Representative on behalf of the Underwriters expressly for use in
such document. The Underwriters severally confirm that these
statements are correct in all material respects and were so
furnished by or on behalf of the Underwriters severally for use
in the Prospectus.
22
(g) Notwithstanding any other provisions in this Section 9, no
party shall be entitled to indemnification or contribution under
this Underwriting Agreement against any loss, claim, liability,
expense or damage arising by reason of such person's willful
misfeasance, bad faith, gross negligence or reckless disregard in
the performance of its duties hereunder.
10. Notices. Except as otherwise herein provided, all statements, requests,
notices and agreements shall be in writing or by telegram and, if to
the Underwriters, shall be sufficient in all respects if delivered or
sent to UBS Warburg LLC, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: Syndicate Department and, if to the Fund or the Investment
Adviser, shall be sufficient in all respects if delivered or sent to
the Fund or the Investment Adviser, as the case may be, at the offices
of the Fund or the Investment Adviser at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President and
General Counsel.
11. Governing Law; Construction. This Agreement and any claim, counterclaim
or dispute of any kind or nature whatsoever arising out of or in any
way relating to this Agreement ("Claim"), directly or indirectly, shall
be governed by, and construed in accordance with, the laws of the State
of New York. The Section headings in this Agreement have been inserted
as a matter of convenience of reference and are not a part of this
Agreement.
12. Submission to Jurisdiction. Except as set forth below, no Claim
may be commenced, prosecuted or continued in any court other than the
courts of the State of New York located in the City and County of New
York or in the United States District Court for the Southern District
of New York, which courts shall have jurisdiction over the
adjudication of such matters, and the Fund consents to the
jurisdiction of such courts and personal service with respect thereto.
The Fund hereby consents to personal jurisdiction, service and venue
in any court in which any Claim arising out of or in any way relating
to this Agreement is brought by any third party against UBS Warburg
LLC or any indemnified party. Each of UBS Warburg LLC, the Fund (on
its behalf and, to the extent permitted by applicable law, on behalf
of its stockholders and affiliates) and the Investment Adviser (on its
behalf and, to the extent permitted by applicable law, on behalf of
its stockholders and affiliates) waives all right to trial by jury in
any action, proceeding or counterclaim (whether based upon contract,
tort or otherwise) in any way arising out of or relating to this
Agreement. Each of the Fund and the Investment Adviser agrees that a
final judgment in any such action, proceeding or counterclaim brought
in any such court may be enforced in any other courts in the
jurisdiction of which the Fund or the Investment Adviser, as the case
may be, is or may be subject, by suit upon such judgment.
23
13. Parties at Interest. The Agreement herein set forth has been and is
made solely for the benefit of the Underwriters and the Fund and to the
extent provided in Section 9 hereof the controlling persons, directors
and officers referred to in such section, and their respective
successors, assigns, heirs, personal representatives and executors and
administrators. No other person, partnership, association or
corporation (including a purchaser, as such purchaser, from any of the
Underwriters) shall acquire or have any right under or by virtue of
this Agreement.
14. Counterparts. This Agreement may be signed by the parties in one or
more counterparts which together shall constitute one and the same
agreement among the parties.
15. Successors and Assigns. This Agreement shall be binding upon the
Underwriters, the Fund or the Investment Adviser, and any successor or
assign of any substantial portion of the Fund's, the Investment
Adviser's, or any of the Underwriters' respective businesses and/or
assets.
16. Disclaimer of Liability of Trustees and Beneficiaries. A copy of the
Declaration of Trust is on file with the Secretary of The Commonwealth
of Massachusetts, and notice hereby is given that this Underwriting
Agreement is executed on behalf of the Trustees of the Fund as Trustees
and not individually and that the obligations or arising out of this
Underwriting Agreement are not binding upon any of the Trustees or
beneficiaries individually but are binding only upon the assets and
properties of the Fund.
24
If the foregoing correctly sets forth the understanding among the Fund
and the Underwriters, please so indicate in the space provided below for the
purpose, whereupon this letter and your acceptance shall constitute a binding
agreement among the Fund, the Investment Adviser and the Underwriters,
severally.
Very truly yours,
▇▇▇▇ ▇▇▇▇▇▇▇ PREFERRED INCOME FUND II
--------------------------
By:
Title:
▇▇▇▇ ▇▇▇▇▇▇▇ ADVISERS, LLC
--------------------------
By:
Title:
Accepted and agreed to as of the date first above written, on behalf of
themselves and the other several Underwriters named in Schedule A
UBS WARBURG LLC
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇
& ▇▇▇▇▇ INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
By: UBS WARBURG LLC
--------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
--------------------------
By: ▇▇▇▇ ▇. Reit
Title: Executive Director
25
SCHEDULE A
Number of Shares
Name to be Purchased
---- ---------------
UBS Warburg.......................................................
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated.................................................
Prudential Securities Incorporated................................
Total.....................................................................
A-1
SCHEDULE B
FORM OF OPINION OF
▇▇▇▇ & ▇▇▇▇ REGARDING THE FUND
January [ ], 2003
UBS Warburg LLC
As Representative of the
Several Underwriters
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: ▇▇▇▇ ▇▇▇▇▇▇▇ Preferred Income Fund II
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 6(e) of the
Underwriting Agreement, dated as of January [ ], 2003 (the "Underwriting
Agreement"), among you, as Representative of the several Underwriters, ▇▇▇▇
▇▇▇▇▇▇▇ Advisers, LLC, a Delaware limited liability company (the "Adviser"), and
▇▇▇▇ ▇▇▇▇▇▇▇ Preferred Income Fund II, a Massachusetts business trust (the
"Fund"). Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings ascribed to them in the Underwriting Agreement.
We have acted as counsel for the Fund and the Adviser in connection
with the sale to the Underwriters by the Fund of an aggregate of [ ] preferred
shares of beneficial interest of the Fund, no par value, designated Series M
Auction Preferred Shares of the Fund, [ ] preferred shares of beneficial
interest of the Fund, no par value, designated Series T Auction Preferred Shares
of the Fund, and [ ] preferred shares of beneficial interest of the Fund, no par
value, designated Series W Auction Preferred Shares of the Fund, each with a
liquidation preference of $25,000 per share (collectively, the "Shares"), all
pursuant to the Section 1 of the Underwriting Agreement. As such counsel, we
have assisted in the preparation and filing with the Securities and Exchange
Commission (the "Commission") of the Fund's Registration Statement on Form N-2
dated December 18, 2002 (File Nos. 333-99685 and 811-21202), and amendments No.
1 and No. 2 thereto, which Registration Statement became effective on January [
], 2003 (the "Effective Date"). Such Registration Statement, in the form in
which it became effective, is referred to herein as the "Registration
Statement," and the prospectus dated January [ ], 2003 and statement of
additional information dated [ ], 2002, included therein, as filed pursuant to
Rule 497 of the Securities Act of 1933, as amended (the "Securities Act"), on
January [ ], 2003, are referred to herein as the "Prospectus" and the "Statement
of Additional Information."
B-1
We have examined and relied upon the Declaration of Trust and Amended
By-laws of the Fund, each as amended to date, records of meetings or written
actions of shareholders and of the Board of Trustees of the Fund, proceedings of
the Fund in connection with the authorization and issuance of the Shares, the
Registration Statement, the Prospectus, the Statement of Additional Information,
the Underwriting Agreement, certificates of representatives of the Fund,
certificates of public officials and such other documents as we have deemed
necessary as a basis for the opinions hereinafter expressed. We have assumed
that all corporate or trust records of the Fund and the Adviser and stock books
of the Fund and are complete and accurate.
Insofar as this opinion relates to factual matters, information with
respect to which is in the possession of the Fund or the Adviser, we have
relied, with your permission, upon certificates, statements and representations
of officers and other representatives of the Fund and the Adviser,
representations made in the Underwriting Agreement and statements contained in
the Registration Statement. We have not attempted to verify independently such
facts, although nothing has come to our attention which has caused us to
question the accuracy of such certificates, statements or representations.
In our examination of the documents referred to above, we have assumed
the genuineness of all signatures, the legal capacity of each individual signing
such documents, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as copies,
and the authenticity of the originals of such documents.
Any reference to "our knowledge" or "best of our knowledge" or to any
matters "known to us," "of which we are aware" or "coming to our attention" or
any variation of any of the foregoing, shall mean the conscious awareness, as to
the existence or absence of any facts which would contradict the opinions and
statements so expressed, of the attorneys of this firm who have rendered
substantive attention to the transaction to which this opinion relates. Other
than as expressly set forth below, we have not undertaken, for purposes of this
opinion, any independent investigation to determine the existence or absence of
such facts, and no inference as to our knowledge of the existence or absence of
such facts should be drawn from the fact of our representation of the Fund and
the Adviser. Moreover, we have not searched any electronic databases or the
dockets of any court, regulatory body or governmental agency or other filing
office in any jurisdiction.
For purposes of this opinion, we have assumed that the agreements
referred to herein have been duly authorized, executed and delivered by all
parties thereto other than the Fund, and that all such other parties have all
requisite power and authority to effect the transactions contemplated by such
agreements. We have also assumed that each such agreement is the valid and
binding obligation of each party thereto other than the Fund and is enforceable
against all such other parties in accordance with its terms. We do not render
any opinion as to the application of any federal or state law or regulation to
the power, authority or competence of any party to the agreements other than the
Fund.
B-2
Our opinions set forth below are qualified to the extent that they may
be subject to or affected by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws relating to or
affecting the rights of creditors generally, (ii) statutory or decisional law
concerning recourse by creditors to security in the absence of notice or
hearing, (iii) duties and standards imposed on creditors and parties to
contracts, including, without limitation, requirements of good faith,
reasonableness and fair dealing, and (iv) general equitable principles. We
express no opinion as to the availability of any equitable or specific remedy
upon any breach of any of the agreements as to which we are opining herein, or
any of the agreements, documents or obligations referred to therein, or to the
successful assertion of any equitable defenses, inasmuch as the availability of
such remedies or the success of any equitable defense may be subject to the
discretion of a court. Without limiting the foregoing, with respect to our
opinion in paragraph 9 below, (i) we are expressing no opinion as to the
enforceability of the indemnification or contribution provisions of the
Underwriting Agreement, (ii) we note that a court may refuse to enforce, or may
limit the application of, the Underwriting Agreement or certain provisions
thereof, as unconscionable or contrary to public policy, and (iii) we have
assumed compliance by all parties with federal and state securities laws.
We also express no opinion herein as to any provision of any agreement
(a) which may be deemed to or construed to waive any right of the Fund, (b) to
the effect that rights and remedies are not exclusive, that every right or
remedy is cumulative and may be exercised in addition to or with any other right
or remedy and does not preclude recourse to one or more other rights or
remedies, (c) relating to the effect of invalidity or unenforceability of any
provision of any agreement on the validity or enforceability of any other
provision thereof, (d) requiring the payment of penalties, consequential damages
or liquidated damages, (e) which is in violation of public policy, including,
without limitation, any provision relating to non-competition and
non-solicitation or relating to indemnification and contribution with respect to
securities law matters, (f) purporting to indemnify any person against his, her
or its own negligence or intentional misconduct, (g) which provides that the
terms of any agreement may not be waived or modified except in writing or (h)
relating to choice of law or consent to jurisdiction.
Our opinion expressed in paragraph 1 below as to the valid existence
and good standing of the Fund is based solely on a certificate of legal
existence issued by the Secretary of State of the Commonwealth of Massachusetts,
a copy of which has been made available to your counsel, and our opinion with
respect to such matters is rendered as of the date of such certificate and
limited accordingly. We express no opinion as to the tax good standing of the
Fund in any jurisdiction.
In connection with our opinion expressed in paragraph 2 below, insofar
as it relates to full payment for the outstanding Common Shares of the Fund, we
have relied solely on a certificate of an officer of the Fund. Our opinion
expressed in paragraph 2 below as to issued and outstanding shares of capital
stock of the Fund is based solely on a certificate of the Fund's transfer agent,
which we assume to be complete and accurate. Our opinion expressed in paragraph
2 below as to the due and valid issuance of all outstanding common shares of the
Fund is based solely on a review of the corporate minute books of the Fund, and
a certificate of an officer of the Fund, each of which we assume to be complete
and accurate.
B-3
Our opinion expressed in paragraph 4 below as to the effectiveness of
the Registration Statement under the Securities Act is based solely upon oral
advice from ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ at the Division of Investment Management of the
Commission that such Registration Statement was declared effective as of [ ]
p.m. on January [ ], 2003. Our opinion expressed in paragraph 10 below as to the
listing of the Common Shares on the New York Stock Exchange is solely based upon
a letter from the Exchange to the Fund dated [ ], 2002.
Our opinions in paragraphs 2 and 3 below are qualified to the extent
that, under Massachusetts law, shareholders of a Massachusetts business trust
may be held personally liable for the obligations of the Fund. However, the
Declaration of Trust disclaims shareholders liability for acts or obligations of
the Fund. Also, the Declaration of Trust provides for indemnification out of
Fund property for all loss and expense of any shareholder held personally liable
for the obligations of the Fund.
We have not made any investigation of the laws of any jurisdiction
other than the state laws of the Commonwealth of Massachusetts and the federal
laws of the United States of America. To the extent that any other laws govern
any of the matters as to which we express an opinion below, we have assumed for
purposes of this opinion, with your permission and without independent
investigation, that the laws of such jurisdiction are identical to the state
laws of the Commonwealth of Massachusetts, and we express no opinion as to
whether such assumption is reasonable or correct. We express no opinion with
respect to the securities or Blue Sky laws of any state of the United States,
with respect to state or federal antifraud laws (except to the extent expressly
provided in the third to last paragraph below) or with respect to the approval
by the National Association of Securities Dealers, Inc. of the offering.
On the basis of and subject to the foregoing, we are of the opinion
that:
1. The Fund is validly existing as a business trust in good
standing under the laws of the Commonwealth of Massachusetts
and has business trust power and authority to carry on its
business and own, lease and operate its properties as
described in the Prospectus, and to enter into and perform its
obligations under the Underwriting Agreement.
2. The authorized, issued and outstanding shares of beneficial
interest of the Fund as of the date of the Prospectus are as
set forth in the Prospectus under the caption "The Fund". All
issued and outstanding shares of beneficial interest of the
Fund as of the date hereof have been duly authorized, validly
issued, and fully paid and are not subject to any preemptive
or similar statutory rights under the Massachusetts Business
Trust statute or, to our knowledge, similar contractual rights
granted by the Fund.
B-4
3. The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor
pursuant to the Underwriting Agreement, will be validly issued
and fully paid.
4. The Registration Statement has been declared effective
under the Securities 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. To the best of our knowledge, no stop order
suspending the effectiveness of the Registration Statement
has been issued under the Securities Act. To the best of our
knowledge, no order of suspension or revocation of
registration pursuant to Section 8(e) of the Investment
Company Act of 1940, as amended (the "1940 Act"), has been
issued, and no proceedings for any such purpose have been
instituted or are pending or threatened by the Commission.
5. The Fund is registered with the Commission under the 1940 Act
as a closed-end, diversified management investment company;
and to our knowledge, no order of suspension or revocation of
such registration has been issued nor have any proceedings
therefore been initiated or threatened by the Commission.
6. The Underwriting Agreement has been duly authorized, executed
and delivered by the Fund.
7. Each of the Investment Advisory Agreement between the
Fund and the Adviser, dated November 29, 2002 (the
"Investment Advisory Agreement"), the Custodian Agreement
between the Fund and The Bank of New York, dated November
29, 2002 (the "Custodian Agreement"), the Transfer Agency
Agreement between the Fund and Mellon Investor Services,
LLC, dated November 29, 2002 (the "Transfer Agency
Agreement"), the Auction Agency Agreement between the Fund
and Deutsche Bank Trust Company Americas, dated January [ ],
2003 (the "Auction Agency Agreement"), the Letter Agreement
between the Fund and the Depository Trust Company, dated
January [ ], 2003 (the "DTC Agreement"), the Underwriting
Agreement, the Shareholder Servicing Agreement between the
Adviser and UBS Warburg, LLC, dated November 29, 2002, and
the Additional Compensation Agreement between the Adviser
and UBS Warburg, LLC, dated November 25, 2002, comply in all
material respects with all applicable provisions of the 1940
Act, the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and the rules and regulations of the
Commission under the 1940 Act and the Advisers Act.
8. Each of the Investment Advisory Agreement, the Custodian
Agreement, the Transfer Agency Agreement, the Auction Agency
Agreement and the DTC Agreement has been duly authorized by
all requisite action on the part of the Fund, executed and
delivered by the Fund, as of the date noted therein. Assuming
due authorization, execution and delivery by the other parties
thereto, each of the Investment Advisory Agreement, the
Custodian Agreement, the Transfer Agency Agreement, the
Auction Agency Agreement and the DTC Agreement constitutes a
valid and binding agreement of the Fund, enforceable against
the Fund in accordance with its terms.
B-5
9. The execution, delivery and performance of the Investment
Advisory Agreement, Transfer Agency Agreement, Custodian
Agreement and the Underwriting Agreement by the Fund, the
compliance by the Fund with all the provisions thereof and
the consummation by the Fund of the transactions
contemplated thereby (including the issuance and sale of the
Shares and the use of the proceeds from the sale of the
Shares as described in the Prospectus under the caption "Use
of Proceeds") do not and will not (A) require any consent,
approval, authorization or other order of, or qualification
with, any Massachusetts state or U.S. federal court or
governmental body or agency (except such as may be required
under the securities or Blue Sky laws of the various states
or the National Association of Securities Dealers, Inc. or
as have been obtained under the federal securities laws),
(B) conflict with or constitute a breach of any of the terms
or provisions of, or a default under, or result in the
imposition of a lien, charge or encumbrance upon the assets
of the Fund pursuant to any indenture, loan agreement,
mortgage, lease or other agreement or instrument filed as an
exhibit to the Registration Statement, (C) violate or
conflict with the Declaration of Trust or By-laws, (D)
violate or conflict with any applicable U.S. federal or
Massachusetts state law, rule or regulation which in our
experience is normally applicable in transactions of the
type contemplated by the Underwriting Agreement, or (E)
violate or conflict with any judgment, order or decree
specifically naming the Fund or its property of which we are
aware.
10. The Common Shares are listed on the New York Stock Exchange.
11. To our knowledge, there are no legal or governmental
proceedings pending or threatened against the Fund.
12. The statements in the Prospectus under the caption
"Description of the Shares" and in Item 29 of Part C of the
Registration Statement, insofar as such statements constitute
matters of law or legal conclusions, are correct in all
material respects.
13. The Fund does not require any tax or other rulings to enable
it to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended.
14. Each of the section in the Prospectus entitled "U.S. Federal
Income Tax Matters" and the section in the Statement of
Additional Information entitled "U.S. Federal Income Tax
Matters" is a fair summary of the principal United States
federal income tax rules currently in effect applicable to the
Fund and to the purchase, ownership and disposition of the
Shares.
B-6
15. The Registration Statement, including any Rule 430A
Information, the Prospectus and each amendment or supplement
to the Registration Statement and Prospectus as of their
respective effective or issue dates (other than the financial
statements and supporting schedules including the notes and
schedules thereto, or any other financial or accounting data
included therein or omitted therefrom, as to which we express
no opinion), and the notification on Form N-8A complied as to
form in all material respects with the requirements of the
Securities Act, the 1940 Act and the rules and regulations of
the Commission thereunder.
In connection with the preparation of the Registration Statement, the
Prospectus and the Statement of Additional Information, we have participated in
conferences with officers and representatives of the Fund and the Adviser,
representatives of the Underwriters, counsel for the Underwriters and the
independent accountants of the Fund, at which conferences we made inquiries of
such persons and others and discussed the contents of the Registration Statement
and the Prospectus and the Statement of Additional Information. While the
limitations inherent in the independent verification of factual matters and the
character of determinations involved in the registration process are such that
we are not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, subject to the foregoing and based on such
participation, inquiries and discussions, no facts have come to our attention
which have caused us to believe that the Registration Statement, as of the
Effective Date (but after giving effect to changes incorporated pursuant to Rule
430A under the Securities Act), contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading (except that we
express no such view with respect to the financial statements, including the
notes and schedules thereto, or any other financial or accounting data included
therein), or that the Prospectus, as of the date it was filed with the
Commission pursuant to Rule 497 under the Securities Act or as of the date
hereof, contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading (except that we
express no such view with respect to the financial statements, including the
notes and schedules thereto, or any other financial or accounting data included
therein).
This opinion is based upon currently existing statutes, rules,
regulations and judicial decisions and is rendered as of the date hereof, and we
disclaim any obligation to advise you of any change in any of the foregoing
sources of law or subsequent developments in law or changes in facts or
circumstances which might affect any matters or opinions set forth herein.
Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters.
B-7
This opinion is being furnished to you, as Representative of the
Underwriters, at the request of the Fund pursuant to the Underwriting Agreement,
is solely for the benefit of the Underwriters, and may not be relied upon by you
for any other purpose, or furnished to, quoted to or relied upon by any other
party for any purpose, without our prior written consent. We understand that
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ (Illinois) in delivering their opinion
pursuant to Section 6(f) of the Underwriting Agreement is relying upon this
opinion as to matters of the laws of the Commonwealth of Massachusetts. We
consent to such reliance.
B-8
SCHEDULE C
FORM OF OPINION OF INTERNAL COUNSEL
REGARDING ▇▇▇▇ ▇▇▇▇▇▇▇ ADVISERS, LLC
i. ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers, LLC ("▇▇▇▇ ▇▇▇▇▇▇▇ Advisers") has been duly formed and
is validly existing as a limited liability company under the laws of the State
of Delaware. ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers has limited liability company power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus and to enter into and perform its obligations
under the Underwriting Agreement, the Shareholder Servicing Agreement, the
Additional Compensation Agreement and the Investment Advisory Agreement.
ii. ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers is 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 and administrator for the Fund as
contemplated by the Investment Advisory Agreement, the Registration Statement
and the Prospectus.
iii. The Underwriting Agreement, the Shareholder Servicing Agreement, the
Investment Advisory Agreement and the Additional Compensation Agreement have
been duly authorized, executed and delivered by ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers, and the
Investment Advisory Agreement, the Shareholder Servicing Agreement and the
Additional Compensation Agreement each constitutes a valid and binding
obligation of ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers, enforceable in accordance with their
respective terms
iv. The execution, delivery and performance of the Underwriting Agreement by
▇▇▇▇ ▇▇▇▇▇▇▇ Advisers, the compliance by ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers with all the
provisions thereof and the consummation by ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers of the
transactions contemplated thereby do not and will not (A) require any consent,
approval, authorization or order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states or the National Association of Securities
Dealers, Inc. or as have been obtained under the federal securities laws), (B)
conflict with or constitute a breach of any of the terms or provisions of, or a
default under or result in the imposition of a lien, charge or encumbrance upon
the assets of ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers pursuant to, any indenture, loan agreement,
mortgage, lease or other agreement or instrument to which ▇▇▇▇ ▇▇▇▇▇▇▇ Adviser
is a party filed as an exhibit to the Registration Statement, (C) violate or
conflict with the Certificate of Limited Liability Company or the Limited
Liability Company Agreement of ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers, or (D) violate or conflict
with any applicable federal and Massachusetts law, rule or regulation or the
Delaware Limited Liability Company statute, or (E) violate or conflict with any
judgment, order or decree specifically naming ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers or its
property.
vi. To our knowledge, there is no legal or governmental proceeding pending or
threatened against ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers that is either: (1) required by the
Securities Act or the 1940 Act and their Rules and Regulations to be described
in the Registration Statement or Prospectus that is not already described, or:
(2) which would, under Section 9 of the 1940 Act, make ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers
ineligible to act as the Fund's investment adviser.
C-1
In connection with the registration of the Shares, such counsel has advised ▇▇▇▇
▇▇▇▇▇▇▇ Advisers as to the requirements of the Securities Act, the Investment
Company Act and the applicable rules and regulations of the Commission
thereunder and has rendered other legal advice and assistance to ▇▇▇▇ ▇▇▇▇▇▇▇
Advisers in the course of the preparation of the registration Statement and the
Prospectus. Rendering such assistance involved, among other things, discussions
and inquiries concerning various legal and related subjects and reviews of
certain corporate records, documents and proceedings. Such counsel has also
participated in conferences with representatives of the Fund and its accountants
and ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers at which the contents of the registration and
Prospectus and related matters were discussed. With your permission, such
counsel not undertaken, except as otherwise indicated herein, to determine
independently, and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements in the Registration Statement or
Prospectus. On the basis of the information which was developed in the course of
the performance of the services referred to above, no information has come to
such counsel's attention that would lead him to believe that the Registration
Statement, at the time it became effective, contained any 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, as of its date and as of the date hereof, contained or contains an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that any amendment
or supplement to the Prospectus, as of its respective date, and as of the date
hereof, contained any untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the statements in the
Prospectus, in the light of the circumstances under which they were made, not
misleading (except the financial statements, schedules and other financial data
included therein or any other financial or accounting data included therein, as
to which such counsel expresses no view).
C-2
SCHEDULE D
FORM OF ACCOUNTANT'S LETTER
January [ ], 2003
The Board of Trustees of
▇▇▇▇ ▇▇▇▇▇▇▇ Preferred Income Fund II
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
UBS Warburg LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
as Managing Representative of the Underwriters
Ladies and Gentlemen:
We have audited the statement of assets and liabilities of
▇▇▇▇ ▇▇▇▇▇▇▇ Preferred Income Fund (the "Fund") as of __ _, 2002 included in the
Registration Statement on Form N-2 filed by the Fund under the Securities Act of
1933 (the "Act") (File No. 333-99685) and under the Investment Company Act of
1940 (the "1940 Act") (File No. 811-21202); 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 public accountants with respect to the
Fund within the meaning of the Act and the applicable rules and
regulations thereunder.
2. In our opinion, the statement of assets and liabilities
included in the Registration Statement and audited by us complies as to
form in all respects with the applicable accounting requirements of the
Act, the 1940 Act and the respective rules and regulations thereunder.
3. For purposes of this letter we have read the minutes of all
meetings of the Shareholders, the Board of Trustees and all Committees
of the Board of Trustees of the Fund as set forth in the minute books
at the offices of the Fund, officials of the Fund having advised us
that the minutes of all such meetings through , 2002, were set forth
therein.
4. Fund officials have advised us that no financial statements
as of any date subsequent to , 2002, 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 , 2002, in the capital shares or net assets of the Fund as compared
with amounts shown in the , 2002, 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.
D-1
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
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.
Very Truly Yours,
D-2