Exhibit (h)(1)
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PREFERRED INCOME STRATEGIES FUND, INC.
(a Maryland corporation)
_____________ Shares of Common Stock
PURCHASE AGREEMENT
Dated: March 25, 2003
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TABLE OF CONTENTS
Page
SECTION 1. Representations and Warranties....................................2
(a) Representations and Warranties by the Fund and the Adviser........2
(b) Additional Representations of the Adviser.........................7
(c) Officer's Certificates............................................9
SECTION 2. Sale and Delivery to the Underwriters; Closing....................9
(a) Initial Shares....................................................9
(b) Option Shares.....................................................9
(c) Payment..........................................................10
(d) Denominations; Registration......................................10
SECTION 3. Covenants of the Fund............................................10
(a) Compliance with Securities Regulations and
Commission Requests..............................................10
(b) Filing of Amendments.............................................11
(c) Delivery of Registration Statements..............................11
(d) Delivery of Prospectus...........................................11
(e) Continued Compliance with Securities Laws........................11
(f) Blue Sky Qualifications..........................................12
(g) Rule 158.........................................................12
(h) Use of Proceeds..................................................12
(i) Subchapter M.....................................................12
(j) Listing..........................................................12
(k) Restrictions on Sale of Shares...................................12
(l) Reporting Requirements...........................................12
SECTION 4. Payment of Expenses..............................................13
(a) Expenses.........................................................13
(b) Termination of Agreement.........................................13
SECTION 5. Conditions of Underwriters' Obligations..........................13
(a) Effectiveness of Registration Statement..........................14
(b) Opinion of Counsel for the Fund..................................14
(c) Opinion of Counsel of the Adviser................................14
(d) Opinion of Counsel for Underwriters..............................14
(e) Officers' Certificates...........................................14
(f) Accountant's Comfort Letter......................................15
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TABLE OF CONTENTS
(continued)
Page
(g) Bring-down Comfort Letter........................................15
(h) Approval of Listing..............................................15
(i) No Objection.....................................................15
(j) Conditions to Purchase Option Shares.............................15
(k) Additional Documents.............................................15
(l) Termination of Agreement.........................................16
(m) Execution of Additional Compensation Agreement...................16
SECTION 6. Indemnification..................................................16
(a) Indemnification of the Underwriters..............................16
(b) Indemnification of Fund, Adviser, Directors,
General Partner and Officers.....................................17
(c) Indemnification for Marketing Materials..........................17
(d) Actions against Parties, Notification............................17
(e) Settlement without Consent if Failure to Reimburse...............18
SECTION 7. Contribution.....................................................18
SECTION 8. Representations, Warranties and Agreements to
Survive Delivery.................................................19
SECTION 9. Termination of Agreement.........................................19
(a) Termination; General.............................................19
(b) Liabilities......................................................19
SECTION 10. Notices..........................................................20
SECTION 11. Parties..........................................................20
SECTION 12. GOVERNING LAW AND TIME...........................................21
SECTION 13. Effect of Headings...............................................21
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EXHIBITS
Exhibit A -- Form of Opinion of Fund's Counsel
Exhibit B -- Form of Opinion of Counsel of the Investment Adviser
Exhibit C -- Form of Accountant's Comfort Letter
PREFERRED INCOME STRATEGIES FUND, INC.
(a Maryland corporation)
_____________ Shares of Common Stock
(Par Value $.10 Per Share)
PURCHASE AGREEMENT
March 25, 2003
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
Advest, Inc.
BB&T Capital Markets, a division of ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc.
▇▇▇▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ LLC
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Company, Incorporated
▇▇▇▇▇ Fargo Securities, LLC
c/o Merrill Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Preferred Income Strategies Fund, Inc., a Maryland corporation (the
"Fund"), and Fund Asset Management, L.P., a Delaware limited partnership (the
"Adviser"), each confirms its agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch,
Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and each of the other
Underwriters named in Schedule A hereto (collectively, the "Underwriters", which
term shall also include any Underwriters substituted as hereinafter provided in
Section 10 hereof), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇ is acting as representative (in such
capacity, the "Representative") with respect to the issue and sale by the Fund
and the purchase by the Underwriters, acting severally and not jointly, of the
respective number of shares of common stock, par value $.10 per share, of the
Fund (the "Common Stock") set forth in said Schedule A, and with respect to the
grant by the Fund to the Underwriters, acting severally and not jointly, of the
option described in Section 2(b) hereof to purchase all or any part of
___________ additional shares of Common Stock to cover over-allotments, if any.
The aforesaid __________ shares of Common Stock (the "Initial Shares") to be
purchased by the Underwriters and all or any part of the _________ shares of
Common Stock subject to the option described in Section 2(b) hereof (the "Option
Shares"), are hereinafter called, collectively, the "Shares."
The Fund understands that the Underwriters propose to make a public
offering of the Shares as soon as the Underwriters deem advisable after this
Agreement has been executed and delivered.
The Fund has filed with the Securities and Exchange Commission (the
"Commission") a notification on Form N-8A of registration of the Fund as an
investment company under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and a
registration statement on Form N-2 (Nos. 333-102712, 811-21286), including the
related preliminary prospectus, for the registration of the Shares under the
Securities Act of 1933, as amended (the "1933 Act"), the Investment Company Act,
and the rules and regulations of the Commission under the 1933 Act and the
Investment Company Act (together, the "Rules and Regulations"), and has filed
such amendments to such registration statement on Form N-2, if any, and such
amended preliminary prospectuses as may have been required to the date hereof.
Promptly after execution and delivery of this Agreement, the Fund will either
(i) prepare and file a prospectus in accordance with the provisions of paragraph
(c) of Rule 497 ("Rule 497(c)") of the rules and regulations of the Commission
under the 1933 Act (the "1933 Act Regulations") or a certificate in accordance
with the provisions of paragraph (j) of Rule 497 ("Rule 497(j)") of the 1933 Act
Regulations, (ii) prepare and file a prospectus in accordance with the
provisions of Rule 430A ("Rule 430A") of the 1933 Act Regulations and paragraph
(h) of Rule 497 ("Rule 497(h)") of the 1933 Act Regulations, or (iii) if the
Fund has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations,
prepare and file a term sheet (a "Term Sheet") in accordance with the provisions
of Rule 434 and Rule 497(h). The information included in any such prospectus or
in any such Term Sheet, as the case may be, that was omitted from such
registration statement at the time it became effective but that is deemed to be
part of such registration statement at the time it became effective (a) pursuant
to paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b)
pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information."
Each prospectus used before such registration statement became effective, and
any prospectus that omitted, as applicable, the Rule 430A Information or the
Rule 434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, including in each case any statement
of additional information incorporated therein by reference, is herein called a
"preliminary prospectus." Such registration statement, including the exhibits
thereto and schedules thereto, if any, at the time it became effective and
including the Rule 430A Information and the Rule 434 Information, as applicable,
is herein called the "Registration Statement." Any registration statement filed
pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the
"Rule 462(b) Registration Statement," and after such filing the term
"Registration Statement" shall include the Rule 462(b) Registration Statement.
The final prospectus in the form first furnished to the Underwriters for use in
connection with the offering of the Shares, including the statement of
additional information incorporated therein by reference, is herein called the
"Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to the
preliminary prospectus dated March 25, 2003, together with the applicable Term
Sheet and all references in this Agreement to the date of such Prospectus shall
mean the date of the applicable Term Sheet. For purposes of this Agreement, all
references to the Registration Statement, any preliminary prospectus, the
Prospectus, or any Term Sheet or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("▇▇▇▇▇").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934, as amended (the "1934
Act"), which is incorporated by reference in the Registration Statement, such
preliminary prospectus or the Prospectus, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Fund and the Adviser. The Fund
and the Adviser each severally represents and warrants to each Underwriter as of
the date hereof, as of the Closing Time
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referred to in Section 2(c) hereof and as of the Date of Delivery (if any)
referred to in Section 2(b) hereof, and agree with each Underwriter, as follows:
(i) Compliance with Registration Requirements. The Fund meets the
requirements for use of Form N-2 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Fund or the Adviser, are contemplated by the
Commission, and any request on the part of the Commission for additional
information has been complied with. If required, the Fund has received any
orders exempting the Fund from any provisions of the Investment Company
Act.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Shares are
purchased, at the Date of Delivery) the Registration Statement, the Rule
462(b) Registration Statement and any amendments or supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act, the Investment Company Act and the Rules and Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. Neither the Prospectus, nor
any amendments or supplements thereto, at the time the Prospectus or any
amendments or supplements thereto were issued and at the Closing Time
(and, if any Option Shares are purchased, at the Date of Delivery)
included or will include an untrue statement of a material fact or omitted
or will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished to the Fund in writing by the
Underwriters expressly for use in the Registration Statement or in the
Prospectus. If Rule 434 is used, the Fund will comply with the
requirements of Rule 434 and the Prospectus shall not be "materially
different", as such term is used in Rule 434, from the prospectus included
in the Registration Statement at the time it became effective.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 497(c) or Rule 497(h) under the 1933
Act, complied when so filed in all material respects with the Rules and
Regulations and each preliminary prospectus and the Prospectus delivered
to the Underwriters for use in connection with this offering was identical
to the electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation S-T.
If a Rule 462(b) Registration Statement is required in connection
with the offering and sale of the Shares, the Fund has complied or will
comply with the requirements of Rule 111 under the 1933 Act Regulations
relating to the payment of filing fees thereof.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules, if any, included in the
Registration Statement are independent public accountants as required by
the 1933 Act and the Rules and Regulations.
(iii) Financial Statements. The financial statements, included in
the Registration Statement and Prospectus, together with the related
schedules and notes, present fairly the
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financial position of the Fund at the date indicated and said statements
have been prepared in conformity with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the period
involved. The supporting schedules, if any, included in the Registration
Statement present fairly in accordance with GAAP the information required
to be stated therein.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
in the Prospectus, except as otherwise stated therein, (A) there has been
no material adverse change in the condition, financial or otherwise, or in
the earnings, business affairs or business prospects of the Fund, whether
or not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the Fund,
other than those in the ordinary course of business, which are material
with respect to the Fund and (C) there has been no dividend or
distribution of any kind declared, paid or made by the Fund on any class
of its capital stock.
(v) Good Standing of the Fund. The Fund has been duly organized and
is validly existing as a
corporation in good standing under the laws of the State of Maryland
and has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus and
to enter into and perform its obligations under this Agreement; and the
Fund is duly qualified as a foreign corporation to transact business and
is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vi) Subsidiaries. The Fund has no subsidiaries.
(vii) Officers and Trustees. No person is serving or acting as an
officer, trustee or investment adviser of the Fund except in accordance
with the provisions of the Investment Company Act and the Rules and
Regulations and the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and the rules and regulations of the Commission
promulgated under the Advisers Act (the "Advisers Act Rules and
Regulations"). Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement to either of them), no trustee
of the Fund is an "interested person" (as defined in the Investment
Company Act) of the Fund or an "affiliated person" (as defined in the
Investment Company Act) of any Underwriter.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Fund is as set forth in the Prospectus under the
caption "Description of Capital Stock." All issued and outstanding shares
of common stock of the Fund have been duly authorized and validly issued
and are fully paid and non-assessable, except as provided for in the
Fund's charter, and have been offered and sold or exchanged by the Fund in
compliance with all applicable laws (including, without limitation,
federal and state securities laws); none of the outstanding shares of
common stock of the Fund was issued in violation of the preemptive or
other similar rights of any securityholder of the Fund.
(ix) Investment Company Act. The Fund is registered with the
Commission under the Investment Company Act as a closed-end, diversified,
management investment company, and no order of suspension or revocation of
such registration has been issued or proceedings therefor initiated, to
the knowledge of the Fund and the Adviser, or threatened by the
Commission.
(x) Authorization of Agreement. This Agreement been duly authorized,
executed and delivered by the Fund.
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(xi) Authorization and Description of Shares. The Shares to be
purchased by the Underwriters from the
Fund have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement, and, when issued and delivered by
the Fund pursuant to this Agreement against payment of the consideration
set forth in this Agreement will be validly issued, fully paid and
non-assessable; the Shares conform to all statements relating thereto
contained in the Prospectus and such description conforms to the rights
set forth in the instruments defining the same; no holder of the Shares
will be subject to personal liability by reason of being such a holder;
and the issuance of the Shares is not subject to the preemptive or other
similar rights of any securityholder of the Fund.
(xii) Absence of Defaults and Conflicts. The Fund is not in
violation of its charter or by-laws or in default in the performance or
observance of any obligation, agreement, covenant or condition contained
in any material contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or other agreement or instrument to which
the Fund is a party or by which it or its properties may be bound, or to
which any of the property or assets of the Fund is subject (collectively,
"Agreements and Instruments"), except for such defaults that would not
result in a Material Adverse Effect; and the execution, delivery and
performance of this Agreement, the Investment Advisory Agreement, the
Custody Agreement referred to in the Registration Statement (as used
herein, the "Advisory Agreement" and the "Custody Agreement,"
respectively) and the consummation of the transactions contemplated in
this Agreement and in the Registration Statement (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")
and compliance by the Fund with its obligations under this Agreement have
been duly authorized by all necessary corporate action and do not and will
not, whether with or without the giving of notice or passage of time or
both, conflict with or constitute a breach of, or a default or Repayment
Event (as defined below) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Fund
pursuant to the Agreements and Instruments (except for such conflicts,
breaches or defaults or liens, charges or encumbrances that would not
result in a Material Adverse Effect), nor will such action result in any
violation of the provisions of the charter or the by-laws of the Fund, or
any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Fund or any of its assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness by the Fund.
(xiii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Fund or the Adviser, threatened against or affecting, the Fund, which
is required to be disclosed in the Registration Statement (other than as
disclosed therein), or which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets of the Fund or
the consummation of the transactions contemplated in this Agreement or the
performance by the Fund of its obligations hereunder; the aggregate of all
pending legal or governmental proceedings to which the Fund is a party or
of which any of its respective property or assets is the subject which are
not described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
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(xiv) Subchapter M Compliance. The Fund intends to, and will, direct
the investment of proceeds of the offering described in the Registration
Statement in such a manner as to comply with the requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended ("Subchapter
M of the Code"), and intends to qualify as a regulated investment company
under Subchapter M of the Code.
(xv) Distribution of Offering Materials. The Fund has not
distributed and, prior to the later to occur of (A) the Closing Time and
(B) completion of the distribution of the Shares, will not distribute any
offering material in connection with the offering and sale of the Shares
other than the Registration Statement, a preliminary prospectus, the
Prospectus or other materials, if any, permitted by the 1933 Act or the
Investment Company Act or the Rules and Regulations.
(xvi) Accounting Controls. The Fund maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization and with the applicable requirements of the
Investment Company Act, the Rules and Regulations and the Code; (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to maintain accountability for assets and to maintain compliance with the
books and records requirements under the Investment Company Act and the
Rules and Regulations; (C) access to assets is permitted only in
accordance with the management's general or specific authorization; and
(D) the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xvii) Absence of Undisclosed Payments. To the Fund's knowledge,
neither the Fund nor any employee or agent of the Fund has made any
payment of funds of the Fund or received or retained any funds, which
payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.
(xviii) Material Agreements. This Agreement, the Advisory Agreement,
the Custody Agreement and the Transfer and Dividend Disbursing Agency and
Registrar Agreement have each been duly authorized by all requisite action
on the part of the Fund and executed and delivered by the Fund, as of the
dates noted therein, and each complies with all applicable provisions of
the Investment Company Act in all material respects. Assuming due
authorization, execution and delivery by the other parties thereto with
respect to the Advisory Agreement, the Custody Agreement and the Transfer
and Dividend Disbursing Agency and Registrar Agreement, each of the
Advisory Agreement, the Custody Agreement and the Transfer and Dividend
Disbursing Agency and Registrar Agreement constitutes a valid and binding
agreement of the Fund, enforceable in accordance with its terms, except as
affected by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith and
fair dealing and except as rights to indemnification or contribution
thereunder may be limited by federal or state laws.
(xix) Registration Rights. There are no persons with registration
rights or other similar rights to have any securities registered pursuant
to the Registration Statement or otherwise registered by the Fund under
the 1933 Act.
(xx) Accuracy of Exhibits. There are no contracts or documents which
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto by
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the 1933 Act, the Investment Company Act or the Rules and Regulations
which have not been so described and filed as required.
(xxi) Possession of Intellectual Property. The Fund owns or
possesses, has the right to use or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by the Fund, and the Fund has not received any notice or is
not otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Intellectual Property or of any facts
or circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Fund therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a Material Adverse Effect.
(xxii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Fund of its
obligations hereunder, in connection with the offering, issuance or sale
of the Shares under this Agreement or the consummation of the transactions
contemplated by this Agreement, except such as have been already obtained
or as may be required under the 1933 Act, the 1934 Act or the Investment
Company Act or the Rules and Regulations or foreign or state securities
laws or under the rules of the NASD (formerly, the National Association of
Securities Dealers, Inc.).
(xxiii) Possession of Licenses and Permits. The Fund possesses such
permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct
the business now operated by it; the Fund is in compliance with the terms
and conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and the Fund has not
received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect.
(xxiv) Advertisements. Any advertising, sales literature or other
promotional material (including "prospectus wrappers", "broker kits,"
"road show slides" and "road show scripts" and "electronic road show
presentations") authorized in writing by or prepared by the Fund or the
Adviser used in connection with the public offering of the Shares
(collectively, "sales material") does not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Moreover, all sales material complied and will comply in all material
respects with the applicable requirements of the 1933 Act, the Investment
Company Act, the Rules and Regulations and the rules and interpretations
of the National Association of Securities Dealers, Inc. ("NASD").
(xxv) NYSE Listing. The Shares have been duly authorized for
listing, upon notice of issuance, on the New York Stock Exchange ("NYSE").
(b) Additional Representations of the Adviser. The Adviser represents and
warrants to the Underwriters as of the date hereof and as of the Representation
Date as follows:
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(i) Organization and Authority of Adviser. The Adviser has been duly
organized as a limited partnership under the laws of the State of
Delaware, with power and authority to conduct its business as described in
the Registration Statement and the Prospectus.
(ii) Investment Advisers Act. The Adviser is duly registered as an
investment adviser under the Investment Advisers Act of 1940, as amended
(the "Investment Advisers Act"), and is not prohibited by the Investment
Advisers Act or the Investment Company Act, or the rules and regulations
under such acts, from acting under the Advisory Agreement for the Fund as
contemplated by the Registration Statement and the Prospectus.
(iii) Description of Advisers. The description of the Adviser in the
Registration Statement and the Prospectus (and any amendment or supplement
to either of them) complied and complies in all material respects with the
provisions of the 1933 Act, the Investment Company Act, the Advisers Act,
the Rules and Regulations and the Advisers Act Rules and Regulations and
is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(iv) Capitalization. The Adviser has the financial resources
available to it necessary for the performance of its services and
obligations as contemplated in the Registration Statement, the Prospectus,
this Agreement and under the Advisory Agreement.
(v) Authorization of Agreements. This Agreement has been duly
authorized, executed and delivered by the Adviser; the Advisory Agreement
has been duly authorized, executed and delivered by the Adviser and the
Additional Compensation Agreement between the Adviser and ▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "Additional Compensation Agreement") has been duly authorized,
executed and delivered by the Adviser, and each constitutes a valid and
binding obligation of the Adviser, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization or other laws relating to or affecting creditors' rights
and to general equitable principles; and neither the execution and
delivery of this Agreement, the Advisory Agreement or the Additional
Compensation Agreement nor the performance by the Adviser of its
obligations hereunder or thereunder will conflict with, or result in a
breach of any of the terms and provisions of, or constitute, with or
without the giving of notice or lapse of time or both, a default under,
any agreement or instrument to which the Adviser is a party or by which it
is bound, the certificate of formation, the operating agreement, or other
organizational documents of the Adviser, or to the Adviser's knowledge, by
any law, order, decree, rule or regulation applicable to it of any
jurisdiction, court, federal or state regulatory body, administrative
agency or other governmental body, stock exchange or securities
association having jurisdiction over the Adviser or its respective
properties or operations; and no consent, approval, authorization or order
of any court or governmental authority or agency is required for the
consummation by the Adviser of the transactions contemplated by this
Agreement, the Advisory Agreement and the Additional Compensation
Agreement, except as have been obtained or may be required under the 1933
Act, the Investment Company Act, the 1934 Act or state securities laws.
(vi) No Material Adverse Change. Since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, there has not occurred any
event which should reasonably be expected to have a material adverse
effect on the ability of the Adviser to perform its respective obligations
under this Agreement and the Advisory Agreement.
-8-
(vii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Adviser, threatened against or affecting the Adviser or any
"affiliated person" of the Adviser (as such term is defined in the
Investment Company Act) or any partners, trustees, officers or employees
of the foregoing, whether or not arising in the ordinary course of
business, which might reasonably be expected to result in any material
adverse change in the condition, financial or otherwise, or earnings,
business affairs or business prospects of the Adviser, materially and
adversely affect the properties or assets of the Adviser or materially
impair or adversely affect the ability of the Adviser to function as an
investment adviser or perform its obligations under the Advisory
Agreement, or which is required to be disclosed in the Registration
Statement and the Prospectus.
(viii) Absence of Violation or Default. The Adviser is not in
violation of its certificate of formation, its operating agreement or
other organizational documents or in default under any agreement,
indenture or instrument, where such violation or default would reasonably
be expected to have a Material Adverse Effect on the Adviser's ability to
function as an investment adviser or perform its obligations under the
Advisory Agreement.
(ix) Rule 482 Compliance. Any advertisement approved by the Adviser
for use in the public offering of the Shares pursuant to Rule 482 under
the 1933 Act Regulations (an "Omitting Prospectus") complies with the
requirements of such Rule 482.
(c) Officer's Certificates. Any certificate signed by any officer of the
Fund or any officer of the Adviser delivered to the Representative or to counsel
for the Fund and the Underwriters shall be deemed a representation and warranty
by the Fund or the Adviser, as the case may be, to each Underwriter as to the
matters covered thereby.
SECTION 2. Sale and Delivery to the Underwriters; Closing.
(a) Initial Shares. On the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set forth, the
Fund agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Fund, at the
price per share set forth in Schedule B, the number of Initial Shares set forth
in Schedule A opposite the name of such Underwriter, plus any additional number
of Initial Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof.
(b) Option Shares. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Fund hereby grants an option to the Underwriters to purchase up to an
additional __________ shares of Common Stock at the price per share set forth in
Schedule B, less an amount per share equal to any dividends or distributions
declared by the Fund and payable on the Initial Shares but not payable on the
Option Shares. The option hereby granted will expire 45 days after the date
hereof and may be exercised in whole or in part from time to time only for the
purpose of covering over-allotments which may be made in connection with the
offering and distribution of the Initial Shares upon notice by the
Representative to the Fund setting forth the number of Option Shares as to which
the several Underwriters are then exercising the option and the time, date and
place of payment and delivery for such Option Shares. Any such time and date of
delivery for the Option Shares (a "Date of Delivery") shall be determined by the
Representative, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to Closing Time, as hereinafter
defined. If the option is exercised as to all or any portion of the Option
Shares, each of the Underwriters, acting severally and not jointly, will
purchase that proportion of the total number of Option Shares then being
purchased which the number of Initial Shares set forth in Schedule A opposite
the name of such
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Underwriter bears to the total number of Initial Shares, subject in each case to
such adjustments as ▇▇▇▇▇▇▇ ▇▇▇▇▇ in its discretion shall make to eliminate any
sales or purchases of a fractional number of Option Shares plus any additional
number of Option Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Shares shall be made at the offices of Sidley
▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at
such other place as shall be agreed upon by the Representative and the Fund, at
9:00 A.M. (Eastern time) on the third business day following the date hereof, or
such other time not later than ten business days after such date as shall be
agreed upon by the Underwriters and the Fund (such time and date of payment and
delivery herein being referred to as "Closing Time").
In addition, in the event that any or all of the Option Shares are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Shares shall be made at the above-mentioned
offices of Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP, or at such other place as shall be
agreed upon by the Representative and the Fund, on each Date of Delivery as
specified in the notice from the Representative to the Fund. Payment shall be
made to the Fund by wire transfer of immediately available funds to a bank
account designated by the Fund, against delivery to the Representative of
certificates for the Shares to be purchased by them. It is understood that each
Underwriter has authorized the Representative, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Shares and the Option Shares, if any, which it has agreed to purchase.
▇▇▇▇▇▇▇ ▇▇▇▇▇, individually and not as representative of the Underwriters, may
(but shall not be obligated to) make payment of the purchase price for the
Initial Shares or the Option Shares, if any, to be purchased by any Underwriter
whose funds have not been received by the Closing Time or the relevant Date of
Delivery, as the case may be, but such payment shall not relieve such
Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial Shares and
the Option Shares, if any, shall be in such denominations and registered in such
names as the Representative may request in writing at least one full business
day before the Closing Time or the relevant Date of Delivery, as the case may
be. The certificates for the Initial Shares and the Option Shares will be made
available by the Fund for examination by the Representative not later than 10:00
A.M. on the last business day prior to Closing Time or the Date of Delivery, as
the case may be.
SECTION 3. Covenants of the Fund. The Fund covenants with each Underwriter
as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Fund, subject to Section 3(b), will comply with the requirements of Rule 430A or
Rule 434, as applicable, and will notify the Representative immediately, and
confirm the notice in writing, (i) if any post-effective amendment to the
Registration Statement shall have become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes, and (v) of the issuance by the Commission
of an order of suspension or revocation of the notification on Form N-8A of
registration of the Fund as an investment company under the Investment Company
Act or the initiation of any proceeding for that purpose. The Fund will make
every reasonable effort to prevent the issuance of any stop order described in
subsection (iv) hereunder or any order of suspension or revocation described in
subsection (v) hereunder and, if any such stop order or order of suspension or
revocation is issued, to obtain the lifting thereof at the earliest possible
moment. The Fund
-10-
will promptly effect the filings necessary pursuant to Rule 497(c), Rule 497(j)
or Rule 497(h) and will take such steps as it deems necessary to ascertain
promptly whether the certificate transmitted for filing under Rule 497(j) or the
form of prospectus transmitted for filing under Rule 497(c) or Rule 497(h) was
received for filing by the Commission and, in the event that it was not, it will
promptly file such certificate or prospectus.
(b) Filing of Amendments. The Fund will give the Representative notice of
its intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment or filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus included
in the Registration Statement at the time it became effective or to the
Prospectus, whether pursuant to the Investment Company Act, the 1933 Act, or
otherwise, and will furnish the Representative with copies of any such documents
a reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file or use any such document to which the Representative
or counsel to the Underwriters and the Fund shall object.
(c) Delivery of Registration Statements. The Fund has furnished or will
deliver to the Representative and counsel to the Underwriters and the Fund,
without charge, signed copies of the notification of registration on Form N-8A
and Registration Statement as originally filed and of each amendment thereto,
(including exhibits filed therewith, or incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will also deliver
to the Representative a conformed copy, without charge, of the Registration
Statement as originally filed and of each amendment thereto (without exhibits)
for each of the Underwriters. The copies of the Registration Statement and each
amendment thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectus. The Fund has delivered to each Underwriter,
without charge, as many copies of each preliminary prospectus as such
Underwriter reasonably requested, and the Fund hereby consents to the use of
such copies for purposes permitted by the 1933 Act. The Fund will furnish to
each Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act, such number of copies of the
Prospectus (as amended or supplemented) as such Underwriter may reasonably
request. The Prospectus and any amendments or supplements thereto furnished to
the Underwriters will be identical to the electronically transmitted copies
thereof field with the Commission pursuant to ▇▇▇▇▇, except to the extent
permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Fund will comply with
the 1933 Act, the Investment Company Act and the Rules and Regulations so as to
permit the completion of the distribution of the Shares as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is required by
the 1933 Act to be delivered in connection with sales of the Shares, any event
shall occur or condition shall exist as a result of which it is necessary, in
the opinion of counsel to the Underwriters and the Fund, to amend the
Registration Statement or amend or supplement any Prospectus in order that the
Prospectus will not include any untrue statements of material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement any Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Fund will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Fund will
furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
-11-
(f) Blue Sky Qualifications. The Fund will use its best efforts, in
cooperation with the Underwriters, to qualify the Shares for offering and sale
under the applicable securities laws of such states and other jurisdictions as
the Representative may designate and to maintain such qualifications in effect
for a period of not less than one year from the later of the effective date of
the Registration Statement and any Rule 462(b) Registration Statement; provided,
however, that the Fund shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to subject
itself to taxation in respect of doing business in any jurisdiction in which it
is not otherwise so subject. In each jurisdiction in which the Shares have been
so qualified, the Fund will file such statements and reports as may be required
by the laws of such jurisdiction to continue such qualification in effect for a
period of not less than one year from the effective date of the Registration
Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Fund will timely file such reports pursuant to the 1934
Act as are necessary in order to make generally available to its securityholders
as soon as practicable an earnings statement for the purposes of, and to provide
the benefits contemplated by, the last paragraph of Section 11(a) of the 1933
Act.
(h) Use of Proceeds. The Fund will use the net proceeds received by it
from the sale of the Shares in the manner specified in the Prospectus under "Use
of Proceeds."
(i) Subchapter M. The Fund will use its best efforts to maintain its
qualification as a regulated investment company under Subchapter M of the Code.
(j) Listing. The Fund will use its best efforts to effect the listing of
the Shares on the New York Stock Exchange or another national securities
exchange so that trading on such Exchange will begin no later than two weeks
from the date of the Prospectus.
(k) Restrictions on Sale of Shares. During a period of 180 days from the
date of the Prospectus, the Fund will not, without the prior written consent of
▇▇▇▇▇▇▇ ▇▇▇▇▇, (i) directly or indirectly offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock of such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Shares to be sold hereunder or (B) any shares or Common Stock issued
pursuant to any dividend reinvestment plan.
(l) Reporting Requirements. The Fund, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the
Investment Company Act and the 1934 Act within the time periods required by the
Investment Company Act and the Rules and Regulations and the 1934 Act and the
rules and regulations of the Commission thereunder, respectively.
(m) No Manipulation of Market for Securities. The Fund will not (a) take,
directly or indirectly, any action designed to cause or to result in, or that
might reasonably be expected to constitute, the stabilization or manipulation of
the price of any security of the Fund to facilitate the sale or resale of the
Shares in violation of federal or state securities laws, and (b) until the
Closing Time, or the Date of Delivery, if any, (i) except for share repurchases
permitted in accordance with applicable laws and purchases of Shares in the open
market pursuant to the Fund's dividend reinvestment plan, sell, bid for or
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purchase the Shares or pay any person any compensation for soliciting purchases
of the Shares or (ii) pay or agree to pay to any person any compensation for
soliciting another to purchase any other securities of the Fund.
(n) Rule 462(b) Registration Statement. If the Fund elects to rely upon
Rule 462(b), the Fund shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time,
on the date of this Agreement, and the Fund shall at the time of filing either
pay to the Commission the filing fee for the Rule 462(b) Registration Statement
or give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the 1933 Act.
SECTION 4. Payment of Expenses.
(a) Expenses. The Fund will pay all expenses incident to the performance
of its obligations under this Agreement, including (i) the preparation, printing
and filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale issuance or delivery of the Shares,
(iii) the preparation, issuance and delivery of the certificates for the Shares
to the Underwriters, including any stock or other transfer taxes and any stamp
or other duties payable upon the sale, issuance or delivery of the Shares to the
Underwriters, (iv) the fees and disbursements of the Fund's counsel, accountants
and other advisors, (v) the qualification of the Shares under the securities
laws in accordance with the provisions of Section 3(f) hereof, including filing
fees and the reasonable fees and disbursements of counsel to the Underwriters
and the Fund in connection therewith and in connection with the preparation of
the Blue Sky Survey and any supplement thereto, (vi) the printing and delivery
to the Underwriters of copies of each preliminary prospectus, any Term Sheet and
of the Prospectus and any amendments or supplements thereto, (vii) the
preparation, printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (viii) the fees and expenses of any transfer
agent or registrar for the Shares, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters and the Fund in
connection with the review by the NASD of the terms of the sale of the Shares,
(x) the printing of any sales material and (xi) the fees and expenses incurred
in connection with the listing of the Shares on the New York Stock Exchange or
another national securities exchange.
(b) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 9(a)
hereof, the Adviser shall reimburse, or arrange for an affiliate to reimburse,
the Underwriters for all of its out-of-pocket expenses, including the reasonable
fees and disbursements of counsel to the Underwriters. In the event the
transactions contemplated hereunder are not consummated, the Adviser agrees to
pay. or arrange for an affiliate to pay, all of the costs and expenses set forth
in paragraph (a) of this Section 4.
SECTION 5. Conditions of Underwriters' Obligations.
The obligations of the several Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Fund and the Adviser
contained in Section 1 hereof, or in the certificates of any officer of the Fund
and the Adviser delivered pursuant to the provisions hereof, to the performance
by the Fund and the Adviser of their respective covenants and obligations
hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement
including any Rule 462(b) Registration Statement has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings
-13-
therefor initiated or threatened by the Commission and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters and the Fund. Either
(i) a certificate has been filed with the Commission in accordance with Rule
497(j) or a prospectus has been filed with the Commission in accordance with
Rule 497(c), or (ii) a prospectus containing the Rule 430A Information shall
have been filed with the Commission in accordance with Rule 497(h) (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if the
Fund has elected to rely upon Rule 434, a Term Sheet shall have been filed with
the Commission in accordance with Rule 497(h).
(b) Opinion of Counsel for the Fund. At Closing Time, the Representative
shall have received the favorable opinion, dated as of Closing Time, of Sidley
▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to the Fund to the effect set forth in Exhibit
A hereto.
(c) Opinion of Counsel of the Adviser. At Closing Time, the Representative
shall have received the favorable opinion, dated as of Closing Time, of ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq., or another senior attorney of the Adviser, in form and
substance satisfactory to counsel to the Underwriters, to the effect set forth
in Exhibit B hereto and to such further effect as counsel to the Underwriters
may reasonably request.
(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representative shall have received the favorable opinion, dated as of Closing
Time, of ▇▇▇▇▇▇▇▇ Chance US LLP, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in clauses (A) (i), (ii), (vi), (vii)
(solely as to preemptive or other similar rights arising by operation of law or
under the charter or by-laws of the Fund), (viii) through (x), inclusive, (xiv)
(solely as to the information in the Prospectus under "Description of Shares")
and the last paragraph of Exhibit A hereto. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other than the
law of the State of New York and the federal law of the United States, upon the
opinions of counsel satisfactory to the Representative. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the Fund and
certificates of public officials.
(e) Officers' Certificates. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Fund, whether or not arising in the ordinary course of business, and the
Representative shall have received (A) a certificate of the President or a Vice
President of the Fund, dated as of Closing Time, to the effect that (i) there
has been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force and
effect as though expressly made at and as of Closing Time, (iii) the Fund has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are pending or are
contemplated by the Commission and (B) a certificate of the President or a Vice
President of the Adviser, dated as of Closing Time, to the effect that (i) the
representations and warranties in Sections 1(a) and 1(b) hereof are true and
correct with the same force and effect as though expressly made at and as of
Closing Time, and (ii) the Adviser has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
Closing Time.
(f) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representative shall have received from Ernst & Young LLP, a
letter, dated such date, in form and substance satisfactory to the
Representative containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and
-14-
certain financial information contained in the Registration Statement and the
Prospectus, to the effect set forth in Exhibit C hereto and to such further
effect as counsel to the Underwriters may reasonably request.
(g) Bring-down Comfort Letter. At Closing Time, the Representative shall
have received from Ernst & Young LLP a letter, dated as of Closing Time, to the
effect that they reaffirm the statements made in the letter, furnished pursuant
to subsection (f) of this Section, except that the "specified date" referred to
shall be a date not more than three business days prior to Closing Time.
(h) Approval of Listing. At Closing Time, the Shares shall have been
approved for listing on the New York Stock Exchange or another national
securities exchange, subject only to official notice of issuance.
(i) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(j) Conditions to Purchase Option Shares. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Shares, the representations and warranties of
the Fund and the Adviser contained herein and the statements in any certificates
furnished by the Fund and the Adviser hereunder shall be true and correct as of
each Date of Delivery and, at the relevant Date of Delivery, the Representative
shall have received:
(i) Officers' Certificates. Certificates, dated such Date of
Delivery, of the President or a Vice President of the Fund and of the
President or a Vice President of the Adviser confirming that the
respective certificates delivered at the Closing Time pursuant to Section
5(d) hereof remains true and correct as of such Date of Delivery.
(ii) Opinions of Counsel. The favorable opinions of Sidley ▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to the Fund, and of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
senior attorney of the Adviser, each in form and substance satisfactory to
the counsel for the Underwriters, dated such Date of Delivery, relating to
the Option Shares to be purchased on such Date of Delivery and otherwise
to the same effect as the opinions required by Sections 5(b) and 5(c)
hereof, respectively.
(iii) Opinion of Counsel for the Underwriters. The favorable opinion
of ▇▇▇▇▇▇▇▇ Chance US LLP, counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Shares to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Ernst & Young LLP in
form and substance satisfactory to the Representative and dated such Date
of Delivery, substantially the same in form and substance as the letter
furnished to the Representative pursuant to Section 5(f), except that the
"specified date" in the letter furnished pursuant to this paragraph shall
be a date not more than five days prior to such Date of Delivery.
(k) Additional Documents. At Closing Time and at each Date of Delivery,
counsel to the Underwriters shall have been furnished with such documents and
opinions as it may require for the purpose of enabling it to pass upon the
issuance and sale of the Shares as herein contemplated, or in order to evidence
the accuracy of any of the representations or warranties, or the fulfillment of
any of the conditions, herein contained; and all proceedings taken by the Fund
in connection with the issuance and sale of the Shares as herein contemplated
shall be satisfactory in form and substance to the Representative and counsel to
the Underwriters.
-15-
(l) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option Shares on
a Date of Delivery which is after the Closing Time, the obligations of the
Underwriters to purchase the relevant Option Shares, may be terminated by the
Representative by notice to the Fund at any time at or prior to Closing Time or
such Date of Delivery, as the case may be, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6, 7, 8 and 13 shall survive any such termination and
remain in full force and effect.
(m) Execution of Additional Compensation Agreement. At Closing Time, the
Underwriters shall have received the Additional Compensation Agreement, dated
the date of the Closing Time, as executed by the Adviser.
SECTION 6. Indemnification.
(a) Indemnification of the Underwriters. The Fund and the Adviser jointly
and severally agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act, and any director, officer, employee
or affiliate thereof as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 430A Information
and the Rule 434 Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus, any Omitting Prospectus or the
Prospectus (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the indemnifying party; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by ▇▇▇▇▇▇▇ ▇▇▇▇▇) reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Fund by any
Underwriter expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus, any Omitting Prospectus or the
Prospectus (or any amendment or supplement thereto).
-16-
(b) Indemnification of Fund, Adviser, Directors, General Partner and
Officers. Each Underwriter severally agrees to indemnify and hold harmless the
Fund, the Adviser, the directors of the Fund, the general partner of the
Adviser, each of the Fund's officers who signed the Registration Statement, and
each person, if any, who controls the Fund or the Adviser within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) including the Rule 430A
Information and the Rule 434 Information, if applicable, or in any preliminary
prospectus, or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the Fund
by such Underwriter through ▇▇▇▇▇▇▇ ▇▇▇▇▇ expressly for use in the Registration
Statement (or any amendment thereto), or any preliminary prospectus, or the
Prospectus (or any amendment or supplement thereto).
(c) Indemnification for Marketing Materials. In addition to the foregoing
indemnification, the Fund and the Adviser also, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, against any and all loss, liability, claim, damage
and expense described in the indemnity contained in Section 6(a), as limited by
the proviso set forth therein, with respect to any sales material.
(d) Actions against Parties, Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by the Underwriters, and,
in the case of parties indemnified pursuant to Section 6(b) above, counsel to
the indemnified parties shall be selected by the Fund and the Adviser. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for the
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(e) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6 (a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such
-17-
settlement being entered into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request prior to the
date of such settlement.
SECTION 7. Contribution.
If the indemnification provided for in Section 6 hereof is for any reason
unavailable to or insufficient to hold harmless an indemnified party in respect
of any losses, liabilities, claims, damages or expenses referred to therein,
then each indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such indemnified
party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Fund and the Adviser on the one hand and the
Underwriters on the other hand from the offering of the Shares pursuant to this
Agreement or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Fund and the Adviser on the one hand and of the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Fund and the Adviser on the one hand
and the Underwriters on the other hand in connection with the offering of the
Shares pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Shares pursuant
to this Agreement (before deducting expenses) received by the Fund, and the
total underwriting commission received by the Underwriters, in each case as set
forth on the cover of the Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet, bear to the aggregate initial public offering price
of the Shares as set forth on such cover.
The relative fault of the Fund and the Adviser on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Fund and the Adviser or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Fund, the Adviser and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, the Underwriters shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which the
Underwriters have otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
-18-
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution of such Underwriter, and
each director of the Fund and the Adviser, respectively, each officer of the
Fund who signed the Registration Statement and each person, if any, who controls
the Fund and the Adviser within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, shall have the same rights to contribution as the
Fund and the Adviser. The Underwriters' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the number of Initial
Shares set forth opposite their respective names in Schedule A hereto and not
joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement
or in certificates of officers of the Fund or of the Adviser submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of the Underwriters or controlling person, or
by or on behalf of the Fund or the Adviser and shall survive delivery of the
Shares to the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representative may terminate this Agreement
by notice to the Fund, at any time at or prior to Closing Time (i) if there has
been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Fund or the Adviser, whether or not arising
in the ordinary course of business, or (ii) if there has occurred any material
adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Representative, impracticable or inadvisable to market the
Shares or to enforce contracts for the sale of the Shares, or (iii) if trading
in any securities of the Fund has been suspended or materially limited by the
Commission or the New York Stock Exchange or such other national securities
exchange upon which the Fund's securities trade, or if trading generally on the
New York Stock Exchange or the American Stock Exchange or in the Nasdaq National
Market System has been suspended or materially limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for securities
have been required, by any of said exchanges or by such system or by order of
the Commission, the NASD or any other governmental authority, or a material
disruption has occurred in commercial banking or securities settlement or
clearance services in the United States or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters.
If one or more of the Underwriters shall fail at closing Time or a Date of
Delivery to purchase the Shares which it or they are obligated to purchase under
this Agreement (the "Defaulted Shares"), the Representative shall have the
right, within 24 hours thereafter, to make arrangements for one or more the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Shares in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representative shall not have
completed such arrangements within such 24-hour period, then:
-19-
(a) if the number of Defaulted Shares does not exceed 10% of the number of
Shares to be purchased on such date, each of the non-defaulting Underwriters
shall be obligated, severally and not jointly, to purchase the full amount
thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Shares exceeds 10% of the number of Shares
to be purchased on such date, this Agreement or, with respect to any Date of
Delivery which occurs after the Closing Time, the obligation of the Underwriters
to purchase and of the Fund to sell the Option Shares to be purchased and sold
on such Date of Delivery shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Fund to sell the relevant Option Shares, as the
case may be, either the Representative or the Fund shall have the right to
postpone Closing Time or the relevant Date of Delivery, as the case may be, for
a period not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.
SECTION 11. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be directed to
Representative c/o Merrill ▇▇▇▇▇ & Co. Inc., 4 World Financial Center, New York,
N.Y. 10080, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Vice President; notices to the Fund and
the Adviser shall be directed to ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
SECTION 12. Parties.
This Agreement shall inure to the benefit of and be binding upon the
Underwriters, the Fund, the Adviser and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters, the Fund, the
Adviser and their respective successors and the controlling persons and
officers, directors and general partner referred to in Sections 6 and 7 and
their heirs and legal representatives, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the Underwriters, the Fund and the Adviser and
their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Shares from the Underwriters
shall be deemed to be a successor merely by reason of such purchase.
SECTION 13. GOVERNING LAW AND TIME.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY
TIME.
SECTION 14. Effect of Headings.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
-20-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Fund a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Fund and the Adviser in accordance with its
terms.
Very truly yours,
PREFERRED INCOME STRATEGIES FUND, INC.
By:
-----------------------------------
Name:
Title:
FUND ASSET MANAGEMENT, L.P.
By: PRINCETON SERVICES, INC.,
General Partner
By:
-----------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
ADVEST, INC.
BB&T CAPITAL MARKETS, A DIVISION OF ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇ INC.
▇▇▇▇▇▇▇▇▇▇ & CO., INC.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ LLC
▇▇▇▇▇▇ ▇▇▇▇▇▇ & COMPANY, INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & COMPANY INCORPORATED
▇▇▇▇▇ FARGO SECURITIES, LLC
By: ▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By:
-----------------------------
Authorized Signatory
For itself and as Representative of the
other Underwriters named
in Schedule A hereto.
-21-
SCHEDULE A
Number of
Name of Underwriter Initial Shares
------------------ --------------
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated..............
Advest, Inc.....................................................
BB&T Capital Markets, a division of ▇▇▇▇▇ & Stingfellow, Inc....
▇▇▇▇▇▇▇▇▇▇ & Co., Inc...........................................
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ LLC.....................................
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc....................................
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.................................
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Company, Incorporated.........................
▇▇▇▇▇ Fargo Securities, LLC.....................................
Deutsche Bank Securities Inc....................................
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Incorporated.............................
Prudential Securities Incorporated..............................
RBC ▇▇▇▇ ▇▇▇▇▇▇▇▇ Inc...........................................
U.S. Bancorp ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc..................................
Wachovia Securities, Inc........................................
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, L.L.C..................................
▇▇▇▇▇ ▇▇▇▇▇▇ & Co., Inc.........................................
▇.▇. ▇▇▇▇▇▇▇▇▇, Towbin..........................................
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co............................................
▇▇▇▇▇▇▇▇▇ & Company LLC.........................................
▇.▇. ▇▇▇▇▇▇▇▇ & Co..............................................
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Incorporated...............................
▇▇▇▇▇▇▇▇, Lemon & Co. Incorporated..............................
Number of
Name of Underwriter Initial Shares
------------------ --------------
McDonald Investments Inc., a KeyCorp Company....................
NatCity Investments, Inc........................................
▇▇▇▇▇▇/Hunter Incorporated......................................
Quick & ▇▇▇▇▇▇, Inc.............................................
Sands Brothers & Co., Ltd.......................................
▇▇▇▇▇▇▇▇ Inc....................................................
SunTrust Capital Markets, Inc...................................
Wedbush ▇▇▇▇▇▇ Securities Inc...................................
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Company, Incorporated......................
▇▇▇▇▇▇, ▇▇▇▇▇ & Co., Inc........................................
Chatsworth Securities LLC.......................................
First Southwest Company.........................................
Gilford Securities Incorporated.................................
▇▇▇▇ ▇▇▇▇▇▇ Investments, Inc....................................
Huntleigh Securities Corporation................................
Lasalle St. Securities, LLC.....................................
Maxim Group LLC.................................................
Mesirow Financial, Inc..........................................
National Securities Corporation.................................
▇▇▇▇▇▇▇ & Company, Inc..........................................
Northeast Securities, Inc.......................................
▇▇▇▇▇ ▇. ▇▇▇▇▇ & Company........................................
Nutmeg Securities, Ltd..........................................
Number of
Name of Underwriter Initial Shares
------------------ --------------
▇▇▇▇▇ Capital Markets, Inc......................................
Pacific Crest Securities Inc....................................
▇▇▇▇▇▇▇ Investment Company, Inc.................................
Peacock, Hilsop, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, Inc...........................
Southwest Securities, Inc.......................................
Sterling Financial Investment Group, Inc........................
▇▇▇▇▇▇ ▇▇▇▇▇ Securities, Inc....................................
Total............................................
=============
SCHEDULE B
PREFERRED INCOME STRATEGIES FUND, INC.
(a Maryland corporation)
_____________ Shares of Common Stock
(Par Value $.10 Per Share)
1. The initial public offering price per share for the Shares, determined
as provided in Section 2, shall be $25.00.
2. The purchase prices per share for the Shares to be paid by the
Underwriters shall be $23.875, being an amount equal to the initial public
offering price set forth above less $1.125 per share; provided that the purchase
price per share for any Option Shares purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Fund and
payable on the Initial Shares but not payable on the Option Shares.
Exhibit A
FORM OF OPINION OF FUND'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
1. The Fund has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland.
2. The Fund has corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectus and to
enter into and perform its obligations under the Purchase Agreement.
3. The Fund is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Fund, whether or not arising in the ordinary course of
business (a "Material Adverse Effect").
4. The authorized, issued and outstanding capital stock of the Fund is as
set forth in the Prospectus under the caption "Description of Capital Stock."
5. The Shares to be purchased by the Underwriters from the Fund have been
duly authorized for issuance and sale to the Underwriters pursuant to the
Purchase Agreement and, when issued and delivered by the Fund pursuant to the
Purchase Agreement against payment of the consideration set forth in the
Purchase Agreement, will be validly issued and fully paid and non-assessable and
no holder of the Shares is or will be subject to personal liability by reason of
being such a holder.
6. The issuance of the Shares is not subject to the preemptive or other
similar rights of any securityholder of the Fund.
7. To the best of our knowledge, the Fund does not have any subsidiaries.
8. The Purchase Agreement has been duly authorized, executed and delivered
by the Fund and complies with all applicable provisions of the Investment
Company Act.
9. The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the certificate pursuant to Rule 497(j) or the Prospectus pursuant to Rule
497(c) or Rule 497(h), as the case may be, has been made in the manner and
within the time period required by Rule 497(j), Rule 497(c) or Rule 497(h), as
the case may be; and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that purpose
have been instituted or are pending or threatened by the Commission.
10. The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectus, and each amendment or supplement to the Registration
Statement and the Prospectus, as of their respective effective or issue
dates (other than the financial statements and supporting schedules included
therein or omitted therefrom, as to which we need express no opinion) complied
as to form in all material respects with the requirements of the 1933 Act, the
Investment Company Act and the Rules and Regulations.
11. The form of certificate used to evidence the Common Stock complies in
all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Fund and the
requirements of the New York Stock Exchange.
12. To the best of our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Fund is a
party, or to which the property of the Fund is subject, before or brought by any
court or governmental agency or body, domestic or foreign, which might
reasonably be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties or
assets thereof or the consummation of the transactions contemplated in the
Purchase Agreement or the performance by the Fund of its obligations thereunder,
other than those disclosed in the Prospectus.
13. The information in the Prospectus under "Description of Capital Stock"
and "Taxes" and in the Registration Statement under Item 29, to the extent that
it constitutes matters of law, summaries of legal matters, the Fund's charter
and bylaws or legal proceedings, or legal conclusions, has been reviewed by us
and is correct in all material respects.
14. To the best of our knowledge, there are no statutes or regulations
that are required to be described in the Prospectus that are not described as
required.
15. All descriptions in the Prospectus of contracts and other documents to
which the Fund is a party are accurate in all material respects; to the best of
our knowledge, there are no franchises, contracts, indentures, mortgages, loan
agreements, notes, leases or other instruments of the Fund required to be
described or referred to in the Registration Statement or to be filed as
exhibits thereto other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto, and the descriptions thereof or
references thereto are correct in all material respects.
16. To the best of our knowledge, the Fund is not in violation of its
charter or by-laws and no default by the Fund exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated by reference
as an exhibit to the Registration Statement.
17. No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than under the 1933 Act, the 1934 Act, the
Investment Company Act, the Rules and Regulations, which have been obtained, or
as may be required under the rules of the NASD (formerly, the National
Association of Securities Dealers, Inc.) or under the securities or blue sky
laws of the various states, as to which we need express no opinion) is necessary
or required in connection with the due authorization, execution and delivery of
the Purchase Agreement, the Advisory Agreement and the Custody Agreement or for
the offering, issuance, sale or delivery of the Shares.
18. The Advisory Agreement and the Custody Agreement have each been duly
authorized and approved by the Fund and comply as to form in all material
respects with all applicable provisions of the Investment Company Act, and each
has been duly executed by the Fund.
19. The Fund is registered with the Commission under the Investment
Company Act as a closed-end, diversified management investment company, and all
required action has been taken by the Fund under the 1933 Act, the Investment
Company Act and the Rules and Regulations to make the public offering and
consummate the sale of the Shares pursuant to the Purchase Agreement; the
provisions of the charter and the by-laws of the Fund comply as to form in all
material respects with the requirements of the Investment Company Act; and, to
the best of their knowledge and information, no order of suspension or
revocation of such registration under the Investment Company Act, pursuant to
Section 8(e) of the Investment Company Act, has been issued or proceedings
therefor initiated or threatened by the Commission.
20. The execution, delivery and performance of the Purchase Agreement and
the consummation of the transactions contemplated in the Purchase Agreement and
in the Registration Statement (including the issuance and sale of the Shares,
and the use of the proceeds from the sale of the Shares as described in the
Prospectus under the caption "Use of Proceeds") and compliance by the Fund with
its obligations under the Purchase Agreement do not and will not, whether with
or without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(xi) of the Purchase Agreement) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Fund pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument, known to us,
to which the Fund is a party or by which it may be bound, or to which any of the
property or assets of the Fund is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Fund, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Fund or any of its properties, assets or operations.
Nothing has come to our attention that has caused us to believe that
the Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no statement),
at the time such Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectus or any amendment or supplement thereto
(except for financial statements and schedules and other financial data included
or incorporated by reference therein or omitted therefrom, as to which we need
make no statement), at the time the Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time, included
or includes an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
In rendering such opinion, we may rely as to matters of fact (but not as
to legal conclusions), to the extent we deem proper, on certificates and written
statements of responsible officers of and accountants for the Fund and the
Adviser and public officials. Such letter shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any treatise,
written policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).
Exhibit B
FORM OF OPINION OF COUNSEL TO THE
INVESTMENT ADVISER TO BE DELIVERED
PURSUANT TO SECTION 5(c)
(1) The Adviser has been duly organized as a limited partnership under the
laws of the State of Delaware, with power and authority to conduct its business
as described in the Registration Statement and in the Prospectus.
(2) The Adviser is duly registered as an investment adviser under the
Investment Advisers Act and is not prohibited by the Investment Advisers Act or
the Investment Company Act, or the rules and regulations under such Acts, from
acting under the Advisory Agreement for the Fund as contemplated by the
Prospectus.
(3) This Agreement, the Advisory Agreement and the Additional Compensation
Agreement have been duly authorized, executed and delivered by the Adviser, and
the Advisory Agreement constitutes a valid and binding obligation of the
Adviser, enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization or other laws relating to or affecting
creditors' rights and to general equity principles; and, to the best of my
knowledge and information, neither the execution and delivery of this Agreement
or the Advisory Agreement nor the performance by the Adviser of its obligations
hereunder or thereunder will conflict with, or result in a breach of, any of the
terms and provisions of, or constitute, with or without the giving of notice or
the lapse of time or both, a default under, any agreement or instrument to which
the Adviser is a party or by which the Adviser is bound, or any law, order, rule
or regulation applicable to the Adviser of any jurisdiction, court, Federal or
state regulatory body, administrative agency or other governmental body, stock
exchange or securities association having jurisdiction over the Adviser or its
properties or operations.
(4) To the best of my knowledge and information, the description of the
Adviser in the Registration Statement and in the Prospectus does not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading.
Exhibit C
FORM OF ACCOUNTANTS'
COMFORT LETTER PURSUANT TO SECTION 5(f)
(1) We are independent public accountants with respect to the Fund within
the meaning of the 1933 Act and Investment Company Act, and the applicable rules
and regulations thereunder adopted by the Commission;
(2) In our opinion the financial statements audited by us and included in
the Registration Statement and the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and
Investment Company Act and the related rules and regulations adopted by the
Commission;
(3) On the basis of procedures (but not an audit in accordance with
generally accepted auditing standards) consisting of:
a. Reading the minutes of meetings of the Board of Directors of the
Fund as set forth in the minute books through a specified date not more
than three business days prior to the date of delivery of such letter;
b. Making inquiries of certain officials of the Fund who have
responsibility for financial and accounting matters regarding changes in
the capital stock, net assets or long-term liabilities of the Fund as
compared with the amounts shown in the latest balance sheet included in
the Registration Statement or for the period from the date of the latest
income statement included in the Registration Statement to a specified
date not more than three business days prior to the delivery of such
letter;
the letter shall also state that the information set forth under the
captions "Fee Table", "Risks and Special Considerations of Leverage" and
"Description of Capital Stock" which is expressed in dollars (or percentages
derived from such dollar amounts) and has been obtained from accounting records
which are subject to controls over financial reporting or which has been derived
directly from such accounting records by analysis or computation, is in
agreement with such records or computations made therefrom, and such other
procedures as the Representative may request and Ernst & Young LLP is willing to
perform and report upon.