USF&G PACHOLDER FUND, INC.
1,663,880 Shares of Common Stock Issuable Upon Exercise
of Non-Transferable Rights to Subscribe for
Such Shares of Common Stock
DEALER MANAGER AGREEMENT
------------------------
January __, 1997
Xxxxxx Associates, Inc.
Bank One Towers
0000 Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
Dear Sirs:
USF&G Pacholder Fund, Inc., a Maryland corporation (the "Fund"), is a
closed-end, diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"). The
Fund proposes to issue to holders of its common stock, par value $.01 per share
(the "Common Stock"), of record as of the close of business on January 24, 1997
("Record Date Shareholders") rights (the "Rights") to subscribe for an aggregate
of 1,663,880 shares (the "Shares") of Common Stock.
The Fund appoints Xxxxxx Associates, Inc. (the "Dealer Manager") as
exclusive dealer manager in connection with the offer of the Shares contemplated
by the proposed issuance of the Rights (the "Offer"), and the Dealer Manager
accepts such appointment. The Dealer Manager represents and warrants that it is
a broker-dealer registered under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Pacholder & Company, an affiliate of the Dealer Manager
(the "Adviser"), manages the investments of the Fund pursuant to an Investment
Advisory Agreement with the Fund, dated November 16, 1988, as amended (the
"Advisory Agreement").
In connection with the Offer, each Record Date Shareholder will be issued
one Right for each full share of Common Stock held on January 24, 1997 (the
"Record Date"). No fractional Rights will be issued. The Rights will entitle
shareholders to acquire at the subscription price per Share described in the
Prospectus (as hereinafter defined) one Share for each three Rights held. The
period of subscription (the "Subscription Period") will commence on January 27,
1997 and end at 5:00 P.M., New York City time, on February 20, 1997, unless
extended by the Fund (the "Expiration
Date"). Any Record Date Shareholder who fully exercises all Rights held by him
will be entitled to subscribe for Shares that were not otherwise subscribed for
by others during the Subscription Period (the "Over-Subscription Privilege").
The Fund may, at the discretion of the Board of Directors, increase the number
of Shares subject to subscription by up to 25%. Additional terms and conditions
of the Offer are set out in the registration statement with respect to the
Rights and Shares filed by the Fund with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), and the Investment Company Act and the rules and regulations (the "Rules
and Regulations") of the Commission thereunder.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the Fund, the
Adviser and the Dealer Manager hereby agree as follows:
1. Representations and Warranties of the Fund and the Adviser.
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(a) The Fund represents and warrants as follows:
(i) The registration statement on Form N-2 (Nos. 333-17313; 811-5639)
with respect to the Rights and Shares has been carefully prepared by the
Fund in conformity with the requirements of the Securities Act and the
Investment Company Act and the Rules and Regulations. Copies of such
registration statement, including any amendments thereto, the preliminary
prospectuses and statement of additional information (meeting the
requirements of Rule 430A under the Securities Act) contained therein and
the exhibits, financial statements and schedules, as finally amended and
revised, have heretofore been delivered by the Fund to the Dealer Manager.
Such registration statement, herein referred to as the "Registration
Statement," which shall be deemed to include all information omitted
therefrom in reliance upon Rule 430A under the Securities Act and contained
in the Prospectus referred to below, has been declared effective by the
Commission under the Securities Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement.
The forms of prospectus and statement of additional information first filed
by the Fund with the Commission pursuant to its Rule 497(b) or (h) and
Rule 430A are herein referred to respectively as the "Prospectus" and
"SAI." Each preliminary prospectus and preliminary statement of additional
information included in the Registration Statement prior to the time it
becomes effective is hereinafter referred to as a "Preliminary Prospectus"
and a "Preliminary SAI."
(ii) The Fund has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland, with
corporate power and authority to own its properties and conduct its
business as described in the Registration Statement; and the Fund is duly
qualified to transact
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business in all jurisdictions in which the conduct of its business requires
such qualification.
(iii) The Fund's authorized capitalization is as set forth in the
Prospectus; the outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable; the
Shares have been duly authorized and when issued, delivered and paid for as
described in the Registration Statement, will be validly issued, fully paid
and non-assessable; and no preemptive rights of stockholders exist with
respect to any of the Shares or the issue and sale thereof.
(iv) The Rights and Shares conform to the statements concerning them
in the Registration Statement.
(v) The Commission has not issued an order preventing or suspending
the use of any Preliminary Prospectus or Preliminary SAI or the Prospectus
or the SAI relating to the Offer nor instituted proceedings for that
purpose. The Registration Statement contains, and the Prospectus and any
amendments or supplements thereto, and the SAI and any amendments or
supplements thereto, will contain, all statements which are required to be
stated therein by, and in all respects conforms or will conform, as the
case may be, to the requirements of, the Securities Act, the Investment
Company Act and the Rules and Regulations. Neither the Registration
Statement nor any amendment thereto, and neither the Prospectus, the SAI
nor any supplement thereto, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that the Fund makes no representations or warranties as
to information contained in or omitted from the Registration Statement, the
Prospectus or the SAI, or any such amendment or supplement, in reliance
upon, and in conformity with, written information furnished to the Fund by
or on behalf of the Dealer Manager, specifically for use in the preparation
thereof.
(vi) The Fund has not, directly or indirectly, (A) taken any action
designed to cause or to result in, or that constituted or which 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, or (B) since the filing of the Registration Statement (1) sold,
bid for, purchased, or paid anyone any compensation for soliciting
purchases of, the Shares or (2) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Fund, except as contemplated by this Agreement or the Fund's dividend
reinvestment plan or as disclosed in writing to the Dealer Manager.
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(vii) The financial statements of the Fund, together with the related
notes and schedules set forth in the Registration Statement, present fairly
the financial position of the Fund at the indicated dates. Such financial
statements have been prepared in accordance with generally accepted
principles of accounting.
(viii) There is no action or proceeding pending or, to the knowledge of
the Fund, threatened against the Fund before any court or administrative
agency which might result in any material adverse change in the business,
condition or prospects of the Fund.
(ix) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has
not been any material change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Fund or the earnings, business affairs, management or
business prospects of the Fund, whether or not occurring in the ordinary
course of business, and there has not been any material transaction entered
into by the Fund, other than transactions in the ordinary course of
business and changes and transactions contemplated by the Registration
Statement, as it may be amended or supplemented. The Fund has no material
contingent obligations which are not disclosed in the Registration
Statement, as it may be amended or supplemented.
(x) The Fund is not in default under any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by
which it or any of its properties is bound and which default is of material
significance in respect of the business or financial condition of the Fund.
The consummation of the transactions herein contemplated and the
fulfillment of the terms hereof will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust or other agreement or instrument to
which the Fund is a party, the charter or bylaws of the Fund or any order,
rule or regulation applicable to the Fund of any court or of any regulatory
body or administrative agency or other governmental body having
jurisdiction.
(xi) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery
by the Fund of, and the consummation of the transactions contemplated by,
this Agreement and the Fund Agreements (as hereinafter defined) (except
such additional steps as may be required by the National Association of
Securities Dealers, Inc. (the "NASD") or may be necessary to qualify the
Rights and Shares
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for public offering by the Fund under state securities or "blue sky" laws)
has been obtained or made and is in full force and effect.
(xii) The Fund holds all material licenses, certificates and permits
from governmental authorities which are necessary to the conduct of its
business.
(xiii) Deloitte & Touche LLP, who have certified the financial
statements of the Fund filed with the Commission as part of the
Registration Statement, are independent public accountants as required by
the Securities Act and the Rules and Regulations.
(xiv) The Fund is registered with the Commission pursuant to
Section 8 of 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 or
threatened by the Commission.
(xv) The Advisory Agreement, the Administration Agreement dated as of
June 5, 1996 between the Fund and Kenwood Administrative Management,
Limited Partnership (the "Administration Agreement"), the Accounting
Services Agreement dated as of May 20, 1991, as amended, between the Fund
and Pacholder Associates, Inc. (the "Accounting Services Agreement"), the
Custody Agreement dated as of May 1, 1996, between the Fund and Star Bank,
N.A. (the "Custodian Agreement"), the Transfer Agency and Service Agreement
dated as of September 23, 1996, between the Fund and Fifth Third Bank (the
"Transfer Agency Agreement"), the Subscription Rights Agency Agreement
dated as of January __, 1997, between the Fund and State Street Bank and
Trust Company (the "Subscription Agent Agreement") and the Information
Agent Agreement dated as of January __, 1997, between the Fund and
Shareholder Communications Corporation (the "Information Agent Agreement")
(collectively, the "Fund Agreements") have been duly authorized, executed
and delivered on behalf of the Fund, are valid and binding obligations of
the Fund enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws affecting the rights of creditors generally and
such principles of equity as a court having jurisdiction may apply, and are
in all respects in full compliance with all applicable provisions of the
Exchange Act, the Investment Company Act and the Investment Advisers Act of
1940, as amended (the "Advisers Act").
(xvi) The Common Stock has been duly listed on the American Stock
Exchange, Inc. and the Shares have been approved for listing, subject to
official notice of issuance.
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(b) The Adviser represents and warrants as follows:
(i) The Adviser has been duly organized and is validly existing as a
general partnership in good standing under the laws of the State of Ohio,
with power and authority to own its properties and conduct its business as
described in the Prospectus; and the Adviser is duly qualified to transact
business in all jurisdictions in which the conduct of its business requires
such qualification.
(ii) The Commission has not issued an order preventing or suspending
the use of any Preliminary Prospectus or Preliminary SAI or the Prospectus
or the SAI relating to the Offer nor instituted proceedings for that
purpose. The Registration Statement contains, and the Prospectus and SAI
and any amendments or supplements thereto will contain, all statements
which are required to be stated therein by, and in all respects conforms or
will conform, as the case may be, to the requirements of, the Securities
Act, the Investment Company Act and the Rules and Regulations. Nothing has
come to the attention of the Adviser that causes the Adviser to believe
that the Registration Statement or any amendment thereto, and the
Prospectus and SAI or any supplement thereto, contains or will contain any
untrue statement of a material fact or omits or will omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Adviser makes no
representations or warranties as to information contained in or omitted
from the Registration Statement, the Prospectus or the SAI, or any such
amendment or supplement, in reliance upon, and in conformity with, written
information furnished to the Fund or the Adviser by or on behalf of the
Dealer Manager specifically for use in the preparation thereof; provided
further, however, that with respect solely to information contained in or
omitted from the Registration Statement, the Prospectus or the SAI, or any
such amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Fund by or on behalf of the Adviser,
specifically for use in the preparation thereof, the Adviser represents and
warrants that such information does not contain any untrue statement of a
material fact and does not omit or will not omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(iii) The Adviser has not, directly or indirectly, (A) taken any
action designed to cause or to result in, or that constituted or which
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, or (B) since the filing of the Registration
Statement (1) sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of, the Shares or (2) paid or agreed to pay to any
person any compensation for soliciting another to purchase any other
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securities of the Fund, except as contemplated by this Agreement or the
Fund's dividend reinvestment plan or as disclosed in writing to the Dealer
Manager.
(iv) There is no action or proceeding pending or, to the knowledge of
the Adviser, threatened against the Adviser before any court or
administrative agency which might result in any material adverse change in
the business, condition or prospects of the Adviser.
(v) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there has
not been any material change or any development involving a prospective
material adverse change in or affecting the condition, financial or
otherwise, of the Adviser or the earnings, business affairs, management or
business prospects of the Adviser, whether or not occurring in the ordinary
course of business, and there has not been any material transaction entered
into by the Adviser, other than transactions in the ordinary course of
business and changes and transactions contemplated by the Registration
Statement, as it may be amended or supplemented. The Adviser has no
material contingent obligations which are not disclosed in the Registration
Statement, as it may be amended or supplemented.
(vi) The Adviser is not in default under any agreement, lease,
contract, indenture or other instrument or obligation to which it is a
party or by which it or any of its properties is bound and which default is
of material significance in respect of the business or financial condition
of the Adviser. The consummation of the transactions herein contemplated
and the fulfillment of the terms hereof will not conflict with or result in
a breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust or other agreement or
instrument to which the Adviser is a party, the partnership agreement of
the Adviser or any order, rule or regulation applicable to the Adviser of
any court or of any regulatory body or administrative agency or other
governmental body having jurisdiction.
(vii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery
by the Adviser of, and the consummation of the transactions contemplated
by, this Agreement and the Advisory Agreement (except such additional steps
as may be required by the NASD or may be necessary to qualify the Rights
and Shares for public offering by the Fund under state securities or "blue
sky" laws) has been obtained or made and is in full force and effect.
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(viii) Subject to the exceptions noted above, the Adviser holds all
material licenses, certificates and permits from governmental authorities
which are necessary to the conduct of its business.
(ix) The Adviser is duly registered with the Commission under the
Advisers Act as an investment adviser, and there does not exist any
proceeding or any facts or circumstances the existence of which could lead
to any proceeding which would adversely affect the registration or good
standing of the Adviser with the Commission. The Adviser is not prohibited
from performing its obligations under the Advisory Agreement.
(x) The Advisory Agreement had been duly authorized, executed and
delivered on behalf of the Adviser, is a valid and binding obligation of
the Adviser enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and other laws affecting the rights of creditors generally and such
principles of equity as a court having jurisdiction may apply, and is in
all respects in full compliance with all applicable provisions of the
Investment Company Act and the Advisers Act.
2. Agreement to Act as Dealer Manager.
----------------------------------
(a) On the basis of the representations and warranties, and subject to the
terms and conditions, set forth in this Agreement:
(i) The Dealer Manager agrees to engage and organize a group of
securities brokers and dealers ("Soliciting Dealers") who will enter into
an agreement with the Fund in the form attached hereto as Exhibit A (the
"Soliciting Dealer Agreement") and solicit, in accordance with the
Securities Act, the Exchange Act and the Investment Company Act, and their
customary practice, the exercise of the Rights, subject to the terms and
conditions of this Agreement, the Subscription Agent Agreement and the
procedures described in the Registration Statement.
(ii) The Fund agrees to furnish, or cause to be furnished, to the
Dealer Manager, lists, or copies of such lists, showing the names and
addresses of, and number of shares of Common Stock held by, Record Date
Shareholders as of the Record Date; and the Dealer Manager agrees to use
such information only in connection with the Offer, and not to furnish the
information to any other person, except for securities brokers and dealers
that the Dealer Manager has requested to solicit exercises of Rights.
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(iii) The Fund will advise or cause the subscription agent for the
Offer to advise the Dealer Manager and each Soliciting Dealer from day to
day during the Subscription Period, and promptly after the Expiration Date,
as to the names and addresses of all Record Date Shareholders exercising
Rights, the total number of Rights exercised by each Record Date
Shareholder during the immediately preceding day, indicating the total
number of Rights verified to be in proper form for exercise, rejected for
exercise and being processed and, for each Soliciting Dealer, the number of
Rights exercised on subscription forms designating such Soliciting Dealer
as the broker-dealer with respect to such exercise, and as to such other
information as the Dealer Manager may reasonably request; and will notify
the Dealer Manager and each Soliciting Dealer, not later than 5:00 P.M.,
New York City time, on the first business day following the Expiration
Date, of the total number of Rights exercised and Shares related thereto,
the total number of Rights verified to be in proper form for exercise,
rejected for exercise and being processed and, for each Soliciting Dealer,
the number of Rights exercised on subscription forms designating such
Soliciting Dealer as the broker-dealer with respect to such exercise, and
as to such other information as the Dealer Manager may reasonably request.
(iv) In addition to the services described in paragraph (a) (i) of
this Section 2, the Dealer Manager agrees to provide financial and
marketing advisory services to the Fund in connection with the Offer. No
advisory fee, other than the fees provided for in Section 3 of this
Agreement and the reimbursement of the Dealer Manager's out-of-pocket
expenses as described in Section 5 of this Agreement, shall be payable by
the Fund to the Dealer Manager in connection with the financial and
marketing advisory services provided by the Dealer Manager pursuant to this
paragraph (a)(iv).
(b) The Fund and the Dealer Manager agree that the Dealer Manager is an
independent contractor with respect to solicitation of the exercise of Rights
contemplated by this Agreement and the performance of the financial and
marketing advisory services to the Fund contemplated by this Agreement; and the
Dealer Manager represents and warrants that it is not a partner or agent of any
other securities broker, dealer or other person soliciting the exercise of
Rights contemplated by this Agreement, or of the Fund or any of its affiliates.
(c) In rendering the services contemplated by this Agreement, the Dealer
Manager shall not be subject to any liability to the Fund or the Adviser, or any
of their affiliates, for any act or omission on the part of any securities
broker or dealer (other than the Dealer Manager) or any other person, and the
Dealer Manager shall not have any liability (whether direct or indirect, in
contract or tort or otherwise) for or in connection with the performance of its
obligations under this Agreement, except for any such liability for losses,
claims, damages or liabilities incurred that are finally judicially
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determined to have resulted primarily from the bad faith or gross negligence of
the Dealer Manager.
3. Dealer Manager and Soliciting Dealer Fees.
-----------------------------------------
(a) In full payment for the financial and marketing advisory services and
other services provided and to be provided hereunder by the Dealer Manager, the
Fund agrees to pay to the Dealer Manager a fee equal to the amount computed by
multiplying (i) 0.90 of 1% by (ii) the aggregate number of Shares purchased in
the Offer by (iii) the subscription price per Share described in the Prospectus
(the "Subscription Price").
(b) The Fund agrees to pay each Soliciting Dealer, as provided in the
Soliciting Dealer Agreement, a fee equal to the amount computed by multiplying
(i) .020 (2.0%) by (ii) the Subscription Price by (iii) (A) the aggregate number
of Shares purchased pursuant to subscription forms on which the Soliciting
Dealer is designated by name as having solicited the exercise of such Rights
plus (B) Shares purchased pursuant to the Offer through the Soliciting Dealer by
beneficial owners of the Fund's Common Stock on whose behalf the Soliciting
Dealer acts as nominee, either directly or through The Depository Trust Company
("DTC") or any other applicable depository, as listed in the Appendix to the
Soliciting Dealer Agreement. In no event shall the number in (iii)(B) above
exceed, as applicable, the number of Shares reported as purchased by beneficial
owners through the Soliciting Dealer by DTC, or any other applicable depository,
or the number of Shares the Soliciting Dealer is entitled to purchase as a
Record Date Shareholder (excluding in either case Shares held for its own
account). If more than one Soliciting Dealer is identified as having solicited
the exercise of identical Rights, the fee described above shall be shared
equally by all such Soliciting Dealers.
(c) Payment to the Dealer Manager by the Fund shall be in the form of a
wire transfer of same day funds to an account or accounts identified by the
Dealer Manager. Such payment shall be made concurrently with the issuance of
the Shares on the date on which the Offer is consummated (the "Closing Date").
Payment to a Soliciting Dealer shall be made by the Fund directly to such
Soliciting Dealer by wire transfer of same day funds to an account or accounts
identified by such Soliciting Dealer. Such payments shall be made on the
Closing Date. The Fund shall be under no liability for any payment made to any
Soliciting Dealer which payment is made in accordance with instructions received
from the Dealer Manager.
4. Covenants of the Fund and the Adviser.
-------------------------------------
(a) The Fund covenants and agrees with the Dealer Manager that:
(i) The Fund will (A) prepare and timely file with the Commission
under Rule 497(b) and (h) of the Rules and Regulations a Prospectus and SAI
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containing any information previously omitted at the time of the
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations and (B) will not file any amendment to the
Registration Statement or supplement to the Prospectus or the SAI of which
the Dealer Manager shall not previously have been advised and furnished
with a copy or to which the Dealer Manager shall have reasonably objected
in writing or which is not in compliance with the Rules and Regulations.
(ii) The Fund will advise the Dealer Manager promptly of any request
of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, or of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or any order
under Section 8(e) of the Investment Company Act or of the institution of
any proceedings for those purposes, and the Fund will use its best efforts
to prevent the issuance of any orders preventing or suspending the use of
the Prospectus or the SAI and to obtain as soon as possible the lifting
thereof, if issued.
(iii) The Fund will deliver to, upon the order of, the Dealer Manager
during the period when delivery of a Prospectus is required under the
Securities Act, as many copies of the Prospectus and SAI in final form, or
as thereafter amended or supplemented, as the Dealer Manager may reasonably
request. The Fund will deliver to the Dealer Manager at or before the date
hereof, one signed copy of the Registration Statement and all amendments
thereto, including all exhibits filed therewith, and will deliver to the
Dealer Manager such number of copies of the Registration Statement, but
without exhibits, and of all amendments thereto, as the Dealer Manager may
reasonably request.
(iv) If, during the period in which a prospectus is required by law to
be delivered by the Fund or a Soliciting Dealer, any event shall occur as a
result of which, in the judgment of the Fund or in the opinion of counsel
for the Dealer Manager, it becomes necessary to amend or supplement the
Prospectus or SAI in order to make the statements therein, in the light of
the circumstances existing at the time the Prospectus is delivered, not
misleading, or if it is necessary at any time to amend or supplement the
Prospectus or SAI to comply with any law, the Fund promptly will prepare
and file with the Commission an appropriate amendment or supplement to the
Prospectus or SAI so that the Prospectus or SAI as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus or SAI will comply with
such law.
(v) The Fund will cooperate with the Dealer Manager in endeavoring to
qualify the Shares for sale under the securities laws of such jurisdictions
as the
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Dealer Manager may reasonably have designated in writing and will make such
applications, file such documents, and furnish such information as may be
reasonably required for that purpose; provided, however, that the Fund
shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction where it is not
now so qualified or required to file such a consent. The Fund will, from
time to time, prepare and file such statements, reports and other documents
as are or may be required to continue such qualifications in effect during
the Subscription Period.
(vi) The Fund will not, directly or indirectly, (A) take any action
designed to cause or to result in, or that has constituted or which 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, or (B) (1) sell, bid for, purchase, or pay anyone any
compensation for soliciting purchases of, the Shares or (2) pay or agree to
pay to any person any compensation for soliciting another to purchase any
other securities of the Fund, except as contemplated by this Agreement or
the Fund's dividend reinvestment plan or as disclosed in writing to the
Dealer Manager.
(vii) The Fund will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 60
days after the close of the period covered thereby, an earnings statement
covering a period of at least twelve consecutive months beginning after the
effective date of the Registration Statement, which earnings statement
shall satisfy the requirements of Section 11(a) of the Securities Act and
Rule 158 thereunder.
(b) The Adviser covenants and agrees with the Dealer Manager that it will
not, directly or indirectly, (i) take any action designed to cause or to result
in, or that has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of any securities of the Fund to
facilitate the sale or resale of Shares, or (ii) (A) sell, bid for, purchase, or
pay anyone any compensation for soliciting purchases of, the Shares or (B) pay
or agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Fund, except as contemplated by this
Agreement or the Fund's dividend reinvestment plan or as disclosed in writing to
the Dealer Manager.
5. Costs and Expenses.
------------------
(a) The Fund will pay all costs, expenses and fees incident to the
performance of its obligations under this Agreement, including, without limiting
the generality of the foregoing, the following: accounting fees of the Fund;
the fees and disbursements of counsel for the Fund; the cost of printing and
delivering to, as requested by, the Dealer Manager copies of the Registration
Statement and the Prospectus and SAI, and any
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supplements or amendments thereto, this Agreement, the Soliciting Dealer
Agreement, any sales literature distributed to Soliciting Dealers or
shareholders, certificates for the Shares and subscription forms relating to the
exercise of Rights; the filing fees of the Commission; the filing fees and
expenses incident to securing any required review by the NASD of the terms of
the sale of the Shares; the listing fee of the American Stock Exchange, Inc.;
the expenses, including the fees and disbursements of counsel, incurred in
connection with the qualification of the Rights and the Shares under state
securities or "blue sky" laws and preparation of the Blue Sky Survey; and the
fees and expenses incurred pursuant to the Subscription Agent Agreement and the
Information Agent Agreement.
(b) In addition to any fees that may be payable to the Dealer Manager
under this Agreement, the Fund agrees to reimburse the Dealer Manager upon
request made from time to time for its reasonable expenses incurred in
connection with its activities under this Agreement in an amount up to $50,000.
(c) If this Agreement is cancelled by the Dealer Manager in accordance
with the provisions of Section 6 or is terminated by the Dealer Manager in
accordance with the provisions of Section 10(a)(iii), the Fund agrees to
reimburse the Dealer Manager for all of its reasonable out-of-pocket expenses
incurred in connection with its performance hereunder. In the event the
transactions contemplated hereunder are not consummated, the Fund agrees to pay
all of the costs and expenses set forth in paragraphs (a) and (b) of this
Section 5 which the Fund would have paid if such transactions had been
consummated.
6. Conditions of Obligations of the Dealer Manager. The obligations of
-----------------------------------------------
the Dealer Manager hereunder are subject to the accuracy of the representations
and warranties of the Fund and the Adviser contained herein, to the performance
by the Fund and the Adviser of their respective obligations hereunder, and to
the following further conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Fund or the Adviser, shall be
contemplated by the Commission.
(b) The Dealer Manager shall have received on the date on which the Offer
commences (the "Commencement Date") the opinion of Piper & Marbury L.L.P.,
counsel for the Fund, dated the Commencement Date, addressed to the Dealer
Manager to the effect that:
(i) the Fund is a corporation duly incorporated and validly existing
in good standing under the laws of the State of Maryland, and has the
corporate power to own its properties and conduct its business as described
in the
-13-
Prospectus; and the Fund is qualified to transact business in all
jurisdictions in which the conduct of its business requires such
qualification, or in which failure to qualify would have a material adverse
effect upon the business of the Fund;
(ii) the Fund has authorized and outstanding capital stock as set
forth in the Prospectus; the outstanding shares of Common Stock and the
Rights have been duly authorized and the outstanding shares of Common Stock
have been validly issued and are fully paid and non-assessable; the Rights
and the Shares conform to the descriptions thereof contained in the
Prospectus; the certificates for the Shares are in due and proper form; the
Shares, including the Shares to be issued pursuant to the Over-Subscription
Privilege, have been duly authorized and will be validly issued, fully paid
and non-assessable when issued and paid for as contemplated by the terms of
the Offer; and no preemptive rights of stockholders exist with respect to
any of the Rights or the Shares or the issue and sale thereof;
(iii) the Registration Statement has become effective under the
Securities Act and, to the knowledge of such counsel, no stop order
proceedings with respect thereto have been instituted or are pending or
threatened under the Securities Act;
(iv) the Registration Statement and the Prospectus, the SAI and any
amendments or supplements thereto (other than the financial statements,
schedules and other financial information included therein, as to which
such counsel need express no opinion) comply as to form in all material
respects with the requirements of the Securities Act or the Investment
Company Act, as applicable, and the applicable rules and regulations
thereunder;
(v) the statements under the captions "Investment Objective and
Policies," "Dividend Reinvestment Plan," "Taxation," "Share Repurchases;
Conversion to Open-End Company" and "Description of Capital Stock" in the
Prospectus and "Investment Policies and Restrictions," "Dividend
Reinvestment Plan" and "Taxation" in the SAI to the extent that they
constitute matters of law or legal descriptions, are accurate, and fairly
and correctly present the information called for with respect to such
matters;
(vi) such counsel does not know of any contracts or documents required
to be filed as exhibits to the Registration Statement or described in the
Registration Statement, the Prospectus or the SAI which are not so filed or
described as required, and such contracts and documents as are summarized
in the Registration Statement, the Prospectus or the SAI are fairly
summarized in all material respects;
-14-
(vii) such counsel knows of no material legal proceedings pending or
threatened against the Fund;
(viii) this Agreement has been duly authorized, executed and delivered
by the Fund;
(ix) the execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, the charter or bylaws of the Fund, or any
agreement or instrument known to such counsel to which the Fund is a party
or by which the Fund may be bound;
(x) no approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation by the Fund of the
transactions herein contemplated (other than as may be required by the NASD
or as required by state securities or "blue sky" laws as to which such
counsel need express no opinion) except such as have been obtained or made,
specifying the same;
(xi) the Fund Agreements have each been duly authorized and approved
by the Fund and comply with all applicable provisions of the Investment
Company Act and the Advisers Act, and the Fund Agreements have each been
duly executed and delivered by the Fund and constitute the valid and
binding agreements of the Fund enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws affecting
the rights of creditors generally and such principles of equity as a court
having jurisdiction may apply;
(xii) the execution and delivery of the Fund Agreements and
fulfillment of the terms thereof will not result in a breach or violation
of the terms and provisions of, or constitute a default under, any
agreement or instrument known to such counsel to which the Fund is a party
or of which its property is the subject nor will such action result in any
violation of the terms and provisions of the charter or bylaws of the Fund
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Fund or any of its
properties; and
(xiii) 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 Securities Act,
the Investment Company Act and the Exchange Act to make the public offering
and
-15-
consummate the sale of the Shares as contemplated by the Offer; and the
provisions of the charter and bylaws of the Fund comply as to form in all
material respects with the requirements of the Investment Company Act.
In rendering such opinion, Piper & Marbury L.L.P. may rely upon
certificates of officers of the Fund and of public officials as to matters of
fact, and may rely as to matters governed by the laws of states other than
Maryland or Federal laws on local counsel in such jurisdictions, provided that
in each case Piper & Marbury L.L.P. shall state that they believe that they and
the Dealer Manager are justified in relying on such other counsel.
In addition to the foregoing opinion, such counsel shall also advise the
Dealer Manager that, while they have not themselves checked the accuracy and
completeness of or otherwise verified, and are not passing upon and assume no
responsibility for the accuracy or completeness of, the statements contained in
the Registration Statement, the Prospectus and the SAI, except to the limited
extent stated in paragraphs (ii) and (v) above, in the course of their review
and discussion of the contents of the Registration Statement, the Prospectus and
the SAI with certain officers of the Fund and its independent accountants and
others, no facts have come to their attention which would cause them to believe
that the Registration Statement, at the time it became effective, or the
Prospectus and SAI, at the time they were filed with the Commission pursuant to
Rule 497(b) and (h) of the Rules and Regulations, or the Registration Statement,
the Prospectus and SAI, at the time they were first provided to the Dealer
Manager, 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 (except that such counsel need express no view as to
financial statements, schedules and other financial information included therein
or excluded therefrom).
(c) The Dealer Manager shall have received on the Commencement Date the
opinion of Xxxxx X. Xxxxxxxx, Xx., Executive Vice-President and General Counsel
of the Adviser, dated the Commencement Date, addressed to the Dealer Manager to
the effect that:
(i) the Adviser is a partnership duly organized and validly existing
in good standing under the laws of the State of Ohio and has the power to
own its properties and conduct its business as described in the Prospectus;
and the Adviser is qualified to transact business in all jurisdictions in
which the conduct of its business requires such qualification, or in which
the failure to qualify would have a material adverse effect upon its
business;
(ii) such counsel knows of no material legal proceedings pending or
threatened against the Adviser; such counsel knows of no material legal
-16-
proceedings pending or threatened against any affiliate of the Adviser
which are required to be disclosed in the Prospectus;
(iii) this Agreement has been duly authorized, executed and delivered
by the Adviser;
(iv) the Adviser is registered with the Commission as an investment
adviser under the Advisers Act and is not prohibited by the Advisers Act or
the Investment Company Act, or the rules and regulations under such acts,
from acting as investment adviser to the Fund as contemplated by the
Advisory Agreement;
(v) the Advisory Agreement has been duly authorized, executed and
delivered on behalf of the Adviser and constitutes a valid and binding
agreement of the Adviser enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other laws affecting the rights of creditors
generally and such principles of equity as a court having jurisdiction may
apply; and
(vi) the execution and delivery by the Adviser of this Agreement or
Advisory Agreement and the performance by the Adviser of its obligations
thereunder or hereunder will not result in a breach or violation of the
terms and provisions of, or constitute a default under, any agreement or
instrument known to such counsel to which the Adviser is a party or of
which its property is the subject nor will such action result in any
violation of the provisions of the partnership agreement of the Adviser or
any statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Adviser or any of its
properties.
In rendering such opinion, Xx. Xxxxxxxx may rely upon certificates of
officers of the Adviser and of public officials as to matters of fact, and may
rely as to matters governed by the laws of states other than Ohio or Federal
laws on local counsel in such jurisdictions, provided that in each case he shall
state that he believes that he and the Dealer Manager are justified in relying
on such other counsel.
(d) The Dealer Manager shall have received from Xxxxx X. Xxxxxxxx, Xx.,
Executive Vice-President and General Counsel of the Dealer Manager, an opinion
dated the Commencement Date with respect to the organization and existence of
the Fund, the validity of the Rights and Shares and other matters as the Dealer
Manager may reasonably request. In rendering such opinion, Xx. Xxxxxxxx may
rely as to all matters governed by the laws of the State of Maryland on the
opinion of Piper & Marbury L.L.P. delivered to the Dealer Manager on the
Commencement Date. In addition, such opinion shall also include a statement to
the effect that nothing has come to the attention of such
-17-
counsel which leads him to believe that the Registration Statement, the
Prospectus or the SAI 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 (except that such counsel need express no view
as to financial statements, schedules and other financial information included
therein or excluded therefrom). With respect to such statement, Xx. Xxxxxxxx may
state that his belief is based upon the procedures set forth therein, but is
without independent check and verification.
(e) The Dealer Manager shall have received at or prior to the Commencement
Date from Piper & Marbury L.L.P. a memorandum or summary, in form and substance
satisfactory to the Dealer Manager, with respect to the qualification for
offering and sale by the Fund of the Rights and Shares under the state
securities or "blue sky" laws of such jurisdictions as the Dealer Manager may
reasonably have designated to the Fund.
(f) The Dealer Manager shall have received on the Commencement Date a
signed letter from Deloitte & Touche LLP, dated the Commencement Date, in form
and substance satisfactory to the Dealer Manager, to the effect that:
(i) they are independent accountants with respect to the Fund under
Rule 101 of the AICPA's Code of Professional Conduct, and its
interpretations and rulings within the meaning of the Securities Act and
the Rules and Regulations;
(ii) they have performed specified procedures, not constituting an
audit, including a reading of the latest available interim financial
statements of the Fund, a reading of the minute books of the Fund,
inquiries of officials of the Fund responsible for financial accounting
matters and such other inquiries and procedures as may be specified in such
letter, and on the basis of such inquiries and procedures nothing came to
their attention that caused them to believe that at the date of the latest
available financial statements read by such accountants, or at a subsequent
specified date not more than five business days prior to the Commencement
Date, there was any change in the capital stock or net assets of the Fund
as compared with amounts shown on the audited financial statements and the
unaudited interim report as of June 30, 1996, included in the Prospectus
except as set forth in the letter.
(g) The Dealer Manager shall have received on the Commencement Date a
certificate or certificates of the Chairman of the Board or President of the
Fund and the Adviser and the Vice-President and Secretary or an Assistant
Vice-President and Assistant Secretary of the Fund and the Adviser to the effect
that, as of the Commencement Date, each of them severally represents as follows:
-18-
(i) The Registration Statement has become effective under the
Securities Act, and no order suspending the effectiveness of the
Registration Statement or under Section 8(e) of the Investment Company Act
has been issued, and no proceedings for such purpose have been taken or
are, to his knowledge, contemplated by the Commission.
(ii) He does not know of any litigation instituted or threatened
against the Fund or the Adviser of a character required to be disclosed in
the Registration Statement which is not so disclosed; he does not know of
any material contract required to be filed as an exhibit to the
Registration Statement which is not so filed; and the representations and
warranties of the Fund and the Adviser contained in Section 1 hereof are
true and correct as of the Commencement Date.
(iii) He has carefully examined the Registration Statement, the
Prospectus and the SAI and, in his opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration
Statement, the Prospectus and the SAI were true and correct, and such
Registration Statement, Prospectus and SAI did not omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading and, in his opinion, since the effective
date of the Registration Statement, no event has occurred which should have
been set forth in a supplement to or an amendment of the Prospectus or the
SAI which has not been so set forth in such supplement or amendment.
(h) The Fund and the Adviser shall have furnished to the Dealer Manager
such further certificates and documents confirming the representations and
warranties contained herein and related matters as the Dealer Manager may
reasonably have requested.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Dealer Manager and to Xxxxx X. Xxxxxxxx, Xx.,
Executive Vice-President and General Counsel of the Dealer Manager.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Dealer Manager and its counsel, this Agreement and all
obligations of the Dealer Manager hereunder may be cancelled by the Dealer
Manager by notifying the Fund of such cancellation in writing or by telegram at
or prior to the Commencement Date.
-19-
In such event, the Adviser, the Fund and the Dealer Manager shall not be
under any obligation to each other (except to the extent provided in Sections 5
and 8 hereof).
7. Conditions of the Obligations of the Fund.
-----------------------------------------
The obligations of the Fund under this Agreement are subject to the
condition that at the Closing Date no stop order suspending the effectiveness of
the Registration Statement or order under Section 8(e) of the Investment Company
Act shall have been issued and in effect or proceedings therefor initiated or
threatened.
8. Indemnification.
----------------
(a) The Fund and the Adviser, jointly and severally, agree to indemnify
and hold harmless the Dealer Manager and each person, if any, who controls the
Dealer Manager within the meaning of the Securities Act against any losses,
claims, damages or liabilities to which the Dealer Manager or such controlling
person may become subject under the Securities Act, or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (x) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, any Preliminary SAI, the Prospectus, the
SAI, or any amendment or supplement thereto, (y) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (z) the Fund or the
Adviser not complying with the Securities Act, the Exchange Act, the Investment
Company Act, the Advisers Act, or other applicable United States securities laws
and regulations; and will reimburse the Dealer Manager and each such controlling
person for any legal or other expenses reasonably incurred by the Dealer Manager
or such controlling person in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding; provided, however,
that the Fund and the Adviser will not be liable in any case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement, or alleged untrue statement, or omission or alleged omission,
made in the Registration Statement, any Preliminary Prospectus, any Preliminary
SAI, the Prospectus, the SAI, or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Fund by or through
the Dealer Manager specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which the Fund or the
Adviser may otherwise have.
(b) The Dealer Manager will indemnify and hold harmless the Fund, each of
its directors, each of its officers who have signed the Registration Statement,
the Adviser and each person, if any, who controls the Fund or the Adviser within
the meaning of the Securities Act, against any losses, claims, damages or
liabilities to which the Fund, the Adviser or any such director, officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
-20-
actions or proceedings in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, any Preliminary SAI, the
Prospectus, the SAI, or any amendment or supplement thereto, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Fund, the
Adviser or any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability action or
proceeding; provided, however, that the Dealer Manager will be liable in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, any Preliminary SAI, the
Prospectus, the SAI, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Fund by the Dealer Manager
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Dealer Manager may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in
Section 8(a) or (b) shall be available to any party who shall fail to give
notice as provided in this Section 8(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related and
was prejudiced by the failure to give such notice, but the failure to give such
notice shall not relieve the indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or otherwise
than on account of the provisions of Section 8(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party and shall
pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred the fees and expenses of the counsel
retained by the indemnified party in the event (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same
-21-
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm for all such indemnified parties. Such firm shall be designated in
writing by the Dealer Manager in the case of parties indemnified pursuant to
Section 8(a) and by the Fund and the Adviser in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if settled
with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
(d) In no case shall the indemnification provided for in this Section 8 be
available to protect any person against any liability to which such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its or his duties, or by reason of its or his
reckless disregard of its or his obligations and duties under this Agreement.
(e) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under Section 8(a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Fund and the Adviser on the one hand and
the Dealer Manager on the other from the Offer. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
Section 8(c) above, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Fund and the Adviser on the one hand and the Dealer Manager on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
as well as any other relevant equitable considerations. The relative benefits
received by the Fund and the Adviser on the one hand and the Dealer Manager on
the other hand shall be deemed to be in the same proportion as the total net
proceeds from the Offer (before deducting expenses) received by the Fund and the
Adviser bear to the fee received by the Dealer Manager pursuant to Section 3(a)
hereof. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Fund or the Adviser on the one hand or the Dealer Manager on the
other 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 Dealer Manager agree that it would not be
just and equitable if contributions pursuant to this paragraph (e) were
determined by pro rata
-22-
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above to this paragraph (e). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this paragraph (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph (e), (i) the Dealer Manager shall not be required
to contribute any amount in excess of the fee received pursuant to Section 3(a)
hereof, and (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) In any proceeding relating to the Registration Statement, the
Prospectus, the SAI, or any supplement or amendment thereto, each party against
whom contribution may be sought under this Section 8 hereby consents to the
jurisdiction of any court having jurisdiction over any other contributing party,
agrees that process issuing from such court may be served upon him or it by any
other contributing party and consents to the service of such process and agrees
that any other contributing party may join him or it as an additional defendant
in any such proceeding in which such other contributing party is a party.
(g) The Fund and the Adviser agree to indemnify each Soliciting Dealer and
its controlling persons to the same extent and subject to the same conditions
and to the same agreements, including with respect to contribution, provided for
in paragraphs (a), (b), (c), (d) and (e) of this Section 8.
9. Notices. All communications hereunder shall be in writing and, except
--------
as otherwise provided herein, shall be mailed, delivered or telegraphed and
confirmed as follows: if to the Dealer Manager, to Xxxxxx Associates, Inc.,
Bank One Towers, 0000 Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxx 00000; if to
the Fund or the Adviser, to USF&G Pacholder Fund, Inc. or Pacholder & Company,
as applicable, Bank One Towers, East Tower, 0000 Xxxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxx 00000.
10. Termination.
-----------
(a) This Agreement shall be subject to termination in the absolute
discretion of the Dealer Manager, by notice given to the Fund prior to the
Expiration Date, if prior to such time (i) financial, political, economic,
currency or banking conditions in the United States shall have undergone any
material change the effect of which on the financial markets makes it, in the
Dealer Manager's reasonable judgment,
-23-
impracticable to proceed with the Offer, (ii) there has occurred any outbreak or
material escalation of hostilities or other calamity or crisis the effect of
which on the financial markets of the United States is such as to make it, in
the Dealer Manager's reasonable judgment, impracticable to proceed with the
Offer, (iii) trading in the shares of Common Stock shall have been suspended by
the Commission or the American Stock Exchange, Inc., (iv) trading in securities
generally on the New York Stock Exchange, Inc. or the American Stock Exchange,
Inc. shall have been suspended or limited or minimum prices that, as of the date
hereof, do not already exist, shall have been established on such exchanges, or
(v) a banking moratorium shall have been declared either by Federal or New York
State authorities.
(b) 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 5.
11. Successors. This Agreement has been and is made solely for the
----------
benefit of the Dealer Manager, the Fund and the Adviser and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. The term "successors" shall not include
any purchaser of the Shares merely because of such purchase.
12. Survival of Representations, Warranties and Agreements. The respective
-------------------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Fund or its officers, of the Adviser or its officers and of the Dealer Manager
set forth in or made pursuant to this Agreement shall remain in full force and
effect, regardless of any (a) cancellation or termination of this Agreement, (b)
any investigation made by or on behalf of Dealer Manager, the Fund or the
Adviser or any of the officers, directors or controlling persons referred to in
Section 8 hereof, and (c) delivery of and payment for the Shares pursuant to the
Offer.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Ohio.
-24-
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
it will become a binding agreement among the Fund, the Adviser and the Dealer
Manager in accordance with its terms.
Very truly yours,
USF&G PACHOLDER FUND, INC.
By:
--------------------------------
PACHOLDER & COMPANY
By: PACHOLDER ASSOCIATES, INC.
General Partner
By:
--------------------------------
Confirmed and Accepted,
as of the date first above written:
XXXXXX ASSOCIATES, INC.
as Dealer Manager
By:
-------------------------------
Xxxxx X. Xxxxxxxx, Xx.
Executive Vice-President and
General Counsel
-25-
EXHIBITS
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Exhibit A - Form of Soliciting Dealer Agreement
-26-
