EXHIBIT 99.2(h)(1)
Salomon Brothers High Income Fund II Inc
Shares/*/
Common Stock
UNDERWRITING
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AGREEMENT
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New York, New York
May 21, 1998
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
As Representative of the several Underwriters
listed in Schedule I hereto
Ladies and Gentlemen:
Salomon Brothers High Income Fund II Inc, a Maryland corporation (the
"Fund"), and Salomon Brothers Asset Management Inc (the "Investment Manager")
each confirms its agreement with you with respect to the sale by the Fund to the
underwriters named in Schedule I hereto (the "Underwriters"), for whom you (the
"Representative") are acting as representative, of shares of Common
Stock, par value $.001 per share, of the Fund ("Common Stock") (said shares to
be issued and sold by the Fund being hereinafter called the "Underwritten
Securities"). The Fund also proposes to grant to the Underwriters, upon the
terms and subject to the conditions set forth in Section 2(b) hereof, an option
to purchase up to additional shares of Common Stock (the "Option
Securities" and together with the Underwritten Securities, the "Securities").
1. Representations and Warranties. (a) Each of the Fund and the
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Investment Manager, jointly and
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/*/ Plus an option to purchase from Salomon Brothers High Income Fund II Inc up
to additional shares to cover over-allotments.
severally, represents and warrants to, and agrees with, each Underwriter as set
forth below in this Section 1. Certain terms used in this Section 1 are defined
in Section 1(iii) hereof.
(i) The Fund meets the requirements for use of Form N-2 under the
Securities Act of 1933 (the "Act") and the Investment Company Act of 1940
(the "Investment Company Act") and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the
"Commission") under each of the Act and the Investment Company Act; the
Fund has filed with the Commission a registration statement (file number
333-48351) on such Form, including a related preliminary prospectus and a
notification of registration on Form N-8A under the Investment Company Act
(file number 811-08709). The Fund may have filed one or more amendments
thereto, including the related preliminary prospectus, each of which has
previously been furnished to you. The Fund will next file with the
Commission one of the following: (A) prior to effectiveness of such
registration statement, a further amendment to such registration statement,
including the form of final prospectus or (B) after effectiveness of such
registration statement, a final prospectus in accordance with Rule 497(b)
or Rules 430A and 497(h), as the case may be. In the case of clause (B),
the Fund has included in such registration statement, as amended at the
Effective Date, all information (other than Rule 430A Information) required
by the Act and the Investment Company Act and the Rules and Regulations to
be included in the Prospectus with respect to the Securities and the
offering thereof. As filed, such amendment and form of final prospectus,
or such final prospectus, shall contain all Rule 430A Information, together
with all other such required information, with respect to the Securities
and the offering thereof and, except to the extent the Representative shall
agree in writing to a modification, shall be in all substantive respects in
the form furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as
2
the Fund has advised you, prior to the Execution Time, will be included or
made therein.
(ii) On the Effective Date, the Registration Statement and the
notification of registration on Form N-8A did or will, and when the
Prospectus is first filed in accordance with Rule 497(b) or (h), as the
case may be, and if subsequently filed pursuant to Rule 497(d), and on
the Closing Date, the Prospectus (and any supplements thereto) will, comply
in all material respects with the applicable requirements of the Act and
the Investment Company Act and the Rules and Regulations; on the Effective
Date, the Registration Statement and the notification of registration on
Form N-8A did not or will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and, on
the Effective Date, the Prospectus, if not filed pursuant to Rule 497(b)
or (h), as the case may be, did not or will not, and on the date of any
filing pursuant to Rule 497(b) or (h), as the case may be, and on the date
of any filing pursuant to Rule 497(d), and on the Closing Date, the
Prospectus (together with any supplement thereto) will not, include any
untrue statement of a material fact or 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; provided,
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however, that the Fund makes no representations or warranties as to the
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information contained in or omitted from the Registration Statement, the
Prospectus (or any supplement thereto) or the notification of registration
on Form N-8A, in reliance upon and in conformity with (A) information
furnished in writing to the Fund by or on behalf of any Underwriter through
the Representative specifically for inclusion in the Registration
Statement, the Prospectus (or any supplement thereto) or the notification
on Form N-8A or (B) information relating to the Investment Manager and
furnished to the Fund by the Investment Manager specifically for inclusion
in the Registration Statement, the Prospectus (or any supplement thereto)
or the notification of registration on Form N-8A.
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(iii) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "Effective Date" shall mean each date that
the Registration Statement and any post-effective amendment or amendments
thereto became or become effective. "Execution Time" shall mean the date
and time that this Agreement is executed and delivered by the parties
hereto. "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in Section 1(i) above and any preliminary prospectus included
in the Registration Statement at the Effective Date that omits Rule 430A
Information. "Prospectus" shall mean the prospectus relating to the
Securities that is first filed pursuant to Rule 497(b) or (h), as the case
may be, after the Execution Time, or as subsequently filed pursuant to
Rule 497(d) under the Act or, if no filing pursuant to Rule 497 is
required, shall mean the form of final prospectus relating to the
Securities included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to
in Section 1(i) above, including incorporated documents, exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto becomes
effec tive prior to the Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended and such term shall
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A. "Rule 430A" and "Rule 497" refer
to such rules under the Act. "Rule 430A Information" means information
with respect to the Securities and the offering thereof permitted to be
omitted from the Registration Statement when it becomes effective
pursuant to Rule 430A.
(iv) The Fund has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland,
with full corporate power and authority to own its property and conduct
its business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction which requires such
4
qualification wherein it owns or leases material properties or conducts
material business; the Fund has no subsidiaries; and the Fund holds all
licenses, certificates and permits from all governmental authorities
necessary for the conduct of its business as described in the Prospectus
(other than the order of the Commission declaring the Registration
Statement effective under the Act and similar orders under the securities
or blue sky laws of the various states of the United States).
(v) The Fund has an authorized equity capitalization as set forth
in the Prospectus; the capital stock of the Fund conforms to the
description thereof contained in the Prospectus; there are no shares of
Common Stock owned of record except 6,667 shares of Common Stock owned of
record by the Investment Manager or an affiliate; the outstanding shares
of Common Stock of the Fund have been duly and validly authorized and
issued and are fully paid and nonassessable; the Securities have been duly
and validly authorized and, when issued and delivered to and paid for by
the Underwriters pursuant to this Agreement, will be validly issued, fully
paid and nonassessable; the Securities have been duly authorized for
listing, subject to official notice of issuance, on the New York Stock
Exchange; the certificates representing the Securities are in valid and
sufficient form; and no holder of outstanding shares of capital stock of
the Fund is entitled to preemptive or other rights to subscribe for the
Securities.
(vi) There is not pending or, to the best knowledge of the Fund,
threatened, any action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Fund of a
character required to be disclosed in the Registration Statement by the
Act, the Investment Company Act or the Rules and Regulations which is not
disclosed in the Prospectus, and there is no franchise, contract, agreement
or document of a character required to be described in the Registration
Statement or Prospectus by the Act, the Investment Company Act or the Rules
and Regulations, or to be filed as an exhibit, which is not described or
filed as required.
5
(vii) Except as stated or contemplated in the Prospectus, subsequent
to the respective dates as of which information is given in the
Registration Statement and the Prospectus, (A) the Fund has not incurred
any liabilities or obligations, direct or contingent, or entered into any
transactions, not in the ordinary course of business, that are material to
the Fund and (B) the Fund has not incurred any indebtedness for borrowed
money.
(viii) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by the Fund of
the transactions contemplated herein, except such as may be required under
the Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Investment Company Act, the Rules and Regulations, the rules and
regulations of the Commission under the Exchange Act or state securities or
blue sky laws of any jurisdiction in connection with the purchase and
distribution of the Securities by the Underwriters.
(ix) The Investment Management Agreement (the "Management
Agreement") to be dated as of the Effective Date, between the Fund and the
Investment Manager, the Custodian Agreement (the "Custodian Agreement") to
be dated as of the Effective Date, between the Fund and PNC Bank, N.A. (the
"Custodian"), and the Transfer Agency and Services Agreement (the
"Transfer Agency Agreement") to be dated as of the Effective Date, between
the Fund and First Data Investor Services Group, Inc., (this Agreement, the
Management Agreement, the Custodian Agreement, and the Transfer Agency
Agreement, collectively, the "Company Agreements") have been duly
authorized, executed and delivered by the Fund; the Management Agreement,
the Custodian Agreement and the Transfer Agency Agreement comply as to form
with all applicable provisions of the Act and each constitutes a legal,
valid and binding instrument enforceable against the Fund in accordance
with its terms (subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally from time to time in effect).
6
(x) 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 under the Act and the Investment Company
Act to make the public offering and consummate the sale of the Securities
under this Agreement, and the provisions of the Fund's articles of
incorporation and by-laws do not violate the Investment Company Act or the
Rules and Regulations of the Commission thereunder.
(xi) The Fund is not in violation of its articles of incorporation
or by-laws or of any law, ordinance, administrative or governmental rule or
regulation applicable to the Fund or of any decree of the Commission, the
National Association of Securities Dealers, Inc. (the "NASD"), any state
securities commission, any national securities exchange, any arbitrator,
any court or any other governmental, regulatory, self-regulatory or
administrative agency or any official having jurisdiction over the Fund or
in default in any material respect in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any mate rial agreement, indenture, lease or
other instrument to which the Fund is a party or by which it or any of its
properties may be bound.
(xii) Neither (A) the issuance and sale of the Securities, (B) the
performance by the Fund of the Fund Agreements, nor (C) the consummation of
the transactions contemplated herein or in the Prospec tus will conflict
with, or result in a breach of or violation of any of the terms and
provisions of, or constitute a default under, any statute, any agree ment
or instrument to which the Fund is a party or by which it is bound or to
which any of the property of the Fund is subject, the Fund's articles of
incorporation or by-laws, or any order, rule or regulation of any court or
governmental agency, authority or body having jurisdiction over the Fund or
any of its properties.
(xiii) Since the date as of which information is given in the
Registration Statement and the
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Prospectus (and any amendment or supplement to either of them), except as
otherwise stated therein, (A) there has been no material, adverse change in
the condition (financial or other), business, properties, net assets or
results of operations of the Fund or business prospects of the Fund,
whether or not arising in the ordinary course of business and (B) there has
been no dividend or distribution of any kind declared, paid or made by the
Fund on any class of its capital stock.
(xiv) The accountants, Price Waterhouse LLP who have certified or
shall certify the financial statements included in the Registration
Statement and the Prospectus (and any amendment or supplement to either of
them), are an independent public accounting firm as required by the Act,
the Investment Company Act and the Rules and Regulations.
(xv) The Statement of Assets and Liabilities, together with related
notes, included in the Registration Statement or the Prospectus (or any
amendment or supplement to either of them) presents fairly the financial
position of the Fund on the basis stated in the Registration Statement at
the respective dates or for the respective periods to which they apply;
such financial statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as disclosed
therein.
(xvi) The Fund has not distributed and, prior to the later to occur
of (A) the Closing Date and (B) completion of the distribution of the
Securities, will not distribute to the public any offering material in
connection with the offering and sale of the Securities other than the
Registration Statement, the prospectus included in Pre-Effective Amendment
No. 1 to the Registration Statement, the Prospectus and the sales
literature filed with the NASD on April 23, 1998 (the "NASD Sales
Literature").
(xvii) The Fund believes that it maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (A)
transactions
8
are executed in accordance with the investment policies and restrictions of
the Fund and the applicable requirements of the Investment Company Act,
the Investment Company Act Rules and Regulations and the Internal Revenue
Code of 1986, as amended; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles, to calculate net asset value and to
maintain material compliance with the books and records requirements under
the Investment Company Act and the Investment Company Act Rules and
Regulations; and (C) the internal books and records of the Fund accurately
reflect the Fund's actual assets in all material respects.
(xviii) Except as stated in this Agreement and in the Prospectus (and
any amendment or supplement thereto), the Fund has not taken and will not
take, directly or indirectly, any action designed to or which might
reasonably be expected to cause or result in or which will constitute
stabilization or manipulation of the price of shares of Common Stock and
the Fund is not aware of any such action taken or to be taken by any
affiliates of the Fund.
(xix) The NASD Sales Literature complied and comply in all material
respects with the applicable requirements of the Act, the Act Rules and
Regulations and the rules and interpretations of the NASD, and neither
the NASD Sales Literature nor any other advertising, sales literature or
other promotional material (including "prospectus wrappers," "broker kits,"
"road show slides" and "road show scripts") authorized by or prepared by or
on behalf of the Fund or the Investment Manager for use in connection with
the offering and sale of the Securities contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(xx) No holder of any security of the Fund has any right to require
registration of shares of Common Stock or any other security of the Fund
because of the filing of the Registration Statement
9
or consummation of the transactions contemplated by this Agreement.
(b) The Investment Manager represents and warrants to, and agrees
with, each Underwriter that:
(i) The Investment Manager is duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to own its property and
conduct its business as described in the Prospectus, and is duly qualified
to do business as a foreign corporation and is in good standing under the
laws of each jurisdiction which requires such qualification wherein it owns
or leases material properties or conducts material business.
(ii) The Investment Manager is duly registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (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 for the Fund under the Management Agreement and as
contemplated by the Prospectus.
(iii) This Agreement and the Management Agreement (collectively, the
"Investment Manager Agreements"), have been duly authorized, executed and
delivered by the Investment Manager; the Management Agreement complies as
to form with all applicable provisions of the Act and the Investment
Company Act and constitutes a legal, valid and binding instrument
enforceable against the Investment Manager in accordance with its terms
(subject, as to enforce ment of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors'
rights generally from time to time in effect).
(iv) neither (A) the operations and activities of the Investment
Manager as contemplated in the Prospectus, (B) the performance by the
Investment Manager of the Investment Manager Agreements, nor (C) the
consummation of the transactions contemplated herein or in the Prospectus
will conflict
10
with, or result in a breach of or violation of any of the terms and
provisions of, or constitute a default under, any statute, any agreement or
instrument to which the Investment Manager is a party or by which it is
bound or to which any of the property of the Investment Manager is subject,
the Investment Manager's certificate of incorporation or by-laws, or any
order, rule or regulation of any court or governmental agency, authority or
body having jurisdiction over the Investment Manager or any of its
properties; and no consent, approval, authorization or order of, or filing
with, any court or governmental agency, authority or body is required for
the consummation of the transactions contemplated by the Investment Manager
Agreements in connection with the issuance or sale of the Securities by the
Fund, except such as may be required under the Act, the Exchange Act, the
Investment Company Act or state securities laws or blue sky laws.
(v) On the Effective Date, the Registration Statement did not or will
not contain any untrue statement of a material fact relating to the
description of the Investment Manager or the Investment Manager Agreements
or omit to state a material fact relating to the description of the
Investment Manager or the Investment Manager Agreements required to be
stated therein or necessary to make the statements therein not misleading;
and on the Effective Date, the Prospectus, if not filed pursuant to Rule
497(b) or (h), as the case may be, did not or will not, and on the date of
any filing pursuant to rule 497(b) or (h), as the case may be, and on the
date of any filing pursuant to Rule 497(d), and on the Closing Date, the
Prospectus (together with any supplements thereto) will not, include any
untrue statement of a material fact relating to the description of the
Investment Manager or the Invest ment Manager Agreements or omit to state a
material fact relating to the description of the Investment Manager or the
Investment Manager Agreements necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(vi) There has not been any material change in the management of the
Investment Manager or any
11
material adverse change in the condition (financial or other) of the
Investment Manager since the date of the Prospectus (or, if the Prospectus
is not in existence, the Preliminary Prospectus).
(vii) There is not pending, or to the best knowledge of the
Investment Manager, threatened, any action, suit, proceeding, inquiry or
investigation before or brought by any court or governmental agency,
authority or body or any arbitration involving the Investment Manager (A)
relating to any of the transactions contemplated by the Investment Manager
Agreements or (B) which might, in the reasonable judgment of the
Investment Manager, individually or in the aggregate, result in any
material adverse change in the condition (financial or other), business,
prospectus or net worth of the Investment Manager, or might materially and
adversely affect the properties or assets thereof.
(viii) Except as stated in this Agreement and in the Prospectus (and
in any amendment or supplement thereto), the Investment Manager has not
taken and will not take, directly or indirectly, any action designed to or
which might reasonably be expected to cause or result in or which will
constitute, stabilization or manipulation of the price of shares of Common
Stock and the Investment Manager is not aware of any such action taken or
to be taken by any affiliates of the Investment Manager.
2. Purchase and Sale. (a) Subject to the terms and conditions and in
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reliance upon the representations and warranties herein set forth, the Fund
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Fund, at a purchase price of $15.00 per share,
the amount of the Underwritten Securities set forth opposite such Underwriter's
name in Schedule I hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Fund hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up
to shares of Option Securities at the same purchase price per share as
the Underwriters shall pay for the Underwritten Securities. Said option may be
12
exercised only to cover over-allotments in the sale of the Underwritten
Securities by the Underwriters. Said option may be exercised in whole or from
time to time in part at any time on or before the 45th day after the date of the
Prospectus upon written or telegraphic notice by the Representative to the Fund
setting forth the number of shares of the Option Securities as to which the
several Underwriters are exercising the option and the settlement date. Delivery
of certificates for the shares of Option Securities, and payment therefor, shall
be made as provided in Section 3 hereof. The number of shares of the Option
Securities to be purchased by each Underwriter shall be the same percentage of
the total number of shares of the Option Securities to be purchased by the
several Underwriters as such Underwriter is purchasing of the Underwritten
Securities, subject to such adjustments as you in your absolute discretion shall
make to eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the
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Underwritten Securities and the Option Securities (if the option provided for in
Section 2(b) hereof shall have been exercised on or before the third business
day prior to the Closing Date) shall be made at 10:00 AM, New York City time, on
May 28, 1998, or such later date (not later than June 4, 1998) as the
Representative shall designate, which date and time may be postponed by
agreement between the Representative and the Fund or as provided in Section 9
hereof (such date and time of delivery and payment for the Securities being
herein called the "Closing Date"). Delivery of the Securities shall be made to
the Representative for the respective accounts of the several Underwriters
against payment by the several Underwriters through the Representative of the
purchase price therefor in immediately available funds. Delivery of the
Underwritten Securities and the Option Securities shall be made at such location
as the Representative shall reasonably designate at least one business day in
advance of the Closing Date and payment for such Securities shall be made at the
office of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP in New York, New York.
Certificates for the Securities shall be registered in such names and in such
denominations as the Representative may request not less than three full
business days in advance of the Closing Date.
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The Fund agrees to have the Securities available for inspection,
checking and packaging by the Representative in New York, New York, not later
than 1:00 PM on the business day prior to the Closing Date.
If the option provided for in Section 2(b) hereof is exercised after
the third business day prior to the Closing Date, the Fund will deliver (at the
expense of the Fund) to the Representative, at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ the date specified by the Representative (which shall in no event
be earlier than three business days nor later than ten business days after
exercise of said option), certificates for the Option Securities in such names
and denominations as the Representative shall have requested against payment of
the purchase price therefor in immediately available funds. If settlement for
the Option Securities occurs after the Closing Date, the Fund will deliver to
the Representative on the settlement date for the Option Securities, and the
obligation of the Underwriters to purchase the Option Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
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Underwriters propose to offer the Securities for sale to the public as set
forth in the Prospectus.
5. Agreements. The Fund agrees with the several Underwriters that:
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(a) The Fund will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment thereof, to
become effective. Prior to the termination of the offering of the Securities,
the Fund will not file any amendment of the Registration Statement or supplement
(whether pursuant to the Act, the Investment Company Act, or otherwise) to the
Prospectus unless the Fund has furnished you a copy for your review prior to
filing and will not file any such proposed amendment or supplement to which you
reasonably object. Subject to the foregoing sentence, if the Registration
Statement has become or becomes effective pursuant to Rule 430A, or filing of
the Prospectus
14
is otherwise required under Rule 497, the Fund will cause the Prospectus,
properly completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 497 within the time period
prescribed and will provide evidence satisfactory to the Representative of such
timely filing. The Fund will promptly advise the Representative (i) when the
Registration Statement, if not effective at the Execution Time, and any
amendment thereto, shall have become effective, (ii) when the Prospectus, and
any supplement thereto, shall have been filed (if required) with the Commission
pursuant to Rule 497, (iii) when, prior to termination of the offering of the
Securities, any amendment to the Registration Statement shall have been filed or
become effective, (iv) of any request by the Commission for any amendment of the
Registration Statement or supplement to the Prospectus or for any additional
information, (v) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement under the Act or the issuance of
any notice or order under Section 8(e) of the Investment Company Act or the
institution or threatening of any proceeding for either such purpose and (vi) of
the receipt by the Fund of any notification with respect to the suspension of
the qualification of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The Fund will use
its best efforts to prevent the issuance of any such stop order and, if issued,
to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend the Registration
Statement or supplement the Prospectus to comply with the Act, the Investment
Company Act or the Rules and Regulations, the Fund promptly will prepare and
file with the Commission, subject to the second sentence of para graph (a) of
this Section 5, an amendment or supplement which will correct such statement or
omission or effect such compliance.
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(c) As soon as practicable, the Fund will make generally available to
its security holders and to the Representative an earnings statement or
statements of the Fund and its subsidiaries which will satisfy the provisions
of Section ll(a) of the Act and Rule 158 under the Act.
(d) The Fund will furnish to the Representative and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
(including exhibits thereto) and to each other Underwriter a copy of the
Registration Statement (without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or dealer may be required by the Act, as many
copies of each Preliminary Prospectus and the Prospectus and any supplement
thereto as the Representative may reasonably request.
(e) The Fund will arrange for the qualification of the Securities for
sale under the laws of such jurisdictions as the Representative may designate,
will maintain such qualifications in effect so long as required for the
distribution of the Securities and will pay the fee of the National Association
of Securities Dealers, Inc., in connection with its review of the offering.
(f) The Fund will not, for a period of 180 days following the date of
the Prospectus, without the prior written consent of the Representative, offer,
sell or contract to sell, register with the Commission or otherwise dispose of,
directly or indirectly, or announce the offering of, any shares of Common Stock
other than the Securities or any securities convertible into, or exchangeable
for, shares of Common Stock; provided, however, that the Fund may issue and sell
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Common Stock pursuant to any dividend reinvestment plan of the Fund in effect at
the Execution Time.
(g) The Fund will apply the net proceeds from the sale of the
Underwritten Securities, and of the Option Securities, if any, for the purposes
set forth in the Prospectus.
(h) The Fund will use its best efforts to list, subject to notice of
issuance, the Securities to be
16
sold by it on the New York Stock Exchange simultaneously with the effectiveness
of the Registration Statement.
6. Conditions to the Obligations of the Underwriters. The
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obligations of the Underwriters to purchase the Underwritten Securities and the
Option Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Fund and the Investment
Manager contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Fund and the Investment Manager made in any certificates pursuant to the
provisions hereof, to the performance by the Fund and the Investment Manager of
their respective obligations hereunder and to the following additional
conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representative agree in writing to a later time,
the Registration Statement will become effective not later than (i) 6:00 PM New
York City time, on the date of determination of the public offering price, if
such determination occurred at or prior to 3:00 PM New York City time on such
date or (ii) 12:00 Noon on the business day following the day on which the
public offering price was determined, if such determination occurred after 3:00
PM New York City time on such date; if filing of the Prospectus, or any
supplement thereto, is required pursuant to Rule 497(b), (d) or (h), the
Prospectus, and any such supplement, will be filed in the manner and within the
time period required by Rule 497(b), (d) or (h), as the case may be; and no stop
order suspending the effectiveness of the Registration Statement under the Act
and no notice or order under Section 8(e) of the Investment Company Act shall
have been issued and no proceedings for either purpose shall have been
instituted or threatened.
(b) The Fund shall have furnished to the Representative the opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Fund, dated the Closing Date, to the
effect that:
(i) the Fund has been duly incorporated and is validly existing and
in good standing as a corporation under the laws of the State of Maryland
and has full corporate power and authority to conduct its
17
business as described in the Prospectus, and is duly registered and
qualified to conduct its business and is in good standing in the State of
New York;
(ii) all outstanding shares of the Fund's Common Stock,
have been duly authorized, and are validly issued, fully paid and
nonassessable; the Securities have been duly authorized and, upon payment
and delivery in accordance with this Agreement, will be validly issued,
fully paid and nonassessable.
(iii) the statements made in the Prospectus under the caption
"Description of Capital Stock - Common Stock," insofar as they purport to
constitute summaries of the terms of the Fund's Common Stock (including the
Securities), constitute accurate summaries of the terms of such Common
Stock in all material respects; the Securities have been authorized for
listing, subject to official notice of issuance and evidence of
satisfactory distribution, on the New York Stock Exchange; the form of
certificates for the Securities conforms to the require ments of the
General Corporation Law of Maryland; there are no preemptive rights under
federal or Maryland law to subscribe for or purchase shares of the Fund's
capital stock and there are no preemptive or other rights to subscribe for
or to purchase, nor any restriction upon the voting or transfer of, any
shares of the Fund's capital stock pursuant to the Fund's articles of
incorporation or by-laws or any agreement or other instrument filed or
incorporated by reference as an exhibit to the Registration Statement.
(iv) to the knowledge of such counsel, there is no pending or
threatened legal or governmental proceeding required to be described in the
Prospectus which is not described as required, or any contracts or
documents of a character required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement or incorporated by reference therein, which are not described and
filed or incorporated by reference as required;
18
(v) the statements in the Prospectus under the captions "Management
of the Fund - Investment Manager," "Management of the Fund - Directors
and Officers" and "Description of Capital Stock - Common Stock," insofar as
they purport to constitute summaries of the terms of Maryland or federal
statutes, rules and regulations thereunder or contracts and other
documents, constitute accurate summaries of the terms of such statutes,
rules and regulations or contracts and other documents in all material re-
spects;
(vi) the statements in the Prospectus under the captions "Dividends
and Distributions; Dividend Reinvestment Plan" and "Taxation," insofar as
they purport to constitute summaries of matters of United States federal
tax law and regulations or legal conclusions with respect thereto,
constitute accurate summaries of the matters described therein in all
material respects;
(vii) the Registration Statement has become effective under the Act
(such counsel may, to the extent necessary, rely on oral confirmation from
the Commission to this effect in rendering such opinion); any required
filing of the Prospectus, and any supplements thereto, pursuant to Rule
497(b), (d) or (h) has been made in the manner and within the time period
required by Rule 497(b), (d) or (h) under the Act; and, to the knowledge of
such counsel, no stop order suspending the effectiveness of the Registra
tion Statement has been issued; and, to the knowledge of such counsel, no
proceeding for that purpose has been instituted or threatened by the
Commission;
(viii) this Agreement has been duly authorized, executed and
delivered by the Fund;
(ix) no consent, approval, authorization, order, registration or
qualification of or with any federal, Maryland or New York governmental
agency or body is required for the issue and sale of the Securities by the
Fund and the compliance by the Fund with all of the provisions of this
Agreement, except for the registration under the Act, the Exchange Act and
the Investment Company Act of the Securities, and such consents, approvals,
authoriza-
19
tions, registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters.
(x) the issue and sale of the Securities by the Fund and the
compliance by the Fund with all of the provisions of this Agreement will
not breach or result in a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument filed or
incorporated by reference as an exhibit to the Registration Statement, nor
will such action violate the articles of incorporation or by-laws of the
Fund or any federal, Maryland or New York statute or any rule or regulation
that has been issued pursuant to any federal, Maryland or New York statute
or any order known to such counsel issued pursuant to any federal, Maryland
or New York stat ute by any court or governmental agency or body or court
having jurisdiction over the Fund or any of its properties;
(xi) the Management Agreement, the Custodian Agreement and the
Transfer Agency Agreement have been duly authorized, executed and delivered
by the Fund, comply as to form with all applicable provisions of the
Investment Company Act and are legal, valid, binding and enforceable
obligations of the Fund, subject, to the effects of bankruptcy, insol-
vency, 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
(xii) the Fund is registered with the Commission under the Investment
Company Act as a closed-end diversified management investment company,
and the provisions of the articles of incorporation and by-laws of the
Fund do not violate the Investment Company Act or the Rules and Regulations
of the Commission thereunder;
In rendering such opinion, such counsel may limit such opinion to matters
involving the application of the laws of the State of New York, the ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ and may rely (A) as to matters involving the application of laws
of the State of Maryland, to the extent they deem proper and specified in such
opinion, upon the opinion of Piper & Marbury L.L.P. or other counsel of good
standing whom they believe to be reliable and who are satisfactory to counsel
for the Underwriters and (B) as to matters of fact, to the extent they deem
proper, on certificates of responsible officers of the Fund, the Investment
Manager and public officials. References to the Prospectus in this Section 6(b)
include any supplements thereto at the Closing Date.
Such counsel has not independently verified the accuracy, completeness
or fairness of the statements made or included in the Registration Statement or
the Prospectus and takes no responsibility therefor, except as and to the extent
set forth in Sections 6(b)(iii), 6(b)(v) and 6(b)(vi) above. In the course of
the preparation by the Fund of the Registration Statement and the Prospectus,
such counsel has participated in conferences with certain officers and emp1oyees
of the Fund and the Investment Manager, with representatives of Price Waterhouse
LLP and with counsel to the Investment Manager. Based upon such counse1's
examination of the Registration Statement and the Prospectus, such counse1's
investigations made in connection with the preparation of the Registration
Statement and the Prospectus and such counsel's participation in the conferences
referred to above, (i) such counsel is of the opinion that the Registration
Statement, as of its effective date, and the Prospectus, as of May 21, 1998,
complied as to form in all material respects with the requirements of the Act
and the Investment Company Act and the applicable rules and regulations of the
Commission thereunder, except that in each case such counsel expresses no
opinion with respect to the financial statements or other financial or
statistical data contained in the Registration Statement or the Prospectus, and
(ii) such counsel has no reason to believe that the Registration Statement, as
of its effective date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading or that the Prospectus
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that in each
case such counsel
21
expresses no belief with respect to the financial state ments or other financial
or statistical data contained in the Registration Statement or the Prospectus.
(c) The Investment Manager shall have furnished to the Representative
the opinion of internal counsel for the Investment Manager reasonably acceptable
to the Representative, dated the Closing Date, to the effect that:
(i) the Investment Manager is duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with full corporate power and authority to own its property and
conduct its business as described in the Prospectus, and is duly qualified
to do business as a foreign corporation and is in good standing under the
laws of each jurisdiction which requires such qualification wherein it owns
or leases material properties or conducts material business;
(ii) the Investment Manager is duly registered 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 either,
from acting as Investment Manager for the Fund under the Management
Agreement and as contemplated in the Prospectus;
(iii) this Agreement and the Management Agreement have each been duly
authorized, executed and delivered by the Investment Manager, and the
Management Agreement constitutes a legal, valid and binding instrument
enforceable against the Investment Manager in accordance with its terms
(subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally from time to time in effect);
(iv) neither (A) the operations and activities of the Investment
Manager as contemplated in the Prospectus, (B) the performance by the
Investment Manager of its obligations under the Investment Management
Agreements, nor (C) the consummation of the transactions contemplated
herein or in the
22
Prospectus will conflict with, or result in a breach of, or constitute a
default under the certificate of incorporation or by-laws of the Investment
Manager or the terms of any indenture or other agreement or instrument
known to such counsel to which the Investment Manager or any of its
affiliates is a party or by which it is bound, or any law, order or regu
lation known to such counsel to be applicable to the Investment Manager of
any court, regulatory body, administrative agency, governmental body, stock
exchange or securities association or any other authority or arbitrator
having jurisdiction over the Investment Manager or any of its affiliates.
Although such counsel has not undertaken, except as otherwise
indicated in their opinion, to determine independently and does not assume any
responsibility for, the accuracy or completeness of the statements in the
Registration Statement, such counsel has participated in the preparation of the
Registration Statement and the Prospectus, including review and discussion of
the contents thereof and nothing has come to the attention of such counsel
that has caused it to believe that the Registration Statement, at the time the
Registration Statement became effective or the Prospectus, as of its date and
as of the Closing Date, as the case may be, or the date of any closing of the
sale of any Option Securities, 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 any amendment or
supplement to the Prospectus, as of the Closing Date or the date of any closing
of the sale of any Option Securities, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (it being understood that such counsel need express no opinion
with respect to the financial statements and the notes thereto and the schedules
and other financial and statistical data included in the Registration
Statement or the Prospectus).
(d) The Representative shall have received from Skadden, Arps, Slate,
▇▇▇▇▇▇▇ & ▇▇▇▇ LLP counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with respect to the issuance and sale of the Securities, the
Registration Statement, the Prospec-
23
tus (together with any supplement thereto) and other related matters as the
Representative may reasonably require, and the Fund shall have furnished to such
counsel such documents as they request for the purpose of enabling them to pass
upon such matters.
(e) The Fund shall have furnished to the Representative a
certificate of the Fund, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of the Fund, dated the Closing
Date, to the effect that the signers of such certificate have carefully examined
the Registration Statement, the Prospectus, any supplement to the Prospectus and
this Agreement and that:
(i) the representations and warranties of the Fund in this Agreement
are true and correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date and the Fund has
complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement under the Act and no notice or order under Section 8(e) of the
Invest ment Company Act has been issued and no proceedings for either
purpose have been instituted or, to the Fund's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been
no material adverse change in the condition (financial or other), earnings,
business or properties of the Fund, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto).
(f) The Investment Manager shall have furnished to the Representative
a certificate of the Investment Manager, signed by the Chairman of the Board,
the President or any Vice President and the principal financial or accounting
officer of the Investment Manager, dated the Closing Date, to the effect that
the signers of
24
such certificate have carefully examined the Registration Statement, the
Prospectus, any supplement to the Prospectus and this Agreement and that the
representations and warranties of the Investment Manager in this Agreement are
true and correct in all material respects on and as of the Closing Date with the
same effect as if made on the Closing Date and the Investment Manager has
complied with all the agreements and satisfied all the conditions on its part to
be performed or satisfied at or prior to the Closing Date;
(g) At the Execution Time and at the Closing Date, Price Waterhouse
LLP shall have furnished to the Representative a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form and
substance satisfactory to the Representative, confirming that they are
independent accountants within the meaning of the Act and the respective
applicable published rules and regulations thereunder and stating in effect
that:
(i) in their opinion the statement of assets and liabilities and
related notes included in the Registration Statement and the Prospectus and
reported on by them comply in form in all material respects with the
applicable accounting requirements of the Act and the Investment Company
Act and the Rules and Regulations;
(ii) on the basis of carrying out certain specified procedures (but
not an examination in accordance with generally accepted auditing ▇▇▇▇-
dards) which would not necessarily reveal matters of significance with
respect to the comments set forth in such letter, a reading of the minutes
of the meetings of the stockholders, directors and committees thereof of
the Fund, and inquiries of certain officials of the Fund who have
responsibility for financial and accounting matters of the Fund, nothing
came to their attention which caused them to believe that at a specified
date no more than five business days prior to the date of the letter there
was any change in the shares of Common Stock or net assets or shareholders'
equity of the Fund as compared with the amounts shown on the statement of
assets and liabilities included in the Prospectus, except in all instances
for changes or decreases set
25
forth in such letter, in which case the letter shall be accompanied by an
explanation by the Fund as to the significance thereof unless said
explanation is not deemed necessary by the Representative.
References to the Prospectus in this paragraph (g) include any supplement
thereto at the date of the letter.
(h) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (g) of this Section 6 or (ii) any change, or
any development involving a prospective change, in or affecting the business or
properties of the Fund the effect of which, in any case referred to in clause
(i) or (ii) above, is, in the judgment of the Representative, so material and
adverse as to make it impractical or inadvisable to proceed with the offering
or the delivery of the Securities as contemplated by the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of any
supplement thereto).
(i) Prior to the Closing Date, the Fund shall have furnished to the
Representative such further information, certificates and documents as the
Representative may reasonably request.
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 Representative and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled
at, or at any time prior to, the Closing Date by the Representative. Notice of
such cancellation shall be given to the Fund in writing or by telephone or
telegraph confirmed in writing.
26
7. Reimbursement of Underwriters' Expenses.
---------------------------------------
The Fund will pay all costs, expenses, fees and taxes incident to the
performance of its obligations under this Agreement, including, but not limited
to, expenses relating to (i) the preparation, printing and filing of the
Registration Statement as originally filed and of each amendment thereto, of the
Preliminary Prospectuses, and of the Prospectus and any amendments or
supplements thereto, (ii) the preparation of the Fund Agreements, (iii) the
preparation, issuance and delivery of the certificates for the Securities to the
Underwriters, including stock transfer taxes, if any, payable upon the sale,
issuance and delivery of the Securities, (iv) the fees and disbursements of the
Fund's counsel and accountants, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 5(e) of this
Agreement, including filing fees and any fees or disbursements of counsel for
the Under writers in connection therewith and in connection with the
preparation of a Blue Sky Survey, (vi) the reproduction and delivery to the
Underwriters of copies of the Registration Statement as originally filed and of
each amendment thereto, of the Preliminary Prospectuses, and of the Prospectus
and any amendments or supplements thereto, (vii) the reproduction and delivery
to the Underwriters of copies of the Blue Sky Survey, (viii) the fees and
expenses incurred with respect to filings with the National Association of
Securities Dealers, Inc., (ix) the preparation and delivery to the Underwriters
of any marketing brochure (excluding any brochures distributed to brokers) and
any tombstone advertisement placed by the Fund or placed by the Underwriters at
the request of the Fund, (x) the fees and expenses incurred with respect to the
listing of the Securities on the New York Stock Exchange and the registration
thereof under the Exchange Act, and (xi) an amount of $250,000 payable on the
Closing Date to the Underwriters in partial reimbursement of their expenses in
connection with the offering.
If the sale of the Securities provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 6 hereof is not satisfied, because of any termination pursuant to
Section 10 hereof or because of any refusal, inability or failure on the part of
the Fund to perform
27
any agreement herein or comply with any provision hereof other than by reason of
a default by any of the Underwriters, the Fund will remain liable to pay all of
the costs, expenses, fees and taxes specified in the preceding paragraph and
will reimburse the Underwriters severally upon demand for all out-of-pocket
expenses (includ ing reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Securities.
8. Indemnification and Contribution. (a) The Fund and the Investment
--------------------------------
Manager jointly and severally agree to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter,
and each person who controls any Underwriter within the meaning of either the
Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement for the registration of the Securities as originally
filed or in any amendment thereof, or in any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon 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, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Fund and the Investment Manager
-------- -------
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the Fund
by or on behalf of any Underwriter through the Representative specifically for
inclusion therein. This indemnity agreement will be in addition to any liability
which the Fund or the Investment Manager may otherwise have.
28
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Fund and the Investment Manager, each of its respective directors, each of
its respective officers who signs the Registration Statement, and each person
who controls the Fund and the Investment Manager within the meaning of either
the Act or the Exchange Act, to the same extent as the foregoing indemnity to
each Underwriter, but only with reference to written information relating to
such Underwriter furnished to the Fund by or on behalf of such Underwriter
through the Representative specifically for inclusion in the documents referred
to in the foregoing indemnity. This indemnity agreement will be in addition to
any liability which any Underwriter may otherwise have. The Fund and the
Investment Manager acknowledge that the statements set forth in the last
paragraph of the cover page and under the heading "Underwriting" in any
Preliminary Prospectus and the Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in any Preliminary Prospectus or the Prospectus, and you, as the Representa
tive, confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
-------- -------
satisfactory to the indemnified party. Notwithstanding the indemnify-
29
ing party's election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv)
the indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indem nifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Fund and the Investment Manager, jointly
and severally, and the Underwriters agree to contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) (collectively
"Losses") to which the Fund, the Investment Manager and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Fund and the Investment Manager on the one
hand and by the Underwriters on the other from the offering of the Securities;
30
provided, however, that in no case shall any Underwriter (except as may be
-------- -------
provided in any agreement among underwriters relating to the offering of the
Securities) be responsible for any amount in excess of the underwriting discount
or commission applicable to the Securities purchased by such Underwriter
hereunder. If the allocation provided by the immediately preceding sentence
is unavailable for any reason, the Fund and the Investment Manager, jointly and
severally, and the Underwriters shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Fund and the Investment Manager on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Fund and the Investment Manager shall be deemed to be
equal to the total net proceeds from the offering (before deducting expenses),
and benefits received by the Underwriters shall be deemed to be equal to the
total underwriting discounts and commissions, in each case as set forth on the
cover page of the Prospectus. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information provided
by the Fund, the Investment Manager or by the Underwriters. The Fund, the
Investment Manager and the Underwriters agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this Section 8(d), no
person guilty of fraudulent misrepresentation (within the mean ing of Section
ll(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8,
each person who controls an Underwriter within the meaning of either the Act or
the Exchange Act and each director, officer, employee and agent of an
Underwriter shall have the same rights to contribution as such Underwriter, and
each person who controls the Fund or the Investment Manager within the meaning
of either the Act or the Exchange Act, each officer of the Fund who shall have
signed the Registration Statement and each director of the Fund shall have the
same rights to contribution as the Fund, subject in each case to the applicable
terms and conditions of this Section 8(d).
31
9. Default by an Underwriter. If any one or more Underwriters shall
-------------------------
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed
to purchase; provided, however, that in the event that the aggregate amount of
-------- -------
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter,
the Investment Manager or the Fund. In the event of a default by any
Underwriter as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding seven days, as the Representative shall determine
in order that the required changes in the Registration Statement and the
Prospectus or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Underwriter of its
liability, if any, to the Fund, the Investment Manager, and any nondefaulting
Underwriter for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in
-----------
the absolute discretion of the Representative, by notice given to the Fund prior
to delivery of and payment for the Securities, if prior to such time (i) trading
in the Fund's Common Stock shall have been suspended by the Commission or the
New York Stock Exchange or trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum prices shall have been
established on such Exchange, (ii) a banking moratorium shall have been declared
either by Federal or New York State authorities or (iii) there shall have
occurred any outbreak or esca-
32
lation of hostilities, declaration by the United States of a national emergency
or war or other calamity or crisis the effect of which on financial markets is
such as to make it, in the judgment of the Representative, impracticable or
inadvisable to proceed with the offering or delivery of the securities as
contemplated by the Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of
the Fund or its officers and of the Underwriters set forth in or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter, the Investment Manager,
or the Fund or any of the officers, directors or controlling persons referred to
in Section 8 hereof, and will survive delivery of and payment for the
Securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Representative, will be mailed,
delivered or telegraphed and confirmed to them, care of ▇▇▇▇▇ ▇▇▇▇▇▇ Inc. at ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, attention: Counsel; or, if sent to
the Fund, will be mailed, delivered or telegraphed and confirmed to care of
Salomon Brothers Asset Management Inc, Seven ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, attention: Counsel.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
--------------
in accordance with the laws of the State of New York applicable to contracts
made and to be performed within the State of New York.
15. Counterparts. This agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
33
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement between the
Fund and the several Underwriters.
Very truly yours,
SALOMON BROTHERS HIGH INCOME
FUND II INC
By:__________________________
Name:
Title:
SALOMON BROTHERS ASSET
MANAGEMENT INC
By:__________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
▇▇▇▇▇ ▇▇▇▇▇▇ INC.
By:______________________
Managing Director
For itself and the several
Underwriters named in Schedule I to the
foregoing Agreement.
34
SCHEDULE I
Underwriters Number of Shares
------------ ----------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney..................
---------
▇.▇. ▇▇▇▇▇▇▇ & Sons, Inc. ............
---------
Advest, Inc. .........................
---------
EVEREN Securities, Inc. ..............
---------
▇▇▇▇▇▇▇▇▇▇ & Co. Inc. ................
---------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Inc. .........
---------
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, Incorporated .
---------
▇▇▇▇▇▇▇▇ & Company Securities, Inc. ..
---------
▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company, Inc. ........
---------
The ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ Company, LLC....
---------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Incorporated...........
---------
Wedbush ▇▇▇▇▇▇ Securities.............
---------
Total..............................
---------
35
