Investment Company Act File No. 811-7633
Securities Act File No. 333-4039
As filed with the Securities and Exchange Commission on August 6, 1996
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 1
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and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
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Amendment No. 3
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(Check appropriate box or boxes)
THE THERMO OPPORTUNITY FUND, INC.
(Exact Name of Registrant as Specified in Charter)
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (513) 629-2000
Gregory E. Ratte
Brundage, Story and Rose, L.L.C.
One Broadway
New York, New York 10004
(Name and Address of Agent for Service)
Copies to:
David M. Leahy, Esq.
Sullivan & Worcester LLP
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
If the securities being registered on this form are to be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities
Act of 1933, other than securities offered in connection with a dividend
reinvestment plan, check the following box. / /
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THE THERMO OPPORTUNITY FUND, INC.
Cross Reference Sheet
Pursuant to Rule 481(a)
Under the Securities Act of 1933
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PART A
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Item No. Registration Statement Caption Caption in Prospectus
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1. Outside Front Cover Registration Statement
Cover Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside
Cover Page Front Cover Pages of
Prospectus
3. Fee Table and Synopsis Fee Table
4. Financial Highlights Prospectus Summary; Risk
Factors; Investment
Objective and Policies
5. Plan of Distribution Prospectus Summary;
Underwriting
6. Selling Shareholders Inapplicable
7. Use of Proceeds Prospectus Summary; Use
of Proceeds
8. General Description of The Fund; Investment
the Registrant Objective and Policies;
Risk Factors
9. Management Operation of the Fund
10. Capital Stock, Long-Term Debt, and Capital Stock; Dividends
Other Securities and Distributions
11. Defaults and Arrears on Senior Not Applicable
Securities
12. Legal Proceedings Not Applicable
13. Table of Contents of the Statement Table of Contents of the
of Additional Information Statement of Additional
Information
(i)
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PART B
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Caption in Statement
of Additional
Item No. Registration Statement Caption Information
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14. Cover Page Cover Page
15. Table of Contents Table of Contents
16. General Information and History Not Applicable
17. Investment Objective and Policies The Thermo Electron
Subsidiaries; Certain
Portfolio Securities and
Investment Techniques;
Investment Restrictions;
Quality Ratings of
Corporate Bonds and
Preferred Stocks;
Portfolio Turnover;
Appendix
18. Management Directors and Officers
19. Control Persons and Principal Not Applicable
Holders of Securities
20. Investment Advisory and Other The Adviser; Custodian;
Services Auditors; MGF Service
Corp.
21. Brokerage Allocation and Other Securities Transactions
Practices
22. Tax Status Taxes
23. Financial Statements Statement of Assets and
Liabilities
PART C
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The information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Registration
Statement.
(ii)
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INDEX TO EXHIBITS
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(a) (1) Articles of Incorporation*
(2) Articles of Amendment dated June 26, 1996*
(b) Bylaws*
(c) Inapplicable
(d) Inapplicable
(e) Form of Dividend Reinvestment Plan*
(f) Inapplicable
(g) Investment Management Agreement
(h) Underwriting Agreement
(i) Inapplicable
(j) Custody Agreement
(k) (1) Transfer Agency and Service Agreement
(2) Administrative Services Agreement
(l) (1) Opinion and Consent of Sullivan & Worcester L.L.P.*
(2) Opinion and Consent of Piper & Marbury L.L.P.*
(m) Inapplicable
(n) Consent of Independent Public Accountants*
(o) Inapplicable
(p) Agreement Relating to Initial Capital*
(q) Inapplicable
(r) Financial Data Schedule*
________________________________
* Incorporated by reference to Registration Statement on
Form N-2, filed May 17, 1996, or to Pre-Effective Amendments
to Registration Statement, filed July 22, 1996 and August 6, 1996.
EXHIBIT 99(g)
INVESTMENT MANAGEMENT AGREEMENT
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Brundage, Story and Rose, L.L.C.
One Broadway
New York, New York 10004
Ladies and Gentlemen:
The Thermo Opportunity Fund, Inc. (the "Fund") is a non- diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended (the "Act"), and subject to the rules and regulations
promulgated thereunder.
1. Appointment as Manager. The Fund being duly authorized hereby
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appoints and employs Brundage, Story and Rose, L.L.C. ("the Manager") as the
discretionary portfolio manager of the Fund, on the terms and conditions set
forth herein.
2. Acceptance of Appointment; Standard of Performance. The Manager
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accepts the appointment as the discretionary portfolio manager and agrees to use
its best professional judgment to make timely investment decisions for the Fund
in accordance with the provisions of this Agreement.
3. Portfolio Management Services of Manager. The Manager is hereby
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employed and authorized to select portfolio securities for investment by the
Fund, to purchase and sell securities of the Fund, and upon making any purchase
or sale decision, to place orders for the execution of such portfolio
transactions in accordance with paragraphs 5 and 6 hereof. In providing
portfolio management services to the Fund, the Manager shall be
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subject to such investment restrictions as are set forth in the Act and the
rules thereunder, the Internal Revenue Code, applicable state securities laws,
the supervision and control of the Board of Directors of the Fund, such specific
instructions as the Board of Directors may adopt and communicate to the Manager,
the investment objectives, policies and restrictions of the Fund furnished
pursuant to paragraph 4, and the provisions of Schedule A hereto. The Manager
is not authorized by the Fund to take any action, including the purchase or sale
of securities for the Fund, in contravention of any restriction, limitation,
objective, policy or instruction described in the previous sentence. The
Manager shall maintain on behalf of the Fund the records listed in Schedule A
hereto (as amended from time to time).
4. Investment Objectives, Policies and Restrictions. The Fund will
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provide the Manager with the statement of investment objectives, policies and
restrictions applicable to the Fund as contained in the Fund's registration
statements under the Act and the Securities Act of 1933, which may consist of
Parts A and B of the Fund's Registration Statement as filed with the Securities
and Exchange Commission ("SEC") on Form N-2, and any instructions adopted by the
Board of Directors supplemental thereto. The Fund will provide the Manager with
such further information concerning the investment objectives, policies and
restrictions applicable thereto as the Manager may from time to time reasonably
request. The Fund retains the right, on written notice to the Manager, to
modify any such investment objectives, policies
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or restrictions in any manner at any time.
5. Transaction Procedures. All transactions will be consummated by
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payment to or delivery by The Fifth Third Bank or any successor custodian (the
"Custodian"), or such depositories or agents as may be designated by the
Custodian in writing, as custodian for the Fund, of all cash and/or securities
due to or from the Fund, and the Manager shall not have possession or custody
thereof. The Manager shall advise the Custodian and confirm in writing to the
Fund all investment orders for the Fund placed by it with brokers and dealers.
The Manager shall issue to the Custodian such instructions as may be
appropriate in connection with the settlement of any transaction initiated by
the Manager. It shall be the responsibility of the Manager to take appropriate
action if the Custodian fails to confirm in writing proper execution of the
instructions.
6. Allocation of Brokerage. The Manager shall have the authority and
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discretion to select brokers and dealers to execute portfolio transactions
initiated by the Manager, and for the selection of the markets on or in which
the transactions will be executed.
A. In doing so, the Manager will attempt to obtain the best overall
results taking into account the execution and operational facilities of the
broker or dealer, the type of transaction involved and other factors.
Consistent with this policy, the Manager may select a broker or dealer that also
provides brokerage and research services (as those terms are
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defined in Section 28(e) of the Securities Exchange Act of 1934, as amended) to
any other accounts over which the Manager exercises investment discretion. It
is understood that neither the Fund nor the Manager has adopted a formula for
the allocation of the Fund's investment transaction business. It is also
understood that it is desirable for the Fund that the Manager have access to
supplemental investment and market research and security and economic analyses
provided by certain brokers and dealers who may execute transactions for the
Fund and that the commissions paid to such brokers and dealers may be higher
than those which the Fund might otherwise have paid to another broker or dealer
if such services had not been provided. Therefore, the Manager is authorized to
place orders for the purchase and sale of securities for the Fund with such
certain brokers or dealers, subject to review by the Fund's Board of Directors
from time to time with respect to the extent and continuation of this practice
and provided the Manager determines in good faith that the amount of the
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker or dealer. The determination may be
viewed in terms of either a particular transaction or the Manager's overall
responsibilities with respect to the Fund and to any other accounts over which
it exercises investment discretion. Information so received will be in addition
to, and not in lieu of, the services required to be performed by the Manager
under this Investment Management Agreement, and the expenses of the Manager will
not necessarily
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be reduced as a result of the receipt of such supplemental information.
Research services furnished to the Manager by brokers who effect securities
transactions for the Fund may be used by the Manager in providing services to
other investment companies and accounts which the Manager may manage.
Similarly, research services furnished to the Manager by brokers who effect
securities transactions for other investment companies and accounts which the
Manager manages now or in the future may be used by the Manager in servicing the
Fund. Not all of these research services are used by the Manager in managing
any particular account, including the Fund. It is understood that although the
information may be useful to the Fund and the Manager, it is not possible to
place a dollar value on such information.
On occasions when the Manager deems the purchase or sale of a security to
be in the best interest of the Fund as well as any other clients, the Manager,
to the extent permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be sold or purchased in
order to obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities so purchased
or sold, as well as expenses incurred in the transaction, will be made by the
Manager, insofar as feasible, in the manner it considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and to such
other clients.
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For each fiscal quarter of the Fund, the Manager shall prepare and render
reports to the Fund's Board of Directors of the total brokerage business placed
and the manner in which the allocation has been accomplished. Such reports
shall set forth at a minimum the information required to be maintained by Rule
31a-1(b)(9) under the Act.
B. The Manager may execute any portfolio transactions for the Fund's
account with a broker or dealer which is an "affiliated person" (as defined in
the Act) of the Fund, the Manager or any portfolio manager of the Fund subject
to Paragraph 6(A) above and provisions adopted by the Board of Directors
pursuant to Rule 17e-1 under the 1940 Act. In order for such an affiliated
person to be permitted to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by such affiliated person must
be reasonable and fair compared to the commissions, fees or other remuneration
received by other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time. This standard would allow such an affiliated person
to receive no more than the remuneration which would be expected to be received
by an unaffiliated broker in a commensurate arm's-length transaction. The Fund
agrees that it will provide the Manager with a list of brokers and dealers which
are "affiliated persons" of the Fund or the Manager.
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7. Proxies. The Fund will vote all proxies solicited by or with respect
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to the issuers of securities in which assets of the Fund may be invested from
time to time. At the Fund's request, the Manager shall provide the Fund with
its recommendations as to the voting of such proxies.
8. Reports to the Manager. The Fund will provide the Manager with such
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periodic reports concerning the status of the Fund as the Manager may reasonably
request.
9. Fees for Services. For the services provided to the Fund, the Fund
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shall pay the Manager, on the first business day following the end of each
month, a fee equal to one twelfth (1/12) of the annual rate of .8% of the Fund's
average weekly net assets during such month.
10. Expenses. During the term of this Agreement, the Manager will pay all
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expenses incurred by it in connection with its portfolio management services
pertaining to the Fund. Notwithstanding the foregoing, the Fund shall pay all
of its own expenses, including the following:
(a) Organizational and offering expenses of the Fund;
(b) Brokerage fees and commissions with regard to portfolio transactions
of the Fund;
(c) Fees and expenses of the custodian of the Fund's portfolio securities;
(d) Fees and expenses of the Fund's administrative agent, the Fund's stock
transfer and dividend paying agent, the Fund's accounting agent and
the plan agent for the Fund's Dividend Reinvestment Plan or, if the
Fund performs any such services without an agent, the costs of the
same;
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(e) Auditing and legal expenses;
(f) Insurance expenses, including the expense of officer and director
insurance;
(g) Cost of maintenance of the Fund's existence as a legal entity;
(h) Compensation and expenses of directors of the Fund who are not
interested persons of the Manager as that term is defined by law;
(i) Costs of stockholders' meetings and other stockholder relations
functions;
(j) Federal and State registration or qualification fees and expenses;
(k) Dues and expenses incurred in connection with listing the Fund's
shares on any stock exchange;
(l) Dues and expenses incurred in connection with membership in investment
company organizations;
(m) Costs of setting in type, printing and mailing Prospectuses, reports
and notices to existing shareholders;
(n) Taxes, interest charges and extraordinary expenses;
(o) The portfolio management fee payable to the Manager, as provided in
paragraph 9 herein; and
(p) Other extraordinary or nonrecurring expenses.
It is understood that the Fund may desire to register the Fund's shares for
sale in certain states which impose expense limitations on investment companies.
The Manager agrees to reimburse the Fund an amount equal to any excess expenses
incurred over the most stringent of such states' limitations in which the Fund's
shares are registered. The Manager shall in no event be required to reimburse
an amount greater than its fees received from the Fund pursuant to paragraph 9,
above.
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11. Other Investment Activities of the Manager. The Fund acknowledges
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that the Manager or one or more of its affiliates may have investment
responsibilities or render investment advice to or perform other portfolio
management services for other individuals or entities and that the Manager, its
affiliates or any of its or their directors, officers, agents or employees may
buy, sell or trade in any securities for its or their respective accounts
("Affiliated Accounts"). Subject to the provisions of paragraph 2 hereof, the
Fund agrees that the Manager or its affiliates may give advice or exercise
investment responsibility and take such other action with respect to other
Affiliated Accounts which may differ from the advice given or the timing or
nature of action taken with respect to the Fund, provided that the Manager acts
in good faith, and provided further, that it is the Manager's policy to
allocate, within its reasonable discretion, investment opportunities to the Fund
over a period of time on a fair and equitable basis relative to the Affiliated
Accounts, taking into account the investment objectives and policies of the Fund
and any specific investment restrictions applicable thereto, each as described
in the Fund's Prospectus under the heading "Investment Objective and Policies."
If any Affiliated Account or Accounts are prepared to invest in, or desire to
dispose of, the same security at the same time as the Fund, transactions in such
securities will be made, insofar as feasible, for the Fund and the Affiliated
Accounts in a manner deemed equitable to all. In some cases, this procedure may
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adversely affect the size of the position obtained for or disposed of by the
Fund or the price paid or received by the Fund. In addition, because of
different investment objectives, a particular security may be purchased for one
or more funds or accounts when one or more funds or accounts are selling the
same security. The Fund acknowledges that one or more of the Affiliated
Accounts may at any time hold, acquire, increase, decrease, dispose of or
otherwise deal with positions in investments in which the Fund may have an
interest from time to time, whether in transactions which involve the Fund or
otherwise. The Manager shall have no obligation to acquire for the Fund a
position in any investment which any Affiliated Account may acquire, and the
Fund shall have no first refusal, co-investment or other rights in respect of
any such investment, either for the Fund or otherwise.
12. Certificates of Authority. The Fund and the Manager shall furnish to
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each other from time to time certified copies of the resolutions of their Boards
of Directors or executive committees, as the case may be, evidencing the
authority of officers and employees who are authorized to act on behalf of the
Fund and/or the Manager.
13. Limitation of Liability. The Manager shall not be liable for any
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action taken, omitted or suffered to be taken by it in its reasonable judgment,
in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement, or in accordance with (or
in
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the absence of) specific directions or instructions from the Fund; provided,
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however, that such acts or omissions shall not have resulted from the Manager's
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willful misfeasance, bad faith or gross negligence, a violation of the standard
of care established by and applicable to the Manager in its actions under this
Agreement or breach of its duty or of its obligations hereunder. Nothing in
this paragraph 13 shall be construed in a manner inconsistent with Sections
17(h) and (i) of the Act. 14. Confidentiality. Subject to the duty of the
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Manager and the Fund to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto shall
treat as confidential all information pertaining to the Fund and the actions of
the Manager and the Fund in respect thereof.
15. Assignment. No assignment of this Agreement shall be made by the
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Manager, and this Agreement shall terminate automatically in the event of
assignment. The Manager shall notify the Fund in writing sufficiently in
advance of any proposed change of control, as defined in Section 2(a)(9) of the
Act, as will enable the Fund to consider whether an assignment will occur, and
to take the steps necessary to enter into a new contract with the Manager.
16. Representations, Warranties and Agreements of the Fund. The Fund
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represents, warrants and agrees that:
A. The Manager has been duly appointed by the Board of Directors of
the Fund to provide portfolio management services to the Fund as contemplated
hereby.
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B. The Fund will deliver to the Manager a true and complete copy of
its then current prospectus and statement of additional information as effective
from time to time and such other documents or instruments governing the
investments of the Fund and such other information as is necessary for the
Manager to carry out its obligations under this Agreement.
C. The Fund is currently in compliance and shall at all times comply
with the requirements imposed upon the Fund by applicable laws and regulations.
17. Representations, Warranties and Agreements of the Manager. The
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Manager represents, warrants and agrees that:
A. The Manager is registered as an "investment adviser" under the
Investment Advisers Act of 1940, as amended.
B. The Manager will maintain, keep current and preserve on behalf of
the Fund, in the manner and for the time periods required or permitted by the
Act, the records identified in Schedule A. The Manager agrees that such records
(unless otherwise indicated on Schedule A) are the property of the Fund, and
will be surrendered to the Fund promptly upon request.
C. The Manager will complete such reports concerning purchases or
sales of securities on behalf of the Fund as the Fund may from time to time
require to ensure compliance with the Act, the Internal Revenue Code and
applicable state securities laws.
D. The Manager will adopt a written code of ethics
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complying with the requirements of Rule 17j-1 under the Act and will provide the
Fund with a copy of such code of ethics and evidence of its adoption. Within
forty-five (45) days of the end of each calendar quarter of each year while this
Agreement is in effect, the Manager shall certify to the Fund that the Manager
has complied with the requirements of Rule 17j-1 during the previous quarter and
that there has been no violation of the Manager's code of ethics or, if such a
violation has occurred, that appropriate action was taken in response to such
violation. Upon the written request of the Fund, the Manager shall submit to
the Fund the reports required to be made by Rule 17j-1(c)(1) under the Act.
E. The Manager will, promptly after filing with the Securities and
Exchange Commission any amendment to its Form ADV, furnish a copy of such
amendment to the Fund.
F. Upon request of the Fund, the Manager will provide assistance to
the Custodian in the collection of income due or payable to the Fund.
G. The Manager will immediately notify the Fund of the occurrence of
any event which would disqualify the Manager from serving as an investment
adviser to an investment company pursuant to Section 9(a) of the Act or
otherwise.
18. Amendment. This Agreement may be amended at any time, but only by
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written agreement between the Manager and the Fund, which amendment, other than
amendments to Schedule A, is subject to the approval of the Board of Directors
and the shareholders of
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the Fund in the manner required by the Act and the rules thereunder, subject to
any applicable exemptive order of the Securities and Exchange Commission
modifying the provisions of the Act with respect to approval of amendments to
this Agreement.
19. Effective Date; Term. This Agreement shall become effective on the
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date of its execution and shall remain in force for two years from the date
thereof, and from year to year thereafter but only so long as such continuance
is specifically approved at least annually by the vote of a majority of the
Directors of the Fund who are not interested persons of the Fund or the Manager,
cast in person at a meeting called for the purpose of voting on such approval,
and by a vote of the Directors of the Fund or of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that this Agreement
may be continued "annually" shall be construed in a manner consistent with the
Act and the rules and regulations thereunder.
20. Termination. This Agreement may be terminated by either party hereto,
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without the payment of any penalty, immediately upon written notice to the other
in the event of a material breach of any provision thereof by the party so
notified, or otherwise upon sixty (60) days' written notice to the other, but
any such termination shall not affect the status, obligations or liabilities of
any party hereto to the other.
21. Definitions. As used in paragraphs 15 and 19 of this Agreement, the
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terms "assignment," interested person" and "vote
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of a majority of the outstanding voting securities" shall have the meanings set
forth in the Act and the rules and regulations thereunder.
22. Applicable Law. To the extent that state law is not preempted by the
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provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the State of New York.
BRUNDAGE, STORY AND ROSE, L.L.C. THE THERMO OPPORTUNITY FUND,
INC.
By: /s/ Paul R. Barkus By:/s/ Francis S. Branin, Jr.
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Title: Principal Title: President
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Date: August 1, 1996 Date: August 1, 1996
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SCHEDULE A
RECORDS TO BE MAINTAINED BY THE MANAGER
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1. (Rule 31a-1(b)(5) and (6)) A record of each brokerage order, and all other
portfolio purchases or sales, given by the Manager on behalf of the Fund
for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such records shall include:
A. The name of the broker;
B. The terms and conditions of the order and of any modification or
cancellation thereof;
C. The time of entry or cancellation;
D. The price at which executed;
E. The time of receipt of a report of execution; and
F. The name of the person who placed the order on behalf of the Fund.
2. (Rule 31a-1(b)(9)) A record for each fiscal quarter, completed within ten
(10) days after the end of the quarter, showing specifically the basis or
bases upon which the allocation of orders for the purchase and sale of
portfolio securities to named brokers or dealers was effected, and the
division of brokerage commissions or other compensation on such purchase
and sale orders. Such record:
A. Shall include the consideration given to:
(i) The sale of shares of the Fund by brokers or dealers.
(ii) The supplying of services or benefits by brokers or dealers to:
(a) The Fund;
(b) the Manager;
(c) any other portfolio manager of the Fund; and
(d) any person affiliated with the foregoing persons.
(iii) Any other consideration other than the technical qualifications
of the brokers and
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dealers as such.
B. Shall show the nature of the services or benefits made available.
C. Shall describe in detail the application of any general or specific
formula or other determinant used in arriving at such allocation of
purchase and sale orders and such division of brokerage commissions or
other compensation.
D. The name of the person responsible for making the determination of
such allocation and such division of brokerage commissions or other
compensation.
3. (Rule 31a-1(b)(10)) A record in the form of an appropriate memorandum
identifying the person or persons, committees or groups authorizing the
purchase or sale of portfolio securities. Where an authorization is made
by a committee or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be retained as part of
this record: any memorandum, recommendation or instruction supporting or
authorizing the purchase or sale of portfolio securities and such other
information as is appropriate to support the authorization, including such
information as is appropriate to support the determination that such
security is a permitted investment for the Fund.*
4. (Rule 31a-1(f)) Such accounts, books and other documents as are required
to be maintained by registered investment advisers by rules adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record the Manager's transactions
with respect to the Fund.
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*Such information might include: the current Form 10-K, annual and
quarterly reports, press releases, reports by analysts and from brokerage firms
(including their recommendation; i.e., buy, sell, hold) or any internal reports
or portfolio manager reviews.
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EXHIBIT 99(h)
1,525,000 Shares
THE THERMO OPPORTUNITY FUND, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
August 5, 1996
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS INC.
SMITH BARNEY INC.
COWEN & COMPANY
FAHNESTOCK & CO. INC.
FIRST ALBANY CORPORATION
As Representatives of the several
Underwriters named in Schedule 1
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M 3XT
England
Dear Sirs:
The Thermo Opportunity Fund, Inc., a Maryland corporation (the
"Company"), proposes to issue and sell 1,525,000 shares (the "Firm Shares") of
its Common Stock, par value $.001 per share (the "Common Stock"), to you and the
other underwriters named in Schedule 1 hereto (the "Underwriters") for whom you
are acting as representatives (the "Representatives"). In addition, the Company
proposes to grant to the Underwriters an option to purchase up to an additional
228,750 shares (the "Option Shares") of Common Stock on the terms and for the
purposes set forth in Paragraph 2. The Firm Shares and any Option Shares
purchased pursuant to this Agreement are hereinafter referred to as the
"Shares." This is to confirm the agreement concerning the purchase of the
Shares from the Company by the Underwriters.
If you are the only Underwriters, all references herein to the
Representatives shall be deemed to be to the Underwriters.
1. (a) The Company represents to, warrants to and agrees with each of the
several Underwriters that:
(i) A registration statement on Form N-2 with respect to the Shares
(A) has been prepared by the Company and complies in all material respects
with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rules and
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Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, the Investment Company Act of 1940, as amended (the "Investment
Company Act," and together with the Securities Act, the "Acts"), and the
rules and regulations of the Commission thereunder, (B) has been filed with
the Commission under the Acts and (C) has become effective under the Acts.
If any post-effective amendment to such registration statement has been
filed with the Commission prior to the execution and delivery of this
Agreement, the most recent such amendment has been declared effective by
the Commission. Copies of such registration statement, as amended to date,
have been delivered by the Company to the Representatives. A notification
of registration on Form N-8A (the "Notification") has been filed by the
Company with the Commission under the Investment Company Act. As used in
this Agreement, "Effective Time" means the date and time as of which such
registration statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective Date"
means the date of the "Effective Time"; "Preliminary Prospectus" means each
prospectus and statement of additional information included in such
registration statement, or any amendments thereto, before it became
effective under the Acts and any prospectus or statement of additional
information filed by the Company with the consent of the Underwriters
pursuant to Rule 497(a) of the Rules and Regulations; "Registration
Statement" means such registration statement, as amended at the Effective
Time, including, if a filing is made in accordance with Rule 430A of the
Rules and Regulations, all information deemed to be a part thereof as of
the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations; and "Prospectus" means the prospectus and statement of
additional information as first used to confirm sales of Shares filed
pursuant to Rule 497 of the Rules and Regulations ("Rule 497"). The
Commission has not issued any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus and the Company has not received
any notice from the Commission pursuant to Section 8(e) of the Investment
Company Act with respect to the Notification or the Registration Statement;
(ii) The Registration Statement contains, and any post-effective
amendment to the Registration Statement filed with the Commission after the
Effective Time, the Prospectus and the Prospectus as amended or
supplemented will contain, all statements which are required by the Acts
and the rules and regulations thereunder; on the Effective Date, the
Registration Statement did not, and any post-effective amendment to the
Registration Statement filed with the
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Commission after the Effective Time, the Prospectus and the Prospectus as
amended and supplemented will not, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Notification complied in all material respects with the requirements of the
Investment Company Act and the rules and regulations of the Commission
thereunder and does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that the
Company makes no representations, warranties or agreements as to the
information contained in or omitted from the Registration Statement, the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through the Representatives specifically for inclusion therein;
(iii) The Company is not in any material violation of its corporate
charter or by-laws or in default under any material agreement, indenture or
instrument to which it is a party or by which it or its property may be
bound;
(iv) This Agreement, the Investment Management Agreement (the
"Advisory Agreement") between the Company and Brundage, Story and Rose,
L.L.C. (the "Adviser"), the Administrative Services Agreement (the
"Administration Agreement") between the Company and MGF Service Corp.
("MGF"), the Custody Agreement (the "Custody") between the Company and The
Fifth Third Bank and the Transfer Agency and Service Agreement (the
"Transfer Agency Agreement") between the Company and The Fifth Third Bank
have each been duly authorized, executed and delivered by the Company; and
this Agreement, the Advisory Agreement, the Administration Agreement, the
Custody Agreement and the Transfer Agency Agreement each constitutes the
valid and binding obligation of the Company, enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights, and to general equity principles. No consent,
approval, authorization or order of any court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement, the Advisory Agreement, the Administration Agreement, the
Custody Agreement or the Transfer Agency Agreement by the Company or for
the consummation by the Company of the transactions contemplated by such
agreements, except such as have been obtained and such as may be
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required under the Acts, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or applicable state securities laws in connection
with the purchase and distribution of the Shares by the Underwriters. The
execution, delivery and performance of this Agreement, the Advisory
Agreement, the Administration Agreement, the Custody Agreement and the
Transfer Agency Agreement by the Company and the consummation by the
Company of the transactions contemplated by such agreements will not
conflict with, result in the creation or imposition of any lien, charge or
encumbrance upon the assets of the Company pursuant to the terms of, result
in a breach or violation by the Company of any of the terms or provisions
of, or constitute a default by the Company under, any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument to
which the Company is a party or to which it or its property is subject, the
corporate charter or by-laws of the Company, any statute, or any judgment,
decree, order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its property;
(v) Since the date as to which information is given in the
Registration Statement and the Prospectus, except as described in or
contemplated therein, (A) there has not been any material adverse change
in, or any material adverse development which affects the business,
properties, financial condition or results of operations of the Company,
(B) there have been no transactions entered into by the Company which are
material to the Company other than those in the ordinary course of business
and (C) there has been no dividend or distribution of any kind declared,
paid or made by the Company on any class of its capital stock;
(vi) Arthur Andersen LLP, whose report appears in the Prospectus, are
independent public auditors as required by the Acts and the Rules and
Regulations;
(vii) All the authorized shares of Common Stock, including the
Shares, have been duly authorized, and all the issued and outstanding
shares of the Common Stock are, and all the Shares being sold by the
Company, when issued, delivered and paid for on the First Delivery Date and
the Second Delivery Date, if any (as hereinafter defined), will be, validly
issued and outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof. None of the Shares when
delivered will be subject to any lien, claim, encumbrance, preemptive
rights or any other claim of any third party and the Shares will conform to
the description thereof contained in the
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<PAGE>
Registration Statement and the Prospectus;
(viii) The Company has been duly incorporated and is validly existing
and in good standing as a corporation under the laws of the State of
Maryland, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to so qualify
would have a material adverse effect, and has all power and authority
necessary to own or hold its properties and to conduct its business as
described in the Prospectus and to issue and sell the Shares as
contemplated by this Agreement;
(ix) Except as described in the Registration Statement and the
Prospectus, there is no litigation or legal proceeding pending or, to the
knowledge of the Company, threatened against the Company or to which its
property is subject that is required to be disclosed in the Registration
Statement and the Prospectus, including the Company's financial statements;
(x) The Statement of Assets and Liabilities filed as part of the
Registration Statement or included in any Preliminary Prospectus or the
Prospectus presents fairly the financial condition of the Company, at the
date indicated, and has been prepared in conformity with generally accepted
accounting principles applied on a consistent basis;
(xi) The Shares are duly authorized for listing, subject to official
notice of issuance, on the American Stock Exchange, Inc. (the "Exchange");
(xii) The advertising and sales literature used by the Company and
prepared in any material respect by the Company, the Adviser or MGF in
connection with the public offering and sale of the Shares (including any
advertising or sales literature used pursuant to Rule 482 under the Rules
and Regulations and filed by the Company with the National Association of
Securities Dealers, Inc. (the "NASD") for review in accordance with Rule
497(i) under the Rules and Regulations (an "Omitting Prospectus")) complies
in all material respects with the Acts and the rules and regulations
thereunder and does not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(xiii) There are no contracts or other documents which are required
to be filed as exhibits to the Registration Statement by the Acts or by the
rules and regulations
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<PAGE>
thereunder which have not been filed as exhibits to the Registration
Statement or incorporated therein by reference as permitted by the rules
and regulations thereunder; and
(xiv) The Company is duly registered with the Commission under the
Investment Company Act as a closed-end, non-diversified management
investment company, and all required action has been taken by the Company
under the Acts to make the public offering and to consummate the sale of
the Shares as provided in this Agreement.
(b) The Adviser makes the same representations and warranties as the
Company set forth under 1(a)(i) and (ii) above, and further represents to,
warrants to and agrees with each of the several Underwriters that:
(i) The Adviser has been duly organized and is validly existing and
in good standing as a limited liability company under the laws of the State
of New York, is duly qualified to do business and is in good standing as a
foreign limited liability company in each other jurisdiction in which such
qualification is required (except where the failure to so qualify would not
have a material adverse effect on the ability of the Adviser to conduct its
business with respect to the Company as described in the Prospectus), and
has all power and authority necessary to perform its advisory services and
to conduct its business with respect to the Company as described in the
Prospectus;
(ii) The Adviser is duly registered and in good standing with the
Commission under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), as an investment adviser. The Adviser is not prohibited
by the Advisers Act or the Investment Company Act, or the rules and
regulations under such acts, from acting for the Company under the Advisory
Agreement as contemplated by the Prospectus;
(iii) The description of the Adviser in the Prospectus is true and
correct and does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made;
(iv) This Agreement and the Advisory Agreement have each been duly
authorized, executed and delivered by the Adviser, and each constitutes the
valid and binding obligation of the Adviser enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy,
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<PAGE>
insolvency, reorganization and other laws of general applicability relating
to or affecting creditors' rights, and to general equity principles and
termination in accordance with the terms of the Investment Company Act. No
consent, approval, authorization or order of any court or governmental
agency or body is required for the execution, delivery and performance of
this Agreement or the Advisory Agreement by the Adviser or for the
consummation by the Adviser of the transactions contemplated by such
agreements, except such as have been obtained and such as may be required
under the Acts, the Exchange Act, the Advisers Act or applicable state
securities laws in connection with the purchase and distribution of the
Shares by the Underwriters. The execution, delivery and performance of
this Agreement and the Advisory Agreement by the Adviser and the
consummation by the Adviser of the transactions contemplated by such
agreements will not conflict with, result in the creation or imposition of
any material lien, charge or encumbrance upon the assets of the Adviser
pursuant to the terms of, result in a material breach or violation by the
Adviser of any of the terms or provisions of, or constitute a material
default by the Adviser under, any material indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which the
Adviser is a party or to which it or its property is subject, the articles
of organization or by-laws of the Adviser, any statute, or any judgment,
decree, order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Adviser or any of its property, which
would materially and adversely affect the ability of the Adviser to serve
as investment adviser to the Company pursuant to the Advisory Agreement;
(v) Except as described in the Registration Statement and the
Prospectus, there is no litigation or legal proceeding pending or, to the
knowledge of the Adviser, threatened against the Adviser or to which its
property is subject that is required to be disclosed in the Registration
Statement and the Prospectus; and
(vi) The advertising and sales literature prepared by the Adviser and
used by the Company in connection with the public offering and sale of the
Shares (including any Omitting Prospectus) complies in all material
respects with the Acts and the rules and regulations thereunder and does
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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<PAGE>
(c) MGF represents to, warrants to and agrees with each of the several
Underwriters that:
(i) MGF has been duly incorporated and is validly existing and in
good standing as a corporation under the laws of the State of Ohio, is duly
qualified to do business and is in good standing as a foreign corporation
in each other jurisdiction where such qualification is required (except
where the failure to so qualify would not have a material adverse effect
upon the ability of MGF to conduct its business with respect to the Company
as described in the Prospectus), and has all power and authority necessary
to own or hold its properties, to perform its administrative services and
to conduct its business with respect to the Company as described in the
Prospectus;
(ii) MGF is not prohibited by the Investment Company Act, or the
rules and regulations thereunder, from acting for the Company under the
Administration Agreement as contemplated by the Prospectus;
(iii) The description of MGF in the Prospectus is true and correct
and does not contain any untrue statement of material fact or omit to state
any 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;
(iv) This Agreement and the Administration Agreement have each been
duly authorized, executed and delivered by MGF, and each constitutes the
valid and binding obligation of MGF enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights, and to general equity principles. No consent,
approval, authorization or order of any court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement or the Administration Agreement by MGF or the consummation by MGF
of the transactions contemplated by such agreements, except such as have
been obtained and such as may be required under the Acts, the Exchange Act
or applicable state securities laws in connection with the purchase and
distribution of the Shares by the Underwriters. The execution, delivery
and performance of this Agreement and the Administration Agreement by MGF
and the consummation by MGF of the transactions contemplated by such
agreements will not conflict with, result in the creation or imposition of
any material lien, charge or encumbrance upon the assets of MGF pursuant to
the terms of, result in a material breach or
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<PAGE>
violation by MGF of any of the terms or provisions of, or constitute a
material default by MGF under, any material indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which MGF
is a party or to which it or its property is subject, the corporate charter
or by-laws of MGF, any statute, or any judgment, decree, order, rule or
regulation of any court or governmental agency or body having jurisdiction
over MGF or any of its property, which would materially adversely affect
the ability of MGF to serve as administrator of the Company pursuant to the
Administration Agreement; and
(v) Except as described in the Registration Statement and the
Prospectus, there is no litigation or legal proceeding pending or, to the
knowledge of MGF, threatened against MGF or to which its property is
subject that might materially adversely affect the ability of MGF to serve
as administrator of the Company pursuant to the Administration Agreement or
which is required to be disclosed in the Registration Statement and the
Prospectus.
2. On the basis of the representations, warranties and agreements
contained in, and subject to the terms and conditions of, this Agreement, the
Company agrees to sell to each of the Underwriters, severally and not jointly,
and each of the Underwriters, severally and not jointly, agrees to purchase the
number of Firm Shares set forth opposite the Underwriter's name in Schedule 1
hereto. In addition, the Company grants to the Underwriters, solely for the
purpose of covering over-allotments in the sale of Firm Shares, an option to
purchase all or any portion of the Option Shares exercisable as provided in
Paragraph 4 hereof. Option Shares shall be purchased severally for the account
of the Underwriters in proportion to the number of Firm Shares set forth
opposite the name of such Underwriters in Schedule 1 hereto. The respective
purchase obligations of each Underwriter with respect to the Option Shares shall
be adjusted by the Representatives so that no Underwriter shall be obligated to
purchase Option Shares other than in 100 share amounts. The price of both the
Firm Shares and the Option Shares to the Underwriters shall be $14.10 per share.
3. The Company shall not be obligated to deliver any of the Shares except
upon payment for all the Shares to be purchased hereunder or as hereinafter
provided.
If, on the First Delivery Date (as hereinafter defined) or the Second
Delivery Date (as hereinafter defined), as the case may be, any Underwriter
defaults in the performance of its obligations under this Agreement, the
remaining non-defaulting Underwriters shall be obligated to purchase the Shares
which the
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<PAGE>
defaulting Underwriter agreed but failed to purchase in the respective
proportions which the number of Firm Shares set forth opposite the name of each
remaining non-defaulting Underwriter in Schedule l hereto bears to the total
number of Firm Shares set forth opposite the names of all the remaining
non-defaulting Underwriters in Schedule 1 hereto; provided that the remaining
non-defaulting Underwriters shall not be obligated to purchase any of the Shares
if the total number of Shares which the defaulting Underwriter or Underwriters
agreed but failed to purchase on such date exceeds 10% of the total number of
Shares to be purchased on such date pursuant to the terms of Paragraph 2, and
any remaining non-defaulting Underwriter shall not be obligated to purchase more
than 110% of the number of Shares which it agreed to purchase on such date
pursuant to the terms of Paragraph 2. If the foregoing maximums are exceeded,
the remaining non-defaulting Underwriters, or those other underwriters
satisfactory to the Representatives who so agree, shall have the right, but
shall not be obligated, to purchase, in such proportion as may be agreed upon
among them, all the Shares. If the remaining Underwriters or other underwriters
satisfactory to the Representatives do not elect to purchase the Shares which
the defaulting Underwriter or Underwriters agreed but failed to purchase, this
Agreement shall terminate without liability on the part of any non-defaulting
Underwriter or the Company, except that the Company and the Adviser will
continue to be liable for the payment of expenses as set forth in Paragraphs
5(j) and 9 of this Agreement.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters agree to purchase the Shares of a defaulting or withdrawing
Underwriter, either the Representatives or the Company may postpone the First
Delivery Date for up to seven full business days in order to effect any changes
that in the opinion of counsel for the Company or counsel for the Underwriters
may be necessary in the Registration Statement, the Prospectus or in any other
document or arrangement relative to the transaction contemplated by the
Registration Statement and this Agreement.
4. Delivery of and payment for the Firm Shares shall be made at the
offices of Stroock & Stroock & Lavan, Seven Hanover Square, New York, New York
10004, at 10:00 A.M., New York City time, on the third business day following
the date of this Agreement or at such later date or time or such other place as
shall be determined by written agreement between the Representatives and the
Company. This date and time are sometimes referred to as the "First Delivery
Date." On the First Delivery Date, the Company shall deliver the certificates
representing the Firm Shares to the Representatives for the
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<PAGE>
account of each Underwriter, against payment to the order of the Company of the
purchase price by certified or official bank check or checks payable in New York
Clearing House (next-day) funds. Time shall be of the essence, and delivery by
the Company at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each Underwriter hereunder. Upon
delivery, the Firm Shares shall be registered in such names and in such
denominations as the Representatives shall request in writing not less than two
full business days prior to the First Delivery Date. For the purpose of
expediting the checking and packaging of the Firm Shares, the Company shall make
the certificates representing the Firm Shares available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the First Delivery Date.
At any time on or before the thirtieth day following the first date on
which the Firm Shares are offered to the public, the option granted in Paragraph
2 may be exercised by written notice being given to the Company by the
Representatives. Such notice shall set forth the aggregate number of Option
Shares as to which the option is being exercised and the date and time, as
determined by the Representatives, when the Option Shares are to be delivered
(the "Second Delivery Date"); provided, however, that the Second Delivery Date
shall not be earlier than the First Delivery Date nor earlier than the second
business day after the date on which the option shall have been exercised nor
later than the third business day after the date on which the option shall have
been exercised.
Delivery of and payment for the Option Shares shall be made at the offices
of Stroock & Stroock & Lavan, Seven Hanover Square, New York, New York 10004, at
10:00 A.M., New York City time, on the Second Delivery Date. On the Second
Delivery Date, the Company shall deliver the certificates representing the
Option Shares to the Representatives for the account of each Underwriter,
against payment to the order of the Company of the purchase price by certified
or official bank check or checks payable in New York Clearing House (next-day)
funds. Time shall be of the essence, and delivery by the Company at the time
and place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Option Shares
shall be registered in such names and in such denominations as the
Representatives shall request in writing not less than two full business days
prior to the Second Delivery Date. For the purpose of expediting the checking
and packaging of the Option Shares, the Company shall make the certificates
representing the Option Shares available for inspection by the Representatives
in New York, New York, not later than 2:00 P.M. on the business day prior to the
Second Delivery Date.
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<PAGE>
5. The Company agrees:
(a) To furnish promptly to the Representatives and to counsel for the
Underwriters a signed copy of the Notification and the Registration
Statement as originally filed, and each amendment thereto filed with the
Commission, including all consents and exhibits filed therewith;
(b) To deliver promptly to the Representatives such number of
conformed copies of the Notification and the Registration Statement as
originally filed and each amendment thereto (excluding exhibits other than
this Agreement) and of each Preliminary Prospectus, the Prospectus and any
amended or supplemented Prospectus as the Representatives may reasonably
request;
(c) To file promptly with the Commission the Prospectus pursuant to
Rule 497 of the Rules and Regulations and any amendment to the Registration
Statement or the Prospectus or any supplement to the Prospectus that may,
in the judgment of the Company or the Representatives, be required by the
Acts or requested by the Commission;
(d) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus, or to filing any
Prospectus pursuant to Rule 497 of the Rules and Regulations, to furnish a
copy thereof to the Representatives and counsel for the Underwriters and
not to make such filing if the Representatives reasonably object thereto;
(e) To advise the Representatives promptly (i) when any
post-effective amendment to the Registration Statement becomes effective,
(ii) of any request or proposed request by the Commission for an amendment
to the Registration Statement, a supplement to the Prospectus or for any
additional information, (iii) of the issuance by the Commission of any
stop-order suspending the effectiveness of the Registration Statement or
the initiation or threat of any stop-order proceeding, (iv) of receipt by
the Company of a notice from or order of the Commission pursuant to Section
8(e) of the Investment Company Act, (v) of receipt by the Company of any
notification with respect to the suspension of the qualification of the
Shares for sale in any jurisdiction or the initiation or threat of any
proceeding for that purpose, (vi) of the happening of any event which makes
untrue any statement of a material fact made in the Registration Statement
or the Prospectus, or which requires the making of a change in the
Registration Statement or the Prospectus in order to make any material
statement therein
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<PAGE>
not misleading, and (vii) of receipt by the Company or any representative
or attorney of the Company of any other communication from the Commission
relating to the Company, the Registration Statement, the Notification, any
Preliminary Prospectus, the Prospectus or to the transactions contemplated
by this Agreement;
(f) If the Commission shall issue a stop-order suspending the
effectiveness of the Registration Statement or an order pursuant to Section
8(e) of the Investment Company Act, to make every reasonable effort to
obtain the lifting of any such order at the earliest possible time;
(g) As soon as practicable after the Effective Date, to make
generally available to its security holders and to deliver to the
Representatives an earnings statement, conforming with the requirements of
Section 11(a) of the Securities Act, covering a period of at least twelve
months beginning after the Effective Date;
(h) For a period of five years from the Effective Date, to furnish to
the Representatives copies of all public reports and all reports and
financial statements furnished by the Company to the Exchange pursuant to
requirements of or agreements with the Exchange or to the Commission
pursuant to the Exchange Act, the Investment Company Act or any rule or
regulation of the Commission thereunder;
(i) To endeavor to qualify the Shares for offer and sale under the
securities laws of such jurisdictions as the Representatives may reasonably
request for as long as necessary for the distribution of the Shares; except
that in no event shall the Company be obligated in connection therewith to
qualify as a foreign corporation or to execute a general consent for
service of process;
(j) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, to pay, or reimburse if
paid by the Representatives, the costs incident to the authorization,
issuance, sale and delivery of the Shares to be sold by the Company to the
Underwriters and any taxes (including stock transfer taxes) payable in that
connection; the costs incident to the preparation, printing and filing
under the Acts of the Registration Statement and the Notification and any
amendments and exhibits thereto; the costs of preparing, printing and
distributing the Registration Statement as originally filed and each
amendment thereto and any post-effective amendments thereof (including
exhibits), any Preliminary Prospectus, any Omitting Prospectus or other
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<PAGE>
advertising or sales literature used in connection with the public offering
of the Shares, the Prospectus and any amendment or supplement to the
Prospectus as provided in this Agreement; the costs of printing any
agreement with selected dealers; the costs of printing this Agreement and
the Agreement Among Underwriters; the costs of filings with the NASD; the
costs of listing the Shares on the Exchange; the fees and expenses of
qualifying the Shares under the securities laws of the several
jurisdictions as provided in this Paragraph and of preparing and printing a
Preliminary and Final Blue Sky Memorandum (including reasonable fees and
expenses of counsel to the Underwriters related to such qualification); and
all other costs and expenses incident to the performance of the obligations
of the Company under this Agreement; provided that, except as provided in
this Paragraph and in Paragraph 9, the Underwriters shall pay their own
costs and expenses, including the fees and expenses of their counsel and
any stock transfer taxes due upon resale of any Shares by the Underwriters;
if the fees and expenses payable by the Company or to be reimbursed by the
Company to the Underwriters pursuant to any provision of this Paragraph
5(j) are not so paid or reimbursed, the Adviser agrees to pay or reimburse
the Underwriters for such fees and expenses;
(k) To apply the net proceeds from the sale of the Shares for the
purposes set forth in the Prospectus; and
(l) To use its best efforts to effect the listing of the Shares on
the Exchange.
6. (a) The Company shall indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act from and against any
loss, claim, damage or liability, joint or several, and any action in respect
thereof, to which that Underwriter or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon (i) any untrue statement or
alleged untrue statement made by the Company in Paragraph 1(a) of this
Agreement, (ii) any untrue statement or alleged untrue statement of a material
fact contained in (A) the Notification, any Preliminary Prospectus, the
Registration Statement, the Prospectus, any Omitting Prospectus or the
Registration Statement or Prospectus as amended or supplemented, or (B) any
application or other document, or any amendment or supplement thereto, executed
by the Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the Shares under the
securities
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<PAGE>
or blue sky laws thereof or filed with the Commission or any securities
association or securities exchange (each, an "Application"), or (iii) the
omission or alleged omission to state in the Notification, any Preliminary
Prospectus, the Registration Statement, the Prospectus, any Omitting Prospectus
or the Registration Statement or Prospectus as amended or supplemented, or any
Application a material fact required to be stated therein or necessary to make
the statements therein not misleading; and shall reimburse, as incurred, each
Underwriter and each such controlling person for any legal and other expenses
reasonably incurred by that Underwriter or controlling person in connection with
investigating or defending or appearing as a third-party witness in connection
with any such loss, claim, damage, liability or action; provided, however, that
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the Company shall not be liable to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter specifically for inclusion in any Preliminary
Prospectus, any Omitting Prospectus or in the Registration Statement or the
Prospectus or any amendment or supplement thereto; and provided, further, that
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the indemnity agreement contained in this Paragraph 6(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or to
the benefit of any person controlling such Underwriter) from whom the person
asserting any such loss, claim, damage, liability or action purchased Shares
which are the subject thereof to the extent that any such loss, claim, damage or
liability (i) results from the fact that such Underwriter failed to send or give
a copy of the Prospectus (as amended or supplemented) to such person within the
time required by the Act and (ii) arises out of or is based upon an untrue
statement or omission of a material fact contained in such Preliminary
Prospectus that was corrected in the Prospectus (or any amendment or supplement
thereto), unless such failure to deliver the Prospectus (as amended or
supplemented) was the result of noncompliance by the Company with Paragraph
5(b). The foregoing indemnity agreement is in addition to any liability which
the Company may otherwise have to any Underwriter or any controlling person of
that Underwriter.
(b) The Adviser shall indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any loss, claim, damage or liability, joint or several, and any action
in respect thereof, to which that Underwriter or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon (i) any untrue
statement or alleged untrue statement made by the Adviser in Paragraph 1(b) of
this Agreement, (ii) any untrue statement or alleged untrue
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<PAGE>
statement of a material fact contained in the Notification, any Preliminary
Prospectus, the Registration Statement, the Prospectus or the Registration
Statement or Prospectus as amended or supplemented, or (iii) the omission or
alleged omission to state in the Notification, any Preliminary Prospectus, the
Registration Statement, the Prospectus or the Registration Statement or
Prospectus as amended or supplemented, a material fact required to be stated
therein or necessary to make the statements therein not misleading; and shall
reimburse, as incurred, each Underwriter and each such controlling person for
any legal and other expenses reasonably incurred by that Underwriter or
controlling person in connection with investigating or defending or appearing as
a third-party witness in connection with any such loss, claim, damage, liability
or action; provided, however, that the Adviser shall not be liable in any such
-------- -------
case to the extent that any such loss, claim, damage, liability or action arises
out of, or is based upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company or the Adviser through the
Representatives by or on behalf of any Underwriter specifically for inclusion in
any Preliminary Prospectus or in the Registration Statement or the Prospectus or
any amendment or supplement thereto; and provided, further, that the indemnity
-------- -------
agreement contained in this Paragraph 6(b) with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or to the benefit
of any person controlling such Underwriter) from whom the person asserting any
such loss, claim, damage, liability or action purchased Shares which are the
subject thereof to the extent that any such loss, claim, damage or liability (i)
results from the fact that such Underwriter failed to send or give a copy of the
Prospectus (as amended or supplemented) to such person within the time required
by the Act and (ii) arises out of or is based upon an untrue statement or
omission of a material fact contained in such Preliminary Prospectus that was
corrected in the Prospectus (or any amendment or supplement thereto), unless
such failure to deliver the Prospectus (as amended or supplemented) was the
result of noncompliance by the Company with Paragraph 5(b); and provided,
--------
further, that the Adviser shall be liable to such indemnified party only to the
- -------
extent that the Company fails to indemnify and hold harmless such indemnified
party pursuant to Paragraph 6(a). The foregoing indemnity agreement is in
addition to any liability which the Adviser may otherwise have to any
Underwriter or any controlling person of that Underwriter. If an indemnified
party makes a written claim to the Company for indemnification pursuant to
Section 6(a) in respect of any such loss, claim, damage, liability or action for
which indemnification may be sought thereunder, accompanied by
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reasonable evidence of the amount thereof and basis therefor, the Company will
request counsel for the directors of the Company who are not interested persons
of the Company within the meaning of the Investment Company Act, or other
independent counsel satisfactory to the parties, to render an opinion to the
Company within 60 days of such request as to whether the Company's indemnity
agreement pursuant to Section 6(a) with respect to such loss, claim, damage,
liability or action should or should not be held to be enforceable by a court of
competent jurisdiction. If such counsel opines that such indemnity agreement
should be held to be so enforceable or fails to render any such opinion within
such 60 day period, the Company shall be deemed for purposes of this Section
6(b) only to have failed to indemnify and hold harmless such indemnified party
pursuant to Section 6(a) in respect of any part of such claim not paid within 60
days after delivery of such opinion or after such failure to deliver an opinion.
If such counsel opines that such indemnity agreement should be held not to be so
enforceable, the Company shall be deemed for purposes of this Section 6(b) only
to have failed to indemnify and hold harmless such indemnified party pursuant to
Section 6(a) in respect of any such claim not paid prior to or immediately upon
delivery of such opinion. The procedure set forth in the two next preceding
sentences is solely for the purpose of determining the Adviser's indemnity
obligation for the purposes of this Section 6(b) and is not intended to diminish
in any way the Company's obligation timely to indemnify and hold harmless any
indemnified party pursuant to Section 6(a). Each indemnified party agrees that
the Adviser may bring suit, or take any other appropriate action in law or in
equity, against the Company in the name of such indemnified party to enforce the
Company's indemnity obligation to such indemnified party pursuant to Section
6(a) in respect of any amount that the Adviser has paid to such indemnified
party pursuant to this Section 6(b). Such indemnified party will cooperate with
and assist the Adviser in the conduct of any such action and the Adviser will
pay all expenses of such action and will reimburse such indemnified party for
all reasonable out-of-pocket expenses. The Adviser will be entitled to all
amounts recovered in any such action.
(c) MGF shall indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act from and against any loss,
claim, damage or liability, joint or several, and any action in respect thereof,
to which that Underwriter or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon (i) any untrue statement or alleged
untrue statement made by the MGF in Paragraph 1(c) of this Agreement, (ii) any
untrue statement or alleged untrue statement of a material fact
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<PAGE>
contained in the Notification, any Preliminary Prospectus, the Registration
Statement, the Prospectus, any Omitting Prospectus or the Registration Statement
or Prospectus as amended or supplemented, or (iii) the omission or alleged
omission to state in the Notification, any Preliminary Prospectus, the
Registration Statement, the Prospectus, any Omitting Prospectus or the
Registration Statement or Prospectus as amended or supplemented, a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and shall reimburse, as incurred, each Underwriter and each such
controlling person for any legal and other expenses reasonably incurred by that
Underwriter or controlling person in connection with investigating or defending
or appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the MGF shall not be liable
-------- -------
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company or MGF through the
Representatives by or on behalf of any Underwriter specifically for inclusion in
any Preliminary Prospectus, any Omitting Prospectus or in the Registration
Statement or the Prospectus or any amendment or supplement thereto; and
provided, further, that the indemnity agreement contained in this Paragraph 6(c)
- -------- -------
with respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) from
whom the person asserting any such loss, claim, damage, liability or action
purchased Shares which are the subject thereof to the extent that any such loss,
claim, damage or liability (i) results from the fact that such Underwriter
failed to send or give a copy of the Prospectus (as amended or supplemented) to
such person within the time required by the Act and (ii) arises out of or is
based upon an untrue statement or omission of a material fact contained in such
Preliminary Prospectus that was corrected in the Prospectus (or any amendment or
supplement thereto), unless such failure to deliver the Prospectus (as amended
or supplemented) was the result of noncompliance by the Company with Paragraph
5(b); and provided, further, that MGF shall be liable to such indemnified party
-------- -------
only to the extent that the Company or the Adviser fails to indemnify and hold
harmless such indemnified party pursuant to Paragraph 6(a) or 6(b), as the case
may be. The foregoing indemnity agreement is in addition to any liability which
MGF may otherwise have to any Underwriter or any controlling person of that
Underwriter.
(d) Each Underwriter severally, but not jointly, shall indemnify and hold
harmless the Company, the Adviser and MGF, each person, if any, who controls the
Company, the Adviser or MGF
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<PAGE>
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and each director and officer of the Company who signed the
Registration Statement from and against any loss, claim, damage or liability, or
any action in respect thereof, to which the Company, the Adviser or MGF or any
such director, officer or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement, the Prospectus, any Omitting Prospectus or the
Registration Statement or Prospectus as amended or supplemented, or any
Application or (ii) the omission or alleged omission therefrom to state in any
Preliminary Prospectus, the Registration Statement, the Prospectus, any Omitting
Prospectus or the Registration Statement or Prospectus as amended or
supplemented, or any Application, a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company, the Adviser or MGF by that
Underwriter specifically for inclusion therein; and shall reimburse, as
incurred, the Company, the Adviser or MGF for any legal and other expenses
reasonably incurred by the Company, the Adviser or MGF or any such director,
officer or controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action in respect thereof. The Company,
the Adviser and MGF acknowledge that, for all purposes under this Agreement, the
statements set forth under the heading "Underwriting" and the information in the
last paragraph on the front cover page and the paragraph with respect to
stabilization on the second page of any Preliminary Prospectus and the
Prospectus constitute the only information relating to any Underwriter furnished
in writing to the Company, the Adviser or MGF by the Representatives on behalf
of the Underwriters specifically for inclusion in the Registration Statement,
any Preliminary Prospectus or the Prospectus. The foregoing indemnity agreement
is in addition to any liability which any Underwriter may otherwise have to the
Company, the Adviser or MGF or any such director, officer or controlling person.
(e) Promptly after receipt by an indemnified party under this Paragraph
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Paragraph, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
-------- -------
the failure to notify the indemnifying party shall not relieve such indemnifying
party from any liability which it may have to an
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<PAGE>
indemnified party under this Paragraph 6 or otherwise, unless, and only to the
extent that, such failure results in the forfeiture of substantive rights or
defenses or the loss of procedural rights or defenses by the indemnifying party.
If any such claim or action shall be brought against an indemnified party, and
it notifies the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein, and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party; provided,
--------
however, that if the defendants in any such action include both the indemnified
- -------
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be one or more legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnifying party shall not have the
right to direct the defense of such action on behalf of such indemnified party
or parties and such indemnified party or parties shall have the right to select
a separate counsel for such indemnified parties to defend such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action and approval by such indemnified party of counsel appointed to defend
such action, the indemnifying party shall not be liable to the indemnified party
under this Paragraph 6 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that the Representatives
-------- -------
shall have the right to employ counsel to represent the Representatives and
those other Underwriters and their respective controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the Underwriters against the Company, the Adviser or MGF under this
Paragraph 6 if, in the reasonable judgment of the Representatives, it is
advisable for the Representatives and those Underwriters and any such
controlling persons to be represented by separate counsel, and in that event the
fees and reasonable expenses of such separate counsel shall be paid by the
indemnifying party or parties; provided, however, in no event shall the
indemnifying party or parties be responsible for the expenses of more than one
separate counsel for all such indemnified parties. After notice from the
indemnifying party to such indemnified party, the indemnifying party will not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the consent of the indemnifying party.
(f) If the indemnification provided for in this Paragraph 6 shall, for any
reason, be unavailable or insufficient to hold
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<PAGE>
harmless an indemnified party under Paragraph 6(a), 6(b), 6(c) or 6(d) in
respect of any loss, claim, damage or liability, or any action in respect
thereof, referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the indemnifying party or parties, on
the one hand, and the indemnified party, on the other, from the offering of the
Shares or (ii) if, but only if, the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying party or parties, on the one hand, and the
indemnified party, on the other, with respect to the statements or omissions or
alleged statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant equitable
considerations. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the relative benefits
received by each party from the offering of the Shares which shall take into
account the portion of the proceeds of the offering realized by each and the
present and future compensation expected at the time of the offering to be
received by each. Relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company, the Adviser or MGF, on the one hand, or the
Underwriters, on the other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission, as
well as any other relevant equitable considerations. The Company, the Adviser,
MGF and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this Paragraph 6(f) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Paragraph 6(f) shall be
deemed to include, for purposes of this Paragraph 6, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending against any such action or claim. Notwithstanding the provisions
of this Paragraph 6(f), no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public exceeds the aggregate amount of
any damages which such
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<PAGE>
Underwriter has otherwise paid or become liable to pay in respect of the same or
any substantially similar claim. No person found 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. The Underwriters' obligations to contribute as
provided in this Paragraph 6(f) are several in proportion to their respective
underwriting obligations and not joint. For purposes of this Paragraph 6(f),
each person, if any, who controls an Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act will have the same
rights to contribution as such Underwriter, and each director of the Company,
each officer of the Company who signed the Registration Statement and each
person, if any, who controls the Company, the Adviser or MGF within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act, will have
the same rights to contribution as the Company, the Adviser and MGF, subject in
each case to the provisions of this Paragraph 6(f). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made under this Paragraph 6(f), notify any such party or
parties from whom contribution may be sought, but the omission so to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation(s) it or they may have hereunder or otherwise than under this
Paragraph 6(f).
(g) The indemnity agreements contained in this Paragraph 6 and the
representations, warranties and agreements of the Company, the Adviser and MGF
in Paragraph 1, and of the Company in Paragraph 5, shall survive the delivery of
the Shares and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by or on
behalf of any indemnified party.
7. The obligations of the Underwriters hereunder may be terminated by the
Representatives, in their absolute discretion, by notice given to and received
by the Company prior to delivery of and payment for the Shares, if prior to that
time trading in securities generally on the Exchange is suspended, or limited or
minimum prices are established on the Exchange, or a banking moratorium is
declared by either Federal or New York State authorities, or there shall have
occurred any outbreak or material escalation of hostilities in which the United
States is involved, any declaration of war by Congress, or any material adverse
change in the existing financial, political or economic conditions in the United
States or elsewhere or any other substantial national or international calamity
or emergency if the effect of any such outbreak, escalation, declaration,
adverse
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<PAGE>
change, calamity or emergency makes it, in the reasonable judgment of the
Representatives, impracticable or inadvisable to proceed with completion of the
sale of, and payment for, the Shares.
8. The respective obligations of the Underwriters hereunder are subject to
the accuracy, when made and on the First Delivery Date and the Second Delivery
Date, of the representations and warranties of the Company, the Adviser and MGF
contained herein, to performance by the Company of its obligations hereunder,
and to each of the following additional terms and conditions:
(a) At or before the First Delivery Date and the Second Delivery
Date, as the case may be, no stop-order suspending the effectiveness of the
Registration Statement or order pursuant to Section 8(e) of the Investment
Company Act shall be in effect, and prior to that time no stop-order
proceeding or proceeding for an order pursuant to Section 8(e) of the
Investment Company Act shall have been initiated and remain pending or
threatened by the Commission; any request of the Commission for inclusion
of additional information in the Registration Statement or the Prospectus
or otherwise shall have been complied with; and the Company shall not have
filed with the Commission the Prospectus or any amendment or supplement to
the Registration Statement or the Prospectus if the Representatives have
reasonably objected to such filing.
(b) No Underwriter shall have discovered and disclosed to the Company
on or prior to the First Delivery Date or the Second Delivery Date, as the
case may be, that the Registration Statement or the Prospectus or any
amendment or supplement thereto contains an untrue statement of a fact
which, in the reasonable opinion of Stroock & Stroock & Lavan, counsel for
the Underwriters, is material or omits to state a fact which, in the
reasonable opinion of such counsel, is material and is required to be
stated therein or is necessary to make the statements therein not
misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement and the Shares and the
form of the Registration Statement and the Prospectus, other than financial
statements and other financial data, and all other legal matters relating
to this Agreement and the transactions contemplated hereby shall be
satisfactory in all respects to Stroock & Stroock & Lavan, counsel for the
Underwriters, and the Company shall have furnished to Stroock & Stroock &
Lavan all documents and information that
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<PAGE>
they may reasonably request to enable them to pass upon such matters.
(d) Sullivan & Worcester LLP shall have furnished to the
Representatives on the First Delivery Date and the Second Delivery Date
their opinion addressed to the Underwriters and dated such Delivery Date,
as counsel to the Company, to the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the
State of Maryland, is duly qualified to do business and in good
standing as a foreign corporation in all jurisdictions in which
failure to so qualify would have a material adverse effect upon the
Company, and has all corporate power and authority necessary to own
its properties and conduct the business in which it is engaged as
described in the Prospectus;
(ii) All of the authorized shares of Common Stock of the
Company, including the Shares, have been duly authorized and, upon
payment for the Shares pursuant to the terms of this Agreement, all of
the issued and outstanding shares of Common Stock of the Company,
including the Shares, will be validly issued and outstanding, fully
paid and nonassessable, with no personal liability attaching to the
ownership thereof; and the certificates evidencing the Shares comply
with all formal requirements of Maryland law;
(iii) There are no preemptive or other rights to subscribe for
or to purchase, nor any restriction upon the voting or transfer of,
any Shares pursuant to the Company's corporate charter or by-laws or
any agreement or other outstanding instrument known to such counsel;
(iv) The Shares conform in all material respects as to legal
matters to the statements concerning the Common Stock of the Company
contained in the Prospectus, and the authorized and outstanding shares
of capital stock of the Company is as set forth in the Prospectus;
(v) The Registration Statement is effective under the Acts; any
required filing of the Prospectus pursuant to Rule 497 has been made
within the time period required by Rule 497; to the knowledge of
Sullivan & Worcester LLP, no stop-order suspending the
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<PAGE>
Registration Statement's effectiveness or order pursuant to Section
8(e) of the Investment Company Act has been issued, and no proceeding
for any such purpose is pending or threatened by the Commission;
(vi) The Notification, the Registration Statement, any Omitting
Prospectus and the Prospectus (except that no opinion need be
expressed as to the financial statements and other financial and
statistical data contained therein) comply as to form in all material
respects with the requirements of the Acts and the rules and
regulations thereunder;
(vii) The statements made in the Prospectus under the caption
"Capital Stock" insofar as they purport to summarize the provisions of
documents or agreements specifically referred to therein, fairly
present the information called for with respect thereto by Form N-2;
(viii) Such counsel does not know of any litigation or any legal
proceeding pending or threatened against the Company which could
materially adversely affect the subject matter of this Agreement, or
is required to be disclosed in the Prospectus which is not disclosed
and correctly summarized therein;
(ix) Such counsel does not know of any contracts or other
documents which are required to be filed as exhibits to the
Registration Statement by the Acts or by the rules and regulations
thereunder which have not been filed as exhibits to the Registration
Statement or incorporated therein by reference as permitted by the
Rules and Regulations;
(x) To the best of such counsel's knowledge, the Company is not
in violation of its corporate charter or by-laws, or in default under
any material agreement, indenture or instrument;
(xi) This Agreement, the Advisory Agreement, the Administration
Agreement, the Custody Agreement and the Transfer Agency Agreement
have been duly authorized, executed and delivered by the Company and
each complies with all applicable provisions of the Investment Company
Act and the Advisers Act, as applicable; this Agreement, the Advisory
Agreement, the Administration Agreement, the Custody Agreement and the
Transfer Agency Agreement each constitutes the valid and binding
obligation of the Company enforceable in
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<PAGE>
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights, to general equity
principles and except, with respect to this Agreement, as to rights of
indemnity and contribution hereunder; the execution, delivery and
performance of this Agreement, the Advisory Agreement, the
Administration Agreement, the Custody Agreement and the Transfer
Agency Agreement by the Company will not conflict with, or result in
the creation or imposition of any material lien, charge or encumbrance
upon any of the assets of the Company pursuant to the terms of, or
constitute a material default under, any material agreement, indenture
or instrument known to such counsel, or result in a violation of the
corporate charter or by-laws of the Company or the Acts, the Exchange
Act, or the Advisers Act, or, to the knowledge of Sullivan & Worcester
LLP, any order, rule or regulation of any court or governmental agency
having jurisdiction over the Company or its property; and no consent,
authorization or order of, or filing or registration with, any court
or governmental agency is required for the execution, delivery and
performance of this Agreement, the Advisory Agreement, the
Administration Agreement, the Custody Agreement or the Transfer Agency
Agreement by the Company, except such as has been obtained under the
Acts or the Exchange Act or as may be required by state securities
laws;
(xii) The Company is duly registered with the Commission under
the Investment Company Act as a closed-end, non-diversified management
investment company, and all required action has been taken by the
Company under the Acts to make the public offering and consummate the
sale of the Shares as provided in this Agreement; the provisions of
the corporate charter and by-laws of the Company and the investment
policies and restrictions described in the Prospectus comply with the
requirements of the Investment Company Act;
(xiii) The information in the Prospectus under the caption
"Taxes," to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is correct in all
material respects; and
(xiv) The Shares have been duly authorized for listing, subject
to official notice of issuance, on the Exchange.
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<PAGE>
Such opinion shall also contain a statement that in the course of the
preparation by the Company of the Registration Statement and the
Prospectus, such counsel participated in conferences with certain officers
and other representatives of the Company, the Adviser and MGF, counsel for
MGF, representatives of the independent auditors for the Company,
representatives of the Underwriters and counsel for the Underwriters and
that such counsel'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 (except as to the
financial statements and other financial and statistical data and schedules
in the Registration Statement or Prospectus as to which no statement need
be made) did not disclose to such counsel any information which caused such
counsel to believe that the Registration Statement, as of the 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 (except
for financial statements and schedules as aforesaid) on such Delivery Date
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.
Such opinion shall also contain a statement that such counsel has no reason
to believe that the Notification contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. In giving
such opinion, Sullivan & Worcester LLP may rely on the opinion of Piper &
Marbury LLP as to matters of Maryland law.
(e) Stroock & Stroock & Lavan shall have furnished to the
Representatives on the First Delivery Date and the Second Delivery Date
their opinion addressed to the Underwriters and dated such Delivery Date,
as counsel to the Representatives, to the effect that:
(i) The Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the
State of Maryland;
(ii) The Shares have been duly authorized and, upon payment for
the Shares pursuant to the terms of this Agreement will be validly
issued and outstanding, fully paid and nonassessable, with no personal
liability attaching to the ownership thereof;
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<PAGE>
(iii) The statements made in the Prospectus under the caption
"Capital Stock," insofar as they purport to summarize the terms of the
Company's Capital Stock (including the Shares), constitute accurate
summaries of the terms of such Capital Stock in all material respects;
and
(iv) This Agreement has been duly authorized, executed and
delivered by the Company.
Such opinion shall also contain a statement that in the course of the
preparation of the Registration Statement and the Prospectus, such counsel
participated in conferences with certain officers and other representatives
of the Company, MGF and the Adviser, counsel for the Company, the Adviser
and MGF, representatives of the independent auditors for the Company and
representatives of the Underwriters, and that such counsel'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 did not disclose to such counsel any information which caused such
counsel to believe that the Registration Statement, as of the 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, in the light of the circumstances under which
they were made, not misleading or that the Prospectus on such Delivery Date
contains any untrue statements of a material fact 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. In
giving such opinion Stroock & Stroock & Lavan may rely on the opinion of
Piper & Marbury LLP as to matters of Maryland law.
(f) Sullivan & Cromwell shall have furnished to the Representatives
on the First Delivery Date and the Second Delivery Date its opinion
addressed to the Underwriters and dated such Delivery Date, as counsel to
the Adviser, to the effect that:
(i) The Adviser has been duly organized and is validly existing
and in good standing as a limited liability company under the laws of
the State of New York, and has all power and authority necessary to
perform its advisory services with respect to the Company as described
in the Prospectus;
(ii) This Agreement and the Advisory Agreement have been duly
authorized, executed and delivered
-28-
<PAGE>
by the Adviser and each complies, as to matters relevant to the
Adviser, with all applicable provisions of the Investment Company Act
and the Advisers Act, as applicable; the Advisory Agreement
constitutes the valid and binding obligation of the Adviser
enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles and termination in accordance with the terms
of the Investment Company Act; the execution, delivery and performance
of this Agreement and the Advisory Agreement by the Adviser will not
conflict with, or result in the creation or imposition of any material
lien, charge or encumbrance upon any of the assets of the Adviser
pursuant to the terms of, or constitute a material default under, any
agreement, indenture or other instrument identified in such opinion or
result in a violation of the Limited Liability Company Operating
Agreement of the Adviser or the Acts; and no consent, authorization or
order of, or filing or registration with, any Federal or New York
court or governmental agency is required for the execution, delivery
and performance of this Agreement or the Advisory Agreement by the
Adviser, except such as has been obtained under the Acts, the Advisers
Act or the Exchange Act or as may be required by state securities
laws;
(iii) The Adviser is registered with the Commission under the
Advisers Act as an investment adviser and is not prohibited by the
Advisers Act or the Investment Company Act, or the rules and
regulations under such acts, from acting under the Advisory Agreement
for the Company as contemplated by the Prospectus; and
(iv) Such counsel does not know of any litigation or any
governmental proceeding pending or threatened against the Adviser
which could materially adversely affect the subject matter of this
Agreement or the Advisory Agreement or the registration or good
standing of the Adviser with the Commission, which is required to be
disclosed in the Prospectus which is not disclosed and summarized
therein.
In addition to this foregoing opinion, such counsel will state that,
as counsel to the Adviser, such counsel reviewed the description of the Adviser
in the Registration Statement and the Prospectus under the headings "Prospectus
Summary--Investment
-29-
<PAGE>
Adviser" and "Operation of the Fund--Investment Adviser," and participated in
discussions with representatives of the Adviser and that on the basis of the
information that such counsel gained in the course of the performance of the
services referred to above, considered in the light of such counsel's
understanding of the applicable law and the experience such counsel has gained
through its practice under the Securities Act, such counsel shall state that
nothing that came to such counsel's attention in the course of such review has
caused such counsel to believe that such description contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they were made, not misleading. Such counsel may state, however, that the
limitations inherent in the independent verification of factual matters and the
character of determinations involved in the registration process are such that
such counsel does not assume any responsibility for the accuracy, completeness
or fairness of the description, and need not express any opinion or belief as to
the financial statements, schedules or other financial, economic or statistical
information contained therein.
(g) John F. Splain, Esq., as General Counsel to MGF, shall have
furnished to the Representatives on the First Delivery Date and the Second
Delivery Date his opinion addressed to the Underwriters and dated such
respective Delivery Date to the effect that:
(i) MGF has been duly incorporated and is validly existing and
in good standing as a corporation under the laws of the State of Ohio,
is duly qualified to do business and in good standing as a foreign
corporation in all jurisdictions in which failure to so qualify would
have a material adverse effect upon the ability of MGF to conduct its
business with respect to the Company as described in the Prospectus,
and has all corporate power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged as
described in the Prospectus;
(ii) This Agreement and the Administration Agreement have been
duly authorized, executed and delivered by MFG, and each complies with
all applicable provisions of the Investment Company Act; the
Administration Agreement constitutes the valid and binding obligation
of MGF, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights,
and to general equity principles and
-30-
<PAGE>
except, with respect to this Agreement, as to rights to indemnity
hereunder; the execution, delivery and performance of this Agreement
and the Administration Agreement by MGF will not conflict with, or
result in the creation or imposition of any material lien, charge or
encumbrance upon any of the assets of MGF pursuant to the terms of, or
constitute a material default under, any material agreement, indenture
or instrument known to such counsel, or result in a material violation
of the corporate charter or by-laws of MGF or any statute (including
the Acts), any order, rule or regulation of any court or governmental
agency having jurisdiction over MGF or its property; and no consent,
authorization or order of, or filing or registration with, any court
or governmental agency is required for the execution, delivery and
performance of this Agreement and the Administration Agreement by MGF,
except such as has been obtained under the Acts or the Exchange Act or
as may be required by state securities laws;
(iii) MGF is not prohibited by the Investment Company Act or the
rules and regulations thereunder from acting under the Administration
Agreement for the Company as contemplated by the Prospectus;
(iv) Such counsel does not know of any litigation or any
proceeding pending or threatened against MGF which could materially
adversely affect the subject matter of the Administration Agreement,
or is required to be disclosed in the Prospectus which is not
disclosed and correctly summarized therein;
(v) To the best of such counsel's knowledge, MGF is not in
violation of its corporate charter or by-laws, or in default under any
material agreement, indenture or instrument; and
(vi) The description of MGF in the Registration Statement and
the Prospectus does not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
Such opinion shall also contain a statement that in the course of the
preparation of the Registration Statement and the Prospectus, such counsel
participated in conferences with certain officers and other representatives
of the Company, the Adviser, counsel for the Company and the
-31-
<PAGE>
Adviser, representatives of the independent auditors for the Company,
representatives of the Underwriters and counsel for the Underwriters and
that such counsel'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 (except as to the
financial statements and other financial and statistical data and schedules
in the Registration Statement or Prospectus as to which no statement need
be made) did not disclose to such counsel any information which caused such
counsel to believe that the Registration Statement, as of the 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 (except
for financial statements and schedules as aforesaid) on such Delivery Date
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.
Such opinion shall also contain a statement that such counsel has no reason
to believe that the Notification contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances in which they were made, not misleading.
(h) The Company shall have furnished to the Representatives on the
First Delivery Date and the Second Delivery Date a certificate, dated such
respective Delivery Date, of its Chairman of the Board and Chief Executive
Officer, its President or a Vice President and its Treasurer or an
Assistant Treasurer stating that:
(i) The representations, warranties and agreements of the
Company in Paragraph l of this Agreement are true and correct as of
such respective Delivery Date; the Company has complied with all its
agreements contained herein; and the conditions set forth in Paragraph
8(a) of this Agreement have been fulfilled; and
(ii) Such individuals have carefully examined the Registration
Statement and the Prospectus and, in their opinion, (A) as of the
Effective Date, the Registration Statement did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading
-32-
<PAGE>
and on such respective Delivery Date, the Prospectus does not include
any untrue statement of a material fact and does not omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) since the Effective Date,
no event has occurred which should have been set forth in a supplement
to or amendment of the Prospectus which has not been set forth in such
a supplement or amendment.
(i) The Adviser shall have furnished to the Representatives on the
First Delivery Date and the Second Delivery Date a certificate, dated such
Delivery Date, of two of its Members stating that:
(i) The representations, warranties and agreements of the
Adviser in Paragraph l of this Agreement are true and correct as of
such respective Delivery Date and the Adviser has complied with all
its agreements contained herein; and
(ii) Such individuals have carefully examined the Registration
Statement and the Prospectus and, in their opinion, (A) as of the
Effective Date, the Registration Statement did not include any untrue
statement of a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and on such respective Delivery Date, the
Prospectus does not include any untrue statement of a material fact
and does not omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and (B) since the Effective Date of the Registration Statement, no
event has occurred which should have been set forth in a supplement to
or amendment of the Prospectus which has not been set forth in such a
supplement or amendment.
(j) MGF shall have furnished to the Representatives on the First
Delivery Date and the Second Delivery Date a certificate of MGF, dated such
Delivery Date, signed on behalf of MGF by, its Chairman of the Board, its
President or a Vice President and by its Treasurer, Assistant Treasurer,
Chief Financial Officer, Chief Accounting Officer or Controller, stating
that the representations, warranties and agreements of MGF in Paragraph l
of this Agreement are true and correct as of such respective Delivery Date
and that MGF has complied with all its agreements contained herein.
-33-
<PAGE>
(k) The Company shall have furnished to the Representatives on the
First Delivery Date and the Second Delivery Date a letter of Arthur
Andersen LLP, addressed to the Underwriters and dated such Delivery Date,
confirming that they are independent public accountants within the meaning
of the Acts and are in compliance with the applicable requirements relating
to the qualification of accountants under Rule 2-01 of Regulation S-X of
the Commission, and stating, as of the date of such letter (or, with
respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the
Prospectus, as of a date not more than five days prior to the date of such
letter), the conclusions and findings of such firm with respect to the
financial information and other matters covered by its letter delivered to
the Representatives concurrently with the execution of this Agreement and
confirming in all material respects the conclusions and findings set forth
in such prior letter.
(l) The Firm Shares being sold by the Company shall have been listed
on the Exchange no later than the opening of trading on the Exchange on the
first full day of trading after the date of this Agreement.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to Stroock & Stroock & Lavan, counsel for the Underwriters.
9. If the sale of the Shares provided for herein is not consummated
because of any failure, refusal or inability on the part of the Company or the
Adviser to perform any agreement on their part to be performed or because any
other condition of the Underwriters' obligations on their part to be fulfilled
herein is not fulfilled by the Company or the Adviser, the Company or the
Adviser shall reimburse the Underwriters for the reasonable fees and expenses of
their counsel and for such other out-of-pocket expenses as shall have been
incurred by them in connection with this Agreement and the proposed purchase of
the Shares, and upon demand the Company or the Adviser shall pay the full amount
thereof to the Representatives. If this Agreement is terminated pursuant to
Paragraph 3 hereof by reason of the default of one or more Underwriters, the
Company or the Adviser shall not be obligated to reimburse any defaulting
Underwriter on account of those expenses.
10. The Company, the Adviser and MGF shall be entitled to act and rely
upon any request, consent, notice or agreement given
-34-
<PAGE>
or made by the Representatives. Any notice by the Company, the Adviser or MGF
to the Underwriters shall be sufficient if given in writing or by telegraph or
facsimile addressed to NatWest Securities Limited, 135 Bishopsgate, London EC2M
3XT, England, Attention: Melvyn Rowe; and any notice by the Underwriters to the
Company or the Adviser shall be sufficient if given in writing or by telegraph
addressed to the Company or the Adviser at One Broadway, New York, New York
10004, Attention: Gregory E. Ratte; and to MGF at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202, Attention: John F. Splain. This Agreement shall inure
to the benefit of and be binding upon the Underwriters, the Company, the
Adviser, MGF and each of their respective successors. This Agreement and the
terms and provisions hereof are for the sole benefit of only those persons,
except that (a) the representations, warranties, indemnities and agreements of
the Company, the Adviser and MGF contained in this Agreement shall also be
deemed to be for the benefit of the person or persons, if any, who control any
Underwriter within the meaning of Section 15 of the Securities Act, and (b) the
indemnity agreement of the Underwriters contained in Paragraph 6 of this
Agreement shall be deemed to be for the benefit of directors of the Company,
officers of the Company who have signed the Registration Statement and any
person controlling the Company, the Adviser or MGF. Nothing in this Agreement
is intended or shall be construed to give any person other than the persons
referred to in this Paragraph any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
11. For purposes of this Agreement, "business day" means any day on which
the Exchange is open for trading.
12. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. This Agreement may be executed in one or
more counterparts, and if
-35-
<PAGE>
executed in more than one counterpart, the executed counterparts shall together
constitute a single instrument.
If the foregoing correctly sets forth the agreement among the Company, the
Adviser, MGF and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
THE THERMO OPPORTUNITY FUND, INC.
By: /s/ FRANCIS S. BRANIN, JR.
------------------------------------
Title: President
BRUNDAGE, STORY AND ROSE, L.L.C.
By: /s/ GREGORY E. RATTE
------------------------------------
Title: Member
MGF SERVICE CORP.
By: /s/ JOHN F. SPLAIN
-------------------------------------
Title: Secretary and General Counsel
Accepted:
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS INC.
SMITH BARNEY INC.
COWEN & COMPANY
FAHNESTOCK & CO. INC.
FIRST ALBANY CORPORATION
By: NATWEST SECURITIES LIMITED
By: /s/ MELVYN ROWE
---------------------------------------
Name: Melvyn Rowe
Title: Director, Equity Capital Markets
For themselves and the other several Underwriters
named in Schedule 1 of this Agreement.
-36-
<PAGE>
SCHEDULE 1
Underwriter Number of
-----------
Shares
---------
Natwest Securities Limited . . . . . . . . . . . 226,000
Lehman Brothers Inc. . . . . . . . . . . . . . . 226,000
Smith Barney Inc. . . . . . . . . . . . . . . . . 226,000
Cowen & Co. . . . . . . . . . . . . . . . . . . . 113,000
Fahnestock & Co. Inc. . . . . . . . . . . . . . . 113,000
First Albany Corporation . . . . . . . . . . . . 113,000
Barrington Research Associates, Inc. . . . . . . 31,750
Brimberg & Co. . . . . . . . . . . . . . . . . . 31,750
EVEREN Securities, Inc. . . . . . . . . . . . . 31,750
First Hanover Securities Inc. . . . . . . . . . 31,750
Gilford Securities Inc. . . . . . . . . . . . . 31,750
Gruntal & Co., Inc. . . . . . . . . . . . . . . 31,750
GS2 Securities, Inc. . . . . . . . . . . . . . . 31,750
Hampshire Securities Corp. . . . . . . . . . . . 31,750
Interstate/Johnson Lane Corp. . . . . . . . . . 31,750
Janney Montgomery Scott Inc. . . . . . . . . . . 31,750
Josephthal Lyon & Ross Inc. . . . . . . . . . . 31,750
McDonald & Co. Securities, Inc. . . . . . . . . 31,750
Needham & Co., Inc. . . . . . . . . . . . . . . 31,750
Roney & Co., LLC . . . . . . . . . . . . . . . . 31,750
Van Kasper & Co. . . . . . . . . . . . . . . . . 31,750
WM Smith Securities Inc. . . . . . . . . . . . . 31,750
---------
Total . . . . . . . . . . . . . . . . . . . . . . 1,525,000
===========
-37-
EXHIBIT 99(j)
CUSTODY AGREEMENT
-----------------
This AGREEMENT, dated as of August 2nd, 1996, by and between THE THERMO
OPPORTUNITY FUND, INC. (the "Fund"), a corporation organized under the laws of
the State of Maryland, and THE FIFTH THIRD BANK, a state of Ohio chartered bank
(the "Custodian").
W I T N E S S E T H:
--------------------
WHEREAS, the Fund desires that its Securities and cash be held and
administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Fund is a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund and the Custodian hereby agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly authorized
-------------------
by resolution of the Board of Directors to give Oral Instructions and Written
Instructions on behalf of the Fund
<PAGE>
and named in Exhibit A hereto or in such resolutions of the Board of Directors,
certified by an Officer, as may be received by the Custodian from time to time.
1.2 "Board of Directors" shall mean the Directors from time to time
--------------------
serving under the Fund's Articles of Incorporation, as from time to time
amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as provided
-------------------
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by
--------------
the American Stock Exchange.
1.5 "NASD" shall mean The National Association of Securities Dealers,
------
Inc.
1.6 "Officer" shall mean the President, any Vice President, the Secretary,
---------
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Fund.
1.7 "Oral Instructions" shall mean instructions orally transmitted to and
-------------------
accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Fund shall cause
all Oral Instructions to be confirmed by Written Instructions prior to the end
of the next Business Day. If such Written Instructions confirming Oral
Instructions are not
2
<PAGE>
received by the Custodian prior to a transaction, it shall in no way affect the
validity of the transaction or the authorization thereof by the Fund. If Oral
Instructions vary from the Written Instructions which purport to confirm them,
the Custodian shall notify the Fund of such variance but such Oral Instructions
will govern unless the Custodian has not yet acted.
1.8 "Fund Custody Account" shall mean the account in the name of the
----------------------
Fund, which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or Written
---------------------
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Depository Trust Company and
-----------------------
(provided that Custodian shall have received a copy of a resolution of the Board
of Directors, certified by an Officer, specifically approving the use of such
clearing agency as a depository for the Fund) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and preferred
------------
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities or other
obligations, and
3
<PAGE>
any certificates, receipts, warrants or other instruments or documents
representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or any similar
property or assets that the Custodian has the facilities to clear and to
service.
1.12 "Shares" shall mean the shares of common stock issued by the Fund.
--------
1.13 "Written Instructions" shall mean (i) written communications actually
----------------------
received by the Custodian and signed by two Authorized Persons, or (ii)
communications by telex or any other such system from two persons reasonably
believed by the Custodian to be Authorized Persons, or (iii) communications
between electro-mechanical or electronic devices provided that the use of such
devices and the procedures for the use thereof shall have been approved by
resolutions of the Board of Directors, a copy of which, certified by an Officer,
shall have been delivered to the Custodian.
ARTICLE II
----------
APPOINTMENT OF CUSTODIAN
------------------------
2.1 Appointment. The Fund hereby constitutes and appoints the Custodian
-----------
as custodian of all Securities and cash owned by or in the possession of the
Fund at any time during the period of this Agreement.
2.2 Acceptance. The Custodian hereby accepts appointment as such
----------
custodian and agrees to perform the duties thereof as hereinafter set forth.
4
<PAGE>
ARTICLE III
-----------
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 Segregation. All Securities and non-cash property held by the
-----------
Custodian for the account of the Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 Fund Custody Account. The Custodian shall open and maintain in its
--------------------
trust department a custody account in the name of the Fund, subject only to
draft or order of the Custodian, in which the Custodian shall enter and carry
all Securities, cash and other assets of the Fund which are delivered to it.
3.3 Appointment of Agents. In its discretion, the Custodian may appoint,
---------------------
and at any time remove, any domestic bank or trust company, which has been
approved by the Board of Directors and is qualified to act as a custodian under
the 1940 Act, as sub-custodian to hold Securities and cash of the Fund and to
carry out such other provisions of this Agreement as it may determine, and may
also open and maintain one or more banking accounts with such a bank or trust
company (any such accounts to be in the name of the Custodian and subject only
to its draft or order), provided, however, that the appointment of any such
agent or opening and maintenance of any such accounts shall be at the
Custodian's expense and shall not relieve the Custodian of any of its
obligations or liabilities under this Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall
-------------------------------
5
<PAGE>
deliver, or cause to be delivered, to the Custodian all of its Securities, cash
and other assets, including (a) all payments of income, payments or principal
and capital distributions received by the Fund with respect to such Securities,
cash or other assets owned by the Fund at any time during the period of this
Agreement, and (b) all cash received by the Fund for the issuance, at any time
during such period, of Shares. The Custodian shall not be responsible for such
Securities, cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
----------------------------------------------
deposit and/or maintain Securities of the Fund in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Fund in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of the Board of Directors, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral
6
<PAGE>
consisting of Securities. So long as such Securities Depository or
Book-Entry System shall continue to be employed for the deposit of
Securities of the Fund, the Fund shall annually re-adopt such
resolution and deliver a copy thereof, certified by an Officer, to the
Custodian.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
(c) The records of the Custodian with respect to Securities of the Fund
maintained in a Book-Entry System or Securities Depository shall, by
book-entry, identify such Securities as belonging to the Fund.
(d) If Securities purchased by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a
7
<PAGE>
Book-Entry System or Securities Depository, the Custodian shall
transfer such Securities upon (i) receipt of advice from the Book-
Entry System or Securities Depository that payment for such Securities
has been transferred to the Depository Account, and (ii) the making of
an entry on the records of the Custodian to reflect such transfer and
payment for the account of the Fund.
(e) The Custodian shall provide the Fund with copies of any report
(obtained by the Custodian from a Book-Entry System of Securities
Depository in which Securities of the Fund are kept) on the internal
accounting controls and procedures for safeguarding Securities
deposited in such Book-Entry System or Securities Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to the
Fund resulting (i) from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful misconduct on the
part of Custodian or any sub-custodian appointed pursuant to Section
3.3 above or any of its or their employees, or (ii) from failure of
Custodian or any such sub-custodian to enforce effectively such rights
as it may have against a Book-Entry System or Securities Depository.
At its
8
<PAGE>
election, the Fund shall be subrogated to the rights of the Custodian
with respect to any claim against a Book-Entry System or Securities
Depository or any other person from any loss or damage to the Fund
arising from the use of such Book-Entry System or Securities
Depository, if and to the extent that the Fund has not been made whole
for any such loss or damage.
3.6 Disbursement of Moneys from Fund Custody Account. Upon receipt of
------------------------------------------------
Proper Instructions, the Custodian shall disburse moneys from the Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in accordance
with Section 4.1 of this Agreement and only (i) in the case of
Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any sub-custodian appointed pursuant to Section 3.3 above) of such
Securities registered as provided in Section 3.9 below or in proper
form for transfer, or if the purchase of such Securities is effected
through a Book-Entry System or Securities Depository, in accordance
with the conditions set forth in Section 3.5 above; (ii) in the case
of options on Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the
9
<PAGE>
customs prevailing among dealers in such options; (iii) in the case of
futures contracts and options on futures contracts, against delivery
to the Custodian (or such sub-custodian) of evidence of title thereto
in favor of the Fund or any nominee referred to in Section 3.9 below;
and (iv) in the case of repurchase or reverse repurchase agreements
entered into between the Fund and a bank which is a member of the
Federal Reserve System or between the Fund and a primary dealer in
U.S. Government securities, against delivery of the purchased
Securities either in certificate form or through an entry crediting
the Custodian's account at a Book-Entry System or Securities
Depository with such Securities;
(b) In connection with the conversion, exchange or surrender, as set forth
in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest; taxes; administration, investment advisory,
accounting,
10
<PAGE>
auditing, transfer agent, custodian, trustee and legal fees; and other
operating expenses of the Fund; in all cases, whether or not such
expenses are to be in whole or in part capitalized or treated as
deferred expenses;
(f) For transfer in accordance with the provisions of any agreement among
the Fund, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Fund;
(g) For transfer in accordance with the provision of any agreement among
the Fund, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any contract
market (or any similar organization or organizations) regarding
account deposits in connection with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other interest-
bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
11
<PAGE>
(i) For any other proper purpose, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Directors, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 Delivery of Securities from Fund Custody Account. Upon receipt of
------------------------------------------------
Proper Instructions, the Custodian shall release and deliver Securities from the
Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against receipt of payment therefor in cash, by certified or cashiers
check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an offeror's depository agent in connection with tender or other
similar offers for Securities of the Fund; provided that, in any such
case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Fund, the Custodian or any sub-custodian appointed pursuant to
Section 3.3 above, or
12
<PAGE>
of any nominee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new Securities are to be
delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by the Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;
13
<PAGE>
(i) For delivery in connection with any loans of Securities of the Fund,
but only against receipt of such collateral as the Fund shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
(l) For delivery in accordance with the provisions of any agreement among
the Fund, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD, relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions
by the Fund;
(m) For delivery in accordance with the provisions of any agreement among
the Fund, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
14
<PAGE>
contract market (or any similar organization or organizations)
regarding account deposits in connection with transactions by the
Fund; or
(n) For any other proper corporate purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Directors, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise
-----------------------------------------
instructed by the Fund, the Custodian shall with respect to all Securities held
for the Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all income and
other payments to which the Fund is entitled either by law or pursuant
to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
15
<PAGE>
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or regulations
of any other taxing authority now or hereafter in effect, and prepare
and submit reports to the Internal Revenue Service ("IRS") and to the
Fund at such time, in such manner and containing such information as
is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to Securities held
therein, through a Book-Entry System or Securities Depository, all
rights and similar securities issued with respect to Securities of the
Fund; and
(g) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with the sale,
exchange, substitution, purchase, transfer and other dealings with
Securites and assets of the Fund.
3.9 Registration and Transfer of Securities. All Securities held for the
---------------------------------------
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for the Fund
may be registered in the name of the Fund, the Custodian, or any sub-
16
<PAGE>
custodian appointed pursuant to Section 3.3 above, or in the name of any nominee
of any of them, or in the name of a Book-Entry System, Securities Depository or
any nominee of either thereof. The Fund shall furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of any of the nominees hereinabove
referred to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of the Fund.
3.10 Records. (a) The Custodian shall maintain complete and accurate
-------
records with respect to Securities, cash or other property held for the Fund,
including (i) journals or other records of original entry containing an itemized
daily record in detail of all receipts and deliveries of Securities and all
receipts and disbursements of cash; (ii) ledgers (or other records) reflecting
(A) Securities in transfer, (B) Securities in physical possession, (C) monies
and Securities borrowed and monies and Securities loaned (together with a record
of the collateral therefor and substitutions of such collateral), (D) dividends
and interest received, and (E) dividends receivable and interest accrued; and
(iii) canceled checks and bank records related thereto. The Custodian shall
keep such other books and records of the Fund as it shall reasonably request, or
as may be required by the 1940 Act, including, but not limited to, Section 31 of
the 1940 Act and Rule 31a-2 promulgated thereunder.
17
<PAGE>
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Fund and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Fund and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Fund and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish the Fund with
-------------------------
a daily activity statement and a summary of all transfers to or from the Fund
Custody Account on the day following such transfers. At least monthly and from
time to time, the Custodian shall furnish the Fund with a detailed statement of
the Securities and moneys held for the Fund under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Fund
--------------------------
with such reports, as the Fund may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to Section
3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies
---------------------------
relating to Securities which are not registered
18
<PAGE>
in the name of the Fund, to be promptly executed by the registered holder of
such Securities, without indication of the manner in which such proxies are to
be voted, and shall promptly deliver to the Fund such proxies, all proxy
soliciting materials and all notices relating to such Securities.
3.14 Information on Corporate Actions. The Custodian shall promptly
--------------------------------
transmit to the Fund all written information received by the Custodian from
issuers of Securities being held for the Fund or from agents of such issuers.
The Custodian shall also promptly notify the Fund of corporate actions, limited
to those Securities registered in nominee name and to those Securities held at a
Securities Depository or sub-custodian acting as agent for the Custodian, if the
notice of such corporate actions is published by the Financial Daily Card
Service, J. J. Kenny Called Bond Service or Depository Trust Company. With
respect to tender or exchange offers, the Custodian shall promptly transmit to
the Fund all written information received by the Custodian from issuers of the
Securities whose tender or exchange is sought and from the party (or its agents)
making the tender or exchange offer. If the Fund desires to take action with
respect to any tender offer, exchange offer or other similar transaction, the
Fund shall notify the Custodian at least five Business Days prior to the date on
which the Custodian is to take such action. The Fund will provide or cause to
be provided to the Custodian all relevant information for any Security which has
unique put/option
19
<PAGE>
provisions at least five Business Days prior to the beginning date of the tender
period.
ARTICLE IV
----------
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
4.1 Purchase of Securities. Promptly upon each purchase of Securities for
----------------------
the Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any) or other units purchased, (c) the date of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, and (f) the name of the person to whom such amount is payable.
The Custodian shall upon receipt of such Securities purchased by the Fund pay
out of the moneys held for the account of the Fund the total amount specified in
such Written Instructions to the person named therein. The Custodian shall not
be under any obligation to pay out moneys to cover the cost of a purchase of
Securities for the Fund, if in the Fund Custody Account there is insufficient
cash available to the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities Purchased.
-------------------------------------------------------------------
In any and every case where payment for the purchase of Securities for the Fund
is made by the Custodian in advance of receipt of the Securities purchased but
in the
20
<PAGE>
absence of specified Written Instructions to so pay in advance, the Custodian
shall be liable to the Fund for such Securities to the same extent as if the
Securities had been received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by the
------------------
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement, (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Fund as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in
such form as shall be satisfactory to it, and may deliver Securities and arrange
for payment in accordance with the customs prevailing among dealers in
Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or any
---------------------------
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual
21
<PAGE>
receipt of final payment therefor. In any such case, the Fund shall bear the
risk that final payment for such Securities may not be made or that such
Securities may be returned or otherwise held or disposed of by or through the
person to whom they were delivered, and the Custodian shall have no liability
for any for the foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from
---------------------------------
time to time, the Custodian may credit the Fund Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Fund, and (iii) income from
cash, Securities or other assets of the Fund. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Fund to use funds so
credited to the Fund Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Fund Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its sole
------------------------------------
discretion and from time to time, advance funds
22
<PAGE>
to the Fund to facilitate the settlement of the Fund's transactions in the Fund
Custody Account. Any such advance shall be repayable immediately upon demand
made by Custodian.
23
<PAGE>
ARTICLE V
---------
REDEMPTION OF FUND SHARES
-------------------------
5.1 Transfer of Funds. From such funds as may be available for the
-----------------
purpose in the Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of the Fund, the
Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Fund may designate with respect to such amount in such
Proper Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not be under any
------------------------------
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
----------
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the 1934 Act and a
member of the NASD
24
<PAGE>
(or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by the Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by the Fund,
(c) which constitute collateral for loans of Securities made by the Fund,
(d) for purposes of compliance by the Fund with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Directors, certified by an Officer, setting forth the
25
<PAGE>
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for the Fund only.
ARTICLE VII
-----------
CONCERNING THE CUSTODIAN
------------------------
7.1 Standard of Care. The Custodian shall be held to the exercise of
----------------
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Fund for any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability or claim unless such loss, damage,
cost, expense, liability or claim arises from negligence, bad faith or willful
misconduct on its part or on the part of any sub-custodian appointed pursuant to
Section 3.3 above. The Custodian shall be entitled to rely on and may act upon
advice of counsel on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall
promptly notify the Fund of any action taken or omitted by the Custodian
pursuant to advice of counsel. The Custodian shall not be under any obligation
at any time to ascertain whether the Fund is in compliance with the 1940 Act,
the regulations thereunder, the provisions of the Fund's charter documents or
bylaws, or its investment objectives and policies as
26
<PAGE>
then in effect.
7.2 Actual Collection Required. The Custodian shall not be liable for, or
--------------------------
considered to be the custodian of, any cash belonging to the Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
7.3 No Responsibility for Title, etc. So long as and to the extent that
---------------------------------
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
-----------------------------
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Fund if such Securities are
in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
----------------------------------------
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or
-------------------
obligations whatsoever except such duties and
27
<PAGE>
obligations as are specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and supply necessary
-----------
information to the entity or entities appointed by the Fund to keep the books of
account of the Fund and/or compute the value of the assets of the Fund. The
Custodian shall take all such reasonable actions as the Fund may from time to
time request to enable the Fund to obtain, from year to year, favorable opinions
from the Fund's independent accountants with respect to the Custodian's
activities hereunder in connection with (a) the preparation of the Fund's
reports on Form N-2 and Form N-SAR and any other reports required by the
Securities and Exchange Commission, and (b) the fulfillment by the Fund of any
other requirements of the Securities and Exchange Commission.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
8.1 Indemnification. The Fund shall indemnify and hold harmless the
---------------
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian, from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state
28
<PAGE>
or foreign securities and/or banking laws) or claim arising directly or
indirectly (a) from the fact that Securities are registered in the name of any
such nominee, or (b) from any action or inaction by the Custodian or such sub-
custodian (i) at the request or direction of or in reliance on the advice of the
Fund, or (ii) upon Proper Instructions, or (c) generally, from the performance
of its obligations under this Agreement or any sub-custody agreement with a sub-
custodian appointed pursuant to Section 3.3 above, provided that neither the
Custodian nor any such sub-custodian shall be indemnified and held harmless from
and against any such loss, damage, cost, expense, liability or claim arising
from the Custodian's or such sub-custodian's negligence, bad faith or willful
misconduct.
8.2 Indemnity to be Provided. If the Fund requests the Custodian to take
------------------------
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Fund shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to the Custodian.
8.3 Security. If the Custodian advances cash or Securities to the Fund
--------
for any purpose, either at the Fund's request or as otherwise contemplated in
this Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its
29
<PAGE>
performance under this Agreement, any loss, damage, cost, expense (including
attorneys' fees and disbursements), liability or claim (except such as may arise
from its or its nominee's negligence, bad faith or willful misconduct), then, in
any such event, any property at any time held for the account of the Fund shall
be security therefor, and should the Fund fail promptly to repay or indemnify
the Custodian, the Custodian shall be entitled to utilize available cash of the
Fund and to dispose of other assets of the Fund to the extent necessary to
obtain reimbursement or indemnification.
ARTICLE IX
----------
FORCE MAJEURE
-------------
Neither the Custodian nor the Fund shall be liable for any failure or delay
in performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
30
<PAGE>
transportation; provided, however, that the Custodian in the event of a failure
or delay (i) shall not discriminate against the Fund in favor of any other
customer of the Custodian in making computer time and personnel available to
input or process the transactions contemplated by this Agreement and (ii) shall
use its best efforts to ameliorate the effects of any such failure or delay.
ARTICLE X
---------
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 Effective Period. This Agreement shall become effective as of its
----------------
execution and shall continue in full force until terminated as hereinafter
provided.
10.2 Termination. Either party hereto may terminate this Agreement by
-----------
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by
the Board of Directors, the Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on such specified date of termination (a)
deliver directly to the successor custodian all Securities (other than
Securities held in a Book-Entry System or Securities Depository) and cash then
owned by the Fund and held by the Custodian as custodian, and (b) transfer any
Securities held in a Book-Entry System or Securities Depository to an
31
<PAGE>
account of or for the benefit of the Fund at the successor custodian, provided
that the Fund shall have paid to the Custodian all fees, expenses and other
amounts to the payment or reimbursement of which it shall then be entitled.
Upon such delivery and transfer, the Custodian shall be relieved of all
obligations under this Agreement. The Fund may at any time immediately
terminate this Agreement in the event of the appointment of a conservator or
receiver for the Custodian by regulatory authorities or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian is
--------------------------------------
not designated by the Fund on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Fund at such bank or trust company all Securities of the
Fund held in a Book-Entry System or Securities Depository. Upon such delivery
and transfer, such bank or trust company shall be the successor custodian under
this Agreement and the Custodian
32
<PAGE>
shall be relieved of all obligations under this Agreement.
ARTICLE XI
----------
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Fund and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Fund are set forth in Exhibit B attached
hereto.
ARTICLE XII
-----------
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Fund:
------------
The Thermo Opportunity Fund, Inc.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202
Telephone: (513) 629-2000
Facsimile: (513) 629-2041
To Custodian:
-------------
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attention: Mutual Fund-Operations
Telephone: (513) 579-5672
Facsimile: (513) 762-8698
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XII.
33
<PAGE>
Writing shall include transmissions by or through teletype, facsimile, central
processing unit connection, on-line terminal and magnetic tape.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
14.1 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Fund shall not circulate any printed
-----------------------
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for the Fund and such other printed matter
as merely identifies Custodian as custodian for the Fund. The Fund shall submit
printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
14.3 No Waiver. No failure by either party hereto to exercise, and no
---------
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no amendment
----------
to this Agreement shall be effective unless
34
<PAGE>
evidenced by an instrument in writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
------------
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
-------- -------
either party hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
--------
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
35
<PAGE>
ATTEST: THE THERMO OPPORTUNITY FUND, INC.
/s/ John F. Splain By: /s/ Francis S. Branin, Jr.
- --------------------------- -----------------------------
Francis S. Branin, Jr.
President
ATTEST: THE FIFTH THIRD BANK
/s/ Elizabeth G. Bernotas By: /s/ Kenneth D. Bane
- --------------------------- ------------------------------
Vice President
36
<PAGE>
EXHIBIT A
---------
AUTHORIZED PERSONS
------------------
Set forth below are the names and specimen signatures of the persons
authorized by the Fund to administer the Fund Custody Account.
Name Signature
- ---- ---------
Francis S. Branin, Jr. /s/ Francis S. Branin, Jr.
-------------------------------
Gregory E. Ratte /s/ Gregory E. Ratte
-------------------------------
Robert G. Dorsey /s/ Robert G. Dorsey
-------------------------------
John F. Splain /s/ John F. Splain
-------------------------------
Mark J. Seger /s/ Mark J. Seger
-------------------------------
M. Kathleen Leugers /s/ M. Kathleen Leugers
-------------------------------
Eric P. Spiegel /s/ Eric P. Spiegel
-------------------------------
37
<PAGE>
EXHIBIT B
SCHEDULE OF FEES
CUSTODY
Base Fee
Asset Value Fee 0.5 Basis Points
Minimum $1,500.00
Maximum $5,000.00
Transfer Fees
DTC Eligible Trades $10.00
FED Eligible Trades $10.00
Money Market Trades $44.00
(includes purchase & maturity)
Repurchase Agreements $20.00
(includes purchase & maturity)
Third Party Repurchase Agreements $18.00
(includes purchase & maturity)
Physical Trades $22.00
Amortized Security Trades $45.00
Options $35.00
Principal & Interest Payments $ 8.00
Wires & Check Disbursements $ 7.00
The cost of supplies, postage, taxes, insurance premiums, extraordinary services
and of non-primary agents will be added to the regular service charges.
38
EXHIBIT 99(k)(1)
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 2nd day of August, 1996, by and between The Thermo
Opportunity Fund, Inc., a Maryland corporation (the "Fund"), and Fifth Third
Bank, an Ohio banking corporation (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its registrar, transfer
agent, dividend disbursing agent, and agent in connection with certain other
activities; and
WHEREAS, the Bank is engaged in the business of providing services for
issuers of securities and desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Terms of Appointment; Duties of the Bank.
----------------------------------------
1.01 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints the Bank to act as, and the Bank agrees to act
as, the registrar, transfer agent, dividend disbursing agent and agent in
connection with the dividend reinvestment plan for the authorized and issued
shares of common stock, par value $.001 per share ("Shares"), of the Fund.
1.02 The Bank agrees that it will perform the services listed in the
attached service responsibility schedule in accordance with the Bank's
regulations attached hereto as Exhibit A and such procedures as may be
established from time to time by written agreement between the Fund and the
Bank. In addition to and neither in lieu nor in contravention of the services
referred to in the preceding sentence, the Bank shall perform all the customary
services of a registrar, transfer agent, dividend disbursing agent and dividend
reinvestment plan agent, including but not limited to maintaining all
Shareholder accounts, preparing shareholder meeting lists, mailing proxies,
receiving and tabulating proxies, mailing shareholder reports to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of accounts to Shareholders for all purchases of Shares and
other confirmable transactions in Shareholder accounts, and providing
Shareholder account information.
2. Fees and Expenses.
-----------------
2.01 For the services to be performed by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank the fees
<PAGE>
provided in the attached fee schedule Exhibit B.
2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees
to reimburse the Bank promptly for reasonable out-of-pocket expenses or advances
incurred by the Bank in connection with its performance under this Agreement for
the items set out in the fee schedule attached hereto. In addition, any other
special out-of-pocket expenses incurred by the Bank at the request or with the
consent of the Fund will be promptly reimbursed by the Fund. Postage for
mailing of dividends, proxies, shareholder reports and other mailings to all
Shareholder accounts shall be advanced to the Bank at least three business days
prior to the mailing date of such materials.
3. Representations and Warranties.
------------------------------
3.01 The Bank represents and warrants to the Fund that:
(i) It is a banking corporation duly organized and existing and in good
standing under the laws of the State of Ohio.
(ii) It is duly qualified to carry on its business in the State of Ohio.
(iii) It is empowered under applicable laws and by its charter and bylaws
to enter into and perform this Agreement.
(iv) All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
(v) It has and will continue to have during the term of this Agreement
access to the necessary facilities, equipment and personnel to
perform its duties and obligations hereunder.
3.02 The Fund represents and warrants to the Bank that:
(i) It is a corporation duly organized and existing and in good standing
under the laws of the State of Maryland.
(ii) It is empowered under the applicable laws and by its charter and
bylaws to enter into and perform this agreement.
(iii) All requisite corporate proceedings have been taken to authorize it
to enter into and perform this agreement.
2
<PAGE>
(iv) It is a closed-end management investment company registered under
the Investment Company Act of 1940
(v) Appropriate federal and state securities law filings have been made
and will continue to be made with respect to all Shares being
offered for sale.
4. Indemnification.
---------------
4.01 The Bank shall not be responsible for, and the Fund shall indemnify
and hold the Bank harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(i) All actions of the Bank or its agents required to be taken by the
Bank pursuant to this Agreement, provided that the Bank has acted in
good faith and without negligence or willful misconduct.
(ii) The reliance by the Bank on, or use by the Bank of, information,
records and documents or services which have been prepared or
maintained by or on behalf of the Fund or any of the Fund's other
service providers, or have been furnished to the Bank by or on
behalf of the Fund or any of the Fund's other service providers.
(iii) The reliance by the Bank on, or the carrying out by the Bank of, any
instructions or requests of the Fund.
(iv) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state, or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of Shares in such state.
(v) The Fund's refusal or failure to comply with the terms of this
Agreement, or the Fund's lack of good faith or it's negligence or
willful misconduct, or the breach of any representation or warranty
of the Fund hereunder.
4.02 The Bank shall indemnify and hold the Fund harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to the Bank's material breech of
this Agreement, or the Bank's actions involving bad faith, negligence or willful
misconduct, or the breach of any representation or warranty of
3
<PAGE>
the Bank hereunder.
4.03 At any time the Bank may apply to an authorized officer of the Fund
for instructions, and may consult with the Fund's legal counsel at the expense
of the Fund, with respect to any matter arising in connection with the services
to be performed by the Bank under this Agreement, and the Bank shall not be
liable and shall be indemnified by the Fund for any action taken or omitted in
good faith by it in reliance upon such instructions or upon the opinion of such
counsel. The Bank shall be protected and indemnified in acting upon any paper
or document reasonably believed by the Bank to be genuine and to have been
signed by the proper person or persons, and shall not be held to have notice of
any change of authority of any person, until receipt of written notice thereof
from the Fund. The Bank shall also be protected and indemnified in recognizing
stock certificates which the Bank reasonably believes to bear the proper manual
or facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
4.04 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage, or other causes reasonably beyond its control,
such party shall not be liable for damages to the other for any damages
resulting from such failure to perform or otherwise from such causes.
4.05 In no event and under no circumstances shall either party to this
Agreement be liable to the other party for consequential, special punitive or
extraordinary damages under any provision of this Agreement or for any act or
failure to act hereunder, and Bank's liability hereunder to the Fund shall be
limited for the initial and all subsequent renewal terms of this Agreement, to
the lesser of the annual fee charged by the Bank or actual damages as may be
substantiated and documented.
4.06 In order that the indemnification provisions contained in this
Article 4 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
4
<PAGE>
5. Covenants of the Fund and the Bank.
----------------------------------
5.01 The Fund shall promptly furnish to the Bank the following:
(i) A certified copy of the resolution of the Board of Directors of the
Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(ii) A certified copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
5.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any,
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
5.03 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable; provided, however,
that all accounts, books and other records of the Fund prepared or maintained by
the Bank solely as registrar, transfer agent and dividend disbursing agent,
hereunder shall be maintained and kept current in compliance with Section 31(a)
of the Investment Company Act of 1940 and the rules thereunder, as the same may
be amended from time to time. To the extent required by such section and rules,
the Bank agrees that all Fund records prepared or maintained by the Bank
hereunder are the property of the Fund and shall be preserved and made available
in accordance with such section and rules, and shall be surrendered promptly to
the Fund on its request provided that the Fund is in compliance with this
agreement.
5.04 The Bank and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
5.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Bank will endeavor to notify the Fund and
to secure instructions from an authorized officer of the fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
5
<PAGE>
6. Effective Period; Termination.
-----------------------------
6.01 This Agreement shall become effective as of its execution and shall
continue in full force and effect until terminated as hereinafter provided.
6.02 This Agreement may be terminated by either party upon sixty days
written notice to the other. Any unpaid fees or reimbursable expenses payable
to the Bank shall be due on any such termination date. The Bank agrees to use
its best efforts to cooperate with the Fund and the successor transfer agent in
accomplishing an orderly transition.
7. Miscellaneous.
-------------
7.01 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the written consent of the other party;
provided, however, that no consent shall be required for any merger of the Fund
with, or sale of all or substantially all the assets of the Fund to, another
investment company.
7.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
7.03 This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio without giving effect to the choice of law
provisions thereof and, to the extent applicable, the federal law of the United
States. To the extent applicable Ohio law or any of the provisions of this
Agreement conflict with applicable provisions of the Investment Company Act of
1940 or other applicable federal laws and regulations, the latter shall control.
7.04 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof, whether oral or written, and may not be modified except by a written
instrument executed by both parties.
7.05 If any provision of this Agreement shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions shall not be affected or impaired
thereby.
7.06 The headings of sections in this Agreement are for convenience of
reference only and shall not affect the meaning or construction of any provision
of this Agreement.
6
<PAGE>
7.07 This Agreement may be executed in one or more counterparts, and by
the parties hereto on separate counterparts, each of which shall be deemed an
original but all of which together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
ATTEST: THE THERMO OPPORTUNITY FUND, INC.
/s/ John F. Splain By:/s/ Gregory E. Ratte
- ------------------------- -----------------------------
Secretary Name: Gregory E. Ratte
Title: Chairman
ATTEST: FIFTH THIRD BANK
/s/ Kerry Byrne By:/s/ Dana S. Hushak
- ------------------------- -----------------------------
Vice President Name: Dana S. Hushak
Title: Vice President
7
<PAGE>
EXHIBIT A
SERVICE RESPONSIBILITY SCHEDULE
-------------------------------
A. Transfer Agent Services
-----------------------
i. Maintaining Shareholder account records, including name, address,
taxpayer identification number, Shares held and certificate numbers.
ii. Processing of all transfers of certificates including the review of
those transfer items requiring supporting documents commonly
referred to as "legal transfers".
iii. Furnishing a list of Shareholders as of each dividend record date if
requested by the Fund.
iv. Furnishing a journal sheet reflecting the daily transfer activity if
requested by the Fund.
v. Maintaining a record of all certificates against which a stop
transfer notice has been placed.
B. Registrar Services
------------------
i. Maintaining a record of the number of authorized and outstanding
Shares.
ii. Registering upon original issue or transfer all certificates for
securities.
C. Dividend Disbursing Agent Services
----------------------------------
i. Preparing dividend checks for each Shareholder of record as of the
record date established for such dividend or dividend credit for
those Shareholders who participate in the dividend reinvestment
plan.
ii. Mailing dividend checks by first class regular mail.
iii. Maintaining a checking account against which checks will be paid
with funds to be supplied by the Fund.
iv. Preparing applicable Internal Revenue Service forms, mailing copies
of such forms to the Shareholders annually and furnishing a computer
tape summary of such forms to the U.S. Treasury Department.
<PAGE>
v. Mailing quarterly financial reports to the Fund.
vi. Obtaining U.S. Treasury forms or other certificates with respect to
Taxpayer Identification Numbers as may be required under U.S.
Treasury regulations.
vii. Withholding of federal income tax on such dividends and processing
the payment of that tax over to the U.S. Treasury as may from time
to time be required by the U.S. Treasury regulations.
viii. Filing tax information return on Shares held and dividends paid with
the various states as requested by the Fund.
D. Dividend Reinvestment Services
------------------------------
i. Collecting the dividends from the Shareholders.
ii. Purchasing of Shares at market price.
iii. Crediting full and fractional Shares to the participant accounts.
iv. Updating and balancing participant records as transactions occur.
v. Generating reports for the Fund.
vi. Generating statements for the participants.
vii. Issuing, as applicable, all Internal Revenue Service forms.
E. Proxy Agent Services
--------------------
Mailing broker-search cards prior to the voting record date of annual and
special meetings of Shareholders, preparing one set of proxies for the general
annual or any special meeting of shareholders for each Shareholder of record on
the record date established for such meeting. If requested by the Fund mailing
those proxies along with the proxy statement and annual report; tabulating those
proxies voted and furnishing the Fund with interim reports and a summary or such
vote; and providing the Fund with a Shareholder list as of record date of the
proxy, in alphabetical sequence for the annual meeting of shareholders.
2
EXHIBIT 99(k)(2)
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------
AGREEMENT dated as of August 1, 1996 between The Thermo Opportunity Fund,
Inc. (the "Fund"), a Maryland corporation, and MGF Service Corp. ("MGF"), an
Ohio corporation.
WHEREAS, the Fund has been organized to operate as a non-diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund wishes to avail itself of the information, advice,
assistance and facilities of MGF to perform on behalf of the Fund the services
as hereinafter described; and
WHEREAS, MGF wishes to provide such services to the Fund under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund and MGF agree as follows:
1. Employment. The Fund, being duly authorized, hereby employs MGF to
----------
perform those services described in this Agreement. MGF shall perform the
obligations thereof upon the terms and conditions hereinafter set forth.
2. Fund Administration. Subject to the direction and control of the
-------------------
Fund, MGF shall supervise the Fund's business affairs not otherwise supervised
by other agents of the Fund. MGF shall (1) prepare all reports required to be
filed by the Fund with the Securities and Exchange Commission ("SEC") on Form N-
SAR, or such other form as the SEC may substitute for Form N-SAR; (2) prepare
and file the Fund's federal, state and local tax returns, and review such
returns after they are prepared; (3) respond to certain inquiries from the
Fund's stockholders in connection with proxies, rights offerings and other such
events; (4) assist in the preparation and dissemination to stockholders of any
Fund proxy materials and rights offering materials and oversee the tabulation of
proxies by the Fund's transfer agent, (5) negotiate contractual arrangements
with the Fund's agents, including custodians, transfer agents, dividend paying
agents, independent accountants and printing companies, monitor the performance
of such agents pursuant to such arrangements, and make such reports and
recommendations to the Board of Directors concerning the provision of such
services as the Fund reasonably
<PAGE>
requests or MGF deems appropriate; (6) assist in preparing
financial information relating to the Fund for the Fund's periodic reports to
stockholders, prospectuses, proxy materials and earnings releases; (7) assist in
monitoring compliance of the Fund's operations with the 1940 Act and with its
investment policies and limitations; (8) assist in the calculation of the Fund's
net asset value in accordance with the Fund's registration statement under the
1940 Act and the Securities Act of 1933 and make the Fund's net asset value
available for public dissemination; (9) assist in establishing the accounting
policies of the Fund; (10) assist the Fund in determining the amount of
dividends or other distributions available to be paid by the Fund to its
stockholders; (11) arrange for the printing (at the Fund's expense) of financial
reports, prospectuses, proxy materials and dividend notices to stockholders;
(12) provide the Fund's transfer agent, dividend paying agent and custodian with
such information as is required for such parties to effect the payment of
dividends and other distributions and implementing the Fund's Dividend
Reinvestment Plan; and (13) assist in the preparation and dissemination of press
releases regarding such dividends and other distributions. Although this
Agreement does not specify the level of assistance to be provided by MGF, it
does obligate MGF to render such services when, as and to the extent that the
Fund deems appropriate in order for the Fund to obtain the benefits of the
Agreement. MGF shall provide personnel to serve as officers of the Fund if so
elected by the Board of Directors of the Fund; provided, however, that the Fund
shall reimburse MGF for the expenses incurred by such personnel in attending
Board of Directors' meetings and any shareholders' meetings of the Fund.
3. Record Keeping and Other Information. MGF shall create and maintain
------------------------------------
all necessary records in accordance with all applicable laws, rules and
regulations, including but not limited to records required by Section 31(a) of
the 1940 Act and the rules thereunder, as the same may be amended from time to
time, pertaining to the various functions performed by it and not otherwise
created and maintained by another party pursuant to contract with the Fund.
Where applicable, such records shall be maintained by MGF for the periods and in
the places required by Rule 31a-2 under the 1940 Act.
4. Audit, Inspection and Visitation. MGF shall make available to the
--------------------------------
Fund during regular business hours all records and other data created and
maintained pursuant to the foregoing provisions of this Agreement for audit and
inspection by the Fund or any regulatory agency having authority over the Fund.
5. Compensation. For the performance of MGF's obligations under this
------------
Agreement, the Fund shall pay MGF, on the first business day following the end
of each month, a fee equal
2
<PAGE>
to one twelfth (1/12) of the annual rate of .15% of the Fund's average weekly
net assets during such month. MGF shall not be required to reimburse the Fund or
the Fund's investment adviser for (or have deducted from its fees) any expenses
in excess of expense limitations imposed by certain state securities commissions
having jurisdiction over the Fund.
6. Indemnification of MGF. MGF may rely on information reasonably
----------------------
believed by it to be accurate and reliable. Except as may otherwise be required
by the 1940 Act and the rules thereunder, neither MGF nor its shareholders,
officers, directors, employees, agents, control persons or affiliates of any
thereof shall be subject to any liability for, or any damages, expenses or
losses incurred by the Fund in connection with, any error of judgment, mistake
of law, any act or omission connected with or arising out of any services
rendered under or payments made pursuant to this Agreement or any other matter
to which this Agreement relates, except by reason of willful misfeasance, bad
faith or gross negligence on the part of any such persons in the performance of
the duties of MGF under this Agreement or by reason of reckless disregard by any
of such persons of the obligations and duties of MGF under this Agreement.
Any person, even though also a director, officer, employee,
shareholder or agent of MGF, or any of its affiliates, who may be or become an
officer, director, employee or agent of the Fund, shall be deemed, when
rendering services to the Fund or acting on any business of the Fund, to be
rendering such services to or acting solely as an officer, director, employee or
agent of the Fund and not as a director, officer, employee, shareholder or agent
of or one under the control or direction of MGF or any of its affiliates, even
though paid by one of those entities.
Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless MGF, its directors, officers, employees,
shareholders, agents, control persons and affiliates, from and against any and
all claims, demands, expenses and liabilities (whether with or without basis in
fact or law) of any and every nature which MGF may sustain or incur or which may
be asserted against MGF by any person, by reason of, or as a result of: (i) any
action taken or omitted to be taken by MGF in good faith in reliance upon any
certificate, instrument, order or stock certificate believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized person, upon
the oral instructions or written instructions of an authorized person of the
Fund or upon the opinion of legal counsel for the Fund or its own counsel; or
(ii) any action taken or omitted to be taken by MGF in connection with its
appointment in good faith in reliance upon any law, act,
3
<PAGE>
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of MGF or its
directors, officers, employees, shareholders or agents in cases of its or their
own gross negligence, willful misconduct, bad faith, or reckless disregard of
its or their own duties hereunder.
7. Services for Others. Nothing in this Agreement shall prevent MGF or
-------------------
any affiliated person of MGF from providing services for any other person, firm
or corporation, including other investment companies; provided, however, that
MGF expressly represents that it will undertake no activities which, in its
judgment, will adversely affect the performance of its obligations to the Fund
under this Agreement.
8. Compliance with the 1940 Act. The parties hereto acknowledge and
----------------------------
agree that nothing contained herein shall be construed to require MGF to perform
any services for the Fund which services could cause MGF to be deemed an
"investment adviser" of the Fund within the meaning of Section 2(a)(20) of the
Investment Company Act of 1940 or to supersede or contravene the Prospectus or
Statement of Additional Information of the Fund or any provisions of the 1940
Act and the rules thereunder.
9. Renewal and Termination. This Agreement shall become effective on
-----------------------
the date first above written and shall remain in force for a period of two (2)
years from such date, and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the vote of a majority
of the Fund's Directors who are not interested persons of the Fund or MGF, cast
in person at a meeting called for the purpose of voting on such approval and by
a vote of the Board of Directors or of a majority of the Fund's outstanding
voting securities. This Agreement may be terminated without the payment of any
penalty by either party upon sixty (60) days' written notice to the other party.
This Agreement shall terminate automatically in the event of its assignment.
Upon the termination of this Agreement, the Fund shall pay MGF such compensation
as may be payable for the period prior to the effective date of such
termination.
10. Miscellaneous. Each party agrees to perform such further acts and
-------------
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Ohio. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
4
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
THE THERMO OPPORTUNITY FUND, INC.
By: /s/ Francis S. Branin, Jr.
------------------------------
Its: President
MGF SERVICE CORP.
By: /s/ Robert G. Dorsey
------------------------------
Its: President
5
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933 and has duly caused this Registration Statement to be signed below
on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, and State of New York, on the 6th day of August, 1996.
THE THERMO OPPORTUNITY FUND, INC.
By:/s/ Francis S. Branin, Jr.
---------------------------------
Francis S. Branin, Jr., President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.
Signature Title
--------- -----
/s/ Francis S. Branin, Jr. August 6, 1996
-------------------------- President
Francis S. Branin, Jr. and Director
/s/ Gregory E. Ratte August 6, 1996
------------------------ Chairman
Gregory E. Ratte and Director
/s/ Mark J. Seger Treasurer August 6, 1996
------------------------
Mark J. Seger
*Henson L. Jones Director By: /s/ John F. Splain
------------------
*Hollis S. McLouglin Director Attorney-in-Fact*
August 6, 1996
*Blair M. Brewster Director
