<PAGE> 1
AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1999
SECURITIES ACT FILE NO. 333-84993
INVESTMENT COMPANY ACT FILE NO. 811-09537
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
-----------
Post-Effective Amendment No. 1 [X]
-----------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
---------------
COLONIAL CALIFORNIA INSURED MUNICIPAL FUND
(Exact Name of Registrant as Specified in Charter)
ONE FINANCIAL CENTER, BOSTON, MA 02111
(Address of Principal Executive Offices)
(617) 426-3750
(Registrant's Telephone Number, including Area Code)
<TABLE>
<CAPTION>
Name and Address of
Agent for Service Copies to
<S> <C> <C>
William J. Ballou, Esq. John M. Loder, Esq. Gary Schpero, Esq.
Colonial Management Associates, Inc. Ropes & Gray Simpson Thacher & Bartlett
One Financial Center One International Place 425 Lexington Avenue
Boston, Massachusetts 02111-2621 Boston, Massachusetts 02110-2624 New York, New York 10017-3954
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement.
[X] This Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act and the Securities Act registration statement number of
the earlier effective registration statement for the same offering is
333-84993.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BEING REGISTERED REGISTERED (1) UNIT (1) PRICE (1) REGISTRATION FEE (2)
- ---------------------- -------------------- --------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Common Shares, 3,500,000 $15.00 $52,500,000 $14,595
No Par Value
Per Share
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Previously paid.
<PAGE> 2
COLONIAL CALIFORNIA INSURED MUNICIPAL FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-2
<TABLE>
<CAPTION>
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
<S> <C> <C>
1................. Outside Front Cover Front Cover Page
2................. Inside Front and Outside Back Cover Page Front and Back Cover Page
3................. Fee Table and Synopsis Prospectus Summary; Summary of Fund
Expenses
4................. Financial Highlights Not Applicable
5................. Plan of Distribution Front Cover Page; Prospectus Summary;
Underwriting
6................. Selling Shareholders Not Applicable
7................. Use of Proceeds Use of Proceeds; Investment Objective and
Policies
8................. General Description of the Registrant Prospectus Summary; The Fund; Investment
Objective and Policies; Use of
Leverage and Related Risks; Additional
Risk Considerations; How the Fund Manages
Risk; Management of the Fund; Description
of Shares; Certain Provisions in the
Declaration of Trust
9................. Management Management of the Fund; Custodian,
Transfer Agent, Dividend Disbursing Agent
and Registrar
10 ............... Capital Stock, Long-Term Debt, Net Asset Value; Distributions; Dividend
and Other Securities Reinvestment Plan; Description of
Shares; Repurchase of Common
Shares; Conversion to Open-End Fund;
Tax Matters
11 ............... Defaults and Arrears on Senior Securities Not Applicable
12 ............... Legal Proceedings Not Applicable
13 ............... Table of Contents of the Table of Contents for the
Statement of Additional Information Statement of Additional Information
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
14 ............... Cover Page Cover Page
15................ Table of Contents Table of Contents
16 ............... General Information and History Not Applicable
17 ............... Investment Objective and Policies Investment Objectives and Policies;
Miscellaneous Investment Practices
18 ............... Management Management of the Fund
19 ............... Control Persons and Principal Management of the Fund
Holders of Securities
20 ............... Investment Advisory and Other Services Fund Charges and Expenses; Management
of the Fund; Custodian; Independent
Accountants
21 ............... Brokerage Allocation and Other Practices Fund Charges and Expenses; Portfolio
Transactions
22 ............... Tax Status Tax Matters
23 ............... Financial Statements Financial Statements
</TABLE>
<PAGE> 3
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements:
Included in Part A
None
Included in Part B
Financial Statements
Report of Independent Accountants
(2) Exhibits
(a)(1) Agreement and Declaration of Trust(1)
(a)(2) Amendment No. 1 to the Agreement and Declaration of Trust(2)
(b)(1) By-Laws(2)
(b)(2) Amended and Restated By-Laws
(c) Not applicable
(d)(1) Portions of the Agreement and Declaration of Trust, as
amended, included as Exhibit (a)(1) and (a)(2), and the
By-Laws of the Registrant, included as Exhibit (b) (see
Article III, Sections 1, 2, 4 and 5; Article V; Article
VIII, Section 4; and Article IX, Sections 4 and 7 of the
Agreement and Declaration of Trust, as amended, and Sections
2, 7 and 8 of the By-Laws).
(d)(2) Form of specimen certificate for the common shares(2)
(e) Dividend Reinvestment Plan(2)
(f) Not applicable
(g) Management Agreement with Colonial Management Associates,
Inc.(2)
(h) Underwriting Agreement
(i) Not applicable
(j)(1) Global Custody Agreement with The Chase Manhattan Bank
(incorporated herein by reference to Item 24, Exhibit No. 8
to Post-Effective Amendment No. 13 to the Registration
Statement of Colonial Trust VI, Registration Nos. 33-45117 &
811-6529, filed with the Commission on or about October 24,
1997)
(j)(2) Amendment No. 8 to Schedule A of Global Custody Agreement
with The Chase Manhattan Bank(2)
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<PAGE> 4
(k)(1) Stock Transfer Agent Services Agreement between the
Registrant and BankBoston, N.A.(2)
(k)(2) Pricing and Bookkeeping Agreement with Colonial
Management Associates, Inc.(2)
(k)(3)(i) Fee Waiver Agreement with Colonial Management
Associates, Inc.(2)
(k)(3)(ii) Expense Reimbursement Agreement with Colonial
Management Associates, Inc.
(l) Opinion and Consent of Ropes & Gray, counsel to
Registrant(2)
(m) Not applicable
(n) Consent of independent accountants(2)
(o) Not applicable
(p) Subscription Agreement with Colonial Management
Associates, Inc.
(q) Not applicable
(r) Power of Attorney for each of Robert J. Birnbaum, Tom
Bleasdale, John V. Carberry, Lora S. Collins, James E.
Grinnell, Richard W. Lowry, Salvatore Macera, William E.
Mayer, James L. Moody, Jr., John J. Neuhauser, Thomas E.
Stitzel, Robert L. Sullivan and Anne-Lee Verville(2)
- ----------------------------------
(1) Incorporated by reference to the Registration Statement filed with the
Commission via EDGAR on or about August 11, 1999.
(2) Incorporated by reference to the Registration Statement filed with the
Commission via EDGAR on or about October 26, 1999.
Item 25. Marketing Arrangements.
See Sections 5(m), 5(n), 6(v) and 11 of Exhibit (h) of Item 24(2) of
this Registration Statement.
Item 26. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses to be incurred in
connection with the Offer described in this Registration Statement:
Registration fees $ 14,595
American Stock Exchange listing fee* 11,000
Printing* 60,000
Accounting fees and expenses* 5,000
Legal fees and expenses* 88,000
Underwriters expense reimbursement* 75,000
NASD fee 5,850
Miscellaneous* 25,000
--------
Total* $284,445
========
(*) Estimated
Item 27. Persons Controlled by or under Common Control with Registrant.
None.
Item 28. Number of Holders of Securities
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Common Shares of Beneficial Interest -1-
</TABLE>
Item 29. Indemnification.
The Agreement and Declaration of Trust, as amended, filed as Exhibit
(a)(1) and (a)(2) to this Registration Statement provides for
indemnification to each of the Registrant's Trustees and officers
against all liabilities and expenses incurred in acting
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<PAGE> 5
as Trustee or officer, except in the case of wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Trustees and officers. The
Underwriting Agreement filed as Exhibit (h) to this Registration
Statement provides for indemnification by the Registrant and
Colonial Management Associates, Inc. (the "Advisor") of Salomon
Smith Barney Inc. (the "Underwriter") and its controlling
persons and by the Underwriter of the Registrant, the Advisor
and their respective Trustees, directors, officers and
controlling persons against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, under
certain circumstances.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The Registrant, Colonial Management Associates, Inc. and their
respective trustees, directors and officers are insured by a
directors and officers/errors and omissions liability policy.
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<PAGE> 6
Item 30. Business and Other Connections of Investment Adviser
The description of the business of Colonial Management Associates,
Inc., the Registrant's Investment Adviser, is set forth under the
caption "The Advisor" in the Prospectus forming part of this
Registration Statement. The following sets forth business and other
connections of each director and officer of Colonial Management
Associates, Inc.
Registrant's investment adviser/administrator, Colonial Management Associates,
Inc. ("Colonial"), is registered as an investment adviser under the Investment
Advisers Act of 1940 ("Advisers Act"). Colonial Advisory Services, Inc.
("CASI"), an affiliate of Colonial, is also registered as an investment adviser
under the Advisers Act. As of the end of the fiscal year, December 31, 1998,
CASI had four institutional, corporate or other accounts under management
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<PAGE> 7
or supervision, the market value of which was approximately $227 million. As of
the end of the fiscal year, December 31, 1998, Colonial was the investment
adviser, sub-adviser and/or administrator to 57 mutual funds, including funds
sub-advised by Colonial, the total market value of which investment companies
was approximately $18,950.90 million. Liberty Funds Distributor, Inc., a
subsidiary of Colonial Management Associates, Inc., is the principal underwriter
and the national distributor of all of the open-end funds in the Liberty Mutual
Funds complex.
The following sets forth the business and other connections of each director and
officer of Colonial Management Associates, Inc.:
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Name and principal
business
addresses* Affiliation
of officers and with Period is through 06/30/99. Other
directors of investment business, profession, vocation or
investment adviser adviser employment connection Affiliation
- ------------------ ---------- -------------------------------- -----------
<S> <C> <C> <C>
Allard, Laurie V.P.
Archer, Joseph A. V.P.
Ballou, William J. V.P., Liberty Funds Trusts I through IX Asst. Sec.
Asst. Colonial High Income
Sec., Municipal Trust Asst. Sec.
Counsel Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
</TABLE>
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<PAGE> 8
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
AlphaTrade Inc. Asst. Clerk
Liberty Funds Distributor,
Inc. Asst. Clerk
Liberty Financial Advisers,
Inc. Asst. Sec.
Liberty Funds Group LLC Asst. Sec.
Liberty Variable Investment
Trust Asst. Sec.
Liberty All-Star Equity Fund Asst. Sec.
Liberty All-Star Growth Fund,
Inc. Asst. Sec.
Barron, Suzan M. V.P., Liberty Funds Trusts I through IX Asst. Sec.
Asst. Colonial High Income
Sec., Municipal Trust Asst. Sec.
Counsel Colonial InterMarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
AlphaTrade Inc. Asst. Clerk
Liberty Funds Distributor,
Inc. Asst. Clerk
Liberty Financial Advisers,
Inc. Asst. Sec.
Liberty Funds Group LLC Asst. Sec.
Liberty Variable Investment
Trust Asst. Sec.
Liberty All-Star Equity Fund Asst. Sec.
Liberty All-Star Growth Fund,
Inc. Asst. Sec.
</TABLE>
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<PAGE> 9
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Barsketis, Ophelia Sr.V.P. Stein Roe & Farnham Incorporated Snr. V.P.
Berliant, Allan V.P.
Bissonnette, Michael Sr.V.P.
Boatman, Bonny E. Sr.V.P.; Colonial Advisory Services,
IPC Mbr. Inc. Exec. V.P.
Stein Roe & Farnham Incorporated Exec. V.P.
Bunten, Walter V.P.
Campbell, Kimberly V.P.
Carnabucci,
Dominick V.P.
Carome, Kevin M. Sr.V.P.; Liberty Funds Distributor,
IPC Mbr. Inc. Assistant Clerk
Liberty Funds Group LLC Sr. V.P.; General
Stein Roe & Farnham Counsel
Incorporated General Counsel;
Secretary
Stein Roe Services, Inc. Asst. Clerk
Carroll, Sheila A. Sr.V.P.
Citrone, Frank, Jr. Sr.V.P.
Conlin, Nancy L. Sr. V.P.; Liberty Funds Trusts I through IX Secretary
Sec.; Clerk Colonial High Income
IPC Mbr.; Municipal Trust Secretary
Dir; Gen. Colonial InterMarket Income
Counsel Trust I Secretary
Colonial Intermediate High
Income Fund Secretary
Colonial Investment Grade
Municipal Trust Secretary
Colonial Municipal Income
Trust Secretary
Liberty Funds Distributor,
Inc. Dir.; Clerk
Liberty Funds Services, Inc. Clerk; Dir.
Liberty Funds Group LLC V.P.; Gen.
Counsel and
Secretary
Liberty Variable Investment
Trust Secretary
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Colonial Advisory Services,
Inc. Dir.; Clerk
AlphaTrade Inc. Dir.; Clerk
Liberty Financial Advisors,
Inc. Dir.; Sec.
Liberty All-Star Equity Fund Secretary
Liberty All-Star Growth Fund,
Inc. Secretary
Connaughton, V.P. Liberty Funds Trusts I through VIII CAO; Controller
J. Kevin Liberty Variable Investment
Trust CAO; Controller
Colonial High Income
Municipal Trust CAO; Controller
Colonial Intermarket Income
Trust I CAO; Controller
Colonial Intermediate High
Income Fund CAO; Controller
Colonial Investment Grade
Municipal Trust CAO; Controller
Colonial Municipal Income
Trust CAO; Controller
Liberty All-Star Equity Fund Controller
Liberty All-Star Growth Fund,
Inc. Controller
Liberty Trust IX Controller
Daniszewski, V.P.
Joseph J.
Dearborn, James V.P.
Desilets, Marian H. V.P. Liberty Funds Distributor,
Inc. V.P.
Liberty Funds Trusts I through IX Asst. Sec.
Colonial High Income
Municipal Trust Asst. Sec.
Colonial Intermarket Income
Trust I Asst. Sec.
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
Liberty Variable Investment
Trust Asst. Sec.
Liberty All-Star Equity Fund Asst. Sec.
Liberty All-Star Growth Fund,
Inc. Asst. Sec.
DiSilva-Begley, V.P. Colonial Advisory Services, Compliance
Linda IPC Mbr. Inc. Officer
Eckelman, Marilyn Sr.V.P.
Ericson, Carl C. Sr.V.P. Colonial Intermediate High
IPC Mbr. Income Fund V.P.
Colonial Advisory Services, Pres.; CEO
Inc. and CIO
Evans, C. Frazier Sr.V.P. Liberty Funds Distributor,
Inc. Mng. Director
Feloney, Joseph L. V.P. Colonial Advisory Services,
Asst. Treas. Inc. Asst. Treas.
Liberty Funds Group LLC Asst. Treas.
Finnemore, Sr.V.P. Colonial Advisory Services,
Leslie W. Inc. Sr. V.P.
Franklin, Sr. V.P. AlphaTrade Inc. President
Fred J. IPC Mbr. Liberty Financial Companies, Chief
Inc. Compliance
Officer; V.P.
Garrison,
William M. V.P. Stein Roe & Farnham
Incorporated V.P.
Gibson, Stephen E. Dir.; Pres.; Liberty Funds Group LLC Dir.;
CEO; Pres.; CEO;
Chairman of Exec. Cmte.
the Board; Mbr.; Chm.
IPC Mbr. Liberty Funds Distributor,
Inc. Dir.; Chm.
Colonial Advisory Services,
Inc. Dir.; Chm.
</TABLE>
C-9
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Liberty Funds Services, Inc. Dir.; Chm.
AlphaTrade Inc. Dir.
Liberty Funds Trusts I
through VIII President
Colonial High Income
Municipal Trust President
Colonial InterMarket Income
Trust I President
Colonial Intermediate High
Income Fund President
Colonial Investment Grade
Municipal Trust President
Colonial Municipal Income
Trust President
Liberty Financial Advisors,
Inc. Director
Stein Roe & Farnham
Incorporated Asst. Chairman;
Exec. V.P.
Liberty Variable Investment
Trust President
Hansen, Loren Sr. V.P.;
IPC Mbr.
Harasimowicz, V.P.
Stephen
Hartford, Brian Sr.V.P.
Haynie, James P. Sr.V.P. Colonial Advisory Services,
Inc. Sr. V.P.
Stein Roe & Farnham
Incorporated Sr. V.P.
Held, Dorothy V.P.
Hernon, Mary V.P.
Hounsell, Clare F. V.P. Stein Roe & Farnham
Incorporated V.P.
Iudice, V.P.; Liberty Funds Group LLC Controller,
Philip J., Jr. Controller CAO, Asst.
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Asst. Treas.
Treasurer Liberty Funds Distributor, CFO,
Inc. Treasurer
Colonial Advisory Services, Controller;
Inc. Asst. Treas.
AlphaTrade Inc. CFO, Treas.
Liberty Financial Advisors,
Inc. Asst. Treas.
Jacoby, Timothy J. Sr. V.P.; Liberty Funds Group LLC V.P., Treasr.,
CFO; CFO
Treasurer Liberty Funds Trusts I
through VIII Treasr.,CFO
Colonial High Income
Municipal Trust Treasr.,CFO
Colonial InterMarket Income
Trust I Treasr.,CFO
Colonial Intermediate High
Income Fund Treasr.,CFO
Colonial Investment Grade
Municipal Trust Treasr.,CFO
Colonial Municipal Income
Trust Treasr.,CFO
Colonial Advisory Services,
Inc. CFO, Treasr.
Liberty Financial Advisors,
Inc. Treasurer
Stein Roe & Farnham
Incorporated Snr. V.P.
Liberty Variable Investment
Trust Treasurer, CFO
Liberty All-Star Equity Fund Treasurer
Liberty All-Star Growth Fund,
Inc. Treasurer
Liberty Funds Trust IX Treasurer
Jansen, Deborah Sr.V.P. Stein Roe & Farnham
Incorporated Sr. V.P.
Jersild, North T. V.P. Stein Roe & Farnham
Incorporated V.P.
</TABLE>
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<PAGE> 14
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Johnson, Gordon V.P.
Knudsen, Gail E. V.P. Liberty Funds Trusts I
through IX Asst. Treas.
Colonial High Income
Municipal Trust Asst. Treas.
Colonial InterMarket Income
Trust I Asst. Treas.
Colonial Intermediate High
Income Fund Asst. Treas.
Colonial Investment Grade
Municipal Trust Asst. Treas.
Colonial Municipal Income
Trust Asst. Treas.
Liberty Variable Investment
Trust Asst. Treas.
Liberty All-Star Equity Fund Asst. Treas.
Liberty All-Star Growth Fund,
Inc. Asst. Treas.
Lapointe, Thomas V.P.
Lasman, Gary V.P.
Lennon, John E. Sr.V.P. Colonial Advisory Services,
Inc. V.P.
Lenzi, Sharon V.P.
Lessard, Kristen V.P.
Loring, William
C., Jr. Sr.V.P.
MacKinnon,
Donald S. Sr.V.P.
Marcus, Harold V.P.
Muldoon, Robert V.P.
Newman, Maureen Sr.V.P.
O'Brien, David Sr.V.P.
Ostrander, Laura Sr.V.P. Colonial Advisory Services,
Inc. V.P.
Palombo, Joseph R. Dir.; Colonial Advisory Services,
Exe.V.P.; Inc. Dir.
IPC Mbr.; Colonial High Income
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Municipal Trust V.P.
Colonial InterMarket
Income Trust I V.P.
Colonial Intermediate High
Income Fund V.P.
Colonial Investment Grade
Municipal Trust V.P.
Colonial Municipal Income
Trust V.P.
Liberty Funds Trusts I through IX V.P.
Liberty Funds Services, Inc. Director
Liberty Funds Group LLC CAO; Ex. V.P.
Liberty Funds Distributor,
Inc. Director
AlphaTrade Inc. Director
Liberty Financial Advisors,
Inc. Director
Stein Roe & Farnham
Incorporated Exec. V.P.
Liberty Variable Investment
Trust V.P.
Liberty All-Star Equity Fund V.P.
Liberty All-Star Growth Fund,
Inc. V.P.
Peishoff, William V.P.
Peterson, Ann T. V.P. Colonial Advisory Services,
Inc. V.P
Pielech, Mitchell V.P.
Pope, David V.P.
Reading, John V.P.; Liberty Funds Services, Inc. Asst. Clerk
Asst. Liberty Funds Group LLC Asst. Sec.
Sec.; Colonial Advisory Services,
Asst. Inc. Asst. Clerk
Clerk and Liberty Funds Distributor,
Counsel Inc. Asst. Clerk
AlphaTrade Inc. Asst. Clerk
Liberty Funds Trusts I through IX Asst. Sec.
Colonial High Income
Municipal Trust Asst. Sec.
Colonial InterMarket Income
Trust I Asst. Sec.
</TABLE>
C-13
<PAGE> 16
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Colonial Intermediate High
Income Fund Asst. Sec.
Colonial Investment Grade
Municipal Trust Asst. Sec.
Colonial Municipal Income
Trust Asst. Sec.
Liberty Financial Advisors,
Inc. Asst. Sec.
Liberty Variable Investment
Trust Asst. Sec.
Liberty All-Star Equity Fund Asst. Sec.
Liberty All-Star Growth Fund,
Inc. Asst. Sec.
Rega, Michael V.P. Colonial Advisory Services, Inc. V.P.
Richards, Scott B. Sr.V.P. Colonial Advisory Services, Inc. Senior V.P.
Schermerhorn, Scott Sr. V.P.
Seibel, Sandra L. V.P. Colonial Advisory Services, Inc. V.P.
Shields, Yvonne B. V.P. Stein Roe & Farnham
Incorporated V.P.
Smalley, Gregg V.P.
Spanos, Gregory J. Sr. V.P. Colonial Advisory Services, Inc. Exec. V.P.
Stevens, Richard V.P. Colonial Advisory Services, Inc. V.P.
Stoeckle, Mark Sr.V.P. Colonial Advisory Services, Inc. V.P.
Swayze, Gary Sr.V.P.
Thomas, Ronald V.P.
Turcotte,
Frederick J. V.P. Liberty Funds Services, Inc. V.P.
Liberty Funds Distributor, Inc. V.P.
Colonial Advisory Services, Inc. V.P.
AlphaTrade Inc. V.P.
Liberty Funds Group LLC V.P.
Liberty Financial Services, Inc. V.P.
Liberty Financial Companies, Inc. V.P. and
Managing Dir.
of Taxation
LREG, Inc. V.P.
Liberty Newport Holdings, Limited V.P.
Newport Pacific Management, Inc. V.P.
Newport Fund Management, Inc. V.P.
Newport Private Equity Asia, Inc. V.P.
Independent Holdings, Inc. V.P.
IFS Agencies, Inc. V.P.
IFMG Agencies of Maine, Inc. V.P.
IFMG Agencies of Oklahoma, Inc. V.P.
IFS Agencies of Alabama, Inc. V.P.
IFS Agencies of New Mexico, Inc. V.P.
IFS Insurance Agencies of Ohio, Inc. V.P.
IFS Insurance Agencies of Texas, Inc. V.P.
Liberty Securities Corporation V.P.
Stein Roe Services, Inc. V.P.
Stein Roe & Farnham Incorporated V.P.
Stein Roe Futures, Inc. V.P.
Progress Investment Management
Company V.P.
Crabbe Huson Group, Inc. V.P.
Wallace, John R. V.P. Colonial Advisory Services,
Asst.Treas. Inc. Asst. Treas.
Liberty Funds Group LLC Asst. Treas.
Ware, Elizabeth M. V.P.
Wiley, Christine V.P.
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Wiley, Peter V.P.
</TABLE>
- -----------------------------------------------
*The Principal address of all of the officers and directors of the investment
adviser is One Financial Center, Boston, MA 02111.
Item 31. Location of Accounts and Records
Registrant: Colonial California Insured Municipal Fund
One Financial Center
Boston, Massachusetts 02111-2621
Investment Advisor: Colonial Management Associates, Inc.
One Financial Center
Boston, Massachusetts 02111-2621
Custodian: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017-2070
Transfer Agent: EquiServe
150 Royall Street
Canton, Massachusetts 02021
Item 32. Management Services
Not Applicable
Item 33. Undertakings
The Registrant hereby undertakes:
(1) To suspend the offering of its common shares of beneficial
interest until it amends its prospectus if (i) subsequent to the
effective date of this Registration Statement, the net asset
value per share of beneficial interest declines more than 10
percent from its net asset value per share of beneficial
interest as of the effective date of this Registration Statement
or, (ii) its net asset value per share of beneficial interest
increases to an amount greater than its net proceeds as stated in
the prospectus contained herein.
(2) Not Applicable
(3) Not Applicable
(4) Not Applicable
(5) (a) That for the purpose of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as a part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant under Rule 497(h) under the Securities Act
of 1933 shall be deemed to be part of this Registration Statement
as of the time it was declared effective; and
(b) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of the securities at that time shall be deemed to
be the initial bona fide offering thereof.
(6) To send by first class mail or other means designed to ensure
equally prompt delivery, within two business days of receipt of a
written or oral request, any Statement of Additional Information.
C-15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Amendment to its Registration Statement on Form N-2 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 28th day of October, 1999.
COLONIAL CALIFORNIA INSURED MUNICIPAL FUND
By: /s/ STEPHEN E. GIBSON
---------------------
Stephen E. Gibson
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in their capacities and
on the date indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ STEPHEN E. GIBSON President (chief October 28, 1999
- ---------------------- executive officer)
Stephen E. Gibson
/s/ J. KEVIN CONNAUGHTON Controller and Chief October 28, 1999
- ------------------------ Accounting Officer
J. Kevin Connaughton
/s/ TIMOTHY J. JACOBY Treasurer and Chief October 28, 1999
- ------------------------ Financial Officer
Timothy J. Jacoby
C-16
<PAGE> 19
<TABLE>
<S> <C> <C>
ROBERT J. BIRNBAUM* Trustee
- -------------------
Robert J. Birnbaum
TOM BLEASDALE* Trustee
- --------------
Tom Bleasdale
JOHN CARBERRY* Trustee
- --------------
John Carberry
LORA S. COLLINS* Trustee
- ----------------
Lora S. Collins
JAMES E. GRINNELL* Trustee
- ------------------
James E. Grinnell
RICHARD W. LOWRY* Trustee By:*/s/ WILLIAM J. BALLOU
- ----------------- --------------------------
Richard W. Lowry William J. Ballou
Attorney-in-fact
For each Trustee
October 28, 1999
SALVATORE MACERA* Trustee
- -----------------
Salvatore Macera
WILLIAM E. MAYER* Trustee
- -----------------
William E. Mayer
JAMES L. MOODY, JR.* Trustee
- ---------------------
James L. Moody, Jr.
JOHN J. NEUHAUSER* Trustee
- ------------------
John J. Neuhauser
THOMAS E. STITZEL* Trustee
- ------------------
Thomas E. Stitzel
ROBERT L. SULLIVAN* Trustee
- -------------------
Robert L. Sullivan
ANNE-LEE VERVILLE* Trustee
- ------------------
Anne-Lee Verville
</TABLE>
C-17
<PAGE> 20
EXHIBIT INDEX
(b)(2) Amended and Restated By-Laws
(h) Underwriting Agreement
(k)(3)(ii) Expense Reimbursement Agreement with Colonial Management Associates,
Inc.
(p) Subscription Agreement with Colonial Management Associates, Inc.
<PAGE> 1
Exhibit (b)(2)
AMENDED AND RESTATED BY-LAWS
OF
COLONIAL CALIFORNIA INSURED MUNICIPAL FUND
ARTICLE 1
AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Colonial California Insured Municipal Fund (the
"Trust"), a Massachusetts business trust established by the Declaration of Trust
of the Trust.
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust shall
be located in Boston, Massachusetts.
ARTICLE 2
SHAREHOLDERS
2.1 SHAREHOLDER MEETINGS. The annual meeting of the shareholders of the
Trust shall be held between April 1 and May 31 in each year, beginning in 2000,
on a date and at a time within that period set by the Trustees. A special
meeting of the shareholders of the Trust may be called at any time by the
Trustees, by the president or, if the Trustees and the president shall fail to
call any meeting of shareholders for a period of 30 days after written
application of one or more shareholders who hold at least 10% of all outstanding
shares of the Trust, then such shareholders may call such meeting. Each call of
a meeting shall state the place, date, hour and purposes of the meeting.
2.2 PLACE OF MEETINGS. All meetings of the shareholders shall be held at
the principal office of the Trust, or, to the extent permitted by the
Declaration of Trust, at such other place within the United States as shall be
designated by the Trustees or the president of the Trust.
2.3 NOTICE OF MEETINGS. A written notice of each meeting of shareholders,
stating the place, date and hour and the purposes of the meeting, shall be given
at least seven days before the meeting to each shareholder entitled to vote
thereat by leaving such notice with him or at his residence or usual place of
business or by mailing it, postage prepaid, and addressed to such shareholder at
his address as it appears in the records of the Trust. Such notice shall be
given by the secretary or an assistant secretary or by an officer designated by
the Trustees. No notice of any meeting of shareholders need be given to a
shareholder if a written waiver of
<PAGE> 2
notice, executed before or after the meeting by such shareholder or his attorney
thereunto duly authorized, is filed with the records of the meeting.
2.4 BALLOTS. No ballot shall be required for any election unless requested
by a shareholder present or represented at the meeting and entitled to vote in
the election.
2.5 PROXIES. Shareholders entitled to vote may vote either in person or by
proxy in writing dated no more than six months before the meeting named therein,
which proxies shall be filed with the secretary or other person responsible to
record the proceedings of the meeting before being voted. Unless otherwise
specifically limited by their terms, such proxies shall entitle the holders
thereof to vote at any adjournment of such meeting but shall not be valid after
the final adjournment of such meeting. The placing of a shareholder's name on a
proxy pursuant to telephonic or electronically transmitted instructions obtained
pursuant to procedures reasonably designed to verify that such instructions have
been authorized by such shareholder shall constitute execution of such proxy by
or on behalf of such shareholder.
ARTICLE 3
TRUSTEES
3.1 COMMITTEES AND ADVISORY BOARD. The Trustees may appoint from their
number an executive committee and other committees. Except as the Trustees may
otherwise determine, any such committee may make rules for the conduct of its
business. The Trustees may appoint an advisory board to consist of not less than
two nor more than five members. The members of the advisory board shall be
compensated in such manner as the Trustees may determine and shall confer with
and advise the Trustees regarding the investments and other affairs of the
Trust. Each member of the advisory board shall hold office until the first
meeting of the Trustees following the next meeting of the shareholders and until
his successor is elected and qualified, or until he sooner dies, resigns, is
removed, or becomes disqualified, or until the advisory board is sooner
abolished by the Trustees.
In addition, the Trustees may appoint a dividend committee of not less than
three persons, at least one of whom shall be a Trustee of the Trust.
No special compensation shall be payable to members of the Dividend
Committee. Each member of the Dividend Committee will hold office until his or
her successor is elected and qualified or until the member dies, resigns, is
removed, becomes disqualified or until the Committee is abolished by the
Trustees.
3.2 REGULAR MEETINGS. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees.
-2-
<PAGE> 3
3.3 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting, when called by the
president or the treasurer or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the secretary or an assistant secretary or by the
officer or one of the Trustees calling the meeting.
3.4 NOTICE. It shall be sufficient notice of a special meeting to a
Trustee to send notice by mail at least forty-eight hours or by telegram or
telecopier at least twenty-four hours before the meeting addressed to the
Trustee at his or her usual or last known business or residence address or to
give notice to him or her in person or by telephone at least twenty-four hours
before the meeting. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
3.5 QUORUM. At any meeting of the Trustees one-third of the Trustees then
in office shall constitute a quorum; provided, however, a quorum shall not be
less than two unless the number of Trustees then in office shall be one. Any
meeting may be adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice.
ARTICLE 4
OFFICERS AND AGENTS
4.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
president, a treasurer, a secretary and such other officers, if any, as the
Trustees from time to time may in their discretion elect or appoint or as the
elected officers may appoint pursuant to section 4.3 of these By-Laws. The Trust
may also have such agents, if any, as the Trustees from time to time may in
their discretion appoint. Any officer may be, but none need be, a Trustee or
shareholder. Any two or more offices may be held by the same person.
4.2 POWERS. Subject to the other provisions of these By-Laws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to his or
her office as if the Trust were organized as a Massachusetts business
corporation and such other duties and powers as the Trustees may from time to
time designate, including without limitation the power to make purchases and
sales of portfolio securities of the Trust pursuant to recommendations of the
Trust's investment adviser in accordance with the policies and objectives of the
Trust set forth in its prospectus and with such general or specific instructions
as the Trustees may from time to time have issued.
4.3 ELECTION. The president, the treasurer and the secretary shall be
elected annually by the Trustees at their first meeting following the annual
meeting of the shareholders. Other
-3-
<PAGE> 4
elected officers, if any, may be elected or appointed by the Trustees at said
meeting or at any other time. Assistant officers may be appointed by the elected
officers.
4.4 TENURE. The president, the treasurer and the secretary shall hold
office until their respective successors are chosen and qualified, or in each
case until he or she sooner dies, resigns, is removed or becomes disqualified.
Each other officer shall hold office at the pleasure of the Trustees. Each agent
shall retain his or her authority at the pleasure of the Trustees.
4.5 PRESIDENT AND VICE PRESIDENTS. The president shall be the chief
executive officer of the Trust. The president shall preside at all meetings of
the shareholders and of the Trustees at which he or she is present, except as
otherwise voted by the Trustees. Any vice president shall have such duties and
powers as shall be designated from time to time by the Trustees.
4.6 TREASURER AND CONTROLLER. The treasurer shall be the chief financial
officer of the Trust and, subject to any arrangement made by the Trustees with a
bank or trust company or other organization as custodian or transfer or
shareholder services agent, shall be in charge of its valuable papers and shall
have such duties and powers as shall be designated from time to time by the
Trustees or by the president. Any assistant treasurer shall have such duties and
powers as shall be designated from time to time by the Trustees.
The Controller shall be the chief accounting officer of the Trust and shall
be in charge of its books of account and accounting records. The Controller
shall be responsible for preparation of financial statements of the Trust and
shall have such other duties and powers as may be designated from time to time
by the Trustees or the President.
4.7 SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record all
proceedings of the shareholders and the Trustees in books to be kept therefor,
which books shall be kept at the principal office of the Trust. In the absence
of the secretary from any meeting of shareholders of trustees, an assistant
secretary, or if there be none or he or she is absent, a temporary clerk chosen
at the meeting shall record the proceedings thereof in the aforesaid books.
ARTICLE 5
RESIGNATIONS AND REMOVALS
Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the president, the treasurer or
the secretary or to a meeting of the Trustees. The Trustees may remove any
officer elected by them with or without cause by the vote of a majority of the
Trustees then in office. Except to the extent expressly provided in a written
agreement with the Trust, no Trustee, officer, or advisory board member
resigning, and no officer or advisory board member removed, shall have any right
to any
-4-
<PAGE> 5
compensation for any period following his or her resignation or removal, nor any
right to damages on account of such removal.
ARTICLE 6
VACANCIES
A vacancy in any office may be filled at any time. Each successor shall
hold office for the unexpired term, and in the case of the president, the
treasurer and the secretary, until his or her successor is chosen and qualified,
or in each case until he or she sooner dies, resigns, is removed or becomes
disqualified.
ARTICLE 7
SHARES OF BENEFICIAL INTEREST
7.1 SHARE CERTIFICATES. Each shareholder shall be entitled to a
certificate stating the number of shares owned by him or her, in such form as
shall be prescribed from time to time by the Trustees. Such certificate shall be
signed by the president or a vice president and by the treasurer or an assistant
treasurer. Such signatures may be facsimiles if the certificate is signed by a
transfer agent or by a registrar who is not a Trustee, officer or employee of
the Trust. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Trust with the same effect as if
he or she were such officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees or the transfer
agent may either issue receipts therefor or may keep accounts upon the books of
the Trust for the record holders of such shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of certificates for such
shares as if they had accepted such certificates and shall be held to have
expressly assented and agreed to the terms hereof.
7.2 LOSS OF CERTIFICATES. In the case of the alleged loss or destruction
or the mutilation of a share certificate, a duplicate certificate may be issued
in place thereof, upon such terms as the Trustee may prescribe.
7.3 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, be written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 8
RECORD DATE AND CLOSING TRANSFER BOOKS
The Trustees may fix in advance a time, which shall not be more than 90
days before the date of any meeting of shareholders or the date for the payment
of any dividend or making
-5-
<PAGE> 6
of any other distribution to shareholders, as the record date for determining
the shareholders having the right to notice and to vote at such meeting and any
adjournment thereof or the right to receive such dividend or distribution, and
in such case only shareholders of record on such record date shall have such
right, notwithstanding any transfer of shares on the books of the Trust after
the record date; or without fixing such record date the Trustees may for any of
such purposes close the transfer books for all or any part of such period.
ARTICLE 9
SEAL
The seal of the Trust shall, subject to alteration by the Trustees, consist
of a flat-faced circular die with the word "Massachusetts" together with the
name of the Trust and the year of its organization, cut or engraved thereon;
but, unless otherwise required by the Trustees, the seal shall not be necessary
to be placed on, and its absence shall not impair the validity of, any document,
instrument or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 10
EXECUTION OF PAPERS
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and all transfers of securities standing in the name
of the Trust shall be executed, by the president or by one of the vice
presidents or by the treasurer or by whomsoever else shall be designated for
that purpose by the vote of the Trustees and need not bear the seal of the
Trust.
ARTICLE 11
FISCAL YEAR
Except as from time to time otherwise provided by the Trustees, the fiscal
year of the Trust shall end on November 30.
ARTICLE 12
SHARES OF BENEFICIAL INTEREST
The Trust has an unlimited number of common shares, without par value,
which may be issued from time to time by the Trustees of the Trust. The Trust
also has a class of _____ preferred shares, without par value, which may be
issued by the Trustees from time to time in one or more series and with such
designations, preferences and other rights, qualifications, limitations and
restrictions as are determined by the Board of Trustees or a duly authorized
committee thereof and set forth in this Article 12.
-6-
<PAGE> 7
12.1 STATEMENT CREATING ONE SERIES OF MUNICIPAL AUCTION RATE CUMULATIVE
PREFERRED SHARES.
There is one series of Municipal Auction Rate Cumulative Preferred Shares.
PART I
DESIGNATION
SERIES __: A series of _____ preferred shares, without par value,
liquidation preference $25,000 per share plus accumulated but unpaid dividends,
if any, thereon (whether or not earned or declared), is hereby designated
"Municipal Auction Rate Cumulative Preferred Shares, Series __" and is referred
to below as "Series __ Municipal Preferred." Each share of Series __ Municipal
Preferred shall be issued on ________ __, 1999; have an Applicable Rate for its
Initial Rate Period equal to ____% per annum; have an initial Dividend Payment
Date of _______, ________ __, 1999; and have such other preferences, limitations
and relative voting and other rights, in addition to those required by
applicable law or set forth in the Trust's Declaration of Trust, as are set
forth in Part I and Part II of this Section 12.1. Series __ Municipal Preferred
shall constitute a separate series of Municipal Preferred of the Trust. The
Board of Trustees of the Trust may, in their discretion, increase the number of
shares of Municipal Preferred authorized under these By-Laws to authorize the
issuance of another series of Municipal Preferred so long as such issuance is
permitted by paragraph 5 of Part I of this Section 12.1.
1. DEFINITIONS. Unless the context or use indicates another or different
meaning or intent, in Part I and Part II of this Section 12.1 the following
terms have the following meanings, whether used in the singular or plural:
"'AA' Composite Commercial Paper Rate," on any date for any Rate Period of
shares of a series of Municipal Preferred, shall mean (i) (A) in the case of any
Minimum Rate Period or any Special Rate Period of fewer than 49 Rate Period
Days, the interest equivalent of the 30-day rate; provided, however, that if
such Rate Period is a Minimum Rate Period and the "AA" Composite Commercial
Paper Rate is being used to determine the Applicable Rate for shares of such
series when all of the Outstanding shares of such series are subject to
Submitted Hold Orders, then the interest equivalent of the seven-day rate, and
(B) in the case of any Special Rate Period of (1) 49 or more but fewer than 70
Rate Period Days, the interest equivalent of the 60-day rate; (2) 70 or more but
fewer than 85 Rate Period Days, the arithmetic average of the interest
equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99 Rate
Period Days, the interest equivalent of the 90-day rate; (4) 99 or more but
fewer than 120 Rate Period Days, the arithmetic average of the interest
equivalent of the 90-day and 120-day rates; (5) 120 or more but fewer than 141
Rate Period Days, the interest equivalent of the 120-day rate; (6) 141 or more
but fewer than 162 Rate Period Days, the arithmetic average of the interest
equivalent of the 120-day and 180- day rates; and (7) 162 or more but fewer than
183 Rate Period Days, the interest equivalent of the 180-day rate, in each case
on commercial paper placed on behalf of issuers whose corporate bonds are rated
"AA" by S&P or the equivalent of such rating by S&P or another rating agency,
-7-
<PAGE> 8
as made available on a discount basis or otherwise by the Federal Reserve Bank
of New York for the Business Day next preceding such date; or (ii) in the event
that the Federal Reserve Bank of New York does not make available any such rate,
then the arithmetic average of such rates, as quoted on a discount basis or
otherwise, by the Commercial Paper Dealers to the Auction Agent for the close of
business on the Business Day next preceding such date. If any Commercial Paper
Dealer does not quote a rate required to determine the "AA" Composite Commercial
Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the
basis of the quotation or quotations furnished by the remaining Commercial Paper
Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Trust to provide such rate
or rates not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers, as the case may be, or, if the Trust does not select any such
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by
the remaining Commercial Paper Dealer or Commercial Paper Dealers. For purposes
of this definition, the "interest equivalent" of a rate stated on a discount
basis (a "discount rate") for commercial paper of a given days' maturity shall
be equal to the quotient (rounded upwards to the next higher one-thousandth
(.001) of 1% of (A) the discount rate divided by (B) the difference between (x)
1.00 and (y) a fraction the numerator of which shall be the product of the
discount rate times the number of days in which such commercial paper matures
and the denominator of which shall be 360.
"Accountant's Confirmation" shall have the meaning specified in paragraph
7(c) of Part I of this Section 12.1.
"Affiliate" shall mean, for purposes of the definition of "Outstanding,"
any Person known to the Auction Agent to be controlled by, in control of or
under common control with the Trust; provided, however, that no Broker-Dealer
controlled by, in control of or under common control with the Trust shall be
deemed to be an Affiliate nor shall any corporation or any Person controlled by,
in control of or under common control with such corporation, one of the
trustees, directors or executive officers of which is a trustee of the Trust be
deemed to be an Affiliate solely because such trustee, director or executive
officer is also a trustee of the Trust.
"Agent Member" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder.
"Anticipation Notes" shall mean Tax Anticipation Notes (TANs), Revenue
Anticipation Notes (RANs), Tax and Revenue Anticipation Notes (TRANs), Grant
Anticipation Notes (GANs) that are rated by S&P and Bond Anticipation Notes
(BANs).
"Applicable Rate" shall have the meaning specified in paragraph 2(e)(i) of
Part I of this Section 12.1.
"Auction" shall mean each periodic implementation of the Auction
Procedures.
-8-
<PAGE> 9
"Auction Agency Agreement" shall mean the agreement between the Trust and
the Auction Agent which provides, among other things, that the Auction Agent
will follow the Auction Procedures for purposes of determining the Applicable
Rate for shares of a series of Municipal Preferred so long as the Applicable
Rate for shares of such series is to be based on the results of an Auction.
"Auction Agent" shall mean the entity appointed as such by a resolution of
the Board of Trustees in accordance with paragraph 6 of Part II of this Section
12.1.
"Auction Date," with respect to any Rate Period, shall mean the Business
Day next preceding the first day of such Rate Period.
"Auction Procedures" shall mean the procedures for conducting Auctions set
forth in Part II of this Section 12.1.
"Available Municipal Preferred" shall have the meaning specified in
paragraph 3(a) of Part II of this Section 12.1.
"Benchmark Rate" shall have the meaning specified in paragraph 3(c) of Part
II of this Section 12.1.
"Beneficial Owner" with respect to shares of a series of Municipal
Preferred, means a customer of a Broker-Dealer who is listed on the records of
that Broker-Dealer (or, if applicable, the Auction Agent) as a holder of shares
of such series.
"Bid" and "Bids" shall have the respective meanings specified in paragraph
1(a) of Part II of this Section 12.1.
"Bidder" and "Bidders" shall have the respective meanings specified in
paragraph 1(a) of Part II of this Section 12.1; provided, however, that neither
the Trust nor any affiliate thereof shall be permitted to be a Bidder in an
Auction, except that any Broker-Dealer that is an affiliate of the Trust may be
a Bidder in an Auction, but only if the Orders placed by such Broker-Dealer are
not for its own account.
"Board of Trustees" shall mean the Board of Trustees of the Trust or any
duly authorized committee thereof.
"Broker-Dealer" shall mean any broker-dealer, commercial bank or other
entity permitted by law to perform the functions required of a Broker-Dealer in
Part II of this Section 12.1, that is a member of, or a participant in, the
Securities Depository or is an affiliate of such member or participant, has been
selected by the Trust and has entered into a Broker-Dealer Agreement that
remains effective.
-9-
<PAGE> 10
"Broker-Dealer Agreement" shall mean an agreement among the Trust, the
Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to
follow the procedures specified in Part II of this Section 12.1.
"Business Day" shall mean a day on which the New York Stock Exchange is
open for trading, and which is neither a Saturday, Sunday nor any other day on
which banks in The City of New York, New York are authorized by law to close.
"By-Laws" means these Amended and Restated By-Laws of the Trust.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commercial Paper Dealers" means Lehman Commercial Paper Incorporated,
Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated and
such other commercial paper dealer or dealers as the Trust may from time to time
appoint, or, in lieu of any thereof, their respective affiliates or successors.
"Common Shares" means the common shares of beneficial interest, without par
value, of the Trust.
"Cure Date" shall have the meaning specified in paragraph 11(b) of Part I
of this Section 12.1.
"Date of Original Issue" with respect to shares of a series of Municipal
Preferred, shall mean the date on which the Trust originally issued such shares.
"Declaration" shall mean the Agreement and Declaration of Trust dated March
16, 1989 of the Trust, as amended by Amendment No. 1 dated July 30, 1999 to the
Agreement and Declaration of Trust of the Trust, both on file with the Secretary
of The Commonwealth of Massachusetts and as hereafter restated or amended from
time to time.
"Deposit Securities" shall mean cash and Municipal Obligations rated at
least A-1+ or SP-1+ by S&P, except that, for purposes of subparagraph (a)(v) of
paragraph 11 of Part I of this Section 12.1, such Municipal Obligations shall be
considered "Deposit Securities" only if they are also rated P-1, MIG-1 or VMIG-1
by Moody's.
"Discounted Value," as of any Valuation Date, shall mean, (i) with respect
to an S&P Eligible Asset, the quotient of the Market Value thereof divided by
the applicable S&P Discount Factor and (ii) (a) with respect to a Moody's
Eligible Asset that is not currently callable as of such Valuation Date at the
option of the issuer thereof, the quotient of the Market Value thereof divided
by the applicable Moody's Discount Factor, or (b) with respect to a Moody's
Eligible Asset that is currently callable as of such Valuation Date at the
option of the issuer thereof, the
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<PAGE> 11
quotient of (1) the lesser of the Market Value or call price thereof, including
any call premium, divided by (2) the applicable Moody's Discount Factor.
"Dividend Payment Date," with respect to shares of a series of Municipal
Preferred, shall mean any date on which dividends are payable on shares of such
series pursuant to the provisions of paragraph 2(d) of Part I of this Section
12.1.
"Dividend Period," with respect to shares of a series of Municipal
Preferred, shall mean the period from and including the Date of Original Issue
of shares of such series to but excluding the initial Dividend Payment Date for
shares of such series and any period thereafter from and including one Dividend
Payment Date for shares of such series to but excluding the next succeeding
Dividend Payment Date for shares of such series.
"Escrowed Bonds" means Municipal Obligations that (i) have been determined
to be legally defeased in accordance with S&P's legal defeasance criteria, (ii)
have been determined to be economically defeased in accordance with S&P's
economic defeasance criteria and assigned a rating of AAA by S&P, (iii) are not
rated by S&P but have been determined to be legally defeased by Moody's, or (iv)
have been determined to be economically defeased by Moody's and assigned a
rating no lower than the rating that is Moody's equivalent of S&P's AAA rating.
"Existing Holder," with respect to shares of a series of Municipal
Preferred, shall mean a Broker-Dealer (or any such other Person as may be
permitted by the Trust) that is listed on the records of the Auction Agent as a
holder of shares of such series.
"Failure to Deposit," with respect to shares of a series of Municipal
Preferred, shall mean a failure by the Trust to pay to the Auction Agent, not
later than 12:00 noon, New York City time, (A) on the Business Day next
preceding any Dividend Payment Date for shares of such series, in funds
available on such Dividend Payment Date in The City of New York, New York, the
full amount of any dividend (whether or not earned or declared) to be paid on
such Dividend Payment Date on any share of such series or (B) on the Business
Day next preceding any redemption date in funds available on such redemption
date for shares of such series in The City of New York, New York, the Redemption
Price to be paid on such redemption date for any shares of such series after
notice of redemption is mailed pursuant to paragraph 11(c) of Part I of this
Section 12.1; provided, however, that the foregoing clause (B) shall not apply
to the Trust's failure to pay the Redemption Price in respect of shares of
Municipal Preferred when the related Notice of Redemption provides that
redemption of such shares is subject to one or more conditions precedent and any
such condition precedent shall not have been satisfied at the time or times and
in the manner specified in such Notice of Redemption.
"Federal Tax Rate Increase" shall have the meaning specified in the
definition of "Moody's Volatility Factor."
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<PAGE> 12
"Gross-up Payment" in respect of any dividend means payment to a Holder of
shares of a series of Municipal Preferred of an amount which, giving effect to
the Taxable Allocations made with respect to such dividend, would cause such
Holder's after-tax returns (taking into account both the Taxable Allocations and
the Gross-up Payment) to be equal to the after-tax return the Holder would have
received if no such Taxable Allocations had occurred. Such Gross-up Payment
shall be calculated: (i) without consideration being given to the time value of
money; (ii) assuming that no Holder of shares of Municipal Preferred is subject
to the Federal alternative minimum tax with respect to dividends received from
the Trust; and (iii) assuming that each Holder of shares of Municipal Preferred
is taxable at the maximum marginal regular Federal individual income tax rate
applicable to ordinary income or net capital gain, as applicable, or the maximum
marginal regular Federal corporate income tax rate applicable to ordinary income
or net capital gain, as applicable, whichever is greater, in effect at the time
such Gross-up Payment is made.
"Holder," with respect to shares of a series of Municipal Preferred, shall
mean the Registered Holder of such shares as the same appears on the record
books of the Trust.
"Hold Order" and "Hold Orders" shall have the respective meanings specified
in paragraph 1(a) of Part II of this Section 12.1.
"Independent Accountant" shall mean a nationally recognized accountant, or
firm of accountants, that is, with respect to the Trust, an independent public
accountant or firm of independent public accountants under the Securities Act of
1933, as amended from time to time.
"Initial Margin" means the amount of cash or securities deposited with a
broker as a margin payment at the time of purchase or sale of a futures
contract.
"Initial Rate Period," with respect to shares of a series of Municipal
Preferred, shall mean the period from and including the Date of Original Issue
for such series to but excluding the initial Dividend Payment Date for such
series.
"Interest Equivalent" shall mean a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
"Inverse Floater" shall mean trust certificates or other instruments
evidencing interests in one or more municipal securities that qualify as S&P
Eligible Assets (and satisfy the issuer and size requirements of the definition
of S&P Eligible Assets) the interest rates on which are adjusted at short-term
intervals on a basis that is inverse to the simultaneous readjustment of the
interest rates on corresponding floating rate trust certificates or other
instruments issued by the same issuer, provided that the ratio of the aggregate
dollar amount of floating rate instruments to inverse floating rate instruments
issued by the same issuer does not exceed one to one at their time or original
issuance unless the floating rate instrument has only one reset remaining until
maturity.
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<PAGE> 13
"Issue Type Category" shall mean, with respect to a Municipal Obligation
acquired by the Fund, (A) for purposes of calculating Moody's Eligible Assets as
of any Valuation Date, one of the following categories into which such Municipal
Obligation falls based upon a good faith determination by the Fund: health care
issues (including issues related to teaching and non-teaching hospitals, public
or private); housing issues (including issues related to single- and
multi-family housing projects); educational facilities issues (including issues
related to public and private schools); student loan issues; resource recovery
issues; transportation issues (including issues related to mass transit,
airports and highways); industrial development bond issues (including issues
related to pollution control facilities); utility issues (including issues
related to the provision of gas, water, sewers and electricity); general
obligation issues; lease obligations (including certificates of participation);
escrowed bonds; and other issues ("Other Issues") not falling within one of the
aforementioned categories; and (B) for purposes of calculating S&P Eligible
Assets as of any Valuation Date, one of the following categories into which such
Municipal Obligation falls based upon a good faith determination by the Fund:
health care issues (including issues related to teaching and non-teaching
hospitals, public or private); housing issues (including issues related to
single- and multi-family housing projects); educational facilities issues
(including issues related to public and private schools); student loan issues;
transportation issues (including issues related to mass transit, airports and
highways); industrial development bond issues (including issues related to
pollution control facilities); public power utilities issues (including issues
related to the provision of electricity, either singly or in combination with
the provision of other utilities, and issues related only to the provision of
gas); water and sewer utilities issues (including issues related to the
provision of water and sewers as well as combination utilities not falling
within the public power utilities category); special utilities issues (including
issues related to resource recovery, solid waste and irrigation as well as other
utility issues not falling within the public power and water and sewer utilities
categories); general obligation issues; lease obligations (including
certificates of participation); Escrowed Bonds; and other issues ("Other
Issues") not falling within one of the aforementioned categories. The general
obligation issue category includes any issuer that is directly or indirectly
guaranteed by the State of California or its political subdivisions. Utility
issuers are included in the general obligation issue category if the issuer is
directly or indirectly guaranteed by the State of California or its political
subdivisions. Municipal Obligations in the utility issuer category will be
classified within one of the three following sub-categories: (i) electric, gas
and combination issues (if the combination issue includes an electric issue);
(ii) water and sewer utilities and combination issues (if the combination issue
does not include an electric issue); and (iii) irrigation, resource recovery,
solid waste and other utilities, provided that Municipal Obligations included in
this sub-category (iii) must be rated by S&P in order to be included in S&P
Eligible Assets. Municipal Obligations in the transportation issue category will
be classified within one of the two following sub-categories: (i) streets and
highways, toll roads, bridges and tunnels, airports and multi-purpose port
authorities (multiple revenue streams generated by toll roads, airports, real
estate, bridges); and (ii) mass transit, parking seaports and others.
-13-
<PAGE> 14
"Kenny Index" shall have the meaning set forth under the definition of
"Taxable Equivalent of the Short-Term Municipal Bond Rate."
"Late Charge" shall have the meaning specified in paragraph 2(e)(i)(B) of
Part I of this Section 12.1.
"Liquidation Preference," with respect to a given number of shares of
Municipal Preferred, means $25,000 times that number.
"Market Value" of any asset of the Trust means the market value thereof
determined by the pricing service designated from time to time by the Board of
Trustees. Market Value of any asset shall include any interest accrued thereon.
The pricing service will use current industry standards to value portfolio
securities. The pricing service may employ electronic data processing techniques
or a matrix system, or both, to determine valuations. Securities for which
quotations are not readily available shall be valued at fair value as determined
by the pricing service using methods which include consideration of: yields or
prices of municipal bonds of comparable quality, type of issue, coupon, maturity
and rating; indications as to value from dealers; and general market conditions.
In the event the pricing service is unable to value a security, the security
shall be valued at the lower of two dealer bids obtained by the Trust from
dealers who are nationally recognized members of the National Association of
Securities Dealers, Inc. who are independent of the investment advisor to the
Trust and make a market in the security, at least one of which shall be in
writing. Futures contracts and options are valued at closing prices for such
instruments established by the exchange or board of trade on which they are
traded, or if market quotations are not readily available, are valued at fair
value on a consistent basis using methods determined in good faith by the
Trustees.
"Maximum Potential Gross-up Payment Liability," as of any Valuation Date,
shall mean the aggregate amount of Gross-up Payments that would be due if the
Trust were to make Taxable Allocations, with respect to any taxable year,
estimated based upon dividends paid and the amount of undistributed realized net
capital gains and other taxable income earned by the Trust, as of the end of the
calendar month immediately preceding such Valuation Date, and assuming such
Gross-up Payments are fully taxable.
"Maximum Rate," for shares of a series of Municipal Preferred on any
Auction Date for shares of such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Trust pursuant to paragraph 4 of Part I of this Section
12.1, the product of (A) the Reference Rate on such Auction Date for the
next Rate Period of shares of such series and (B) the Rate Multiple on such
Auction Date, unless shares of such series have or had a Special Rate
Period (other than a Special Rate Period of 28 Rate Period Days or fewer)
and an Auction
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<PAGE> 15
at which Sufficient Clearing Bids existed has not yet occurred for a
Minimum Rate Period of shares of such series after such Special Rate
Period, in which case the higher of:
(A) the dividend rate on shares of such series for the
then-ending Rate Period; and
(B) the product of (1) the higher of (x) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then-ending Rate Period
was 364 Rate Period Days or fewer, or the Treasury Note Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was
more than 364 Rate Period Days, and (y) the Reference Rate on such
Auction Date for a Rate Period equal in length to such Special Rate
Period of shares of such series, if such Special Rate Period was 364
Rate Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to such Special Rate Period, if
such Special Rate Period was more than 364 Rate Period Days and (2)
the Rate Multiple on such Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Trust pursuant to paragraph 4 of Part I of this Section
12.1, the product of (A) the highest of (1) the Reference Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was 364
Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date
for a Rate Period equal in length to the then-ending Rate Period of shares
of such series, if such then-ending Rate Period was more than 364 Rate
Period Days, (2) the Reference Rate on such Auction Date for the Special
Rate Period for which the Auction is being held if such Special Rate Period
is 364 Rate Period Days or fewer or the Treasury Note Rate on such Auction
Date for the Special Rate Period for which the Auction is being held if
such Special Rate Period is more than 364 Rate Period Days, and (3) the
Reference Rate on such Auction Date for Minimum Rate Periods and (B) the
Rate Multiple on such Auction Date.
"Minimum Rate Period" shall mean any Rate Period consisting of 7 Rate
Period Days.
"Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.
"Moody's Discount Factor" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set forth
opposite such rating that is the same length as or is longer than the Moody's
Exposure Period, in accordance with the table set forth below:
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<PAGE> 16
<TABLE>
<CAPTION>
Rating Category
--------------------------------------------------------------------------------------------------
Exposure Period Aaa* Aa* A* Baa* Other** (V)MIG-1*** SP-1+**** Unrated*****
- --------------- ---- --- -- ---- ------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7 weeks............ 151% 159% 166% 173% 187% 136% 148% 225%
8 weeks or less but
greater than seven
weeks.............. 154 161 168 176 190 137 149 231
9 weeks or less but
greater than eight
weeks.............. 156 163 170 177 192 138 150 240
</TABLE>
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-1, which do not mature or
have a demand feature at par exercisable in 30 days and which do not
have a long-term rating.
**** Municipal Obligations not rated by Moody's but rated SP-1+ by S&P,
which do not mature or have a demand feature at par exercisable in 30
days and which do not have a long-term rating.
***** Municipal Obligations rated less than Baa3 by Moody's or less than
BBB by S&P or not rated by Moody's or S&P.
Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term Municipal Obligations will be 115%, so long as such Municipal
Obligations are rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or
have a demand feature at par exercisable in 30 days or less, or 125%, so long as
such Municipal Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and
mature or have a demand feature at par exercisable in 30 days or less, and (ii)
no Moody's Discount Factor will be applied to cash or to Receivables for
Municipal Obligations Sold or futures, options and similar instruments (to the
extent such securities are Moody's Eligible Assets); provided, however, that for
purposes of determining the Moody's Discount Factor applicable to a Municipal
Obligation, any Municipal Obligation (excluding any short-term Municipal
Obligation) not rated by Moody's but rated by S&P shall be deemed to have a
Moody's rating which is one full rating category lower than its S&P rating.
"Moody's Eligible Asset" shall mean cash, Receivables for Municipal
Obligations Sold, futures, options and similar instruments (other than Inverse
Floaters and index warrants) or a Municipal Obligation that (i) pays interest in
cash, (ii) does not have its Moody's rating, if applicable, suspended by
Moody's, (iii) is part of an issue of Municipal Obligations of at least
$10,000,000, and (iv) is not subject to a covered call or a covered put option
written by the Trust. Municipal Obligations issued by any one issuer and not
rated by Moody's or rated lower than Baa3 by Moody's and not rated by S&P or
rated lower than BBB by S&P ("Unrated Moody's Municipal Obligations") may
comprise no more than 4% of total Moody's Eligible Assets; such Unrated Moody's
Municipal Obligations, if any, together with any Municipal Obligations issued
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<PAGE> 17
by the same issuer and rated BBB by S&P may comprise no more than 4% of total
Moody's Eligible Assets; such BBB-rated Municipal Obligations and Unrated
Moody's Municipal Obligations, if any, together with any Municipal Obligations
issued by the same issuer and rated Baa by Moody's or A by S&P may comprise no
more than 6% of total Moody's Eligible Assets; such BBB, Baa and A-rated
Municipal Obligations and Unrated Moody's Municipal Obligations, if any,
together with any Municipal Obligations issued by the same issuer and rated A by
Moody's or AA by S&P, may comprise no more than 10% of total Moody's Eligible
Assets; and such BBB, Baa, A and AA-rated Municipal Obligations and Unrated
Moody's Municipal Obligations, if any, together with any Municipal Obligations
issued by the same issuer and rated Aa by Moody's or AAA by S&P, may comprise no
more than 20% of total Moody's Eligible Assets. For purposes of the foregoing
sentence, any Municipal Obligation backed by the guaranty, letter of credit or
insurance issued by a third party shall be deemed to be issued by such third
party if the issuance of such third-party credit is the sole determinant of the
rating on such Municipal Obligations. Other securities falling within a
particular Issue Type Category may comprise no more than 12% of total Moody's
Eligible Assets; such other securities, if any, together with any Municipal
Obligations falling within a particular Issue Type Category and rated Baa by
Moody's or A by S&P, may comprise no more than 20% of total Moody's Eligible
Assets; such other securities, Baa and A-rated Municipal Obligations, if any,
together with any Municipal Obligations falling within a particular Issue Type
Category and rated A by Moody's or AA by S&P, may comprise no more than 40% of
total Moody's Eligible Assets; and such other securities, Baa, A and AA-rated
Municipal Obligations, if any, together with any Municipal Obligations falling
within a particular Issue Type Category and rated Aa by Moody's or AAA by S&P,
may comprise no more than 60% of total Moody's Eligible Assets. Notwithstanding
any other provision of this definition, (A) in the case of general obligation
Municipal Obligations only, other securities issued by issuers located within
any one county may comprise no more than 4% of Moody's Eligible Assets; such
other securities, if any, together with any Municipal Obligations issued by
issuers located within the same county and rated Baa by Moody's or A by S&P, may
comprise no more than 6% of Moody's Eligible Assets; such other securities, Baa
and A-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by issuers located with the same county and rated A by
Moody's or AA by S&P, may comprise no more than 10% of Moody's Eligible Assets;
and such other securities, Baa, A and AA-rated Municipal Obligations, if any,
together with any Municipal Obligations issued by issuers located within the
same county and rated Aa by Moody's or AAA by S&P, may comprise no more than 20%
of Moody's Eligible Assets; and (B) in no event may (i) student loan Municipal
Obligations comprise more than 10% of Moody's Eligible Assets; (ii) resource
recovery Municipal Obligations comprise more than 10% of Moody's Eligible
Assets; and (iii) Other Issues comprise more than 10% of Moody's Eligible
Assets. For purposes of applying the foregoing requirements, a Municipal
Obligation shall be deemed to be rated BBB by S&P if rated BBB-, BBB or BBB+ by
S&P, Moody's Eligible Assets shall be calculated without including cash, and
Municipal Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated by Moody's,
rated A-1+/Aa or SP-1+/AA by S&P, shall be considered to have a long-term rating
of A. When the Trust sells a Municipal Obligation and agrees to repurchase such
Municipal Obligation at a future day, such Municipal Obligation shall be valued
at its Discounted Value for purposes of determining
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<PAGE> 18
Moody's Eligible Assets, and the amount of the repurchase price of such
Municipal Obligation shall be included as a liability for purposes of
calculating the Municipal Preferred Basic Maintenance Amount. When the Trust
purchases a Moody's Eligible Asset and agrees to sell it at a future date, such
Eligible Asset shall be valued at the amount of cash to be received by the Trust
upon such future date, provided that the counterparty to the transaction has a
long-term debt rating of at least A2 and a short-term debt rating of at least P1
from Moody's and the transaction has a term of no more than 30 days; otherwise
such Eligible Asset shall be valued at the Discounted Value of such Eligible
Asset. For purposes of determining the aggregate Discounted Value of Moody's
Eligible Assets, such aggregate amount shall be reduced with respect to any
futures contracts as set forth in paragraph 10(a) of Part I of this Section
12.1.
Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset to the extent it is (i) subject to any material lien, mortgage,
pledge, security interest or security agreement of any kind (collectively,
"Liens"), except for (a) Liens which are being contested in good faith by
appropriate proceedings and which Moody's has indicated to the Trust will not
affect the status of such asset as a Moody's Eligible Asset, (b) Liens for taxes
that are not then due and payable or that can be paid thereafter without
penalty, (c) Liens to secure payment for services rendered or cash advanced to
the Trust by Colonial Management Associates, Inc., The Chase Manhattan Bank or
the Auction Agent and (d) Liens by virtue of any repurchase agreement or futures
contract; or (ii) deposited irrevocably for the payment of any liabilities for
purposes of determine the Municipal Preferred Basic Maintenance Amount.
"Moody's Exposure Period" shall mean the period commencing on a given
Valuation Date and ending 49 days thereafter.
"Moody's Volatility Factor" shall mean, as of any Valuation Date, (i) in
the case of any Minimum Rate Period, any Special Rate period of 28 Rate Period
Days or fewer, or any Special Rate Period of 57 Rate Period Days or more, a
multiplicative factor equal to 275%, except as otherwise provided in the last
sentence of this definition; (ii) in the case of any Special Rate Period of more
than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to
203%; (iii) in the case of any Special Rate Period of more than 35 but fewer
than 43 Rate Period Days, a multiplicative factor equal to 217%; (iv) in the
case of any Special Rate Period of more than 42 but fewer than 50 Rate Period
Days, a multiplicative factor equal to 226%; and (v) in the case of any Special
Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative
factor equal to 235%. If, as a result of the enactment of changes to the Code,
the greater of the maximum marginal Federal individual income tax rate
applicable to ordinary income and the maximum marginal Federal corporate income
tax rate applicable to ordinary income will increase, such increase being
rounded up to the next five percentage points (the "Federal Tax Rate Increase"),
until the effective date of such increase, the Moody's Volatility Factor in the
case of any Rate Period described in (i) above in this definition instead shall
be determined by reference to the following table:
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<PAGE> 19
<TABLE>
<CAPTION>
Federal Volatility
Tax Rate Increase Factor
----------------- ----------
<S> <C>
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
</TABLE>
"Municipal Obligations" shall mean "Municipal Obligations" as defined in
the Trust's registration statement on Form N-2 as filed with the Securities and
Exchange Commission on ________ __, 1999 (the "Registration Statement").
"Municipal Preferred" shall mean Municipal Auction Rate Cumulative
Preferred Shares, without par value, liquidation preference $25,000 per share,
of the Trust.
"Municipal Preferred Basic Maintenance Amount," as of any Valuation Date,
shall mean the dollar amount equal to the sum of (i)(A) the product of the
number of shares of Municipal Preferred outstanding on such date multiplied by
$25,000 (plus the product of the number of shares of any other series of
Preferred Shares outstanding on such date multiplied by the liquidation
preference of such shares), plus any redemption premium applicable to shares of
Municipal Preferred (or other Preferred Shares) then subject to redemption; (B)
the aggregate amount of dividends that will have accumulated at the respective
Applicable Rates (whether or not earned or declared) to (but not including) the
first respective Dividend Payment Dates for shares of Municipal Preferred
outstanding that follow such Valuation Date (plus the aggregate amount of
dividends, whether or not earned or declared, that will have accumulated in
respect of other outstanding Preferred Shares to, but not including, the first
respective dividend payment dates for such other shares that follow such
Valuation Date); (C) the aggregate amount of dividends that would accumulate on
shares of each series of Municipal Preferred outstanding from such first
respective Dividend Payment Date therefor through the 49th day after such
Valuation Date, at the Maximum Rate (calculated as if such Valuation Date were
the Auction Date for the Rate Period commencing on such Dividend Payment Date)
for a Minimum Rate Period of shares of such series to commence on such Dividend
Payment Date, assuming, solely for purposes of the foregoing, that if on such
Valuation Date the Trust shall have delivered a Notice of Special Rate Period to
the Auction Agent pursuant to paragraph 4(d)(i) of Part I of this Section 12.1
with respect to shares of such series, such Maximum Rate shall be the higher of
(a) the Maximum Rate for the Special Rate Period of shares of such series to
commence on such Dividend Payment Date and (b) the Maximum Rate for a Minimum
Rate Period of shares of such series to commence on such Dividend Payment Date,
multiplied by the Volatility Factor applicable to a Minimum Rate Period, or, in
the event the Trust shall have delivered a Notice of Special Rate Period to the
Auction Agent pursuant to paragraph 4(d)(i) of Part I of this
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<PAGE> 20
Section 12.1 with respect to shares of such series designating a Special Rate
Period consisting of 49 Rate Period Days or more, the Volatility Factor
applicable to a Special Rate Period of that length (plus the aggregate amount of
dividends that would accumulate at the maximum dividend rate or rates on any
other Preferred Shares outstanding from such respective dividend payment dates
through the 49th day after such Valuation Date, as established by or pursuant to
the respective statements establishing and fixing the rights and preferences of
such other Preferred Shares) (except that (1) if such Valuation Date occurs at a
time when a Failure to Deposit (or, in the case of Preferred Shares other than
Municipal Preferred, a failure similar to a Failure to Deposit) has occurred
that has not been cured, the dividend for purposes of calculation would
accumulate at the current dividend rate then applicable to the shares in respect
of which such failure has occurred and (2) for those days during the period
described in this subparagraph (C) in respect of which the Applicable Rate in
effect immediately prior to such Dividend Payment Date will remain in effect
(or, in the case of the Preferred Shares other than Municipal Preferred, in
respect of which the dividend rate or rates in effect immediately prior to such
respective dividend payment dates will remain in effect), the dividend for
purposes of calculation would accumulate at such Applicable Rate (or other rate
or rates, as the case may be) in respect of those days); (D) the amount of
anticipated expenses of the Trust for the 90 days subsequent to such Valuation
Date; (E) the amount of the Trust's Maximum Potential Gross-up Payment Liability
in respect of shares of Municipal Preferred (and similar amounts payable in
respect of other Preferred Shares pursuant to provisions similar to those
contained in paragraph 3 of Part I of this Section 12.1) as of such Valuation
Date; and (F) any current liabilities as of such Valuation Date to the extent
not reflected in any of (i)(A) through (i)(E) (including, without limitation,
any payables for Municipal Obligations purchased as of such Valuation Date and
any liabilities incurred for the purpose of clearing securities transactions)
less (ii) the value (i.e., for purposes of current Moody's guidelines, the face
value of cash, short-term Municipal Obligations rated MIG-1, VMIG-1 or P-1, and
short-term securities that are the direct obligation of the U.S. government,
provided in each case that such securities mature on or prior to the date upon
which any of (i) (A) through (i)(F) become payable, otherwise the Moody's
Discounted Value or for purposes of current S&P guides, the face value of cash,
short-term municipal securities rated "A-1+" or "SP-1+" and mature or have a
demand feature exercisable in 30 days or less, and short-term securities that
are the direct obligation of the U.S. government, provided in each case that
such securities mature on or prior to the date upon which any of (i)(A) through
(i)(F) become payable, otherwise S&P's Discounted Value) of any of the Trust's
assets irrevocably deposited by the Trust for the payment of any of (i)(A)
through (i)(F).
"Municipal Preferred Basic Maintenance Cure Date," with respect to the
failure by the Trust to satisfy the Municipal Preferred Basic Maintenance Amount
(as required by paragraph 7(a) of Part I of this Section 12.1) as a given
Valuation Date, shall mean the second Business Day following such Valuation
Date.
"Municipal Preferred Basic Maintenance Report" shall mean a report signed
by the President, Treasurer, Controller, Secretary or any Senior Vice President
or Vice President of the Trust which sets forth, as of the related Valuation
Date, the assets of the Trust, the Market Value
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<PAGE> 21
and the Discounted Value thereof (seriatim and in aggregate), and the Municipal
Preferred Basic Maintenance Amount.
"1940 Act" shall mean the Investment Company Act of 1940, as amended from
time to time.
"1940 Act Cure Date," with respect to the failure by the Trust to maintain
the 1940 Act Municipal Preferred Asset Coverage (as required by paragraph 7 of
Part I of this Section 12.1) as of the last Business Day of each month, shall
mean the last Business Day of the following month.
"1940 Act Municipal Preferred Asset Coverage" shall mean asset coverage, as
defined in Section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Trust which are shares of beneficial
interest, including all outstanding shares of Municipal Preferred (or such other
asset coverage as may in the future be specified in or under the 1940 Act as the
minimum asset coverage for senior securities which are shares or stock of a
closed-end investment company as a condition of declaring dividends on its
common shares or stock).
"Notice of Redemption" shall mean any notice with respect to the redemption
of shares of Municipal Preferred pursuant to paragraph 11(c) of Part I of this
Section 12.1.
"Notice of Special Rate Period" shall mean any notice with respect to a
Special Rate Period of shares of Municipal Preferred pursuant to paragraph
4(d)(i) of Part I of this Section 12.1.
"Order" and "Orders" shall have the respective meanings specified in
paragraph 1(a) of Part II of this Section 12.1.
"Outstanding" shall mean, as of any Auction Date with respect to shares of
any series of Municipal Preferred, the number of shares of such series
theretofore issued by the Trust except, without duplication, (i) any shares of
such series theretofore canceled or delivered to the Auction Agent for
cancellation or redeemed by the Trust, (ii) any shares of such series as to
which the Trust or any Affiliate thereof shall be an Existing Holder and (iii)
any shares of such series represented by any certificate in lieu of which a new
certificate has been executed and delivered by the Trust.
"Persons" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
"Potential Beneficial Owner," with respect to shares of a series of
Municipal Preferred, shall mean a customer of a Broker-Dealer that is not a
Beneficial Owner of shares of such series but that wishes to purchase shares of
such series, or that is a Beneficial Owner of shares of such series that wishes
to purchase additional shares of such series.
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<PAGE> 22
"Potential Holder," with respect to shares of a series of Municipal
Preferred, shall mean a Broker-Dealer (or any such other person as may be
permitted by the Trust) that is not an Existing Holder of shares of such series
or that is an Existing Holder of shares of such series that wishes to become the
Existing Holder of additional shares of such series.
"Preferred Shares" shall mean the preferred shares, without par value, of
the Trust, and includes the shares of Municipal Preferred.
"Quarterly Valuation Date" shall mean the last Business Day of each March,
June, September and December of each year, commencing on September 30, 1999 with
respect to Series M Municipal Preferred.
"Rate Multiple," for shares of a series of Municipal Preferred on any
Auction Date for shares of such series, shall mean the percentage, determined as
set forth below, based on the prevailing rating of shares of such series in
effect at the close of business on the Business Day next preceding such Auction
Date:
<TABLE>
<CAPTION>
Prevailing Rating Percentage
----------------- ----------
<S> <C>
"aa3"/AA- or higher.................................................. 110%
"a3"/A-.............................................................. 125%
"baa3"/BBB-.......................................................... 150%
"ba3"/BB-............................................................ 200%
Below "ba3"/BB-...................................................... 250%
</TABLE>
provided, however, that in the event the Trust has notified the Auction Agent of
its intent to allocate income taxable for Federal income tax purposes to shares
of such series prior to the Auction establishing the Applicable Rate for shares
of such series, the applicable percentage in the foregoing table shall be
divided by the quantity 1 minus the greater of the maximum marginal combined
regular Federal individual and California state personal income tax rate
applicable to ordinary income (taking into account the Federal income tax
deductibility of state taxes paid or incurred) or the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income.
For purposes of this definition, the "prevailing rating" of shares of a
series of Municipal Preferred shall be (i) "aa3"/AA- or higher if such shares
have a rating of "aa3" or better by Moody's and AA- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (ii) if not "aa3"/AA- or
higher, then "a3"/A- if such shares have a rating of "a3" or better by Moody's
and A- or better by S&P or the equivalent of such ratings by such agencies or a
substitute rating agency or substitute rating agencies selected as provided
below, (iii) if not "aa3"/AA- or higher or "a3"/A-, then "baa3"/BBB- if such
shares have a rating of "baa3" or better by Moody's and BBB- or better by S&P or
the equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iv) if not "aa3"/AA- or
higher,
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<PAGE> 23
"a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have a rating of "ba3" or
better by Moody's and BB- or better by S&P or the equivalent of such ratings by
such agencies or a substitute rating agency or substitute rating agencies
selected as provided below, and (v) if not "aa3"/AA- or higher, "a3"/A-,
"baa3"/BBB-, or "ba3"/BB-, then below "ba3"/BB-; provided, however, that if such
shares are rated by only one rating agency, the prevailing rating will be
determined without reference to the rating of any other rating agency. The Trust
shall take all reasonable action necessary to enable either S&P or Moody's to
provide a rating for shares of Municipal Preferred. If neither S&P nor Moody's
shall make such a rating available, Salomon Smith Barney Inc. or its successor
shall select at least one nationally recognized statistical rating organization
(as that term is used in the rules and regulations of the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended from
time to time) to act as a substitute rating agency in respect of shares of such
series of Municipal Preferred, and the Trust shall take all reasonable action to
enable such rating agency to provide a rating for such shares.
"Rate Period," with respect to shares of a series of Municipal Preferred,
shall mean the Initial Rate Period of shares of such series and any Subsequent
Rate Period, including any Special Rate Period, of shares of such series.
"Rate Period Days," for any Rate Period or Dividend Period, means the
number of days that would constitute such Rate Period or Dividend Period but for
the application of paragraph 2(d) of Part I of this Section 12.1 or paragraph
4(b) of Part I of this Section 12.1.
"Receivables for Municipal Obligations Sold" shall mean (A) for purposes of
calculating Moody's Eligible Assets as of any Valuation Date, no more than the
aggregate of the following: (i) the book value of receivables for Municipal
Obligations sold as of or prior to such Valuation Date if such receivables are
due within five business days of such Valuation Date, and if the trades which
generated such receivables are (x) settled through clearing house firms with
respect to which the Trust has received prior written authorization from Moody's
or (y) with counterparties having a Moody's long-term debt rating of at least
Baa3; and (ii) the Moody's Discounted Value of Municipal Obligations sold as of
or prior to such Valuation Date which generated receivables, if such receivables
are due within five business days of such Valuation Date but do not comply with
either of the conditions specified in (i) above, and (B) for purposes of
calculating S&P Eligible Assets as of any Valuation Date, the book value of
receivables for Municipal Obligations sold as of or prior to such Valuation Date
if such receivables are due within five business days of such Valuation Date.
"Redemption Price" shall mean the applicable redemption price specified in
paragraph 11(a) or (b) of Part I of this Section 12.1.
"Reference Rate" shall mean (i) the higher of the Taxable Equivalent of the
Short-Term Municipal Bond Rate and the "AA" Composite Commercial Paper Rate in
the case of Minimum Rate Periods and Special Rate Periods of 28 Rate Period Days
or fewer; (ii) the "AA" Composite Commercial Paper Rate in the case of Special
Rate Periods of more than 28 Rate Period Days but
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<PAGE> 24
fewer than 183 Rate Period Days; and (iii) the Treasury Bill Rate in the case of
Special Rate Periods of more than 182 Rate Period Days but fewer than 365 Rate
Period Days.
"Registration Statement" has the meaning specified in the definition of
"Municipal Obligations."
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors.
"S&P Discount Factor" shall mean, for purposes of determining the
Discounted Value of any S&P Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest S&P Exposure Period set
forth opposite such rating that is the same length as or is longer than the S&P
Exposure Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
Rating Category
-----------------------------------------------------
Exposure Period AAA* AA* A* BBB* Unrated** Zeros***
- --------------- --- -- - --- ------- --------
<S> <C> <C> <C> <C> <C> <C>
45 Business Days.......................................... 190% 195% 210% 250% 220% 572%
25 Business Days.......................................... 170 175 190 230 220 496
10 Business Days.......................................... 155 160 175 215 220 426
7 Business Days.......................................... 150 155 170 210 220 411
3 Business Days.......................................... 130 135 150 190 220 388
</TABLE>
- --------------
* S&P rating.
** S&P Eligible Assets not rated by S&P or rated less than BBB by S&P and
not rated at least the equivalent of an "A" rating by another nationally
recognized credit rating agency.
*** Municipal Obligations rated AAA by S&P which are not interest bearing or
do not pay interest at least semi-annually.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Municipal Obligations will be 115%, so long as such Municipal Obligations are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable
within 30 days or less, 120% if such Municipal Obligations are rated A-1 or
SP-1- by S&P and mature or have a demand feature exercisable within 30 days or
less, or 125% if such Municipal Obligations are not rated by S&P but are rated
VMIG-1, P-1 or MIG-1 by Moody's; provided, however, that any such Moody's-rated
short-term Municipal Obligations which have demand features exercisable within
30 days or less must be backed by a letter of credit, liquidity facility or
guarantee from a bank or other financial institution with a short-term rating of
at least A-1+ from S&P; and further provided that such Moody's-rated short-term
Municipal Obligations may comprise no more than 50% of short-term Municipal
Obligations that qualify as S&P Eligible Assets; (ii) no S&P Discount Factor
will be applied to cash, options and similar instruments or to Receivables for
Municipal Obligations Sold, except that S&P Discount Factors will be applied to
futures and Inverse Floaters; and (iii) except as set forth in clause (i) above,
in the case of any Municipal Obligation that is not rated by S&P but qualifies
as an S&P Eligible Asset pursuant to clause (iii) of that definition, such
Municipal Obligation will be deemed to have an S&P rating one full rating
category lower than the S&P rating category that is the equivalent of the rating
category in which such Municipal
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<PAGE> 25
Obligation is placed by such other nationally recognized credit rating agency.
For purposes of the foregoing, Anticipation Notes rated SP-1+ or, if not rated
by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not mature or have a demand
feature at par exercisable in 30 days and which do not have a long-term rating,
shall be considered to be short-term Municipal Obligations.
"S&P Eligible Asset" shall mean cash (excluding any cash irrevocably
deposited by the Trust for the payment of any liabilities within the meaning of
Municipal Preferred Basic Maintenance Amount), Receivables for Municipal
Obligations Sold, futures, options, Inverse Floaters and similar instruments or
a Municipal Obligation owned by the Trust that (i) is interest bearing and pays
interest at least semi-annually; (ii) is payable with respect to principal and
interest in U.S. Dollars; (iii) is publicly rated BBB or higher by S&P or,
except in the case of Anticipation Notes that are Grant Anticipation Notes or
Bond Anticipation Notes which must be rated by S&P to be included in S&P
Eligible Assets, if not rated by S&P but rated by another nationally recognized
credit rating agency, is rated at least A by such agency; (iv) is not part of a
private placement of Municipal Obligations (except in the case of Inverse
Floaters); (v) is part of an issue of Municipal Obligations with an original
issue size of at least $20 million or, if of an issue with an original issue
size below $20 million (but in no event below $10 million), is issued by an
issuer with a total of at least $50 million of securities outstanding; and (vi)
is not subject to a covered call or covered put option written by the Trust.
Solely for purposes of this definition, the term "Municipal Obligation" means
any obligation the interest on which is exempt from regular Federal income
taxation and which is issued by any of the fifty United States, the District of
Columbia or any of the territories of the United States, their subdivisions,
counties, cities, towns, villages, school districts and agencies (including
authorities and special districts created by the states), and federally
sponsored agencies such as local housing authorities. Notwithstanding the
foregoing limitations:
(1) Municipal Obligations (excluding Escrowed Bonds) of any one issuer
or guarantor (excluding bond insurers) shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 10% of the aggregate Market Value of S&P Eligible Assets,
provided that 2% is added to the applicable S&P Discount Factor for every
1% by which the Market Value of such Municipal Obligations exceeds 5% of
the aggregate Market Value of S&P Eligible Assets, and provided that
Municipal Obligations (excluding Escrowed Bonds) not rated by S&P or rated
less than BBB by S&P or not rated at least A by another nationally
recognized credit rating agency of any one issuer or guarantor (excluding
bond insurers) shall constitute S&P Eligible Assets only to the extent the
Market Value of such Municipal Obligations does not exceed 5% of the
aggregate Market Value of S&P Eligible Assets;
(2) Municipal Obligations (excluding Escrowed Bonds) of any one Issue
Type Category shall be considered S&P Eligible Assets only to the extent
the Market Value of such Municipal Obligations does not exceed 25% of the
aggregate Market Value of S&P
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<PAGE> 26
Eligible Assets; provided, however, that Municipal Obligations falling
within the utility Issue Type Category will be broken down into three
sub-categories and such Municipal Obligations will be considered S&P
Eligible Assets to the extent the Market Value of such Municipal
Obligations in each such sub-category does not exceed 25% of the aggregate
Market Value of S&P Eligible Assets per each sub-category provided that the
total utility Issue Type Category does not exceed 60% of the Aggregate
Market Value of S&P Eligible Assets; provided, however, that Municipal
Obligations falling within the transportation Issue Type Category will be
broken down into two sub-categories and such Municipal Obligations will be
considered S&P Eligible Assets to the extent the Market Value of such
Municipal Obligations in both sub-categories combined does not exceed 40%
of the aggregate Market Value of S&P Eligible Assets (exposure to
transportation sub-category (i) described in the definition of Issue Type
Category is limited to 25% of the aggregate Market Value of S&P Eligible
Assets, provided, however, exposure to transportation sub-category (ii)
described above can exceed the 25% limit to the extent that exposure to
transportation sub-category (i) is reduced, for a total exposure up to and
not exceeding 40% of the aggregate Market Value of S&P Eligible Assets for
the transportation Issue Type Category); and provided, however, that
general obligation issues will be considered S&P Eligible Assets only to
the extent the Market Value of such general obligation issues does not
exceed 50% of the aggregate Market Value of S&P Eligible Assets;
(3) Municipal Obligations not rated at least BBB by S&P or not rated
by S&P or not rated at least A by another nationally recognized credit
rating agency shall be considered S&P Eligible Assets only to the extent
the Market Value of such Municipal Obligations does not exceed 50% of the
aggregate Market Value of S&P Eligible Assets; provided, however, that if
the Market Value of such Municipal Obligations exceeds 50% of the aggregate
Market Value of S&P Eligible Assets, a portion of such Municipal
Obligations (selected by the Trust) shall not be considered S&P Eligible
Assets, so that the Market Value of such Municipal Obligations (excluding
such portion) does not exceed 50% of the aggregate Market Value of S&P
Eligible Assets;
(4) Municipal Obligations which are not interest bearing or do not pay
interest at least semi-annually shall be considered S&P Eligible Assets if
rated AAA by S&P; and
(5) Non-California long-term Municipal Obligations shall be considered
S&P Eligible Assets only to the extent the Market Value of such Municipal
Obligations does not exceed 20% of the aggregate Market Value of S&P
Eligible Assets.
For purposes of determining the aggregate Discounted Value of S&P's
Eligible Assets, such aggregate amount shall be reduced with respect to any
futures contracts as set forth in paragraph 10(a) of Part I of this Section
12.1.
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<PAGE> 27
"S&P Exposure Period" shall mean the period commencing on a given Valuation
Date and ending three business days thereafter.
"S&P Volatility Factor" shall mean, as of any Valuation Date, a
multiplicative factor equal to (i) 305% in the case of any Minimum Rate Period
or any Special Rate Period of 28 Rate Period Days or fewer; (ii) 268% in the
case of any Special Rate Period of more than 28 Rate Period Days but fewer than
183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period of
more than 182 Rate Period Days.
"Securities Depository" shall mean The Depository Trust Company and its
successors and assigns or any other securities depository selected by the Trust
which agrees to follow the procedures required to be followed by such securities
depository in connection with shares of Municipal Preferred.
"Sell Order" and "Sell Orders" shall have the respective meanings specified
in paragraph 1(a) of Part II of this Section 12.1.
"Special Rate Period," with respect to shares of a series of Municipal
Preferred, shall have the meaning specified in paragraph 4(a) of Part I of this
Section 12.1.
"Special Redemption Provisions" shall have the meaning specified in
paragraph 11(a)(i) of Part I of this Section 12.1.
"Submission Deadline" shall mean 1:30 P.M., New York City time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers are
required to submit Orders to the Auction Agent as specified by the Auction Agent
from time to time.
"Submitted Bid" and "Submitted Bids" shall have the respective meanings
specified in paragraph 3(a) of Part II of this Section 12.1.
"Submitted Hold Order" and "Submitted Hold Orders" shall have the
respective meanings specified in paragraph 3(a) of Part II of this Section 12.1.
"Submitted Order" and "Submitted Orders" shall have the respective meanings
specified in paragraph 3(a) of Part II of this Section 12.1.
"Submitted Sell Order" and "Submitted Sell Orders" shall have the
respective meanings specified in paragraph 3(a) of Part II of this Section 12.1.
"Subsequent Rate Period," with respect to shares of a series of Municipal
Preferred, shall mean the period from and including the first day following the
Initial Rate Period of shares of such series to but excluding the next Dividend
Payment Date for shares of such series and any period thereafter from and
including one Dividend Payment Date for shares of such series to but
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<PAGE> 28
excluding the next succeeding Dividend Payment Date for shares of such series;
provided, however, that if any Subsequent Rate Period is also a Special Rate
Period, such term shall mean the period commencing on the first day of such
Special Rate Period and ending on the last day of the last Dividend Period
thereof.
"Substitute Commercial Paper Dealer" shall mean CS First Boston or Morgan
Stanley & Co. Incorporated or their respective affiliates or successors, if such
entity is a commercial paper dealer; provided, however, that none of such
entities shall be a Commercial Paper Dealer.
"Substitute U.S. Government Securities Dealer" shall mean CS First Boston
and Merrill Lynch, Pierce, Fenner & Smith Incorporated or their respective
affiliates or successors, if such entity is a U.S. Government securities dealer;
provided, however, that none of such entities shall be a U.S. Government
Securities Dealer.
"Sufficient Clearing Bids" shall have the meaning specified in paragraph
3(a) of Part II of this Section 12.1.
"Taxable Allocation" shall have the meaning specified in paragraph 3 of
Part I of this Section 12.1.
"Taxable Equivalent of the Short-Term Municipal Bond Rate," on any date for
any Minimum Rate Period or Special Rate Period of 28 Rate Period Days or fewer,
shall mean 90% of the quotient of (A) the per annum rate expressed on an
interest equivalent basis equal to the S&P Kenny 30 day High Grade Index or any
successor index (the "Kenny Index") (provided, however, that any such successor
index must be approved by Moody's (if Moody's is then rating the shares of
Municipal Preferred) and S&P (if S&P is then rating the shares of Municipal
Preferred)), made available for the Business Day immediately preceding such date
but in any event not later than 8:30 A.M., New York City time, on such date by
S&P J.J. Kenny Evaluation Services or any successor thereto, based upon 30-day
yield evaluations at par of short-term bonds the interest on which is excludable
for regular Federal income tax purposes under the Code, of "high grade"
component issuers selected by S&P J.J. Kenny Evaluation Services or any such
successor from time to time in its discretion, which component issuers shall
include, without limitation, issuers of general obligation bonds, but shall
exclude any bonds the interest on which constitutes an item of tax preference
under Section 57(a)(5) of the Code, or successor provisions, for purposes of the
"alternative minimum tax," divided by (B) 1.00 minus the greater of the maximum
marginal regular Federal individual income tax rate applicable to ordinary
income or the maximum marginal regular Federal corporate income tax rate
applicable to ordinary income (in each case expressed as a decimal); provided,
however, that if the Kenny Index is not made so available by 8:30 A.M., New York
City time, on such date by S&P J.J. Kenny Evaluation Services or any successor,
the Taxable Equivalent of the Short-Term Municipal Bond Rate shall mean the
quotient of (A) the per annum rate expressed on an interest equivalent basis
equal to the most recent Kenny Index so made available for any preceding
Business Day, divided by (B) 1.00 minus the greater of the maximum marginal
regular Federal individual income tax rate applicable
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<PAGE> 29
to ordinary income or the maximum marginal regular Federal corporate income tax
rate applicable to ordinary income (in each case expressed as a decimal).
"Taxable Income" shall have the meaning specified in paragraph 3(c) of Part
II of this Section 12.1.
"Treasury Bill" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of 364 days or less.
"Treasury Bill Rate," on any date for any Rate Period, shall mean (i) the
bond equivalent yield, calculated in accordance with prevailing industry
convention, of the rate on the most recently auctioned Treasury Bill with a
remaining maturity closest to the length of such Rate Period, as quoted in The
Wall Street Journal on such date for the Business Day next preceding such date;
or (ii) in the event that any such rate is not published in The Wall Street
Journal, then the bond equivalent yield, calculated in accordance with
prevailing industry convention, as calculated by reference to the arithmetic
average of the bid price quotations of the most recently auctioned Treasury Bill
with a remaining maturity closest to the length of such Rate Period, as
determined by bid price quotations as of the close of business on the Business
Day immediately preceding such date obtained from the U.S. Government Securities
Dealers to the Auction Agent.
"Treasury Note" shall mean a direct obligation of the U.S. Government
having a maturity at the time of issuance of five years or less but more than
364 days.
"Treasury Note Rate," on any date for any Rate Period, shall mean (i) the
yield on the most recently auctioned Treasury Note with a remaining maturity
closest to the length of such Rate Period, as quoted in The Wall Street Journal
on such date for the Business Day next preceding such date; or (ii) in the event
that any such rate is not published in The Wall Street Journal, then the yield
as calculated by reference to the arithmetic average of the bid price quotations
of the most recently auctioned Treasury Note with a remaining maturity closest
to the length of such Rate Period, as determined by bid price quotations as of
the close of business on the Business Day immediately preceding such date
obtained from the U.S. Government Securities Dealers to the Auction Agent. If
any U.S. Government Securities Dealer does not quote a rate required to
determine the Treasury Bill Rate or the Treasury Note Rate, the Treasury Bill
Rate or the Treasury Note Rate shall be determined on the basis of the quotation
or quotations furnished by the remaining U.S. Government Securities Dealer or
U.S. Government Securities Dealers and any Substitute U.S. Government Securities
Dealers selected by the Trust to provide such rate or rates not being supplied
by any U.S. Government Securities Dealer or U.S. Government Securities Dealers,
as the case may be, or, if the Trust does not select any such Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers,
by the remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.
"U.S. Government Securities Dealer" shall mean Lehman Government Securities
Incorporated, Goldman, Sachs & Co., Salomon Smith Barney Inc. and Morgan
Guaranty Trust
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<PAGE> 30
Company of New York or their respective affiliates or successors, if such entity
is a U.S. government securities dealer.
"Valuation Date" shall mean, for purposes of determining whether the Trust
is maintaining the Municipal Preferred Basic Maintenance Amount, each Business
Day.
"Variation Margin" means, in connection with an outstanding futures
contract owned or sold by the Trust, the amount of cash or securities paid to or
received from a broker (subsequent to the Initial Margin payment) from time to
time as the price of such futures contract fluctuates.
"Volatility Factor" shall mean, as of any Valuation Date, the greater of
the Moody's Volatility Factor and the S&P Volatility Factor.
"Voting Period" shall have the meaning specified in paragraph 5(b) of Part
I of this Section 12.1.
"Winning Bid Rate" shall have the meaning specified in paragraph 3(a) of
Part II of this Section 12.1.
2. DIVIDENDS.
(a) RANKING. The shares of a series of Municipal Preferred shall rank on a
parity with each other, with shares of any other series of Municipal Preferred
and with shares of any other series of Preferred Shares as to the payment of
dividends by the Trust.
(b) CUMULATIVE CASH DIVIDENDS. The Holders of shares of Municipal
Preferred of any series shall be entitled to receive, when, as and if declared
by the Board of Trustees, out of funds legally available therefor in accordance
with the Declaration, these By-Laws and applicable law, cumulative cash
dividends at the Applicable Rate for shares of such series, determined as set
forth in subparagraph (e) of this paragraph 2, and no more (except to the extent
set forth in paragraph 3 of Part I of this Section 12.1), payable on the
Dividend Payment Dates with respect to shares of such series determined pursuant
to subparagraph (d) of this paragraph 2. Holders of shares of Municipal
Preferred shall not be entitled to any dividend, whether payable in cash,
property or shares, in excess of full cumulative dividends, as herein provided,
on shares of Municipal Preferred. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
shares of Municipal Preferred which may be in arrears, and, except to the extent
set forth in subparagraph (e)(i) of this paragraph 2, no additional sum of money
shall be payable in respect of any such arrearage.
(c) DIVIDENDS CUMULATIVE FROM DATE OF ORIGINAL ISSUE. Dividends on shares
of Municipal Preferred of any series shall accumulate at the Applicable Rate for
shares of such series from the Date of Original Issue thereof.
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<PAGE> 31
(d) DIVIDEND PAYMENT DATES AND ADJUSTMENTS THEREOF. The Dividend Payment
Dates with respect to shares of a series of Municipal Preferred shall be
_______, ________ __, 1999 and each _______ thereafter with respect to shares of
Series __ Municipal Preferred; provided, however, that
(i) (A) if the _______ on which dividends would otherwise be payable
on shares of Series __ Municipal Preferred is not a Business Day, then such
dividends shall be payable on shares of such series on the first Business
Day that falls [before/after] such _______; and
(ii) notwithstanding the foregoing provisions of this paragraph 2(d),
the Trust in its discretion may establish the Dividend Payment Dates in
respect of any Special Rate Period of shares of a series of Municipal
Preferred consisting of more than 28 Rate Period Days; provided, however,
that such dates shall be set forth in the Notice of Special Rate Period
relating to such Special Rate Period, as delivered to the Auction Agent,
which Notice of Special Rate Period shall be filed with the Secretary of
the Trust; and further provided that (1) any such Dividend Payment Date
shall be a Business Day and (2) the last Dividend Payment Date in respect
of such Special Rate Period shall be the Business Day immediately following
the last day thereof, as such last day is determined in accordance with
subparagraph (b) of paragraph 4 of Part I of this Section 12.1.
(e) DIVIDEND RATES AND CALCULATION OF DIVIDENDS.
(i) DIVIDEND RATES. The dividend rate on shares of Municipal Preferred
of any series during the period from and after the Date of Original Issue
of shares of such series to and including the last day of the Initial Rate
Period of shares of such series shall be equal to the rate per annum set
forth with respect to shares of such series under "Designation" in Part I
of this Section 12.1. For each Subsequent Rate Period of shares of such
series thereafter, the dividend rate on shares of such series shall be
equal to the rate per annum that results from an Auction for shares of such
series on the Auction Date next preceding such Subsequent Rate Period;
provided, however, that if:
(A) an Auction for any such Subsequent Rate Period is not held
for any reason other than as described below, the dividend rate on
shares of such series for such Subsequent Rate Period will be the
Maximum Rate for shares of such series on the Auction Date therefor;
(B) any Failure to Deposit shall have occurred with respect to
shares of such series during any Rate Period thereof (other than any
Special Rate Period consisting of more than 364 Rate Period Days or
any Rate Period succeeding any Special Rate Period consisting of more
than 364 Rate Period Days during which a Failure to Deposit occurred
that has not been cured), but, prior to 12:00 Noon,
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New York City time, on the third Business Day next succeeding the date
on which such Failure to Deposit occurred, such Failure to Deposit
shall have been cured in accordance with subparagraph (f) of this
paragraph 2 and the Trust shall have paid to the Auction Agent a late
charge ("Late Charge") equal to the sum of (1) if such Failure to
Deposit consisted of the failure timely to pay to the Auction Agent
the full amount of dividends with respect to any Dividend Period of
the shares of such series, an amount computed by multiplying (x) 200%
of the Reference Rate for the Rate Period during which such Failure to
Deposit occurs on the Dividend Payment Date for such Dividend Period
by (y) a fraction, the numerator of which shall be the number of days
for which such Failure to Deposit has not been cured in accordance
with subparagraph (f) of this paragraph 2 (including the day such
Failure to Deposit occurs and excluding the day such Failure to
Deposit is cured) and the denominator of which shall be 360, and
applying the rate obtained against the aggregate Liquidation
Preference of the outstanding shares of such series and (2) if such
Failure to Deposit consisted of the failure timely to pay to the
Auction Agent the Redemption Price of the shares, if any, of such
series for which Notice of Redemption has been mailed by the Trust
pursuant to paragraph 11(c) of Part I of this Section 12.1, an amount
computed by multiplying (x) 200% of the Reference Rate for the Rate
Period during which such Failure to Deposit occurs on the redemption
date by (y) a fraction, the numerator of which shall be the number of
days for which such Failure to Deposit is not cured in accordance with
subparagraph (f) of this paragraph 2 (including the day such Failure
to Deposit occurs and excluding the day such Failure to Deposit is
cured) and the denominator of which shall be 360, and applying the
rate obtained against the aggregate Liquidation Preference of the
outstanding shares of such series to be redeemed, no Auction will be
held in respect of shares of such series for the Subsequent Rate
Period thereof and the dividend rate for shares of such series for
such Subsequent Rate Period will be the Maximum Rate for shares of
such series on the Auction Date for such Subsequent Rate Period;
(C) any Failure to Deposit shall have occurred with respect to
shares of such series during any Rate Period thereof (other than any
Special Rate Period consisting of more than 364 Rate Period Days or
any Rate Period succeeding any Special Rate Period consisting of more
than 364 Rate Period Days during which a Failure to Deposit occurred
that has not been cured), and, prior to 12:00 Noon, New York City
time, on the third Business Day next succeeding the date on which such
Failure to Deposit occurred, such Failure to Deposit shall not have
been cured in accordance with subparagraph (f) of this paragraph 2 or
the Trust shall not have paid the applicable Late Charge to the
Auction Agent, no Auction will be held in respect of shares of such
series for the first Subsequent Rate Period thereof thereafter (or for
any Rate Period thereof thereafter to and including the Rate Period
during which (1) such Failure to Deposit is cured in accordance with
subparagraph (f) of this paragraph 2 and (2) the Trust pays the
applicable Late
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Charge to the Auction Agent (the condition set forth in this clause
(2) to apply only in the event Moody's is rating such shares at the
time the Trust cures such Failure to Deposit), in each case no later
than 12:00 Noon, New York City time, on the fourth Business Day prior
to the end of such Rate Period), and the dividend rate for shares of
such series for each such Subsequent Rate Period shall be a rate per
annum equal to the Maximum Rate for shares of such series on the
Auction Date for such Subsequent Rate Period (but with the prevailing
rating for shares of such series, for purposes of determining such
Maximum Rate, being deemed to be "Below 'ba3'/BB-"); or
(D) any Failure to Deposit shall have occurred with respect to
shares of such series during a Special Rate Period thereof consisting
of more than 364 Rate Period Days, or during any Rate Period thereof
succeeding any Special Rate Period consisting of more than 364 Rate
Period Days during which a Failure to Deposit occurred that has not
been cured, and, prior to 12:00 Noon, New York City time, on the
fourth Business Day preceding the Auction Date for the Rate Period
subsequent to such Rate Period, such Failure to Deposit shall not have
been cured in accordance with subparagraph (f) of this paragraph 2 or,
in the event Moody's is then rating such shares, the Trust shall not
have paid the applicable Late Charge to the Auction Agent (such Late
Charge, for purposes of this subparagraph (D), to be calculated by
using, as the Reference Rate, the Reference Rate applicable to a Rate
Period (x) consisting of more than 182 Rate Period Days but fewer than
365 Rate Period Days and (y) commencing on the date on which the Rate
Period during which Failure to Deposit occurs commenced), no Auction
will be held in respect of shares of such series for such Subsequent
Rate Period (or for any Rate Period thereof thereafter to and
including the Rate Period during which (1) such Failure to Deposit is
cured in accordance with subparagraph (f) of this paragraph 2 and (2)
the Trust pays the applicable Late Charge to the Auction Agent (the
condition set forth in this clause (2) to apply only in the event
Moody's is rating such shares at the time the Trust cures such Failure
to Deposit), in each case no later than 12:00 Noon, New York City
time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for each such
Subsequent Rate Period shall be a rate per annum equal to the Maximum
Rate for shares of such series on the Auction Date for such Subsequent
Rate Period (but with the prevailing rating for shares of such series,
for purposes of determining such Maximum Rate, being deemed to be
"Below 'ba3'/BB-") (the rate per annum of which dividends are payable
on shares of a series of Municipal Preferred for any Rate Period
thereof being herein referred to as the "Applicable Rate" for shares
of such series).
(ii) Calculation of Dividends. The amount of dividends per share
payable on shares of a series of Municipal Preferred on any date on which
dividends shall be payable on shares of such series shall be computed by
multiplying the Applicable Rate for shares
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of such series in effect for such Dividend Period or Dividend Periods or
part thereof for which dividends have not been paid by a fraction, the
numerator of which shall be the number of days in such Dividend Period or
Dividend Periods or part thereof and the denominator of which shall be 365
if such Dividend Period consists of 7 Rate Period Days and 360 for all
other Dividend Periods, and applying the rate obtained against $25,000.
(f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with respect to
shares of a series of Municipal Preferred shall have been cured (if such Failure
to Deposit is not solely due to the willful failure of the Trust to make the
required payments to the Auction Agent) with respect to any Rate Period of
shares of such series if, within the respective time periods described in
subparagraph (e)(i) of this paragraph 2, the Trust shall have paid to the
Auction Agent (A) all accumulated and unpaid dividends on shares of such series
and (B) without duplication, the Redemption Price for shares, if any, of such
series for which Notice of Redemption has been mailed by the Trust pursuant to
paragraph 11(c) of Part I of this Section 12.1; provided, however, that the
foregoing clause (B) shall not apply to the Trust's failure to pay the
Redemption Price in respect of shares of Municipal Preferred when the related
Redemption Notice provides that redemption of such shares is subject to one or
more conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
(g) DIVIDEND PAYMENTS BY TRUST TO AUCTION AGENT. The Trust shall pay to
the Auction Agent, not later than 12:00 Noon, New York City time, on the
Business Day next preceding each Dividend Payment Date for shares of a series of
Municipal Preferred, an aggregate amount of funds available on the next Business
Day in The City of New York, New York, equal to the dividends to be paid to all
Holders of shares of such series on such Dividend Payment Date.
(h) AUCTION AGENT AS TRUSTEE OF DIVIDEND PAYMENTS BY TRUST. All moneys
paid to the Auction Agent for the payment of dividends (or for the payment of
any Late Charge) shall be held in trust for the payment of such dividends (and
any such Late Charge) by the Auction Agent for the benefit of the Holders
specified in subparagraph (i) of this paragraph 2. Any moneys paid to the
Auction Agent in accordance with the foregoing but not applied by the Auction
Agent to the payment of dividends (and any such Late Charge) will, to the extent
permitted by law, be repaid to the Trust at the end of 90 days from the date on
which such moneys were so to have been applied.
(i) DIVIDENDS PAID TO HOLDERS. Each dividend on shares of Municipal
Preferred shall be paid on the Dividend Payment Date therefor to the Holders
thereof as their names appear on the record books of the Trust on the Business
Day next preceding such Dividend Payment Date.
(j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID DIVIDENDS.
Any dividend payment made on shares of Municipal Preferred shall first be
credited against the
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earliest accumulated but unpaid dividends due with respect to such shares.
Dividends in arrears for any past Dividend Period may be declared and paid at
any time, without reference to any regular Dividend Payment Date, to the Holders
as their names appear on the record books of the Trust on such date, not
exceeding 15 days preceding the payment date thereof, as may be fixed by the
Board of Trustees.
(k) DIVIDENDS DESIGNATED AS EXEMPT-INTEREST DIVIDENDS. Dividends on shares
of Municipal Preferred shall be designated as exempt-interest dividends up to
the amount of tax-exempt income of the Trust, to the extent permitted by, and
for purposes of, Section 852 of the Code.
3. GROSS-UP PAYMENTS.
Holders of shares of Municipal Preferred shall be entitled to receive,
when, as and if declared by the Board of Trustees, out of funds legally
available therefor in accordance with the Declaration, these By-Laws and
applicable law, dividends in an amount equal to the aggregate Gross-up Payments
as follows:
(a) MINIMUM RATE PERIODS AND SPECIAL RATE PERIODS OF 28 RATE PERIOD DAYS
OR FEWER. If, in the case of any Minimum Rate Period or any Special Rate Period
of 28 Rate Period Days or fewer, the Trust allocates any net capital gain or
other income taxable for Federal and/or California state personal income tax
purposes to a dividend paid on shares of Municipal Preferred without having
given advance notice thereof to the Auction Agent as provided in paragraph 5 of
Part II of this Section 12.1 (such allocation being referred to herein as a
"Taxable Allocation") solely by reason of the fact that such allocation is made
retroactively as a result of the redemption of all or a portion of the
outstanding shares of Municipal Preferred or the liquidation of the Trust, the
Trust shall, prior to the end of the calendar year in which such dividend was
paid, provide notice thereof to the Auction Agent and direct the Trust's
dividend disbursing agent to send such notice with a Gross-up Payment to each
Holder of such shares that was entitled to such dividend payment during such
calendar year at such Holder's address as the same appears or last appeared on
the record books of the Trust.
(b) SPECIAL RATE PERIODS OF MORE THAN 28 RATE PERIOD DAYS. If, in the case
of any Special Rate Period of more than 28 Rate Period Days, the Trust makes a
Taxable Allocation to a dividend paid on shares of Municipal Preferred, the
Trust shall, prior to the end of the calendar year in which such dividend was
paid, provide notice thereof to the Auction Agent and direct the Trust's
dividend disbursing agent to send such notice with a Gross-up Payment to each
Holder of shares that was entitled to such dividend payment during such calendar
year at such Holder's address as the same appears or last appeared on the record
books of the Trust.
(c) NO GROSS-UP PAYMENTS IN THE EVENT OF A REALLOCATION. The Trust shall
not be required to make Gross-up Payments with respect to any net capital gain
or other taxable income
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determined by the Internal Revenue Service to be allocable in a manner different
from that allocated by the Trust.
4. DESIGNATION OF SPECIAL RATE PERIODS.
(a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The Trust, at its
option, may designate any succeeding Subsequent Rate Period of shares of a
series of Municipal Preferred as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to adjustment as provided in subparagraph (b) of this paragraph 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with subparagraphs (c) and (d)(i) of
this paragraph 4, (B) an Auction for shares of such series shall have been held
on the Auction Date immediately preceding the first day of such proposed Special
Rate Period and Sufficient Clearing Bids for shares of such series shall have
existed in such Auction, and (C) if any Notice of Redemption shall have been
mailed by the Trust pursuant to paragraph 11(c) of Part I of this Section 12.1
with respect to any shares of such series, the Redemption Price with respect to
such shares shall have been deposited with the Auction Agent. In the event the
Trust wishes to designate any succeeding Subsequent Rate Period for shares of a
series of Municipal Preferred as a Special Rate Period consisting of more than
28 Rate Period Days, the Trust shall notify S&P (if S&P is then rating such
series) and Moody's (if Moody's is then rating such series) in advance of the
commencement of such Subsequent Rate Period that the Trust wishes to designate
such Subsequent Rate Period as a Special Rate Period and shall provide S&P (if
S&P is then rating such series) and Moody's (if Moody's is then rating such
series) with such documents as either may request.
(b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. In the event the Trust
wishes to designate a Subsequent Rate Period as a Special Rate Period, but the
day following what would otherwise be the last day of such Special Rate Period
is not a _______ that is a Business Day, then the Trust shall designate such
Subsequent Rate Period as a Special Rate Period consisting of the period
commencing at the end of the immediately preceding Rate Period and ending on the
first _______ that is followed by a _______ that is a Business Day preceding
what would otherwise be such last day, in the case of Series __ Municipal
Preferred.
(c) NOTICE OF PROPOSED SPECIAL RATE PERIOD. If the Trust proposes to
designate any succeeding Subsequent Rate Period of shares of a series of
Municipal Preferred as a Special Rate Period pursuant to subparagraph (a) of
this paragraph 4, not less than 20 (or such lesser number of days as may be
agreed to from time to time by the Auction Agent) nor more than 30 days prior to
the date the Trust proposes to designate as the first day of such Special Rate
Period (which shall be such day that would otherwise be the first day of a
Minimum Rate Period), notice shall be (i) published or caused to be published by
the Trust in a newspaper of general circulation to the financial community in
The City of New York, New York, which carries financial news, and (ii) mailed by
the Trust by first-class mail, postage prepaid, to the Holders of shares of such
series. Each such notice shall state (A) that the Trust may exercise its option
to designate a
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succeeding Subsequent Rate Period of shares of such series as a Special Rate
Period, specifying the first day thereof and (B) that the Trust will, by 11:00
A.M., New York City time, on the second Business Day next preceding such date
(or by such later time or date, or both, as may be agreed to by the Auction
Agent) notify the Auction Agent of either (x) its determination, subject to
certain conditions, to exercise such option, in which case the Trust shall
specify the Special Rate Period designated, or (y) its determination not to
exercise such option.
(d) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of any proposed
Special Rate Period of shares of a series of Municipal Preferred as to which
notice has been given as set forth in subparagraph (c) of this paragraph 4 (or
such later time or date, or both, as may be agreed to by the Auction Agent), the
Trust shall deliver to the Auction Agent either:
(i) a notice ("Notice of Special Rate Period") stating (A) that the
Trust has determined to designate the next succeeding Rate Period of shares
of such series as a Special Rate Period, specifying the same and the first
day thereof, (B) the Auction Date immediately prior to the first day of
such Special Rate Period, (C) that such Special Rate Period shall not
commence if (1) an Auction for shares of such series shall not be held on
such Auction Date for any reason or (2) an Auction for shares of such
series shall be held on such Auction Date but Sufficient Clearing Bids for
shares of such series shall not exist in such Auction, (D) the scheduled
Dividend Payment Dates for shares of such series during such Special Rate
Period and (E) the Special Redemption Provisions, if any, applicable to
shares of such series in respect of such Special Rate Period; such notice
to be accompanied by a Municipal Preferred Basic Maintenance Report showing
that, as of the third Business Day next preceding such proposed Special
Rate Period, Moody's Eligible Assets (if Moody's is then rating such
series) and S&P Eligible Assets (if S&P is then rating such series) each
have an aggregate Discounted Value at least equal to the Municipal
Preferred Basic Maintenance Amount as of such Business Day (assuming for
purposes of the foregoing calculation that (a) the Maximum Rate is the
Maximum Rate on such Business Day as if such Business Day were the Auction
Date for the proposed Special Rate Period, and (b) the Moody's Discount
Factors applicable to Moody's Eligible Assets are determined by reference
to the first Exposure Period longer than the Exposure Period then
applicable to the Trust, as described in the definition of Moody's Discount
Factor herein); or
(ii) a notice stating that the Trust has determined not to exercise
its option to designate a Special Rate Period of shares of such series and
that the next succeeding Rate Period of shares of such series shall be a
Minimum Rate Period.
(e) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the Trust fails
to deliver either of the notices described in subparagraphs (d)(i) or (d)(ii) of
this paragraph 4 (and, in the case of the notice described in subparagraph
(d)(i) of this paragraph 4, a Municipal Preferred Basic Maintenance Report to
the effect set forth in such subparagraph (if either Moody's or S&P is then
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rating the series in question)) with respect to any designation of any proposed
Special Rate Period to the Auction Agent by 11:00 A.M., New York City time, on
the second Business Day next preceding the first day of such proposed Special
Rate Period (or by such later time or date, or both, as may be agreed to by the
Auction Agent), the Trust shall be deemed to have delivered a notice to the
Auction Agent with respect to such Special Rate Period to the effect set forth
in subparagraph (d)(ii) of this paragraph 4. In the event the Trust delivers to
the Auction Agent a notice described in subparagraph (d)(i) of this paragraph 4,
it shall file a copy of such notice with the Secretary of the Trust, and the
contents of such notice shall be binding on the Trust. In the event the Trust
delivers to the Auction Agent a notice described in subparagraph (d)(ii) of this
paragraph 4, the Trust will provide Moody's (if Moody's is then rating the
series in question) and S&P (if S&P is then rating the series in question) a
copy of such notice.
5. VOTING RIGHTS.
(a) ONE VOTE PER SHARE OF MUNICIPAL PREFERRED. Except as otherwise
provided in the Declaration, this paragraph 5 or as otherwise required by law,
(i) each Holder of shares of Municipal Preferred shall be entitled to one vote
for each share of Municipal Preferred held by such Holder on each matter
submitted to a vote of shareholders of the Trust, and (ii) the holders of
outstanding Preferred Shares, including each share of Municipal Preferred, and
of Common Shares shall vote together as a single class; provided, however, that,
at any meeting of the shareholders of the Trust held for the election of
trustees, the holders of outstanding Preferred Shares, including Municipal
Preferred, represented in person or by proxy at said meeting, shall be entitled,
as a class, to the exclusion of the holders of all other securities and classes
of shares of beneficial interest of the Trust, to elect two trustees of the
Trust, each Preferred Share, including each share of Municipal Preferred,
entitling the holder thereof to one vote. Subject to subparagraph (b) of this
paragraph 5, the holders of outstanding Common Shares and Preferred Shares,
including Municipal Preferred, voting together as a single class, shall elect
the balance of the trustees.
(b) VOTING FOR ADDITIONAL TRUSTEES.
(i) VOTING PERIOD. During any period in which any one or more of the
conditions described in subparagraphs (A) or (B) of this subparagraph
(b)(i) shall exist (such period being referred to herein as a "Voting
Period"), the number of trustees constituting the Board of Trustees shall
be automatically increased by the smallest number that, when added to the
two trustees elected exclusively by the holders of Preferred Shares,
including shares of Municipal Preferred, would constitute a majority of the
Board of Trustees as so increased by such smallest number; and the holders
of Preferred Shares, including Municipal Preferred, shall be entitled,
voting as a class on a one-vote-per-share basis (to the exclusion of the
holders of all other securities and classes of shares of beneficial
interest of the Trust), to elect such smallest number of additional
trustees, together with the two trustees that such holders are in any event
entitled to elect. A Voting Period shall commence:
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(A) if at the close of business on any dividend payment date
accumulated dividends (whether or not earned or declared) on any
outstanding Preferred Share, including Municipal Preferred, equal to
at least two full years' dividends shall be due and unpaid and
sufficient cash or specified securities shall not have been deposited
with the Auction Agent for the payment of such accumulated dividends;
or
(B) if at any time holders of Preferred Shares are entitled under
the 1940 Act to elect a majority of the trustees of the Trust.
Upon the termination of a Voting Period, the voting rights described in this
subparagraph (b)(i) shall cease, subject always, however, to the revesting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this subparagraph (b)(i).
(ii) NOTICE OF SPECIAL MEETING. As soon as practicable after the
accrual of any right of the holders of Preferred Shares to elect additional
trustees as described in subparagraph (b)(i) of this paragraph 5, the Trust
shall notify the Auction Agent and the Auction Agent shall call a special
meeting of such holders, by mailing a notice of such special meeting to
such holders, such meeting to be held not less than 10 nor more than 20
days after the date of mailing of such notice. If the Trust fails to send
such notice to the Auction Agent or if the Auction Agent does not call such
a special meeting, it may be called by any such holder on like notice. The
record date for determining the holders entitled to notice of and to vote
at such special meeting shall be the close of business on the fifth
Business Day preceding the day on which such notice is mailed. At any such
special meeting and at each meeting of holders of Preferred Shares held
during a Voting Period at which trustees are to be elected, such holders,
voting together as a class (to the exclusion of the holders of all other
securities and classes of shares of beneficial interest of the Trust),
shall be entitled to elected the number of trustees prescribed in
subparagraph (b)(i) of this paragraph 5 on a one-vote-per-share basis.
(iii) TERMS OF OFFICE OF EXISTING TRUSTEES. The terms of office of all
persons who are trustees of the Trust at the time of a special meeting of
Holders and holders of other Preferred Shares to elect trustees shall
continue, notwithstanding the election at such meeting by the Holders and
such other holders of the number of trustees that they are entitled to
elect, and the persons so elected by the Holders and such other holders,
together with the two incumbent trustees elected by the Holders and such
other holders of Preferred Shares and the remaining incumbent trustees
elected by the Holders of the Common Shares and Preferred Shares, shall
constitute the duly elected trustees of the Trust.
(iv) TERMS OF OFFICE OF CERTAIN TRUSTEES TO TERMINATE UPON TERMINATION
OF VOTING PERIOD. Simultaneously with the termination of a Voting Period,
the term of office of the additional trustees elected by the Holders and
holders of other Preferred
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Shares pursuant to subparagraph (b)(i) of this paragraph 5 shall terminate,
the remaining trustees shall constitute the trustees of the Trust and the
voting rights of the Holders and such other holders to elect additional
trustees pursuant to subparagraph (b)(i) of this paragraph 5 shall cease,
subject to the provisions of the last sentence of subparagraph (b)(i) of
this paragraph 5.
(c) HOLDERS OF MUNICIPAL PREFERRED TO VOTE ON CERTAIN OTHER MATTERS.
(i) INCREASES IN CAPITALIZATION. So long as any shares of Municipal
Preferred are outstanding, the Trust shall not, without the affirmative
vote or consent of the Holders of at least a majority of the shares of
Municipal Preferred outstanding at the time, in person or by proxy, either
in writing or at a meeting, voting as a separate class: (a) authorize,
create or issue any class or series of shares ranking prior to or on a
parity with shares of Municipal Preferred with respect to the payment of
dividends or the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Trust, or authorize, create or issue
additional shares of any series of Municipal Preferred (except that,
notwithstanding the foregoing, but subject to the provisions of paragraph
10(c) of Part I of this Section 12.1, the Board of Trustees, without the
vote or consent of the Holders of Municipal Preferred, may from time to
time authorize and create, and the Trust may from time to time issue,
additional shares of any series of Municipal Preferred or classes or series
of Preferred Shares ranking on a parity with shares of Municipal Preferred
with respect to the payment of dividends and the distribution of assets
upon dissolution, liquidation or winding up of the affairs of the Trust;
provided, however, that if Moody's or S&P is not then rating the shares of
Municipal Preferred, the aggregate liquidation preference of all Preferred
Shares of the Trust outstanding after any such issuance, exclusive of
accumulated and unpaid dividends, may not exceed $60,000,000) or (b) amend,
alter or repeal the provisions of the Declaration or the By-Laws, including
this Section 12.1, whether by merger, consolidation or otherwise, so as to
materially affect any preference, right or power of such shares of
Municipal Preferred to the Holders thereof; provided, however, that (i)
none of the actions permitted by the exception to (a) above will be deemed
to affect such preferences, rights or powers, (ii) a division of a share of
Municipal Preferred will be deemed to affect such preferences, rights or
powers only if the terms of such division adversely affect the Holders of
shares of Municipal Preferred and (iii) the authorization, creation and
issuance of classes or series of shares ranking junior to shares of
Municipal Preferred with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Trust, will be deemed to affect such preferences, rights or
powers only if Moody's or S&P is then rating shares of Municipal Preferred
and such issuance would, at the time thereof, cause the Trust not to
satisfy the 1940 Act Municipal Preferred Asset Coverage or the Municipal
Preferred Basic Maintenance Amount. So long as any shares of Municipal
Preferred are outstanding, the Trust shall not, without the affirmative
vote or consent of the Holders of at least 66 2/3% of the shares of
Municipal Preferred outstanding at the time, in person or by proxy, either
in writing or at a meeting, voting as
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a separate class, file a voluntary application for relief under Federal
bankruptcy law or any similar application under state law for so long as
the Trust is solvent and does not foresee becoming insolvent.
(ii) 1940 ACT MATTERS. Unless a higher percentage is provided for in
the Declaration or these By-Laws, (A) the affirmative vote of the Holders
of at least a majority of the Preferred Shares, including Municipal
Preferred, outstanding at the time, voting as a separate class, shall be
required to approve any conversion of the Trust from a closed-end to an
open-end investment company and (B) the affirmative vote of the Holders of
a "majority of the outstanding Preferred Shares," including Municipal
Preferred, voting as a separate class, shall be required to approve any
plan of reorganization (as such term is used in the 1940 Act) adversely
affecting such shares. The affirmative vote of the Holders of a "majority
of the outstanding Preferred Shares," including Municipal Preferred, voting
as a separate class, shall be required to approve any action not described
in the first sentence of this paragraph 5(c)(ii) requiring a vote of
security holders of the Trust under Section 13(a) of the 1940 Act. For
purposes of the foregoing, "majority of the outstanding Preferred Shares"
means (i) 67% or more of such shares present at a meeting, if the Holders
of more than 50% of such shares are present or represented by proxy, or
(ii) more than 50% of such shares, whichever is less. In the event a vote
of Holders of Municipal Preferred is required pursuant to the provisions of
Section 13(a) of the 1940 Act, the Trust shall, not later than ten Business
Days prior to the date on which such vote is to be taken, notify Moody's
(if Moody's is then rating the shares of Municipal Preferred) and S&P (if
S&P is then rating the shares of Municipal Preferred) that such vote is to
be taken and the nature of the action with respect to which such vote is to
be taken. The Trust shall, not later than ten Business Days after the date
on which such vote is taken, notify Moody's (if Moody's is then rating the
shares of Municipal Preferred) and S&P (if S&P is then rating the shares of
Municipal Preferred) of the results of such vote.
(iii) SEPARATE VOTE BY SERIES. To the extent permitted by the 1940
Act, with respect to actions set forth in paragraph 5(c)(i) and paragraph
5(c)(ii) above (including amendment, alteration or repeal of the provisions
of the Declaration of Trust or the By-Laws, whether by merger,
consolidation or otherwise) that would adversely affect the rights of one
or more series of Municipal Preferred (the "Affected Series") in a manner
different from any other series of Municipal Preferred, the Trust will not
approve any such action without the affirmative vote or consent of the
Holders of at least a majority of the shares of each such Affected Series
outstanding at the time, in person or proxy, either in writing or at a
meeting (each such Affected Series voting as a separate class).
(d) BOARD MAY TAKE CERTAIN ACTIONS WITHOUT SHAREHOLDER APPROVAL. The Board
of Trustees, without the vote or consent of the shareholders of the Trust, may
from time to time amend, alter or repeal any or all of the definitions of the
terms listed below, or any provision of this Section 12.1 viewed by Moody's or
S&P as a predicate for any such definition, and any such
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amendment, alteration or repeal will not be deemed to affect the preferences,
rights or powers of shares of Municipal Preferred or the Holders thereof;
provided, however, that the Board of Trustees receives written confirmation from
(i) Moody's (such confirmation being required to be obtained only in the event
Moody's is rating the shares of Municipal Preferred and in no event being
required to be obtained in the case of the definitions of (x) Deposit
Securities, Discounted Value, Receivables for Municipal Obligations Sold and
Other Issues as such terms apply to S&P Eligible Asset and (y) S&P Discount
Factor, S&P Eligible Asset, S&P Exposure Period and S&P Volatility Factor) and
(ii) S&P (such confirmation being required to be obtained only in the event S&P
is rating the shares of Municipal Preferred and in no event being required to be
obtained in the case of the definitions of (x) Discounted Value, Receivables for
Municipal Obligations Sold and Other Issues as such terms apply to Moody's
Eligible Asset, and (y) Moody's Discount Factor, Moody's Eligible Asset, Moody's
Exposure Period and Moody's Volatility Factor) that any such amendment,
alteration or repeal would not impair the ratings then assigned by Moody's or
S&P, as the case may be, to shares of Municipal Preferred:
<TABLE>
<CAPTION>
<S> <C>
Deposit Securities Moody's Exposure Period
Discounted Value Moody's Volatility Factor
Escrowed Bonds 1940 Act Cure Date
Market Value 1940 Act Municipal Preferred Asset Coverage
Maximum Potential Gross-up Payment Other Issues
Liability Quarterly Valuation Date
Municipal Preferred Basic Maintenance Receivables for Municipal Obligations Sold
Amount S&P Discount Factor
Municipal Preferred Basic Maintenance Cure S&P Eligible Asset
Date S&P Exposure Period
Municipal Preferred Basic Maintenance S&P Volatility Factor
Report Valuation Date
Moody's Discount Factor Volatility Factor
Moody's Eligible Asset
</TABLE>
(e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS. Unless
otherwise required by law, these By-Laws or by the Declaration, the Holders of
shares of Municipal Preferred shall not have any relative rights or preferences
or other special rights other than those specifically set forth herein.
(f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of shares of
Municipal Preferred shall have no preemptive rights or rights to cumulative
voting.
(g) VOTING FOR TRUSTEES SOLE REMEDY FOR TRUST'S FAILURE TO PAY DIVIDENDS.
In the event that the Trust fails to pay any dividends on the shares of
Municipal Preferred, the exclusive remedy of the Holders shall be the right to
vote for Trustees pursuant to the provisions of this paragraph 5.
(h) HOLDERS ENTITLED TO VOTE. For purposes of determining any rights of
the Holders to vote on any matter, whether such right is created by this Section
12.1, by the other provisions of these By-Laws or the Declaration, by statute or
otherwise, no Holder shall be entitled to vote
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any share of Municipal Preferred and no share of Municipal Preferred shall be
deemed to be "outstanding" for the purpose of voting or determining the number
of shares required to constitute a quorum if, prior to or concurrently with the
time of determination of shares entitled to vote or shares deemed outstanding
for quorum purposes, as the case may be, the requisite Notice of Redemption with
respect to such shares shall have been mailed as provided in paragraph 11(c) of
Part I of this Section 12.1 and the Redemption Price for the redemption of such
shares shall have been deposited in trust with the Auction Agent for that
purpose. No shares of Municipal Preferred held by the Trust or any affiliate of
the Trust (except for shares held by a Broker-Dealer that is an affiliate of the
Trust for the account of its customers) shall have any voting rights or be
deemed to be outstanding for voting or other purposes.
(i) Notwithstanding any provision of these By-Laws to the contrary,
neither the Holders of Municipal Preferred, nor the Holders of any one or more
series thereof, shall be entitled to vote as a separate class with respect to
any matter, if such separate class vote is prohibited by the 1940 Act.
6. 1940 ACT MUNICIPAL PREFERRED ASSET COVERAGE.
The Trust shall maintain, as of the last Business Day of each month in
which any share of Municipal Preferred is outstanding, the 1940 Act Municipal
Preferred Asset Coverage.
7. MUNICIPAL PREFERRED BASIC MAINTENANCE AMOUNT.
(a) So long as shares of Municipal Preferred are outstanding, the Trust
shall maintain, on each Valuation Date, and shall verify to its satisfaction
that it is maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the Municipal Preferred
Basic Maintenance Amount (if S&P is then rating the shares of Municipal
Preferred) and (ii) Moody's Eligible Assets having an aggregate Discounted Value
equal to or greater than the Municipal Preferred Basic Maintenance Amount (if
Moody's is then rating the shares of Municipal Preferred).
(b) On or before 5:00 P.M., New York City time, on the third Business Day
after a Valuation Date on which the Trust fails to satisfy the Municipal
Preferred Basic Maintenance Amount, and on the third Business Day after the
Municipal Preferred Basic Maintenance Cure Date with respect to such Valuation
Date, the Trust shall complete and deliver to S&P (if S&P is then rating the
shares of Municipal Preferred), Moody's (if Moody's is then rating the shares of
Municipal Preferred) and the Auction Agent (if either S&P or Moody's is then
rating the shares of Municipal Preferred) a Municipal Preferred Basic
Maintenance Report as of the date of such failure or such Municipal Preferred
Basic Maintenance Cure Date, as the case may be, which will be deemed to have
been delivered to the Auction Agent if the Auction Agent receives a copy of
telecopy, telex or other electronic transcription thereof and on the same day
the Trust mails to the Auction Agent for delivery on the next Business Day the
full Municipal Preferred Basic Maintenance Report.
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<PAGE> 44
The Trust shall also deliver a Municipal Preferred Basic Maintenance Report
to (i) the Auction Agent (if either Moody's or S&P is then rating the shares of
Municipal Preferred) as of (A) the fifteenth day of each month (or, if such day
is not a Business Day, the next succeeding Business Day) and (B) the last
Business Day of each month, (ii) Moody's (if Moody's is then rating the shares
of Municipal Preferred) and S&P (if S&P is then rating the shares of Municipal
Preferred) as of any Quarterly Valuation Date, in each case on or before the
third Business Day after such day, and (iii) S&P and Moody's, if and when
requested for any Valuation Date, on or before the third Business Day after such
request. A failure by the Trust to deliver a Municipal Preferred Basic
Maintenance Report pursuant to the preceding sentence shall be deemed to be
delivery of a Municipal Preferred Basic Maintenance Report indicating the
Discounted Value for all assets of the Trust is less than the Municipal
Preferred Basic Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of a Municipal
Preferred Basic Maintenance Report in accordance with subparagraph (b) of this
paragraph 7 relating to a Quarterly Valuation Date, the Trust shall cause the
Independent Accountant to confirm in writing to S&P (if S&P is then rating the
shares of Municipal Preferred), Moody's (if Moody's is then rating the shares of
Municipal Preferred) and the Auction Agent (if either S&P or Moody's is then
rating the shares of Municipal Preferred) (i) the mathematical accuracy of the
calculations reflected in such Report (and in any other Municipal Preferred
Basic Maintenance Report, randomly selected by the Independent Accountant, that
was delivered by the Trust during the quarter ending on such Quarterly Valuation
Date) and (ii) that, in such Report (and in such randomly selected Report), the
Trust determined in accordance with this paragraph whether the Trust had, at
such Quarterly Valuation Date (and at the Valuation Date addressed in such
randomly-selected Report), S&P Eligible Assets (if S&P is then rating the shares
of Municipal Preferred) of an aggregate Discounted Value at least equal to the
Municipal Preferred Basic Maintenance Amount and Moody's Eligible Assets (if
Moody's is then rating the shares of Municipal Preferred) of an aggregate
Discounted Value at least equal to the Municipal Preferred Basic Maintenance
Amount (such confirmation being herein called the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery of a Municipal
Preferred Basic Maintenance Report in accordance with subparagraph (b) of this
paragraph 7 relating to any Valuation Date on which the Trust failed to satisfy
the Municipal Preferred Basic Maintenance Amount, and relating to the Municipal
Preferred Basic Maintenance Cure Date with respect to such failure to satisfy
the Municipal Preferred Basic Maintenance Amount, the Trust shall cause the
Independent Accountant to provide to S&P (if S&P is then rating the shares of
Municipal Preferred), Moody's (if Moody's is then rating the shares of Municipal
Preferred) and the Auction Agent (if either S&P or Moody's is then rating the
shares of Municipal Preferred) an Accountant's Confirmation as to such Municipal
Preferred Basic Maintenance Report.
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<PAGE> 45
(e) If any Accountant's Confirmation delivered pursuant to subparagraph
(c) or (d) of this paragraph 7 shows that an error was made in the Municipal
Preferred Basic Maintenance Report for a particular Valuation Date for which
such Accountant's Confirmation was required to be delivered, or shows that a
lower aggregate Discounted Value for the aggregate of all S&P Eligible Assets
(if S&P is then rating the shares of Municipal Preferred) or Moody's Eligible
Assets (if Moody's is then rating the shares of Municipal Preferred), as the
case may be, of the Trust was determined by the Independent Accountant, the
calculation or determination made by such Independent Accountant shall be final
and conclusive and shall be binding on the Trust, and the Trust shall
accordingly amend and deliver the Municipal Preferred Basic Maintenance Report
to S&P (if S&P is then rating the shares of Municipal Preferred), Moody's (if
Moody's is then rating the shares of Municipal Preferred) and the Auction Agent
(if either S&P or Moody's is then rating the shares of Municipal Preferred)
promptly following receipt by the Trust of such Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of any shares of Municipal Preferred, the Trust
shall complete and deliver to S&P (if S&P is then rating the shares of Municipal
Preferred) and Moody's (if Moody's is then rating the shares of Municipal
Preferred) a Municipal Preferred Basic Maintenance Report as of the close of
business on such Date of Original Issue. Within five Business Days of such Date
of Original Issue, the Trust shall cause the Independent Accountant to confirm
in writing to S&P (if S&P is then rating the shares of Municipal Preferred) (i)
the mathematical accuracy of the calculations reflected in such Report and (ii)
that the Discounted Value of S&P Eligible Assets reflected thereon equals or
exceeds the Municipal Preferred Basic Maintenance Amount reflected thereon.
(g) On or before 5:00 p.m., New York City time, on the third Business Day
after either (i) the Trust shall have redeemed Common Shares or (ii) the ratio
of the Discounted Value of S&P Eligible Assets or the Discounted Value of
Moody's Eligible Assets to the Municipal Preferred Basic Maintenance Amount is
less than or equal to 105%, the Trust shall complete and deliver to S&P (if S&P
is then rating the shares of Municipal Preferred) or Moody's (if Moody's is then
rating the shares of Municipal Preferred), as the case may be, a Municipal
Preferred Basic Maintenance Report as of the date of either such event.
8. [RESERVED].
9. RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS.
(a) DIVIDENDS ON PREFERRED SHARES OTHER THAN MUNICIPAL PREFERRED. Except
as set forth in the next sentence, no dividends shall be declared or paid or set
apart for payment on the shares of any class or series of shares of beneficial
interest of the Trust ranking, as to the payment of dividends, on a parity with
shares of Municipal Preferred for any period unless full cumulative dividends
have been or contemporaneously are declared and paid on the shares of each
series of Municipal Preferred through its most recent Dividend Payment Date.
When dividends are not
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paid in full upon the shares of each series of Municipal Preferred through its
most recent Dividend Payment Date or upon the shares of any other class or
series of shares of beneficial interest of the Trust ranking on a parity as to
the payment of dividends with shares of Municipal Preferred through their most
recent respective dividend payment dates, all dividends declared upon shares of
Municipal Preferred and any other such class or series of shares of beneficial
interest ranking on a parity as to the payment of dividends with shares of
Municipal Preferred shall be declared pro rata so that the amount of dividends
declared per share on shares of Municipal Preferred and such other class or
series of shares of beneficial interest shall in all cases bear to each other
the same ratio that accumulated dividends per share on the shares of Municipal
Preferred and such other class or series of shares of beneficial interest bear
to each other (for purposes of this sentence, the amount of dividends declared
per share of Municipal Preferred shall be based on the Applicable Rate for such
shares for the Dividend Periods during which dividends were not paid in full).
(b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON SHARES UNDER
THE 1940 ACT. The Board of Trustees shall not declare any dividend (except a
dividend payable in Common Shares), or declare any other distribution, upon the
Common Shares, or purchase Common Shares, unless in every such case the
Preferred Shares have, at the time of any such declaration or purchase, an asset
coverage (as defined in and determined pursuant to the 1940 Act) of at least
200% (or such other asset coverage as may in the future be specified in or under
the 1940 Act as the minimum asset coverage for senior securities which are
shares or stock of a closed-end investment company as a condition of declaring
dividends on its common shares or stock) after deducting the amount of such
dividend, distribution or purchase price, as the case may be.
(c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. For so long
as any share of Municipal Preferred is outstanding, and except as set forth in
subparagraph (a) of this paragraph 9 and paragraph 12(c) of Part I of this
Section 12.1, (A) the Trust shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or purchase,
Common Shares or other shares, if any, ranking junior to the shares of Municipal
Preferred as to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up) in respect of the Common Shares or any
other shares of the Trust ranking junior to or on a parity with the shares of
Municipal Preferred as to the payment of dividends or the distribution of assets
upon dissolution, liquidation or winding up, or call for redemption, redeem,
purchase or otherwise acquire for consideration any Common Shares or any other
such junior shares (except by conversion into or exchange for shares of the
Trust ranking junior to the shares of Municipal Preferred as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up), or any such parity shares (except by conversion into or exchange
for shares of the Trust ranking junior to or on a parity with Municipal
Preferred as to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up), unless (i) full cumulative dividends on
shares of each series of Municipal Preferred through its most recently ended
Dividend Period shall have been paid or shall have been declared and sufficient
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<PAGE> 47
funds for the payment thereof deposited with the Auction Agent and (ii) the
Trust has redeemed the full number of shares of Municipal Preferred required to
be redeemed by any provision for mandatory redemption pertaining thereto, and
(B) the Trust shall not declare, pay or set apart for payment any dividend or
other distribution (other than a dividend or distribution paid in shares of, or
in options, warrants or rights to subscribe for or purchase, Common Shares or
other shares, if any, ranking junior to shares of Municipal Preferred as to the
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of Common Shares or any other shares of
the Trust ranking junior to shares of Municipal Preferred as to the payment of
dividends or the distribution of assets upon dissolution, liquidation or winding
up, or call for redemption, redeem, purchase or otherwise acquire for
consideration any Common Shares or any other such junior shares (except by
conversion into or exchange for shares of the Trust ranking junior to shares of
Municipal Preferred as to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up), unless immediately after
such transaction the Discounted Value of Moody's Eligible Assets (if Moody's is
then rating the shares of Municipal Preferred) and S&P Eligible Assets (if S&P
is then rating the shares of Municipal Preferred) would each at least equal the
Municipal Preferred Basic Maintenance Amount.
10. RATING AGENCY RESTRICTIONS.
For so long as any shares of Municipal Preferred are outstanding and
Moody's or S&P, or both, are rating such shares, the Trust will not, unless it
has received written confirmation from Moody's or S&P, or both, as appropriate,
that any such action would not impair the ratings then assigned by such rating
agency to such shares, engage in any one or more of the following transactions:
(a) purchase or sell futures contracts, write, purchase or sell options on
futures contracts or write put options (except covered put options) or call
options (except covered call options) on portfolio securities except that the
Trust may purchase or sell futures contracts based on the Bond Buyer Municipal
Bond Index (the "Municipal Index") or United States Treasury Bonds or Notes
("Treasury Bonds") and write, purchase or sell put and call options on such
contracts (collectively, "Hedging Transactions"), subject to the following
limitations:
(i) the Trust will not engage in any Hedging Transaction based on the
Municipal Index (other than transactions which terminate a futures contract
or option held by the Trust by the Trust's taking an opposite position
thereto ("Closing Transactions")), which would cause the Trust at the time
of such transaction to own or have sold the least of (A) more than 1,000
outstanding futures contracts based on the Municipal Index, (B) outstanding
futures contracts based on the Municipal Index exceeding in number 25% of
the quotient of the Market Value of the Trust's total assets divided by
$1,000 or (C) outstanding futures contracts based on the Municipal Index
exceeding in number 10% of the average number of daily open interest
futures contracts based on the Municipal Index in the 30 days preceding the
time of effecting such transaction as reported by The Wall Street Journal.
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<PAGE> 48
(ii) the Trust will not engage in any Hedging Transaction based on
Treasury Bonds (other than Closing Transactions) which would cause the
Trust at the time of such transaction to own or have sold the lesser of (A)
outstanding futures contracts based on Treasury Bonds exceeding in number
50% of the quotient of the Market Value of the Trust's total assets divided
by $100,000 ($200,000 in the case of a two-year United States Treasury
Note) or (B) outstanding futures contracts based on Treasury Bonds
exceeding in number 10% of the average number of daily traded futures
contracts based on Treasury Bonds in the 30 days preceding the time of
effecting such transaction as reported by The Wall Street Journal;
(iii) the Trust will engage in Closing Transactions to close out any
outstanding futures contract which the Trust owns or has sold or any
outstanding option thereon owned by the Trust in the event (A) the Trust
does not have S&P Eligible Assets or Moody's Eligible Assets, as the case
may be, with an aggregate Discounted Value equal to or greater than the
Municipal Preferred Basic Maintenance Amount on two consecutive Valuation
Dates and (B) the Trust is required to pay Variation Margin on the second
such Valuation Date;
(iv) the Trust will engage in a Closing Transaction to close out any
outstanding futures contract or option thereon in the month prior to the
delivery month under the terms of such futures contract or option thereon
unless the Trust holds the securities deliverable under such terms; and
(v) when the Trust writes a futures contract or option thereon, it
will either maintain an amount of cash, cash equivalents or high grade
(rated A or better by S&P or Moody's, as the case may be), fixed-income
securities in a segregated account with the Trust's custodian, so that the
amount so segregated plus the amount of Initial Margin and Variation Margin
held in the account of or on behalf of the Trust's broker with respect to
such futures contract or option equals the Market Value of the futures
contract or option, or, in the event the Trust writes a futures contract or
option thereon which requires delivery of an underlying security, it shall
hold such underlying security in its portfolio.
For purposes of determining whether the Trust has S&P Eligible Assets or
Moody's Eligible Assets, as the case may be, with a Discounted Value that equals
or exceeds the Municipal Preferred Basic Maintenance Amount, the Discounted
Value of cash or securities held for the payment of Initial Margin or Variation
Margin shall be zero and the aggregate Discounted Value of S&P Eligible Assets
or Moody's Eligible Assets, as the case may be, shall be reduced by an amount
equal to (I) 30% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on the Municipal Index which are owned by
the Trust plus (II) 25% of the aggregate settlement value, as marked to market,
of any outstanding futures contracts based on Treasury Bonds which contracts are
owned by the Trust.
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(b) borrow money, except that the Trust may, without obtaining the written
confirmation described above, borrow money for the purpose of clearing
securities transactions if (i) the Municipal Preferred Basic Maintenance Amount
would continue to be satisfied after giving effect to such borrowing (which
shall mean, for purposes of the calculation of the Municipal Preferred Basic
Maintenance Amount, adding the amount of the liability for such borrowing to the
calculation of the Municipal Preferred Basic Maintenance Amount under
subparagraph (F) under the definition of that term in Part I of this Section
12.1) and (ii) such borrowing (A) is privately arranged with a bank or other
person and is evidenced by a promissory note or other evidence of indebtedness
that is not intended to be publicly distributed or (B) is for "temporary
purposes," is evidenced by a promissory note or other evidence of indebtedness
and is an amount not exceeding 5% of the value of the total assets of the Trust
at the time of the borrowing; for purposes of the foregoing, "temporary purpose"
means that the borrowing is to be repaid within sixty days and is not to be
extended or renewed;
(c) issue additional shares of any series of Municipal Preferred or any
class or series of shares ranking prior to or on a parity with shares of
Municipal Preferred with respect to the payment of dividends or the distribution
of assets upon dissolution, liquidation or winding up of the Trust, or reissue
any shares of Municipal Preferred previously purchased or redeemed by the Trust;
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any corporation;
(g) change the pricing service (currently both Muller Data Corporation and
Standard & Poor's J.J. Kenny Evaluation Services are used by the Trust) referred
to in the definition of Market Value to a pricing service other than Muller Data
Corporation or Standard & Poor's J.J. Kenny Evaluation Services; or
(h) enter into reverse repurchase agreements.
11. REDEMPTION.
(a) OPTIONAL REDEMPTION.
(i) Subject to the provisions of subparagraph (v) of this subparagraph
(a), shares of Municipal Preferred of any series may be redeemed, at the
option of the Trust, as a whole or from time to time in part, on the second
Business Day preceding any Dividend Payment Date for shares of such series,
out of funds legally available therefor, at a redemption price per share
equal to the sum of $25,000 plus an amount equal to
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accumulated but unpaid dividends thereon (whether or not earned or
declared) to (but not including) the date fixed for redemption; provided,
however, that (1) shares of a series of Municipal Preferred may not be
redeemed in part if after such partial redemption fewer than 500 shares of
such series remain outstanding; (2) unless otherwise provided herein,
shares of a series of Municipal Preferred are redeemable by the Trust
during the Initial Rate Period thereof only on the second Business Day next
preceding the last Dividend Payment Date for such Initial Rate Period; and
(3) subject to subparagraph (ii) of this subparagraph (a), the Notice of
Special Rate Period relating to a Special Rate Period of shares of a series
of Municipal Preferred, as delivered to the Auction Agent and filed with
the Secretary of the Trust, may provide that shares of such series shall
not be redeemable during the whole or any part of such Special Rate Period
(except as provided in subparagraph (iv) of this subparagraph (a)) or shall
be redeemable during the whole or any part of such Special Rate Period only
upon payment of such redemption premium or premiums as shall be specified
therein ("Special Redemption Provisions").
(ii) A Notice of Special Rate Period relating to shares of a series of
Municipal Preferred for a Special Rate Period thereof may contain Special
Redemption Provisions only if the Trust's Board of Trustees, after
consultation with the Broker-Dealer or Broker-Dealers for such Special Rate
Period of shares of such series, determines that such Special Redemption
Provisions are in the best interest of the Trust.
(iii) If fewer than all of the outstanding shares of a series of
Municipal Preferred are to be redeemed pursuant to subparagraph (i) of this
subparagraph (a), the number of shares of such series to be redeemed shall
be determined by the Board of Trustees, and such shares shall be redeemed
pro rata from the Holders of shares of such series in proportion to the
number of shares of such series held by such Holders.
(iv) Subject to the provisions of subparagraph (v) of this
subparagraph (a), shares of any series of Municipal Preferred may be
redeemed, at the option of the Trust, as a whole but not in part, out of
funds legally available therefor, on the first day following any Dividend
Period thereof included in a Rate Period consisting of more than 364 Rate
Period Days if, on the date of determination of the Applicable Rate for
shares of such series for such Rate Period, such Applicable Rate equaled or
exceeded on such date of determination the Treasury Note Rate for such Rate
Period, at a redemption price per share equal to the sum of $25,000 plus an
amount equal to accumulated but unpaid dividends thereon (whether or not
earned or declared) to (but not including) to the date fixed for
redemption.
(v) The Trust may not on any date mail a Notice of Redemption pursuant
to subparagraph (c) of this paragraph 11 in respect of a redemption
contemplated to be effected pursuant to this subparagraph (a) unless on
such date (a) the Trust has available Deposit Securities with maturity or
tender dates not later than the day preceding the applicable redemption
date and having a value not less than the amount (including any
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applicable premium) due to Holders of shares of Municipal Preferred by
reason of the redemption of such shares on such redemption date and (b) the
Discounted Value of Moody's Eligible Assets (if Moody's is then rating the
shares of Municipal Preferred) and the Discounted Value of S&P Eligible
Assets (if S&P is then rating the shares of Municipal Preferred) each at
least equal the Municipal Preferred Basic Maintenance Amount, and would at
least equal the Municipal Preferred Basic Maintenance Amount immediately
subsequent to such redemption if such redemption were to occur on such
date. For purposes of determining in clause (b) of the preceding sentence
whether the Discounted Value of Moody's Eligible Assets at least equals the
Municipal Preferred Basic Maintenance Amount, the Moody's Discount Factors
applicable to Moody's Eligible Assets shall be determined by reference to
the first Exposure Period longer than the Exposure Period then applicable
to the Trust, as described in the definition of Moody's Discount Factor
herein.
(b) MANDATORY REDEMPTION. The Trust shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Trustees for redemption, certain of the shares of Municipal Preferred,
if the Trust fails to have either Moody's Eligible Assets with a Discounted
Value, or S&P Eligible Assets with a Discounted Value, greater than or equal to
the Municipal Preferred Basic Maintenance Amount or fails to maintain the 1940
Act Municipal Preferred Asset Coverage, in accordance with the requirements of
the rating agency or agencies then rating the shares of Municipal Preferred, and
such failure is not cured on or before the Municipal Preferred Basic Maintenance
Cure Date or the 1940 Act Cure Date, as the case may be (the "Cure Date"). The
number of shares of Municipal Preferred to be redeemed shall be equal to the
lesser of (i) the minimum number of shares of Municipal Preferred, together with
all other Preferred Shares subject to redemption or retirement, the redemption
of which, if deemed to have occurred immediately prior to the opening of
business on the Cure Date, would have resulted in the Trust's having both
Moody's Eligible Assets with a Discounted Value, and S&P Eligible Assets with a
Discounted Value, greater than or equal to the Municipal Preferred Basic
Maintenance Amount or maintaining the 1940 Act Municipal Preferred Asset
Coverage, as the case may be, on such Cure Date (provided, however, that if
there is no such minimum number of shares of Municipal Preferred and other
Preferred Shares the redemption or retirement of which would have had such
result, all shares of Municipal Preferred and Preferred Shares then outstanding
shall be redeemed), and (ii) the maximum number of shares of Municipal
Preferred, together with all other Preferred Shares subject to redemption or
retirement, that can be redeemed out of funds expected to be legally available
therefor in accordance with the Declaration, these By-Laws and applicable law.
In determining the shares of Municipal Preferred required to be redeemed in
accordance with the foregoing, the Trust shall allocate the number required to
be redeemed to satisfy the Municipal Preferred Basic Maintenance Amount or the
1940 Act Municipal Preferred Asset Coverage, as the case may be, pro rata among
shares of Municipal Preferred and other Preferred Shares (and, then pro rata
among each series of Municipal Preferred) subject to redemption or retirement.
The Trust shall effect such redemption on the date fixed by the Trust therefor,
which date shall not be earlier than 20 days nor later than 40
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days after such Cure Date, except that if the Trust does not have funds legally
available for the redemption of all of the required number of shares of
Municipal Preferred and other Preferred Shares which are subject to redemption
or retirement or the Trust otherwise is unable to effect such redemption on or
prior to 40 days after such Cure Date, the Trust shall redeem those shares of
Municipal Preferred and other Preferred Shares which it was unable to redeem on
the earliest practicable date on which it is able to effect such redemption. If
fewer than all of the outstanding shares of a series of Municipal Preferred are
to be redeemed pursuant to this subparagraph (b), the number of shares of such
series to be redeemed shall be redeemed pro rata from the Holders of shares of
such series in proportion to the number of shares of such series held by such
Holders.
(c) NOTICE OF REDEMPTION. If the Trust shall determine or be required to
redeem shares of a series of Municipal Preferred pursuant to subparagraph (a) or
(b) of this paragraph 11, it shall mail a Notice of Redemption with respect to
such redemption by first class mail, postage prepaid, to each Holder of the
shares of such series to be redeemed, at such Holder's address as the same
appears on the record books of the Trust on the record date established by the
Board of Trustees. Such Notice of Redemption shall be so mailed not less than 20
nor more than 45 days prior to the date fixed for redemption. Each such Notice
of Redemption shall state: (i) the redemption date; (ii) the number of shares of
Municipal Preferred to be redeemed and the series thereof; (iii) the CUSIP
number for shares of such series; (iv) the Redemption Price; (v) the place or
places where the certificate(s) for such shares (properly endorsed or assigned
for transfer, if the Board of Trustees shall so require and the Notice of
Redemption shall so state) are to be surrendered for payment of the Redemption
Price; (vi) that dividends on the shares to be redeemed will cease to accumulate
on such redemption date; and (vii) the provisions of this paragraph 11 under
which such redemption is made. If fewer than all shares of a series of Municipal
Preferred held by any Holder are to be redeemed, the Notice of Redemption mailed
to such Holder shall also specify the number of shares of such series to be
redeemed from such Holder. The Trust may provide in any Notice of Redemption
relating to an optional redemption contemplated to be effected pursuant to
subparagraph (a) of this paragraph 11 that such redemption is subject to one or
more conditions precedent and that the Trust shall not be required to make such
redemption unless each such condition shall have been satisfied at the time or
times and in the manner specified in such Notice of Redemption.
(d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding the
provisions of subparagraphs (a) or (b) of this paragraph 11, if any dividends on
shares of a series of Municipal Preferred (whether or not earned or declared)
are in arrears, no shares of such series shall be redeemed unless all
outstanding shares of such series are simultaneously redeemed, and the Trust
shall not purchase or otherwise acquire any shares of such series; provided,
however, that the foregoing shall not prevent the purchase or acquisition of all
outstanding shares of such series pursuant to the successful completion of an
otherwise lawful purchase or exchange offer made on the same terms to, and
accepted by, Holders of all outstanding shares of such series.
(e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally
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available funds therefor in accordance with the Declaration, these By-Laws and
applicable law, such redemption shall be made as soon as practicable to the
extent such funds become available. Failure to redeem shares of Municipal
Preferred shall be deemed to occur if at any time after the date specified for
redemption in a Notice of Redemption the Trust shall have failed, for any reason
whatsoever, to deposit in trust with the Auction Agent the Redemption Price with
respect to any shares of which such Notice of Redemption has been mailed;
provided, however, that the foregoing shall not apply in the case of the Trust's
failure to deposit in trust with the Auction Agent the Redemption Price with
respect to any shares where (1) the Notice of Redemption relating to such
redemption provided that such redemption was subject to one or more conditions
precedent and (2) any such condition precedent shall not have been satisfied at
the time or times and in the manner specified in such Notice of Redemption.
Notwithstanding the fact that the Trust may not have redeemed shares of
Municipal Preferred for which a Notice of Redemption has been mailed, dividends
may be declared and paid on shares of Municipal Preferred and shall include
those shares of Municipal Preferred for which a Notice of Redemption has been
mailed.
(f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY TRUST. All moneys
paid to the Auction Agent for payment of the Redemption Price of shares of
Municipal Preferred called for redemption shall be held in trust by the Auction
Agent for the benefit of Holders of shares so to be redeemed.
(g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE NO LONGER
OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant to
subparagraph (c) of this paragraph 11, upon the deposit with the Auction Agent
(on the Business Day next preceding the date fixed for redemption thereby, in
funds available on the next Business Day in The City of New York, New York) of
funds sufficient to redeem the shares of Municipal Preferred that are the
subject of such notice, dividends on such shares shall cease to accumulate and
such shares shall no longer be deemed to be outstanding for any purpose, and all
rights of the Holders of the shares so called for redemption shall cease and
terminate, except the right of such Holders to receive the Redemption Price, but
without any interest or other additional amount, except as provided in
paragraphs 2(e)(i) and 3 of Part I of this Section 12.1. Upon surrender in
accordance with the Notice of Redemption of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of Trustees
shall so require and the Notice of Redemption shall so state), the Redemption
Price shall be paid by the Auction Agent to the Holders of shares of Municipal
Preferred subject to redemption. In the case that fewer than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued, representing the unredeemed shares, without cost to the Holder thereof.
The Trust shall be entitled to receive from the Auction Agent, promptly after
the date fixed for redemption, any cash deposited with the Auction Agent in
excess of (i) the aggregate Redemption Price of the shares of Municipal
Preferred called for redemption on such date and (ii) all other amounts to which
Holders of shares of Municipal Preferred called for redemption may be entitled.
Any funds so deposited that are unclaimed at the end of 90 days from such
redemption date shall, to the extent permitted by law, be repaid to the Trust,
after which time the Holders of shares of Municipal Preferred so called for
redemption may look only to the Trust for payment of the Redemption Price and
all
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other amounts to which they may be entitled. The Trust shall be entitled to
receive, from time to time after the date fixed for redemption, any interest on
the funds so deposited.
(h) COMPLIANCE WITH APPLICABLE LAW. In effecting any redemption pursuant
to this paragraph 11, the Trust shall use its best efforts to comply with all
applicable conditions precedent to effecting such redemption under the 1940 Act
and any applicable Massachusetts law, but shall effect no redemption except in
accordance with the 1940 Act and any applicable Massachusetts law.
(i) ONLY WHOLE SHARES OF MUNICIPAL PREFERRED MAY BE REDEEMED. In the case
of any redemption pursuant to this paragraph 11, only whole shares of Municipal
Preferred shall be redeemed, and in the event that any provision of the
Declaration or these By-Laws would require redemption of a fractional share, the
Auction Agent shall be authorized to round up so that only whole shares are
redeemed.
12. LIQUIDATION RIGHTS.
(a) RANKING. The shares of a series of Municipal Preferred shall rank on a
parity with each other, with shares of any other series of Municipal Preferred
and with shares of any other series of Preferred Shares as to the distribution
of assets upon dissolution, liquidation or winding up of the affairs of the
Trust.
(b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution, liquidation or
winding up of the affairs of the Trust, whether voluntary or involuntary, the
Holders of shares of Municipal Preferred then outstanding shall be entitled to
receive and to be paid out of the assets of the Trust available for distribution
to its shareholders, before any payment or distribution shall be made on the
Common Shares or on any other class of shares of the Trust ranking junior to the
Municipal Preferred upon dissolution, liquidation or winding up, an amount equal
to the Liquidation Preference with respect to such shares plus an amount equal
to all dividends thereon (whether or not earned or declared) accumulated but
unpaid to (but not including) the date of final distributions in same-day funds,
together with any payments required to be made pursuant to paragraph 3 of Part I
of this Section 12.1 in connection with the liquidation of the Trust. After the
payment to the Holders of the shares of Municipal Preferred of the full
preferential amounts provided for in this subparagraph (b), the holders of
Municipal Preferred as such shall have no right or claim to any of the remaining
assets of the Trust.
(c) PRO RATA DISTRIBUTIONS. In the event the assets of the Trust available
for distribution to the Holders of shares of Municipal Preferred upon any
dissolution, liquidation or winding up of the affairs of the Trust, whether
voluntary or involuntary, shall be insufficient to pay in full all amounts to
which such Holders are entitled pursuant to subparagraph (b) of this paragraph
12, no such distribution shall be made on account of any shares of any other
class or series of Preferred Shares ranking on a parity with the shares of
Municipal Preferred with respect to the distribution of assets upon such
dissolution, liquidation or winding up unless proportionate
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distributive amounts shall be paid on account of the shares of Municipal
Preferred, ratably, in proportion to the full distributable amounts for which
holders of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
(d) RIGHTS OF JUNIOR SHARES. Subject to the rights of the holders of
shares of any series or class or classes of shares ranking on a parity with the
shares of Municipal Preferred with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Trust, after
payment shall have been made in full to the Holders of the shares of Municipal
Preferred as provided in subparagraph (b) of this paragraph 12, but not prior
thereto, any other series or class or classes of shares ranking junior to the
shares of Municipal Preferred with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Trust shall,
subject to the respective terms and provisions (if any) applying thereto, be
entitled to receive any and all assets remaining to be paid or distributed, and
the Holders of the shares of Municipal Preferred shall not be entitled to share
therein.
(e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the sale of all
or substantially all of the property or business of the Trust, nor the merger or
consolidation of the Trust into or with any Massachusetts business trust or
corporation nor the merger or consolidation of any Massachusetts business trust
or corporation into or with the Trust shall be a dissolution, liquidation or
winding up, whether voluntary or involuntary, for the purposes of this paragraph
12.
13. MISCELLANEOUS.
(a) AMENDMENT OF THIS SECTION 12.1 TO ADD ADDITIONAL SERIES. Subject to
the provisions of subparagraph (c) of paragraph 10 of Part I of this Section
12.1, the Board of Trustees may, by resolution duly adopted, without shareholder
approval (except as otherwise provided by this Section 12.1 or required by
applicable law), amend Section 12.1 to (1) reflect any amendment hereto which
the Board of Trustees is entitled to adopt pursuant to the terms of this Section
12.1 without shareholder approval or (2) add additional series of Municipal
Preferred or additional shares of a series of Municipal Preferred (and terms
relating thereto) to the series and shares of Municipal Preferred theretofore
described thereon. Each such additional series and all such additional shares
shall be governed by the terms of this Section 12.1.
(b) [RESERVED]
(c) NO FRACTIONAL SHARES. No fractional shares of Municipal Preferred
shall be issued.
(d) STATUS OF SHARES OF MUNICIPAL PREFERRED REDEEMED, EXCHANGED OR
OTHERWISE ACQUIRED BY THE TRUST. Shares of Municipal Preferred which are
redeemed, exchanged or otherwise acquired by the Trust shall return to the
status of authorized and unissued Preferred Shares without designation as to
series.
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(e) BOARD MAY RESOLVE AMBIGUITIES. To the extent permitted by applicable
law, the Board of Trustees may interpret or adjust the provisions of this
Section 12.1 to resolve any inconsistency or ambiguity or to remedy any formal
defect, and may amend this Section 12.1 with respect to any series of Municipal
Preferred prior to this issuance of shares of such series.
(f) HEADINGS NOT DETERMINATIVE. The headings contained in this Section
12.1 are for convenience of reference only and shall not affect the meaning or
interpretation of this Section 12.1.
(g) NOTICES. All notices or communications, unless otherwise specified in
these ByLaws or this Section 12.1, shall be sufficiently given if in writing and
delivered in person or mailed by first-class mail, postage prepaid.
PART II
1. ORDERS.
(a) Prior to the Submission Deadline on each Auction Date for shares of a
series of Municipal Preferred:
(i) each Beneficial Owner of shares of such series may submit to its
Broker-Dealer by telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner desires to
continue to hold without regard to the Applicable Rate for shares of
such series for the next succeeding Rate Period of such shares;
(B) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner offers to sell if
the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be less than the rate per
annum specified by such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner offers to sell
without regard to the Applicable Rate for shares of such series for
the next succeeding Rate Period of shares of such series;
and
(ii) one or more Broker-Dealers, using lists of Potential Beneficial
Owners, shall in good faith for the purpose of conducting a competitive
Auction in a commercially
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reasonable manner, contact Potential Beneficial Owners (by telephone or
otherwise), including Persons that are not Beneficial Owners, on such lists
to determine the number of shares, if any, of such series which each such
Potential Beneficial Owner offers to purchase if the Applicable Rate for
shares of such series for the next succeeding Rate Period of shares of such
series shall not be less than the rate per annum specified by such
Potential Beneficial Owner.
For purposes hereof, the communication by a Beneficial Owner or Potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction Agent,
of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this
subparagraph (a) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each Potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with the
Auction Agent, is hereinafter referred to as a "Bidder" and collectively as
"Bidders"; an Order containing the information referred to in clause (i)(A) of
this subparagraph (a) is hereinafter referred to as a "Hold Order" and
collectively as "Hold Orders"; an Order containing the information referred to
in clause (i)(B) or (ii) of this subparagraph (a) is hereinafter referred to as
a "Bid" and collectively as "Bids"; and an Order containing the information
referred to in clause (i)(C) of this subparagraph (a) is hereinafter referred to
as a "Sell Order" and collectively as "Sell Orders."
(b) (i) A Bid by a Beneficial Owner or an Existing Holder of shares of a
series of Municipal Preferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in
such Bid if the Applicable Rate for shares of such series determined
on such Auction Date shall be less than the rate specified therein;
(B) such number or a lesser number of Outstanding shares of such
series to be determined as set forth in paragraph 4(a)(iv) of Part II
of this Section 12.1 if the Applicable Rate for shares of such series
determined on such Auction Date shall be equal to the rate specified
therein; or
(C) the number of Outstanding shares of such series specified in
such Bid if the rate specified therein shall be higher than the
Maximum Rate for shares of such series, or such number or a lesser
number of Outstanding shares of such series to be determined as set
forth in paragraph 4(b)(iii) of Part II of this Section 12.1 if the
rate specified therein shall be higher than the Maximum Rate for
shares of such series and Sufficient Clearing Bids for shares of such
series do not exist.
(ii) A Sell Order by a Beneficial Owner or an Existing Holder of
shares of a series of Municipal Preferred subject to an Auction on any
Auction Date shall constitute an irrevocable offer to sell:
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(A) the number of Outstanding shares of such series specified in
such Sell Order; or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in paragraph 4(b)(iii) of Part II of this Section
12.1 if Sufficient Clearing Bids for shares of such series do not
exist;
provided, however, that a Broker-Dealer that is an Existing Holder with
respect to shares of a series of Municipal Preferred shall not be liable to
any Person for failing to sell such shares pursuant to a Sell Order
described in the proviso to paragraph 2(c) of Part II of this Section 12.1
if (1) such shares were transferred by the Beneficial Owner thereof without
compliance by such Beneficial Owner or its transferee Broker-Dealer (or
other transferee person, if permitted by the Trust) with the provisions of
paragraph 7 of Part II of this Section 12.1 or (2) such Broker-Dealer has
informed the Auction Agent pursuant to the terms of its Broker-Dealer
Agreement that, according to such Broker-Dealer's records, such
Broker-Dealer believes it is not the Existing Holder of such shares.
(iii) A Bid by a Potential Beneficial Holder or a Potential Holder of
shares of a series of Municipal Preferred subject to an Auction on any
Auction Date shall constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of such series specified in
such Bid if the Applicable Rate for shares of such series determined
on such Auction Date shall be higher than the rate specified therein;
or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in paragraph 4(a)(v) of Part II of this Section
12.1 if the Applicable Rate for shares of such series determined on
such Auction Date shall be equal to the rate specified therein.
(c) No Order for any number of shares of Municipal Preferred other than
whole shares shall be valid.
2. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
(a) Each Broker-Dealer shall submit in writing to the Auction Agent prior
to the Submission Deadline on each Auction Date all Orders for shares of
Municipal Preferred of a series subject to an Auction on such Auction Date
obtained by such Broker-Dealer, designating itself (unless otherwise permitted
by the Trust) as an Existing Holder in respect of shares subject to Orders
submitted or deemed submitted to it by Beneficial Owners and as a Potential
Holder in respect of shares subject to Orders submitted to it by Potential
Beneficial Owners, and shall specify with respect to each Order for such shares:
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(i) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Trust);
(ii) the aggregate number of shares of such series that are the
subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder of shares
of such series:
(A) the number of shares, if any, of such series subject to any
Hold Order of such Existing Holder;
(B) the number of shares, if any, of such series subject to any
Bid of such Existing Holder and the rate specified in such Bid; and
(C) the number of shares, if any, of such series subject to any
Sell Order of such Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder of shares of
such series, the rate and number of shares of such series specified in
such Potential Holder's Bid.
(b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next highest one thousandth (.001) of 1%.
(c) If an Order or Orders covering all of the Outstanding shares of
Municipal Preferred of a series held by any Existing Holder is not submitted to
the Auction Agent prior to the Submission Deadline, the Auction Agent shall deem
a Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding shares of
Municipal Preferred of a series subject to an Auction held by such Existing
Holder, such Orders shall be considered valid in the following order of
priority:
(i) all Hold Orders for shares of such series shall be considered
valid, but only up to and including in the aggregate the number of
Outstanding shares of such series held by
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such Existing Holder, and if the number of shares of such series subject to
such Hold Order exceeds the number of Outstanding shares of such series
held by such Existing Holder, the number of shares subject to each such
Hold Order shall be reduced pro rata to cover the number of Outstanding
shares of such series held by such Existing Holder;
(ii) (A) any Bid for shares of such series shall be considered valid
up to and including the excess of the number of Outstanding shares of such
series held by such Existing Holder over the number of shares of such
series subject to any Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of an Existing
Holder for shares of such series is submitted to the Auction Agent
with the same rate and the number of Outstanding shares of such series
subject to such Bids is greater than such excess, such Bids shall be
considered valid up to and including the amount of such excess, and
the number of shares of such series subject to each Bid with the same
rate shall be reduced pro rata to cover the number of shares of such
series equal to such excess;
(C) subject to subclauses (A) and (B), if more than one Bid of an
Existing Holder for shares of such series is submitted to the Auction
Agent with different rates, such Bids shall be considered valid in the
ascending order of their respective rates up to and including the
amount of such excess; and
(D) in any such event, the number, if any, of such Outstanding
shares of such series subject to any portion of Bids considered not
valid in whole or in part under this clause (ii) shall be treated as
the subject of a Bid for shares of such series by or on behalf of a
Potential Holder at the rate therein specified; and
(iii) all Sell Orders for shares of such series shall be considered
valid up to and including the excess of the number of Outstanding shares of
such series held by such Existing Holder over the sum of shares of such
series subject to valid Hold Orders referred to in clause (i) above and
valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of Municipal
Preferred is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and number
of shares therein specified.
(f) Any Order submitted by a Beneficial Owner or a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date, shall be irrevocable.
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3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE.
(a) Not earlier than the Submission Deadline on each Auction Date for
shares of a series of Municipal Preferred, the Auction Agent shall assemble all
valid Orders submitted or deemed submitted to it by the Broker-Dealers in
respect of shares of such series (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the
case may be, or as a "Submitted Order," and collectively as "Submitted Hold
Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as
"Submitted Orders") and shall determine for such series:
(i) the excess of the number of Outstanding shares of such series over
the number of Outstanding shares of such series subject to Submitted Hold
Orders (such excess being hereinafter referred to as the "Available
Municipal Preferred" of such series);
(ii) from the Submitted Orders for shares of such series whether:
(A) the number of Outstanding shares of such series subject to
Submitted Bids of Potential Holders specifying one or more rates equal
to or lower than the Maximum Rate for shares of such series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such series subject to
Submitted Bids of Existing Holders specifying one or more rates higher
than the Maximum Rate for shares of such series; and
(C) the number of Outstanding shares of such series subject to
Submitted Sell Orders
(in the event such excess or such equality exists (other than because
the number of shares of such series in subclauses (B) and (C) above is
zero because all of the Outstanding shares of such series are subject
to Submitted Hold Orders), such Submitted Bids in subclause (A) above
being hereinafter referred to collectively as "Sufficient Clearing
Bids" for shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such series exist, the
lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for
shares of such series) which if:
(A) (I) each such Submitted Bid of Existing Holders specifying
such lowest rate and (II) all other such Submitted Bids of Existing
Holders specifying
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lower rates were rejected, thus entitling such Existing Holders to
continue to hold the shares of such series that are subject to such
Submitted Bids; and
(B) (I) each such Submitted Bid of Potential Holders specifying
such lowest rate and (II) all other such Submitted Bids of Potential
Holders specifying lower rates were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series
which, when added to the number of Outstanding shares of such series to be
purchased by such Potential Holders described in subclause (B) above, would
equal not less than the Available Municipal Preferred of such series.
(b) Promptly after the Auction Agent has made the determinations pursuant
to subparagraph (a) of this paragraph 3, the Auction Agent shall advise the
Trust of the Maximum Rate for shares of the series of Municipal Preferred for
which an Auction is being held on the Auction Date and, based on such
determination, the Applicable Rate for shares of such series for the next
succeeding Rate Period thereof as follows:
(i) if Sufficient Clearing Bids for shares of such series exist, that
the Applicable Rate for all shares of such series for the next succeeding
Rate Period thereof shall be equal to the Winning Bid Rate for shares of
such series so determined;
(ii) if Sufficient Clearing Bids for shares of such series do not
exist (other than because all of the Outstanding shares of such series are
subject to Submitted Hold Orders), that the Applicable Rate for all shares
of such series for the next succeeding Rate Period thereof shall be equal
to the Maximum Rate for shares of such series; or
(iii) if all of the Outstanding shares of such series are subject to
Submitted Hold Orders, that the Applicable Rate for all shares of such
series for the next succeeding Rate Period thereof shall be as set forth in
subparagraph (c) of this paragraph 3.
(c) For purposes of subparagraph (b)(iii) of this paragraph 3, the
Applicable Rate for shares of such series for the next succeeding Rate Period of
shares of such series shall be equal to the lesser of the Kenny Index (if such
Rate Period consists of fewer than 183 Rate Period Days) or the product of (A)
(I) the "AA" Composite Commercial Paper Rate on such Auction Date for such Rate
Period, if such Rate Period consists of fewer than 183 Rate Period Days; (II)
the Treasury Bill Rate on such Auction Date for such Rate Period, if such Rate
Period consists of more than 182 but fewer than 365 Rate Period Days; or (III)
the Treasury Note Rate on such Auction Date for such Rate Period, if such Rate
Period is more than 364 Rate Period Days (the rate described in the foregoing
clause (A)(I), (II) or (III), as applicable, being referred to herein as the
"Benchmark Rate") and (B) 1 minus the greater of the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or the maximum
marginal regular
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Federal corporate income tax rate applicable to ordinary income; provided,
however, that if the Trust has notified the Auction Agent of its intent to
allocate to shares of such series in such Rate Period any net capital gains or
other income taxable for Federal income tax purposes ("Taxable Income"), the
Applicable Rate for shares of such series for such Rate Period will be (i) if
the Taxable Yield Rate (as defined below) is greater than the Benchmark Rate,
then the Benchmark Rate, or (ii) if the Taxable Yield Rate is less than or equal
to the Benchmark Rate, then the rate equal to the sum of (x) the lesser of the
Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or
the product of the Benchmark Rate multiplied by the factor set forth in the
preceding clause (B) and (y) the product of the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax applicable to ordinary income, whichever is
greater, multiplied by the Taxable Yield Rate. For purposes of the foregoing,
"Taxable Yield Rate" means the rate determined by (a) dividing the amount of
Taxable Income available for distribution per such share of Municipal Preferred
by the number of days in the Dividend Period in respect of which such Taxable
Income is contemplated to be distributed, (b) multiplying the amount determined
in (a) above by 365 (in the case of a Dividend Period of 7 Rate Period Days) or
360 (in the case of any other Dividend Period), and (c) dividing the amount
determined in (b) above by $25,000.
4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS
AND ALLOCATION OF SHARES. Existing Holders shall continue to hold the shares of
Municipal Preferred that are subject to Submitted Hold Orders, and, based on the
determinations made pursuant to subparagraph (a) of paragraph 3 of Part II of
this Section 12.1, the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected by the Auction Agent and the Auction Agent shall take such
other action as set forth below:
(a) If Sufficient Clearing Bids for shares of a series of Municipal
Preferred have been made, all Submitted Sell Orders with respect to shares of
such series shall be accepted and, subject to the provisions of subparagraphs
(d) and (e) of this paragraph 4, Submitted Bids with respect to shares of such
series shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids with respect to shares of such series
shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is higher than the Winning Bid Rate for shares of
such series shall be accepted, thus requiring each such Existing Holder to
sell the shares of Municipal Preferred subject to such Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be rejected, thus entitling each such Existing Holder to
continue to hold the shares of Municipal Preferred subject to such
Submitted Bids;
(iii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be accepted;
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(iv) each Existing Holders' Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be rejected, thus entitling such Existing Holder to continue
to hold the share of Municipal Preferred subject to such Submitted Bid,
unless the number of Outstanding shares of Municipal Preferred subject to
all such Submitted Bids shall be greater than the number of shares of
Municipal Preferred ("remaining shares") in the excess of the Available
Municipal Preferred of such series over the number of shares of Municipal
Preferred subject to Submitted Bids described in clauses (ii) and (iii) of
this subparagraph (a), in which event such Submitted Bid of such Existing
Holder shall be rejected in part, and such Existing Holder shall be
entitled to continue to hold shares of Municipal Preferred subject to such
Submitted Bid, but only in an amount equal to the number of shares of
Municipal Preferred of such series obtained by multiplying the number of
remaining shares by a fraction, the numerator of which shall be the number
of Outstanding shares of Municipal Preferred held by such Existing Holder
subject to such Submitted Bid and the denominator of which shall be the
aggregate number of Outstanding shares of Municipal Preferred subject to
such Submitted Bids made by all such Existing Holders that specified a rate
equal to the Winning Bid Rate for shares of such series; and
(v) each Potential Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate of shares of such
series shall be accepted but only in an amount equal to the number of
shares of such series obtained by multiplying the number of shares in the
excess of the Available Municipal Preferred of such series over the number
of shares of Municipal Preferred subject to Submitted Bids described in
clauses (ii) through (iv) of this subparagraph (a) by a fraction, the
numerator of which shall be the number of Outstanding shares of Municipal
Preferred subject to such Submitted Bids and the denominator of which shall
be the aggregate number of Outstanding shares of Municipal Preferred
subject to such Submitted Bids made by all such Potential Holders that
specified a rate equal to the Winning Bid Rate for shares of such series.
(b) If Sufficient Clearing Bids for shares of a series of Municipal
Preferred have not been made (other than because all of the Outstanding shares
of such series are subject to Submitted Hold Orders), subject to the provisions
of subparagraph (d) of this paragraph 4, Submitted Orders for shares of such
series shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids for shares of such series shall be
rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be rejected, thus entitling such Existing
Holders to continue to hold the shares of Municipal Preferred subject to
such Submitted Bids;
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(ii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of such series
specifying any rate that is higher than the Maximum Rate for shares of such
series and the Submitted Sell Orders for shares of such series of each
Existing Holder shall be accepted, thus entitling each Existing Holder that
submitted or on whose behalf was submitted any such Submitted Bid or
Submitted Sell Order to sell the shares of such series subject to such
Submitted Bid or Submitted Sell Order, but in both cases only in an amount
equal to the number of shares of such series obtained by multiplying the
number of shares of such series subject to Submitted Bids described in
clause (ii) of this subparagraph (b) by a fraction, the numerator of which
shall be the number of Outstanding shares of such series held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order and
the denominator of which shall be the aggregate number of Outstanding
shares of such series subject to all such Submitted Bids and Submitted Sell
Orders.
(c) If all of the Outstanding shares of a series of Municipal Preferred are
subject to Submitted Hold Orders, all Submitted Bids for shares of such series
shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of
subparagraph (a) or clause (iii) of subparagraph (b) of this paragraph 4, any
Existing Holder would be entitled or required to sell, or any Potential Holder
would be entitled or required to purchase, a fraction of a share of a series of
Municipal Preferred on any Auction Date, the Auction Agent shall, in such manner
as it shall determine in its sole discretion, round up or down the number of
shares of Municipal Preferred of such series to be purchased or sold by any
Existing Holder or Potential Holder on such Auction Date as a result of such
procedures so that the number of shares so purchased or sold by each Existing
Holder or Potential Holder on such Auction Date shall be whole shares of
Municipal Preferred.
(e) If, as a result of the procedures described in clause (v) of paragraph
(a) of this paragraph 4, any Potential Holder would be entitled or required to
purchase less than a whole share of series of Municipal Preferred on any Auction
Date, the Auction Agent shall, in such manner as it shall determine in its sole
discretion, allocate shares of Municipal Preferred of such series for purchase
among Potential Holders so that only whole shares of Municipal Preferred of such
series are purchased on such Auction Date as a result of such procedures by any
Potential Holder, even if such allocation results in one or more Potential
Holders not purchasing shares of Municipal Preferred of such series on such
Auction Date.
(f) Based on the results of each Auction for shares of a series of
Municipal Preferred, the Auction Agent shall determine the aggregate number of
shares of such series to be purchased and the aggregate number of shares of such
series to be sold by Potential Holders and Existing Holders and, with respect to
each Potential Holder and Existing Holder, to the extent that such
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aggregate number of shares to be purchased and such aggregate number of shares
to be sold differ, determine to which other Potential Holder(s) or Existing
Holder(s) they shall deliver, or from which other Potential Holder(s) or
Existing Holder(s) they shall receive, as the case may be, shares of Municipal
Preferred of such series. Notwithstanding any provision of the Auction
Procedures or the Settlement Procedures to the contrary, in the event an
Existing Holder or Beneficial Owner of shares of a series of Municipal Preferred
with respect to whom a Broker-Dealer submitted a Bid to the Auction Agent for
such shares that was accepted in whole or in part, or submitted or is deemed to
have submitted a Sell Order for such shares that was accepted in whole or in
part, fails to instruct its Agent Member to deliver such shares against payment
therefor, partial deliveries of shares of Municipal Preferred that have been
made in respect of Potential Holders' or Potential Beneficial Owners' Submitted
Bids for shares of such series that have been accepted in whole or in part shall
constitute good delivery to such Potential Holders and Potential Beneficial
Owners.
(g) Neither the Trust nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Benefit Owner, a Potential Beneficial
Owner or its respective Agent Member to deliver shares of Municipal Preferred of
any series or to pay for shares of Municipal Preferred of any series sold or
purchased pursuant to the Auction Procedures or otherwise.
5. NOTIFICATION OF ALLOCATIONS. Whenever the Trust intends to include any
net capital gain or other income taxable for Federal income tax purposes in any
dividend on shares of Municipal Preferred, the Trust shall, in the case of a
Minimum Rate Period or a Special Rate Period of 28 Rate Period Days or fewer,
and may, in the case of any other Special Rate Period, notify the Auction Agent
of the amount to be so included not later than the Dividend Payment Date next
preceding the Auction Date on which the Applicable Rate for such dividend is to
be established. Whenever the Auction Agent receives such notice from the Trust,
it will be required in turn to notify each Broker-Dealer, who, on or prior to
such Auction Date, in accordance with its Broker-Dealer Agreement, will be
required to notify its Beneficial Owners and Potential Beneficial Owners of
shares of Municipal Preferred believed by it to be interested in submitting an
Order in the Auction to be held on such Auction Date.
6. AUCTION AGENT. For so long as any shares of Municipal Preferred are
outstanding, the Auction Agent, duly appointed by the Trust to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Trust and its affiliates (which however, may engage or have
engaged in business transactions with the Trust or its affiliates) and at no
time shall the Trust or any of its affiliates act as the Auction Agent in
connection with the Auction Procedures. If the Auction Agent resigns or for any
reason its appointment is terminated during any period that any shares of
Municipal Preferred are outstanding, the Board of Trustees shall use its best
efforts promptly thereafter to appoint another qualified commercial bank, trust
company or financial institution to act as the Auction Agent. The Auction
Agent's registry of Existing Holders of shares of a series of Municipal
Preferred shall be conclusive and binding on the Broker-Dealers. A Broker-Dealer
may inquire of the Auction Agent between
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3:00 p.m. on the Business Day preceding an Auction for shares of a series of
Municipal Preferred and 9:30 a.m. on the Auction Date for such Auction to
ascertain the number of shares of a series in respect of which the Auction Agent
has determined such Broker-Dealer to be an Existing Holder. If such
Broker-Dealer believes it is the Existing Holder of fewer shares of such series
than specified by the Auction Agent in response to such Broker-Dealer's inquiry,
such Broker-Dealer may so inform the Auction Agent of that belief. Such
Broker-Dealer shall not, in its capacity as Existing Holder of shares of such
series, submit Orders in such Auction in respect of shares of such series
covering in the aggregate more than the number of shares of such series
specified by the Auction Agent in response to such Broker-Dealer's inquiry.
7. TRANSFER OF SHARES OF MUNICIPAL PREFERRED. Unless otherwise permitted
by the Trust, a Beneficial Owner or an Existing Holder may sell, transfer or
otherwise dispose of shares of Municipal Preferred only in whole shares and only
pursuant to a Bid or Sell Order placed with the Auction Agent in accordance with
the procedures described in Part II of this Section 12.1 or to a Broker-Dealer;
provided, however, that (a) a sale, transfer or other disposition of shares of
Municipal Preferred from a customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer as the holder of such shares to that Broker-Dealer
or another customer of that Broker-Dealer shall not be deemed to be a sale,
transfer or other disposition for purposes of this paragraph 7 if such
Broker-Dealer remains the Existing Holder of the shares so sold, transferred or
disposed of immediately after such sale, transfer or disposition and (b) in the
case of all transfers other than pursuant to Auctions, the Broker-Dealer (or
other Person, if permitted by the Trust) to whom such transfer is made shall
advise the Auction Agent of such transfer.
8. GLOBAL CERTIFICATE. Prior to the commencement of a Voting Period, (i)
all of the shares of a series of Municipal Preferred outstanding from time to
time shall be represented by one global certificate registered in the name of
the Securities Depository or its nominee and (ii) no registration of transfer of
shares of a series of Municipal Preferred shall be made on the books of the
Trust to any Person other than the Securities Depository or its nominee.
ARTICLE 13
AMENDMENTS
These By-Laws may be amended or replaced, in whole or in part, by a
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such a majority. Any action required to be taken
by a majority of the Trustees under this Article may also be taken by a
committee of the Trustees duly appointed for the purpose.
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EXECUTION COPY
COLONIAL CALIFORNIA INSURED MUNICIPAL FUND
2,400,000 Shares
Common Shares of Beneficial Interest
UNDERWRITING AGREEMENT
October 26, 1999
SALOMON SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
PAINE WEBBER INCORPORATED
As Representatives of the
several Underwriters listed in
Schedule I hereto
c/o SALOMON SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Colonial California Insured Municipal Fund, a Massachusetts business trust
(the "Trust"), proposes, upon the terms and conditions set forth herein, to
issue and sell an aggregate of 2,400,000 shares (the "Firm Shares") of its
common shares of beneficial interest, no par value per share (the "Common
Shares"). The Trust also proposes to grant to the Underwriters (as defined
below), upon the terms and subject to the conditions set forth herein, an option
to purchase up to 360,000 additional shares (the "Option Shares" and together
with the Firm Shares, the "Shares") of its Common Shares. The Shares will be
authorized by, and subject to the terms and conditions of, the Agreement and
Declaration of Trust of the Trust, as amended (the "Declaration"), in the form
filed as an exhibit to the Registration Statement referred to in Section 1 of
this agreement. The Trust and its investment adviser, Colonial Management
Associates, Inc. ("CMA" or the "Advisor"), wish to confirm as follows their
agreement with Salomon Smith Barney Inc., A.G. Edwards & Sons, Inc. and Paine
Webber Incorporated (the "Representatives"), as representatives of the several
Underwriters listed in Schedule I hereto (the "Underwriters"), in connection
with the purchase of the Shares by the Underwriters.
Collectively, the Management Agreement dated as of October 25, 1999 between
the Trust and CMA (the "Management Agreement"), the Custodian Agreement dated as
of August 17, 1997 between the Trust and The Chase Manhattan Bank (the
"Custodian
<PAGE> 2
2
Agreement"), and the Stock Transfer Agent Agreement dated as of October 25, 1999
between the Trust and BankBoston, N.A. (the "Transfer Agency Agreement") are
hereinafter referred to as the "Trust Agreements." This Underwriting Agreement
is hereinafter referred to as the "Agreement."
1. REGISTRATION STATEMENT AND PROSPECTUS. The Trust has prepared in
conformity with the provisions of the Securities Act of 1933, as amended (the
"1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations of the Securities and Exchange Commission (the
"Commission") promulgated under the 1933 Act (the "1933 Act Rules and
Regulations") and the 1940 Act (the "1940 Act Rules and Regulations" and,
together with the 1933 Act Rules and Regulations, the "Rules and Regulations") a
registration statement on Form N-2, as amended (File Nos. 333-84993 and
811-09537), under the 1933 Act and the 1940 Act (the "registration statement"),
including a prospectus relating to the Shares, and has filed the registration
statement and prospectus in accordance with the 1933 Act and the 1940 Act. The
Trust also has filed a notification of registration of the Trust as an
investment company under the 1940 Act on Form N-8A (the "1940 Act
Notification"). The term "Registration Statement" as used in this Agreement
means the registration statement (including all financial schedules and
exhibits), as amended at the time it becomes effective under the 1933 Act or, if
the registration statement became effective under the 1933 Act prior to the
execution of this Agreement, as amended or supplemented at the time it became
effective, prior to the execution of this Agreement. If it is contemplated, at
the time this Agreement is executed, that a post-effective amendment to the
registration statement will be filed under the 1933 Act and must be declared
effective before the offering of the Shares may commence, the term "Registration
Statement" as used in this Agreement means the registration statement as amended
by said post-effective amendment. If the Trust has filed an abbreviated
registration statement to register an additional amount of Shares pursuant to
Rule 462(b) under the 1933 Act (the "Rule 462 Registration Statement"), then any
reference herein to the term "Registration Statement" shall include such Rule
462 Registration Statement. The term "Prospectus" as used in this Agreement
means the prospectus and statement of additional information in the forms
included in the Registration Statement as supplemented by the addition of the
information contained in the prospectus filed with the Commission pursuant to
Rule 497(h). The term "Prepricing Prospectus" as used in this Agreement means
the prospectus and statement of additional information subject to completion in
the forms included in the registration statement at the time of filing of
amendment no. 2 to the registration statement with the Commission on September
27, 1999, and as such prospectus and statement of additional information shall
have been amended from time to time prior to the date of the Prospectus,
together with any other prospectus and statement of additional information
relating to the Trust other than the Prospectus approved in writing by or
directly or indirectly prepared by the Trust or the Advisor; it being understood
that the definition of Prepricing Prospectus above shall not include any
Prepricing Prospectus prepared by the Underwriters unless approved in writing by
the Trust or the Advisor. The terms "Registration Statement," "Prospectus" and
"Prepricing Prospectus" shall also include any financial statements and other
information incorporated by reference therein.
<PAGE> 3
3
The Trust has furnished you with copies of such registration statement,
each amendment to such registration statement filed with the Commission and each
Prepricing Prospectus.
2. AGREEMENTS TO SELL AND PURCHASE. (a) The Trust hereby agrees, subject
to all the terms and conditions set forth herein, to issue and sell to the
Underwriters and, upon the basis of the representations, warranties and
agreements of the Trust and the Advisor herein contained and subject to all the
terms and conditions set forth herein, each Underwriter agrees severally and not
jointly to purchase from the Trust, at a purchase price of $15.00 per share, the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto.
(b) The Trust also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the Trust herein contained and
subject to all the terms and conditions set forth herein, the Underwriters shall
have the right to purchase from the Trust, at the same purchase price per share
as the Underwriters shall pay for the Firm Shares, pursuant to an option (the
"over-allotment option") which may be exercised at any time and from time to
time prior to 9:00 P.M., New York City time, on the 45th day after the date of
the Prospectus (or, if such 45th day shall be a Saturday or Sunday or a holiday,
on the next business day thereafter when the American Stock Exchange is open for
trading), up to an aggregate of 360,000 Option Shares. Option Shares may be
purchased only for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. Upon any exercise of the over-allotment
option, each Underwriter, severally and not jointly, agrees to purchase from the
Trust the number of Option Shares (subject to such adjustments as you may
determine in order to avoid fractional shares) which bears the same proportion
to the number of Option Shares to be purchased by the Underwriters as the number
of Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto (or such number of Firm Shares increased as set forth in Section 11
hereof) bears to the aggregate number of Firm Shares.
(c) The Trust also agrees, subject to all the terms and conditions set
forth herein, to sell to the Advisor, and, upon the basis of the
representations, warranties and agreements of the Trust herein contained and
subject to all the terms and conditions set forth herein, the Advisor shall have
the right to purchase from the Trust, at the same purchase price per share as
the Underwriters shall pay for the Option Shares, pursuant to an option (the
"Advisor Option") which may be exercised at any time and from time to time prior
to 9:00 P.M., New York City time, on the 45th day after the date of the
Prospectus (or, if such 45th day shall be a Saturday or Sunday or a holiday, on
the next business day thereafter when the American Stock Exchange is open for
trading), up to an aggregate of 1,000 shares of beneficial interest of the Trust
(the "Advisor Shares").
3. TERMS OF PUBLIC OFFERING. The Trust and the Advisor have been advised
by you that the Underwriters propose to make a public offering of their
respective Shares as soon after the Registration Statement and this Agreement
have become effective as in your judgment is advisable and initially to offer
the Shares upon the terms set forth in the Prospectus.
<PAGE> 4
4
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares and the Option Shares (if the
option provided for in Section 2(b) hereof shall have been exercised on or
before the third business day prior to the Closing Date (as defined below))
shall be made at the office of Simpson Thacher & Bartlett, 425 Lexington Avenue,
New York, NY 10017, at 9:30 A.M., New York City time, on October 29, 1999 (the
"Closing Date"). The place of closing for the Firm Shares and the Closing Date
may be varied by agreement between you and the Trust.
Delivery to the Underwriters of and payment for any Option Shares to be
purchased by the Underwriters shall be made at the aforementioned office of
Simpson Thacher & Bartlett at such time on such date (the "Option Closing
Date"), which may be the same as the Closing Date but shall in no event be
earlier than the Closing Date nor earlier than two nor later than ten business
days after the giving of the notice hereinafter referred to, as shall be
specified in a written notice from you on behalf of the Underwriters to the
Trust of the Underwriters' determination to purchase a number, specified in such
notice, of Option Shares. The place of closing for any Option Shares and the
Option Closing Date for such Shares may be varied by agreement between you and
the Trust.
The place and time for the closing of the Advisor Shares shall be as agreed
upon by the Advisor and the Trust, except that the date of such closing for the
Advisor Shares shall in no event be earlier than the Closing Date.
Certificates for the Firm Shares and for any Option Shares to be purchased
hereunder shall be registered in such names and in such denominations as you
shall request prior to 9:30 A.M., New York City time, on the second business day
preceding the Closing Date or any Option Closing Date, as the case may be. Such
certificates shall be made available to you in New York City for inspection and
packaging not later than 9:30 A.M., New York City time, on the business day next
preceding the Closing Date or the Option Closing Date, as the case may be. The
certificates evidencing the Firm Shares and any Option Shares to be purchased
hereunder shall be delivered to you on the Closing Date or the Option Closing
Date, as the case may be, through the facilities of The Depository Trust
Company, against payment of the purchase price therefor in immediately available
funds.
5. AGREEMENTS OF THE TRUST AND THE ADVISOR. The Trust and the Advisor,
jointly and severally, agree with the several Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective under the 1933 Act before the offering of the Shares
may commence, the Trust will endeavor to cause the Registration Statement or
such post-effective amendment to become effective under the 1933 Act as soon as
possible and will advise you promptly and, if requested by you, will confirm
such advice in writing when the Registration Statement or such post-effective
amendment has become effective.
<PAGE> 5
5
(b) The Trust will advise you promptly and, if requested by you, will
confirm such advice in writing: (i) of any request made by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus (or any amendment or supplement to any of the
foregoing) or for additional information, (ii) of the issuance by the
Commission, the National Association of Securities Dealers, Inc. (the "NASD"),
any state securities commission, any national securities exchange, any
arbitrator, any court or any other governmental, regulatory, self-regulatory or
administrative agency or any official of any order suspending the effectiveness
of the Registration Statement, prohibiting or suspending the use of the
Prospectus or any Prepricing Prospectus, or any sales material (as hereinafter
defined), of any notice pursuant to Section 8(e) of the 1940 Act, of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purposes, (iii)
of receipt by the Trust, the Advisor, any affiliate of the Trust or the Advisor
or any representative or attorney of the Trust or the Advisor of any other
material communication from the Commission, the NASD, any state securities
commission, any national securities exchange, any arbitrator, any court or any
other governmental, regulatory, self-regulatory or administrative agency or any
official relating to the Trust (if such communication relating to the Trust is
received by such person within three years after the date of this Agreement),
the Registration Statement, the 1940 Act Notification, the Prospectus, any
Prepricing Prospectus, any sales material (as herein defined) (or any amendment
or supplement to any of the foregoing) or this Agreement or any of the Trust
Agreements and (iv) within the period of time referred to in paragraph (f)
below, of any material adverse change in the condition (financial or other),
business, prospects, properties, net assets or results of operations of the
Trust or the Advisor or of the happening of any other event which makes any
statement of a material fact made in the Registration Statement or the
Prospectus, or any Prepricing Prospectus or any sales materials (as herein
defined) (or any amendment or supplement to any of the foregoing) untrue or
which requires the making of any additions to or changes in the Registration
Statement or the Prospectus, or any Prepricing Prospectus or any sales materials
(as herein defined) (or any amendment or supplement to any of the foregoing) in
order to state a material fact required by the 1933 Act, the 1940 Act or the
Rules and Regulations to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or of the necessity to amend or supplement the Registration
Statement, the Prospectus, or any Prepricing Prospectus or any sales material
(as herein defined) (or any amendment or supplement to any of the foregoing) to
comply with the 1933 Act, the 1940 Act, the Rules and Regulations or any other
law or order of any court or regulatory body. If at any time the Commission, the
NASD, any state securities commission, any national securities exchange, any
arbitrator, any court or any other governmental, regulatory, self-regulatory or
administrative agency or any official shall issue any order suspending the
effectiveness of the Registration Statement, prohibiting or suspending the use
of the Prospectus or any sales material (as herein defined) (or any amendment or
supplement to any of the foregoing) or suspending the qualification of the
Shares for offering or sale in any jurisdiction, the Trust will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.
(c) The Trust will furnish to you, without charge, three signed copies of
the Registration Statement as originally filed with the Commission and of each
amendment thereto,
<PAGE> 6
6
including financial statements and all exhibits thereto, and will also furnish
to you, without charge, such number of conformed copies of the Registration
Statement as originally filed and of each amendment thereto, but without
exhibits, as you may request.
(d) The Trust will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus, or any sales
material (as herein defined), of which you shall not previously have been
advised or to which you shall reasonably object after being so advised or (ii)
so long as, in the opinion of counsel for the Underwriters, a Prospectus is
required by the 1933 Act to be delivered in connection with sales by any
Underwriter or any dealer, file any information, documents or reports pursuant
to the Securities Exchange Act of 1934, as amended (the "1934 Act"), without
delivering a copy of such information, documents or reports to you, as
Representatives of the several Underwriters, prior to or concurrently with such
filing.
(e) Prior to the execution and delivery of this Agreement, the Trust has
delivered to you, without charge, in such quantities as you have requested,
copies of each form of the Prepricing Prospectus. The Trust consents to the use,
in accordance with the provisions of the 1933 Act and with the state securities
or blue sky laws of the jurisdictions in which the Shares are offered by the
several Underwriters and by dealers, prior to the date of the Prospectus, of
each Prepricing Prospectus so furnished by the Trust.
(f) As soon after the execution and delivery of this Agreement as possible
and thereafter from time to time for such period as in the opinion of counsel
for the Underwriters a prospectus is required by the 1933 Act to be delivered in
connection with sales by any Underwriter or any dealer, the Trust will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may reasonably request. The Trust consents to the use of the Prospectus (and
of any amendment or supplement thereto) in accordance with the provisions of the
1933 Act and with the state securities or blue sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
the 1933 Act to be delivered in connection with sales by any Underwriter or any
dealer. If during such period of time any event shall occur that in the judgment
of the Trust or in the opinion of counsel for the Underwriters is required to be
set forth in the Registration Statement or the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Registration
Statement or the Prospectus to comply with the 1933 Act, the 1940 Act, the Rules
and Regulations or any other federal law, rule or regulation, or any state
securities or blue sky disclosure laws, rules or regulations, the Trust will
forthwith prepare and, subject to the provisions of paragraph (d) above,
promptly file with the Commission an appropriate supplement or amendment
thereto, and will expeditiously furnish to the Underwriters and dealers, without
charge, a reasonable number of copies thereof; provided that, if the supplement
or amendment is required exclusively as a result of a misstatement in or
omission from the information provided to the Trust in writing by the
Underwriters expressly for use in the Prospectus, the Trust may deliver such
supplement or
<PAGE> 7
7
amendment to the Underwriters and dealers at a reasonable charge not to exceed
the actual cost thereof to the Trust. In the event that the Trust and you, as
Representatives of the several Underwriters, agree that the Registration
Statement or the Prospectus should be amended or supplemented, the Trust, if
requested by you, will promptly issue a press release announcing or disclosing
the matters to be covered by the proposed amendment or supplement.
(g) The Trust will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or blue sky laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Trust be obligated to qualify to do business or as a
dealer in securities in any jurisdiction where it is not now so qualified or to
take any action which would subject it to service of process in suits, other
than those arising out of the offering or sale of the Shares, in any
jurisdiction where it is not now so subject nor will the Trust be obligated to
execute a general consent to service of process.
(h) The Trust will make generally available to its security holders an
earnings statement, which need not be audited, covering a twelve-month period
ending not later than 15 months after the effective date of the Registration
Statement as soon as practicable after the end of such period, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule
158 of the 1933 Act Rules and Regulations.
(i) During the period of five years hereafter, the Trust will furnish to
you (i) as soon as available, a copy of each report of the Trust mailed to
shareholders or filed with the Commission or furnished to the American Stock
Exchange (the "AMEX") other than reports on Form N-SAR, and (ii) from time to
time such other information concerning the Trust as you may reasonably request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than by notice given by
you terminating this Agreement pursuant to Section 12 hereof or pursuant to the
second paragraph of Section 11 hereof) or if this Agreement shall be terminated
by the Underwriters because of any failure or refusal on the part of the Trust
or the Advisor to comply with the terms or fulfill any of the conditions of this
Agreement, the Trust and the Advisor, jointly and severally, agree to reimburse
the Representatives for all out-of-pocket expenses (including reasonable fees
and expenses of counsel for the Underwriters) incurred by the Underwriters in
connection herewith.
(k) The Trust will apply the net proceeds from the sale of the irm Shares,
and of the Option Shares, if any, substantially in accordance with the
description set forth in the Prospectus and in such a manner as to comply with
the investment objectives, policies and restrictions of the Trust as described
in the Prospectus.
(l) The Trust will timely file the requisite copies of the Prospectus with
the Commission pursuant to Rule 497(c) or Rule 497(h) of the 1933 Act Rules and
Regulations, whichever is applicable or, if applicable, will timely file the
certification permitted by Rule
<PAGE> 8
8
497(j) of the 1933 Act Rules and Regulations and will advise you of the time and
manner of such filing.
(m) Except as provided in this Agreement, the Trust will not sell,
contract to sell or otherwise dispose of any Common Shares or any securities
convertible into or exercisable or exchangeable for Common Shares, or grant any
options or warrants to purchase Common Shares, for a period of 180 days after
the date of the Prospectus, without the prior written consent of Salomon Smith
Barney Inc.; provided, however, that the Trust may issue and make open market
purchases of Common Shares pursuant to any dividend reinvestment plan of the
Trust in effect as of the Closing Date.
(n) Except as stated in this Agreement and in the Prepricing Prospectus
and Prospectus, and except for share repurchases, tender offers or purchases of
Shares in the open market pursuant to the Trust's dividend reinvestment plan,
neither the Trust nor the Advisor has taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Shares or any
other securities issued by the Trust to facilitate the sale or resale of the
Shares.
(o) The Trust will use its best efforts to cause the Shares to be duly
authorized for listing by the AMEX prior to the date the Shares are issued.
(p) The Trust will use its best efforts to comply with all requirements
under the Internal Revenue Code of 1986, as amended (the "Code") to qualify as a
regulated investment company under Subchapter M of the Code.
(q) The Trust and the Advisor will each use its best efforts to perform
all of the agreements required of it and discharge all conditions to closing as
set forth in this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE TRUST AND THE ADVISOR. The Trust
and the Advisor, jointly and severally, represent and warrant to each
Underwriter that:
(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 497 of the 1933 Act Rules and Regulations, complied
when so filed in all material respects with the provisions of the 1933 Act, the
1940 Act and the Rules and Regulations. The Commission has not issued any order
preventing or suspending the use of any Prepricing Prospectus.
(b) The registration statement in the form in which it became or becomes
effective and also in such form as it may be when any post-effective amendment
thereto shall become effective and the Prospectus and any supplement or
amendment thereto when filed with the Commission under Rule 497 of the 1933 Act
Rules and Regulations and the 1940 Act Notification when originally filed with
the Commission and any amendment or supplement thereto when filed with the
Commission, complied or will comply in all material respects with the
requirements of the 1933 Act, the 1940 Act and the Rules and Regulations, as
applicable, and did not or will not at any such times contain an untrue
statement of a material fact or omit to state
<PAGE> 9
9
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that this representation and warranty does not apply to
(i) statements in or omissions from the registration statement or the Prospectus
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Trust in writing by or on behalf of any Underwriter
expressly for use therein or (ii) with respect to the representations of the
Trust, the description of the Advisor contained in the Prospectus under the
heading "Management of the Fund."
(c) All the outstanding shares of beneficial interest of the Trust have
been duly authorized and validly issued, are fully paid and, except as set forth
in the Statement of Additional Information of the Trust under "Shareholder
Liability," nonassessable and are free of any preemptive or similar rights; the
Shares have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof, will
be validly issued, fully paid and, except as set forth in the Statement of
Additional Information of the Trust under "Shareholder Liability," nonassessable
and free of any preemptive or similar rights that entitle or will entitle any
person to acquire any Shares upon the issuance thereof by the Trust, and will
conform to the description thereof in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them); and the
capitalization of the Trust conforms to the description thereof in the
Registration Statement and the Prospectus (and any amendment or supplement to
either of them).
(d) Except for the Option Shares and the Advisor Shares and as otherwise
described in the Prospectus, there are no outstanding options, warrants or other
rights calling for the issuance of, or any commitment, plan or arrangement to
issue, any shares of beneficial interest of the Trust or any security
convertible into or exchangeable or exercisable for shares of beneficial
interest of the Trust.
(e) The Trust is a business trust duly organized and validly existing in
good standing under the laws of the Commonwealth of Massachusetts with full
business trust power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them), and is duly
registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify does not have a material adverse effect on the
condition (financial or other), business, prospects, properties, net assets or
results of operations of the Trust; and the Trust has no subsidiaries.
(f) There are no legal or governmental proceedings pending or, to the
knowledge of the Trust, threatened, against the Trust, or to which the Trust or
any of its properties is subject, that are required to be described in the
Registration Statement or the Prospectus (and any amendment or supplement to
either of them) but are not described as required, and there are no agreements,
contracts, indentures, leases or other instruments that are required to be
described in the Registration Statement or the Prospectus (and any amendment or
supplement to either of them) or to be filed as an exhibit to the Registration
Statement that are not described or filed as required by the 1933 Act, the 1940
Act or the Rules and Regulations.
<PAGE> 10
10
(g) The Trust is not in violation of the Declaration or its bylaws (the
"Bylaws"), or other organizational documents of the Trust (together with the
Declaration and the Bylaws, the "Organizational Documents") or of any law,
ordinance, administrative or governmental rule or regulation applicable to the
Trust or of any decree of the Commission, the NASD, any state securities
commission, any national securities exchange, any arbitrator, any court or
governmental agency, body or official having jurisdiction over the Trust, or in
default in the performance of any material obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any material agreement, indenture, lease or other instrument to which the
Trust is a party or by which it or any of its properties may be bound, except
where such violation does not have a material adverse effect on the condition
(financial or other), business, prospects, properties, net assets or results of
operations of the Trust.
(h) Neither the issuance and sale of the Shares, the execution, delivery
or performance of this Agreement or any of the Trust Agreements by the Trust,
nor the consummation by the Trust of the transactions contemplated hereby or
thereby (A) requires any consent, approval, authorization or other order of, or
registration or filing with, the Commission, the NASD, any state securities
commission, any national securities exchange, any arbitrator, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may have been obtained prior to the date hereof and
such as may be required for compliance with the state securities or blue sky
laws of various jurisdictions which have been or will be effected in accordance
with this Agreement) or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the Organizational Documents or (B)
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under, any agreement, indenture, lease or other instrument to which
the Trust is a party or by which it or any of its properties may be bound, or
violates or will violate any statute, law, regulation or judgment, injunction,
order or decree applicable to the Trust or any of its properties, or will result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Trust pursuant to the terms of any agreement or
instrument to which it is a party or by which it may be bound or to which any of
its property or assets is subject. The Trust is not subject to any order of any
court or of any arbitrator, governmental authority or administrative agency.
(i) The accountants, PricewaterhouseCoopers LLP, who have certified or
shall certify the financial statements included or incorporated by reference in
the Registration Statement and the Prospectus (or any amendment or supplement to
either of them) are independent public accountants as required by the 1933 Act,
the 1940 Act and the Rules and Regulations.
(j) The financial statements, together with related schedules and notes,
included or incorporated by reference in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them), present fairly
the financial position, results of operations and changes in financial position
of the Trust on the basis stated or incorporated by reference in the
Registration Statement at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the
<PAGE> 11
11
periods involved, except as disclosed therein; and the other financial and
statistical information and data included in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them) are accurately
presented and prepared on a basis consistent with such financial statements and
the books and records of the Trust.
(k) The execution and delivery of, and the performance by the Trust of its
obligations under, this Agreement and the Trust Agreements have been duly and
validly authorized by the Trust, and this Agreement and the Trust Agreements
have been duly executed and delivered by the Trust and assuming due
authorization, execution and delivery by the other parties thereto, constitute
the valid and legally binding agreements of the Trust, enforceable against the
Trust in accordance with their terms (subject to the qualification that the
enforceability of the Trust's obligations thereunder may be limited by
bankruptcy, insolvency, reorganization, moratorium, and similar laws of general
applicability relating to or affecting creditors' rights, and to general
principles of equity regardless of whether enforceability is considered in a
proceeding in equity or at law), except as rights to indemnity and contribution
hereunder and thereunder may be limited by federal or state securities laws.
(l) Except as disclosed in the Registration Statement and the Prospectus
(or any amendment or supplement to either of them), subsequent to the respective
dates as of which such information is given in the Registration Statement and
the Prospectus (or any amendment or supplement to either of them), the Trust has
not incurred any liability or obligation, direct or contingent, or entered into
any transaction, not in the ordinary course of business, that is material to the
Trust, and there has not been any change in the capitalization, or material
increase in the short-term debt or long-term debt, of the Trust, or any material
adverse change, or any development involving or which may reasonably be expected
to involve, a prospective material adverse change, in the condition (financial
or other), business, prospects, properties, net assets or results of operations
of the Trust, whether or not arising in the ordinary course of business (a
"Material Adverse Effect").
(m) The Trust has not distributed and, prior to the later to occur of (i)
the Closing Date and (ii) completion of the distribution of the Shares, will not
distribute any offering material in connection with the offering and sale of the
Shares other than the Registration Statement, the Prepricing Prospectus, the
Prospectus or other materials, if any, permitted by the 1933 Act, the 1940 Act
or the Rules and Regulations.
(n) (i) The Trust has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits") as are
necessary to own its properties and to conduct its business in the manner
described in the Prospectus (and any amendment or supplement thereto), except
for any such permits the absence of which would not have a Material Adverse
Effect and subject to such qualifications as may be set forth in the Prospectus;
(ii) the Trust has fulfilled and performed all its material obligations with
respect to such permits and no event has occurred which allows, or after notice
or lapse of time would allow, revocation or termination thereof or results in
any other material impairment of the rights of the Trust under any such permit,
subject in each case to such qualification as may be set forth in the Prospectus
(and any amendment or supplement thereto); and (iii) except as described in the
Prospectus (and
<PAGE> 12
12
any amendment or supplement thereto), none of such permits contains any
restriction that is materially burdensome to the Trust, except where the failure
of (i), (ii) or (iii) to be accurate would not, individually or in the
aggregate, have a Material Adverse Effect on the Trust.
(o) The Trust maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization and with the
applicable requirements of the 1940 Act, the 1940 Act Rules and Regulations and
the Code; (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting principles
and to maintain accountability for assets and to maintain compliance with the
books and records requirements under the 1940 Act and the 1940 Act Rules and
Regulations; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(p) To the Trust's knowledge, neither the Trust nor any employee or agent
of the Trust has made any payment of funds of the Trust or received or retained
any funds, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus, except for the issuance of up to
6,667 shares of beneficial interest of the Trust to the Advisor to comply with
the net worth requirements of Section 14(a) of the 1940 Act.
(q) The Trust has filed all tax returns required to be filed, if any,
which returns are complete and correct in all material respects, and the Trust
is not in default in the payment of any taxes which were payable pursuant to
said returns or any assessments with respect thereto.
(r) No holder of any security of the Trust has any right to require
registration of any security of the Trust because of the filing of the
registration statement or consummation of the transactions contemplated by this
Agreement.
(s) The Trust, subject to the registration statement having been declared
effective and the filing of the Prospectus under Rule 497 under the 1933 Act
Rules and Regulations, has taken all required action under the 1933 Act, the
1940 Act and the Rules and Regulations to make the public offering and
consummate the sale of the Shares as contemplated by this Agreement.
(t) The conduct by the Trust of its business (as described in the
Prospectus) does not require it to be the owner, possessor or licensee of any
patents, patent licenses, trademarks, service marks or trade names which it does
not own, possess or license.
(u) The Trust is registered under the 1940 Act as a closed-end,
non-diversified management investment company and the 1940 Act Notification has
been duly filed with the Commission and, at the time of filing thereof and any
amendment or supplement thereto, conformed in all material respects with all
applicable provisions of the 1940 Act and the 1940 Act Rules and Regulations.
The Trust has not received any notice from the Commission pursuant to Section
8(e) of the 1940 Act with respect to the 1940 Act Notification. The Trust is,
<PAGE> 13
13
and at all times through the completion of the transactions contemplated hereby,
will be, in compliance in all material respects with the terms and conditions of
the 1933 Act and the 1940 Act. No person is serving or acting as an officer,
director or investment adviser of the Trust except in accordance with the
provisions of the 1940 Act and the 1940 Act Rules and Regulations and the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and the rules
and regulations of the Commission promulgated under the Advisers Act (the
"Advisers Act Rules and Regulations").
(v) Except as stated in this Agreement and in the Prospectus (and any
amendment or supplement thereto), the Trust has not taken, nor will it take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in stabilization or manipulation of the price of any
securities issued by the Trust to facilitate the sale or resale of the Shares,
and the Trust is not aware of any such action taken or to be taken by any
affiliates of the Trust.
(w) All advertising and other sales literature (including "prospectus
wrappers") authorized in writing by or prepared by the Trust or the Advisor for
use in connection with the offering and sale of the Shares (collectively, "sales
material") complied and comply in all material respects with the applicable
requirements of the 1933 Act, the 1940 Act, the Rules and Regulations and the
rules and interpretations of the NASD and no such sales material contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
The "broker kits" prepared by or approved by the Trust or the Advisor for
distribution to and use internally by brokers and dealers participating in the
offering of the Shares accurately and fairly presents the information contained
therein in all material respects for purposes of such internal use and contains
only information the substance of which is included in the Prospectus or the
Statement of Additional Information of the Trust. Any road show slides and road
show scripts prepared or approved in writing by the Trust or the Advisor for use
in presentations to brokers and dealers participating in the offering of the
Shares accurately and fairly present the information contained therein in all
material respects for purposes of such use.
(x) Each of the Trust Agreements and the Trust's obligations under this
Agreement and each of the Trust Agreements comply in all material respects with
all applicable provisions of the 1933 Act, the 1940 Act, the Rules and
Regulations, the Advisers Act and the Advisers Act Rules and Regulations.
(y) Except as disclosed in the Registration Statement and the Prospectus
(or any amendment or supplement to either of them), no director of the Trust is
an "interested person" (as defined in the 1940 Act) of the Trust or an
"affiliated person" (as defined in the 1940 Act) of any Underwriter.
(z) The Shares have been duly authorized for listing, subject to official
notice of issuance, on the AMEX.
<PAGE> 14
14
(aa) The Advisor has considered, and is taking actions to address, the
possible adverse effects of the Year 2000 on the critical computer systems used
by the Advisor and its affiliates on behalf of the Trust. Testing and
remediation of those systems is complete and the Advisor has determined that
recognition and execution of date-sensitive functions involving certain dates
prior to and after December 31, 1999 (the "Year 2000 Problem") will not pose
significant problems for the computer systems used by the Advisor on behalf of
the Trust. The Advisor believes, after reasonable inquiry, that suppliers,
vendors, or financial service organizations used in the operation of the Trust
have remedied or will remedy the Year 2000 Problem and that those suppliers,
vendors or financial service organizations believe that their modifications will
be completed on a timely basis, except to the extent that a failure to remedy by
any such supplier, vendor, or financial service organization would not have a
material adverse effect on the operations of the Trust. The Trust is in
compliance with the Commission's Release No. 33-7558 related to Year 2000
compliance, as amended to date.
7. REPRESENTATIONS AND WARRANTIES OF THE ADVISOR. CMA represents and
warrants to each Underwriter that:
(a) The Advisor is a corporation duly incorporated and validly existing in
good standing under the laws of the Commonwealth of Massachusetts, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them), and is duly
registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or to qualify does not have a material adverse effect on the
condition (financial or other), business, prospects, properties, net assets or
results of operations of the Advisor or on the ability of the Advisor to perform
its obligations under this Agreement and the Management Agreement.
(b) The Advisor is duly registered with the Commission as an investment
adviser under the Advisers Act and is not prohibited by the Advisers Act, the
Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules and
Regulations from acting under the Management Agreement for the Trust as
contemplated by the Prospectus (or any amendment or supplement thereto). There
does not exist any proceeding or any facts or circumstances the existence of
which could lead to any proceeding which might adversely affect the registration
of the Advisor with the Commission.
(c) There are no legal or governmental proceedings pending or, to the
knowledge of the Advisor, threatened against the Advisor, or to which the
Advisor or any of its properties is subject, that are required to be described
in the Registration Statement or the Prospectus (or any amendment or supplement
to either of them) but are not described as required or that may reasonably be
expected to involve a prospective material adverse change, in the condition
(financial or other), business, prospects, properties, net assets or results of
operations of the Advisor or on the ability of the Advisor to perform its
obligations under this Agreement and the Management Agreement.
<PAGE> 15
15
(d) Neither the execution, delivery or performance of this Agreement or
the performance of the Management Agreement by the Advisor, nor the consummation
by the Advisor of the transactions contemplated hereby or thereby (A) requires
the Advisor to obtain any consent, approval, authorization or other order of or
registration or filing with, the Commission, the NASD, any state securities
commission, any national securities exchange, any arbitrator, any court,
regulatory body, administrative agency or other governmental body, agency or
official or conflicts or will conflict with or constitutes or will constitute a
breach of or a default under, the certificate of incorporation or by-laws, or
other organizational documents, of the Advisor or (B) conflicts or will conflict
with or constitutes or will constitute a breach of or a default under, any
agreement, indenture, lease or other instrument to which the Advisor is a party
or by which it or any of its properties may be bound, or violates or will
violate any statute, law, regulation or filing or judgment, injunction, order or
decree applicable to the Advisor or any of its properties or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Advisor pursuant to the terms of any agreement or instrument to
which it is a party or by which it may be bound or to which any of the property
or assets of the Advisor is subject. The Advisor is not subject to any order of
any court or of any arbitrator, governmental authority or administrative agency.
(e) The execution and delivery of, and the performance by the Advisor of
its obligations under, this Agreement and the Management Agreement have been
duly and validly authorized by the Advisor, and this Agreement and the
Management Agreement have been duly executed and delivered by the Advisor and,
assuming due authorization, execution and delivery by the other parties thereto,
each constitutes the valid and legally binding agreement of the Advisor,
enforceable against the Advisor in accordance with its terms (subject to the
qualification that the enforceability of the Advisor's obligations thereunder
may be limited by bankruptcy, insolvency, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights, and to
general principles of equity regardless of whether enforceability is considered
in a proceeding in equity or at law), except as rights to indemnity and
contribution hereunder may be limited by federal or state securities laws.
(f) The description of the Advisor in the Registration Statement and the
Prospectus (and any amendment or supplement thereto) complied and comply in all
material respects with the provisions of the 1933 Act, the 1940 Act, the
Advisers Act, the Rules and Regulations and the Advisers Act Rules and
Regulations and did not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(g) Except as disclosed in the Registration Statement and the Prospectus
(or any amendment or supplement to either of them), subsequent to the respective
dates as of which such information is given in the Registration Statement and
the Prospectus (or any amendment or supplement to either of them), the Advisor
has not incurred any liability or obligation, direct or contingent, or entered
into any transaction, not in the ordinary course of business, that is material
to the Advisor or the Trust and that is required to be disclosed in the
Registration Statement or the Prospectus and there has not been any material
adverse change, or any development
<PAGE> 16
16
involving or which may reasonably be expected to involve, a prospective material
adverse change, in the condition (financial or other), business, prospects,
properties, net assets or results of operations of the Advisor, whether or not
arising in the ordinary course of business, or which, in each case, could have a
material adverse effect on the ability of the Advisor to perform its obligations
under this Agreement and the Management Agreement.
(h) (i) The Advisor has such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("permits") as are
necessary to own its properties and to conduct its business in the manner
described in the Prospectus (and any amendment thereto); (ii) the Advisor has
fulfilled and performed all its material obligations with respect to such
permits and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other material
impairment of the rights of the Advisor under any such permit; and (iii) except
as described in the Prospectus (and any amendment or supplement thereto), none
of such permits contains any restriction that is materially burdensome to the
Advisor, except where the failure of (i), (ii), or (iii) to be accurate would
not, individually or in the aggregate, have a Material Adverse Effect on the
Advisor.
(i) Except as stated in this Agreement and in the Prospectus (and in any
amendment or supplement thereto), the Advisor has not taken, nor will it take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in stabilization or manipulation of the price of any
securities issued by the Trust to facilitate the sale or resale of the Shares,
and the Advisor is not aware of any such action taken or to be taken by any
affiliates of the Advisor.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Trust and the Advisor,
jointly and severally, agree to indemnify and hold harmless you and each other
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation), joint or several, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Prepricing Prospectus or in the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading, except
insofar as such losses, claims, damages, liabilities or expenses arise out of or
are based upon any untrue statement or omission or alleged untrue statement or
omission which has been made therein or omitted therefrom in reliance upon and
in conformity with the information relating to any Underwriter furnished in
writing to the Trust by or on behalf of any Underwriter expressly for use in
connection therewith; provided, however, that the indemnification contained in
this paragraph (a) with respect to any Prepricing Prospectus, Prospectus or
Registration Statement (or any amendment or supplement to any of the foregoing)
shall not inure to the benefit of any Underwriter (or to the benefit of any
person controlling such Underwriter) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Shares by such Underwriter to
any person if a copy of the Prospectus (or any amendment or supplement thereto)
shall not have been delivered or sent to such person within the time required by
the 1933 Act and
<PAGE> 17
17
the 1933 Act Rules and Regulations, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
Prepricing Prospectus was corrected in the Prospectus (or any amendment or
supplement thereto), provided that the Trust has delivered the Prospectus (or
any amendment or supplement thereto) to the several Underwriters in requisite
quantity on a timely basis to permit such delivery or sending. The foregoing
indemnity agreement shall be in addition to any liability which the Trust or the
Advisor may otherwise have.
(b) Any party that proposes to assert the right to be indemnified under
this Section 8 will, promptly after receipt of notice of commencement of any
action against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 8, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission to so notify such indemnifying party (i) will
not relieve it from any liability that it may have to any indemnified party
under the foregoing provision of this Section 8 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party and (ii) will not, in any event, relieve such
indemnifying party from any other obligation (other than pursuant to the
foregoing provision of this Section 8) it may have under this Agreement. If any
action, suit or proceeding shall be brought against any Underwriter or any
person controlling any Underwriter in respect of which indemnity may be sought
against the Trust or the Advisor, such Underwriter or such controlling person
shall promptly notify the Trust or the Advisor, and the Trust or the Advisor
shall assume the defense thereof, including the employment of counsel and
payment of all fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the Trust or the Advisor have agreed in writing to
pay such fees and expenses, (ii) the Trust and the Advisor have failed to assume
the defense and employ counsel, or (iii) the named parties to any such action,
suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the Trust or the Advisor and such
Underwriter or such controlling person shall have been advised by its counsel
that representation of such indemnified party and the Trust or the Advisor by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between them (in
which case the Trust and the Advisor shall not have the right to assume the
defense of such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the Trust and the Advisor
shall, in connection with any one such action, suit or proceeding or separate
but substantially similar or related actions, suits or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time for all such
Underwriters and controlling persons not having actual or potential differing
interests with you or among themselves, which firm shall be designated in
writing by the Representatives, and that all such fees and expenses shall be
reimbursed as they are incurred. The Trust and the Advisor shall not be liable
for any settlement of any such action, suit or proceeding effected without their
written consent (which consent shall not be unreasonably withheld), but if
settled with such written
<PAGE> 18
18
consent, or if there be a final judgment for the plaintiff in any such action,
suit or proceeding, the Trust and the Advisor agree to indemnify and hold
harmless any Underwriter, to the extent provided in the preceding paragraph, and
any such controlling person from and against any loss, claim, damage, liability
or expense by reason of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Trust and the Advisor, their trustees, directors, any officers
who sign the Registration Statement, and any person who controls the Trust or
the Advisor within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act, to the same extent as the foregoing indemnity from the Trust and
the Advisor to each Underwriter, but only with respect to information relating
to such Underwriter furnished in writing by or on behalf of such Underwriter
expressly for use in the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto. If any action,
suit or proceeding shall be brought against the Trust or the Advisor, any of
their trustees or directors, any such officer, or any such controlling person
based on the Registration Statement, the Prospectus or any Prepricing
Prospectus, or any amendment or supplement thereto, and in respect of which
indemnity may be sought against any Underwriter pursuant to this paragraph (c),
such Underwriter shall have the rights and duties given to the Trust and the
Advisor by paragraph (b) above (except that if the Trust or the Advisor shall
have assumed the defense thereof such Underwriter shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such
Underwriter's expense), and the Trust and the Advisor, their trustees and
directors, any such officer, and any such controlling person shall have the
rights and duties given to the Underwriters by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which the
Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Trust and the
Advisor on the one hand (treated jointly for this purpose as one person) and the
Underwriters on the other hand from the offering of the Shares, or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Trust and the
Advisor on the one hand (treated jointly for this purpose as one person) and the
Underwriters on the other in connection with the statements or omissions that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Trust and the Advisor on the one hand (treated jointly for this purpose as
one person) and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Trust bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault of the Trust and the
Advisor on the one hand (treated jointly for this purpose as one person) and the
Underwriters
<PAGE> 19
19
on the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Trust and the Advisor on the one hand (treated jointly for this
purpose as one person) or by the Underwriters on the other hand and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action against such
party in respect of which a claim for contribution may be made under this
Section 8(d), notify such party or parties from whom contribution may be sought,
but the omission so to notify (i) will not relieve the party or parties from
whom contribution may be sought from any other obligation it or they may have
under this Section 8(d), unless such omission results in the forfeiture of
substantive rights or defenses by the party or parties from whom contribution is
being sought and (ii) will not, in any event, relieve the party or parties from
whom contribution may be sought from any other obligation (other than pursuant
to this Section 8(d)) it or they may have under this Agreement. Except for a
settlement entered into pursuant to the last sentence of Section 8(b) hereof, no
party will be liable for contribution with respect to any action or claim
settled without its written consent (which consent shall not be unreasonably
withheld).
(e) The Trust, the Advisor and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 8 were determined by
a pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages,
liabilities and expenses referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
any claim or defending any such action, suit or proceeding. Notwithstanding the
provisions of this Section 8, no Underwriter shall be required to contribute any
amount in excess of the amount by which such total price of the Shares
underwritten by it and distributed to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section 8 are several in proportion to the
respective numbers of Firm Shares set forth opposite their names in Schedule I
hereto (or such numbers of Firm Shares increased as set forth in Section 11
hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
<PAGE> 20
20
(g) Notwithstanding any other provisions in this Section 8, no party shall
be entitled to the benefit of any provision under this Agreement which protects
or purports to protect such person against any liability to the Trust or its
security holders to which such person would otherwise be subject by reason of
such person's willful misfeasance, bad faith, or gross negligence, in the
performance of such person's duties hereunder, or by reason of such person's
reckless disregard of such person's obligations and duties hereunder.
(h) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Trust and the Advisor set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Trust, the Advisor, their trustees, directors
or officers, or any person controlling the Trust or the Advisor, (ii) acceptance
of any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Trust, the Advisor, their trustees, directors or
officers, or any person controlling the Trust or the Advisor, shall be entitled
to the benefits of the indemnity, contribution, and reimbursement agreements
contained in this Section 8.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase the Firm Shares and the Option Shares, as the case
may be, hereunder are subject to the following conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 497 and 430A under the 1933 Act and the 1933
Act Rules and Regulations shall have been timely made; no stop order suspending
the effectiveness of the Registration Statement or order pursuant to Section
8(e) of the 1940 Act shall have been issued and no proceeding for those purposes
shall have been instituted or, to the knowledge of the Trust, the Advisor or any
Underwriter, threatened by the Commission, and any request of the Commission for
additional information (to be included in the registration statement or the
prospectus or otherwise) shall have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall not
have occurred (i) any change or any development involving a prospective change
in or affecting the condition (financial or other), business, prospects,
properties, net assets, or results of operations of the Trust or the Advisor not
contemplated by the Prospectus, which in your opinion, as Representatives of the
several Underwriters, would materially adversely affect the market for the
Shares, or (ii) any event or development relating to or involving the Trust or
the Advisor or any officer or director of the Trust or the Advisor which makes
any statement made in the Prospectus
<PAGE> 21
21
untrue or which, in the opinion of the Trust and its counsel or the Underwriters
and their counsel, requires the making of any addition to or change in the
Prospectus in order to state a material fact required by the 1933 Act, the 1940
Act or the Rules and Regulations or any other law to be stated therein or
necessary in order to make the statements therein not misleading, if amending or
supplementing the Prospectus to reflect such event or development would, in your
opinion, as Representatives of the several Underwriters, materially adversely
affect the market for the Shares.
(c) You shall have received on the Closing Date an opinion of Ropes &
Gray, counsel for the Trust, dated the Closing Date and addressed to you, as
Representatives of the several Underwriters, in form and substance satisfactory
to you and to the effect that:
(i) The Trust has been duly organized and is validly existing and in
good standing as an unincorporated voluntary association (commonly known as
a Massachusetts business trust) under the laws of the Commonwealth of
Massachusetts and has full power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus and to issue and sell the Shares as
contemplated by this Agreement;
(ii) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance with
the terms of this Agreement, will be validly issued, fully paid and, except
as set forth in the Statement of Additional Information under "Shareholder
Liability," nonassessable and free of any preemptive or similar rights; the
form of certificates evidencing the Shares complies with all requirements
of Massachusetts law;
(iii) The Shares conform in all material respects with the statements
relating thereto contained in the Prospectus under the caption "Description
of Shares"; and the Trust's authorized and outstanding capitalization is as
set forth in the Prospectus under the caption "Description of Shares";
(iv) The Registration Statement is effective under the 1933 Act and
the 1940 Act; the filing of the Prospectus pursuant to Rule 497(h) under
the 1933 Act has been made within the time required by Rule 497(h); and, to
the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for any such purpose is pending or threatened by the Commission;
(v) The Trust is duly registered with the Commission under the 1940
Act as a closed-end, non-diversified management investment company and, to
such counsel's knowledge, no order of suspension or revocation of such
registration pursuant to Section 8(e) of the 1940 Act has been issued or
proceedings therefor initiated or threatened by the Commission;
<PAGE> 22
22
(vi) The 1940 Act Notification, the Registration Statement, the
Prospectus and each amendment thereof or supplement thereto (other than the
financial statements and schedules, the notes thereto and any schedules and
other financial data contained or incorporated by reference therein or
omitted therefrom, as to which such counsel need express no opinion) comply
as to form in all material respects with the applicable requirements of the
1933 Act, the 1940 Act and the Rules and Regulations;
(vii) The statements made in the Prospectus (including the Statement
of Additional Information) under the caption "Tax Matters", insofar as they
constitute matters of law or legal conclusions, have been reviewed by such
counsel and constitute accurate statements of any such matters of law or
legal conclusions in all material respects, and fairly present the
information called for with respect thereto by Form N-2 under the 1940 Act;
(viii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Trust, or to which the Trust
or any of its properties is subject, that are required to be described in
the Registration Statement or the Prospectus but are not described as
required;
(ix) To the best of such counsel's knowledge after reasonable inquiry,
there are no agreements, contracts, indentures, leases or other instruments
that are required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement by
the 1933 Act or the 1940 Act or by the rules and regulations thereunder
which have not been so described or filed as an exhibit or incorporated
therein by reference as permitted by the 1933 Act, the 1940 Act or the
Rules and Regulations;
(x) Neither the issuance and sale of the Shares as described in the
Prospectus, the execution, delivery or performance of this Agreement, or
any of the Trust Agreements by the Trust, nor the consummation by the Trust
of the transactions contemplated thereby (i) requires any consent,
approval, authorization or other order of or registration or filing by the
Trust with the Commission, the NASD, any national securities exchange, any
arbitrator, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may have been
obtained or made on or prior to the date hereof and such as may be required
for compliance with state securities or Blue Sky laws) or conflicts or will
conflict with or constitutes or will constitute a breach of, or a default
under, the Declaration of Trust, the By-Laws or other organizational
documents of the Trust or (ii) (a) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, any
agreement, indenture, lease or other instrument to which the Trust is a
party or by which it or any of its properties may be bound and that is
identified, in an officer's certificate of the Trust, as material to the
business, financial condition, operations, properties or prospects of the
Trust (the "Agreements and Instruments"), (b) violates or will
<PAGE> 23
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violate any statute, law or regulation (assuming compliance with state
securities and Blue Sky laws), (c) violates or will violate any judgment,
injunction, order or decree that is applicable to the Trust or any of its
properties and that is known to such counsel or, or (d) will result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Trust pursuant to the terms of the Agreements and
Instruments;
(xi) The Trust has the power and authority to enter into this
Agreement and each of the Trust Agreements, and this Agreement and each of
the Trust Agreements have been duly authorized, executed and delivered by
the Trust; assuming due authorization, execution and delivery by the other
parties thereto, this Agreement and each of the Trust Agreements
constitutes the valid and binding obligation of the Trust enforceable in
accordance with its terms (except as rights to indemnity and contribution
in each such agreement may be limited by Federal or state securities laws),
subject as to enforcement to bankruptcy, insolvency, moratorium,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles (regardless of
whether enforceability is considered in a proceeding in equity or at law);
(xii) The Trust Agreements comply in all material respects with all
applicable provisions of the 1933 Act, the Advisers Act, the 1940 Act, the
1933 Act Rules and Regulations, the Advisers Act Rules and Regulations and
the 1940 Act Rules and Regulations;
(xiii) The provisions of the Declaration of Trust, as amended, and
ByLaws of the Trust and the investment policies and restrictions described
in the Prospectus (including the Statement of Additional Information) under
the captions "Investment Objectives and Policies" and "Miscellaneous
Investment Practices" comply with the requirements of the 1940 Act and the
Rules and Regulations; and
(xiv) The Shares have been duly authorized for listing, subject to
official notice of issuance, on the AMEX.
Such counsel may also state, in substantially the same form, that:
They have not independently verified the accuracy, completeness or fairness
of the statements made or the information contained in the Registration
Statement or the Prospectus, and, except for the statements referred to in
paragraphs (iii) and (vii) above and the information referred to in paragraph
(xiii) above, they are not passing upon and do not assume any responsibility
therefor. In the course of the preparation by the Trust of the Registration
Statement and the Prospectus, they have participated in discussions with the
Representatives and employees and officers of the Trust and the Advisor and in
discussions with the Trust's independent accountants, in which the business and
the affairs of the Trust and the Advisor and the contents of the Registration
Statement and the Prospectus were discussed. On the basis of information that
they have gained in the course of their representation of the Trust in
connection
<PAGE> 24
24
with its preparation of the Registration Statement and the Prospectus and their
participation in the discussions referred to above, no facts have come to their
attention that would lead them to believe that as of its effective date, the
Registration Statement 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 as of the Closing
Date the Prospectus contained an untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (in each case other than the financial statements and schedules,
the notes thereto and any schedules and other financial data contained or
incorporated by reference therein or omitted therefrom, as to which they need
express no opinion).
(d) You shall have received on the Closing Date an opinion of the General
Counsel, counsel for the Advisor, dated the Closing Date and addressed to you,
as Representatives of the several Underwriters, in form and substance
satisfactory to you and to the effect that:
(i) The Advisor is a corporation duly incorporated and validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts and has full power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus;
(ii) The Advisor is duly registered with the Commission as an
investment adviser under the Advisers Act of 1940, as amended (the
"Advisers Act"), and is not prohibited by the 1940 Act, the Advisers Act or
the rules and regulations thereunder from acting as the investment advisor
to the Trust pursuant to the Management Agreement as described in the
Prospectus;
(iii) To the best of such counsel's knowledge after reasonable
inquiry, there are no legal or governmental proceedings pending or
threatened against the Advisor, or to which the Advisor or any of its
properties is subject, that are required to be described in the
Registration Statement or the Prospectus but are not described as required;
(iv) To the best of such counsel's knowledge after reasonable inquiry,
the Adviser is not in violation of the Articles or By-Laws, nor is the
Advisor in default under any material agreement, indenture or instrument or
in breach or violation of any judgment, decree, order, rule or regulation
of any court or governmental or self-regulatory agency or body;
(v) Neither the execution, delivery or performance of the Underwriting
Agreement, nor the consummation by the Advisor of the transactions
contemplated hereby or thereby, (i) requires any consent, approval,
authorization or other order of or registration or filing by the Advisor
with, the Commission, the NASD, any national securities exchange, any
arbitrator, any
<PAGE> 25
25
court, regulatory body, administrative agency or other governmental body,
agency or official (except such as may have been obtained or made on or
prior to the date hereof and such as may be required for compliance with
state securities or Blue Sky laws) or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
Articles, the By-Laws or other organizational documents of the Advisor or
(ii) (a) conflicts or will conflict with or constitutes or will constitute
a breach of, or a default under, any agreement, indenture, lease or other
instrument to which the Advisor is a party or by which it or any of its
properties may be bound (the "Agreements and Instruments"), (b) violates or
will violate any statute, law or regulation (assuming compliance with state
securities and Blue Sky laws), (c) violates or will violate any judgment,
injunction, order or decree that is applicable to the Advisor or any of its
properties and that is known to me or (d) will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Advisor pursuant to the terms of the Agreements and Instruments;
(vi) The Adviser has the corporate power and authority to enter into
this Agreement and the Management Agreement, and this Agreement and the
Management Agreement have been duly authorized, executed and delivered by
the Advisor; assuming due authorization, execution and delivery by the
other parties thereto, the Underwriting Agreement and the Management
Agreement each constitutes the valid and binding obligation of the Advisor
enforceable in accordance with its terms (except as rights to indemnity and
contribution in this Agreement and the Management Agreement may be limited
by Federal or state securities laws), subject as to enforcement to
bankruptcy, insolvency, moratorium, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles (regardless of whether enforceability is
considered in a proceeding in equity or at law); and
(vii) The description of the Advisor (other than statements as to the
Advisor's investment decisions, beliefs and strategies regarding the
Trust's portfolio as to which such counsel need express no opinion) in the
Registration Statement and the Prospectus (including the Statement of
Additional Information) 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 light of the circumstances
under which they were made, not misleading.
Such counsel may also state, in substantially the same form, that:
She has not independently verified the accuracy, completeness or fairness
of the statements made or the information contained in the Registration
Statement or the Prospectus, and, except for the information referred to in
paragraph (vii) above, she is not passing upon and does not assume any
responsibility therefor.
<PAGE> 26
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(e) You shall have received on the Closing Date an opinion of Heller
Ehrman White & McAuliffe, special California counsel for the Trust, dated the
Closing Date and addressed to you, as Representatives of the several
Underwriters, in form and substance satisfactory to you and to the effect that:
(i) The statements in the Prospectus under the caption "Additional
Risk Considerations -- Certain Risks Associated with Investments in
California Municipal Obligations" and in the Statement of Additional
Information under the caption "Appendix B -- Special Considerations
Relating to California," insofar as they refer to statements of law or
legal conclusions, are accurate and present fairly the information required
to be shown; and
(ii) Such counsel shall also state that they have participated in the
preparation and review of the statements set forth in the Registration
Statement under the captions "Additional Risk Considerations -- Certain
Risks Associated with Investments in California Municipal Obligations" and
"Appendix B --Special Considerations Relating to California," the
statements set forth in the Prospectus under the caption "Additional Risk
Considerations -- Certain Risks Associated with Investments in California
Municipal Obligations," and the statements set forth in the Statement of
Additional Information under the caption "Appendix B -- Special
Considerations Relating to California," and that based upon the foregoing,
no facts have come to their attention which cause them to believe that the
statements contained in the Registration Statement under such captions
(except as to any financial statements or other financial data included in
the Registration Statement, as to which they express no belief), as of its
effective date, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements contained therein not misleading or that the statements
contained in the Prospectus and Statement of Additional Information under
such captions (except as to any financial statements or other financial
data included in the Prospectus or any such amendment or supplement, as to
which they express no belief), as of its issue date and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements contained therein,
in the light of the circumstances under which they were made, not
misleading.
(f) You shall have received on the Closing Date an opinion of Simpson
Thacher & Bartlett, counsel for the Underwriters, dated the Closing Date and
addressed to you, with respect to such matters as you may reasonably request.
(g) You shall have received letters addressed to you and dated the date
hereof and the Closing Date from PricewaterhouseCoopers LLP, independent
certified public accountants, substantially in the forms heretofore approved by
the Representatives.
<PAGE> 27
27
(h) (i) No order suspending the effectiveness of the Registration
Statement or prohibiting or suspending the use of the Prospectus (or any
amendment or supplement thereto) or any Prepricing Prospectus or any sales
material shall have been issued and no proceedings for such purpose or for the
purpose of commencing an enforcement action against the Trust, the Advisor or,
with respect to the transactions contemplated by the Prospectus (or any
amendment or supplement thereto) and this Agreement, any Underwriter, may be
pending before or, to the knowledge of the Trust, the Advisor or any Underwriter
or in the reasonable view of counsel to the Underwriters, shall be threatened or
contemplated by the Commission at or prior to the Closing Date and that any
request for additional information on the part of the Commission (to be included
in the Registration Statement, the Prospectus or otherwise) be complied with to
the satisfaction of the Underwriters; (ii) there shall not have been any change
in the capitalization of the Trust nor any material increase in the short-term
or long-term debt of the Trust (other than in the ordinary course of business)
from that set forth or contemplated in this Agreement, the Registration
Statement or the Prospectus (or any amendment or supplement thereto); (iii)
there shall not have been, subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus (or any
amendment or supplement to either of them), except as may otherwise be stated in
the Registration Statement and Prospectus (or any amendment or supplement to
either of them), any material adverse change in the condition (financial or
other), business, prospects, properties, net assets or results of operations of
the Trust or the Advisor; (iv) the Trust shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Trust, other than those reflected in the
Registration Statement or the Prospectus (or any amendment or supplement to
either of them); and (v) all the representations and warranties of the Trust and
the Advisor contained in this Agreement shall be true and correct on and as of
the date hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and you shall have received a certificate of the Trust and the
Advisor, dated the Closing Date and signed by the chief executive officer and
the chief financial officer of each of the Trust and the Advisor (or such other
officers as are acceptable to you), to the effect set forth in this Section 9(h)
and in Section 9(i) hereof.
(i) Neither the Trust nor the Advisor shall have failed at or prior to the
Closing Date to have performed or complied in all material respects with any of
its agreements herein contained and required to be performed or complied with by
it hereunder at or prior to the Closing Date.
(j) The Shares have been duly authorized for listing, subject to official
notice of issuance, on the AMEX.
(k) The Trust and the Advisor shall have furnished or caused to be
furnished to you such further certificates and documents as you shall have
reasonably requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and your counsel.
<PAGE> 28
28
Any certificate or document signed by any officer of the Trust or the
Advisor and delivered to you, or to your counsel, shall be deemed a
representation and warranty by the Trust or the Advisor, as applicable, to each
Underwriter as to the statements made therein.
10. EXPENSES. The Trust agrees to pay the following costs and expenses and
all other costs and expenses incident to the performance by it of its
obligations hereunder: (i) the preparation, printing or reproduction, and filing
with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the 1940 Act
Notification, the Prospectus and each amendment or supplement to any of them
(including, without limitation, the filing fees prescribed by the 1933 Act, the
1940 Act and the Rules and Regulations); (ii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Registration Statement, each Prepricing
Prospectus, the Prospectus, any sales material and all amendments or supplements
to any of them as may be reasonably requested for use in connection with the
offering and sale of the Shares; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Shares, including
any stamp taxes in connection with the original issuance and sale of the Shares;
(iv) the reproduction and delivery of this Agreement, any dealer agreements and
all other agreements or documents reproduced and delivered in connection with
the offering of the Shares; (v) the registration of the Shares under the 1934
Act and the listing of the Shares on the AMEX; (vi) the registration or
qualification of the Shares for offer and sale under the securities or blue sky
laws of the several states as provided in Section 5(g) hereof (including the
reasonable fees, expenses and disbursements of counsel for the Underwriters
relating to the preparation, printing or reproduction, and delivery of the
preliminary and supplemental blue sky memoranda and such registration and
qualification); (vii) the filing fees and the fees and expenses of counsel for
the Underwriters in connection with any filings required to be made with the
NASD; (viii) the transportation and other expenses incurred by or on behalf of
Trust representatives in connection with presentations to prospective purchasers
of the Shares; and (ix) the fees and expenses of the Trust's accountants and the
fees and expenses of counsel (including local and special counsel) for the
Trust. The Advisor and not the Trust agrees to pay an amount not greater than
$75,000 in reimbursement of certain expenses of the Underwriter in connection
with this Agreement.
11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
registration statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of the registration statement or such post-effective amendment
has been released by the Commission. Until such time as this Agreement shall
have become effective, it may be terminated by the Trust, by notifying you, or
by you, as Representatives of the several Underwriters, by notifying the Trust.
If any one or more of the Underwriters shall fail or refuse to purchase
Shares which it or they are obligated to purchase hereunder on the Closing Date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters are obligated but fail or refuse to purchase is not more than
one-tenth of the aggregate number of Shares which the
<PAGE> 29
29
Underwriters are obligated to purchase on the Closing Date, each non-defaulting
Underwriter shall be obligated, severally, in the proportion which the number of
Firm Shares set forth opposite its name in Schedule I hereto bears to the
aggregate number of Firm Shares set forth opposite the names of all
non-defaulting Underwriters or in such other proportion as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters are
obligated, but fail or refuse, to purchase. If any one or more of the
Underwriters shall fail or refuse to purchase Shares which it or they are
obligated to purchase on the Closing Date and the aggregate number of Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares which the Underwriters are obligated to purchase on
the Closing Date and arrangements satisfactory to you and the Trust for the
purchase of such Shares by one or more non-defaulting Underwriters or other
party or parties approved by you and the Trust are not made within 36 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter or the Trust. In any such case which does not
result in termination of this Agreement, either you or the Trust shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Registration Statement and
the Prospectus or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Underwriter
from liability in respect of any such default of any such Underwriter under this
Agreement. The term "Underwriter" as used in this Agreement includes, for all
purposes of this Agreement, any party not listed in Schedule I hereto who, with
your approval and the approval of the Trust, purchases Shares which a defaulting
Underwriter is obligated, but fails or refuses, to purchase.
Any notice under this Section 11 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
12. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Trust or the Advisor, by notice to the Trust or the Advisor,
if prior to the Closing Date or any Option Closing Date (if different from the
Closing Date and then only as to the Option Shares), as the case may be, (i)
trading in securities generally on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market shall have been suspended or
materially limited, (ii) a general moratorium on commercial banking activities
in New York shall have been declared by either federal or state authorities, or
(iii) there shall have occurred any outbreak or escalation of hostilities or
other international or domestic calamity, crisis or change in political,
financial or economic conditions, the effect of which on the financial markets
of the United States is to make it, in your judgment, impracticable or
inadvisable to commence or continue the offering of the Shares at the offering
price to the public set forth on the cover page of the Prospectus or to enforce
contracts for the resale of the Shares by the Underwriters. Notice of such
termination may be given to the Trust by telegram, telecopy or telephone and
shall be subsequently confirmed by letter.
13. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth in
the last sentence of the last paragraph of the front cover page in the
Prospectus, as well as, under the caption "Underwriting" in the Prospectus, the
names of the underwriters and numbers of Shares
<PAGE> 30
30
listed opposite such names in the first paragraph, the last sentence of the
second paragraph, the second sentence of the ninth paragraph and the first
sentence of the eleventh paragraph constitute the only information relating to
any Underwriter furnished to the Fund in writing by or on behalf of the
Underwriters through you as such information is referred to herein, expressly
for use in the Prospectus.
14. MISCELLANEOUS. Except as otherwise provided in Sections 5, 11 and 12
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Trust or the Advisor, at the office
of the Trust at One Financial Center, Boston, MA 02111, Attention: Secretary; or
(ii) if to you, as Representatives of the several Underwriters, to Salomon Smith
Barney Inc., 388 Greenwich Street, New York, New York 10013, Attention: Manager,
Investment Banking Division.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Trust, the Advisor, their directors and officers, and the
other controlling persons referred to in Section 8 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
15. NOTICE. A copy of the Agreement and Declaration of Trust of the Trust
is on file with the Secretary of State of the Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed on behalf of the Trust by
an officer or Trustee of the Trust in his or her capacity as an officer or
Trustee of the Trust and not individually and that the obligations of or arising
out of this instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and property of
the Trust.
16. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
[End of text]
<PAGE> 31
31
Please confirm that the foregoing correctly sets forth the agreement among
the Trust, the Advisor and the several Underwriters.
Very truly yours,
COLONIAL CALIFORNIA INSURED
MUNICIPAL FUND
By: /s/ Stephen E. Gibson
------------------------------
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: /s/ Stephen E. Gibson
------------------------------
Confirmed as of the date first
above mentioned on behalf of themselves and the
other several Underwriters named in Schedule I hereto.
SALOMON SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
PAINE WEBBER INCORPORATED
As Representatives of the Several Underwriters
By: SALOMON SMITH BARNEY INC.
By: /s/ Robert Bush
--------------------------------
Director
<PAGE> 32
SCHEDULE I
COLONIAL CALIFORNIA INSURED MUNICIPAL FUND
Number of
Underwriter Firm Shares
----------- -----------
Salomon Smith Barney Inc. ....................................... 417,600
A.G. Edwards & Sons, Inc......................................... 417,600
Paine Webber Incorporated........................................ 417,600
Sotro & Co. Incorporated......................................... 417,600
Wedbush Morgan Securities........................................ 417,600
Bear, Stearns & Co. Inc.......................................... 36,000
CIBC Oppenheimer Corp............................................ 36,000
Advest, Inc...................................................... 24,000
Robert W. Baird & Co. Incorporated............................... 24,000
Crowell, Weedon & Co............................................. 24,000
Fahnestock & Co. Inc............................................. 24,000
Kilpatrick, Pettis, Smith, Polian, Inc........................... 24,000
Morgan Keegan & Company, Inc..................................... 24,000
The Robinson-Humphrey Company, LLC............................... 24,000
M.L. Stern & Co., Inc............................................ 24,000
TD Securities (USA) Inc.......................................... 24,000
U.S. Bancorp Piper Jaffray Inc................................... 24,000
---------
Total............................................................ 2,400,000
=========
<PAGE> 1
Exhibit (k)(3)(ii)
EXPENSE REIMBURSEMENT AGREEMENT
AGREEMENT made this 25th day of October, 1999, by and between COLONIAL
CALIFORNIA INSURED MUNICIPAL FUND, a Massachusetts business trust (the "Fund"),
and COLONIAL MANAGEMENT ASSOCIATES, INC., a Massachusetts corporation (the
"Adviser").
WHEREAS, the Fund and the Adviser have separately entered into an Investment
Management Agreement of even date herewith (the "Management Agreement"), and a
Fee Waiver Agreement of even date herewith (the "Fee Waiver Agreement");
In consideration of the mutual covenants hereinafter contained, and in
connection with the establishment and commencement of operations of the Fund,
it is hereby agreed by and between the parties hereto as follows:
1. For the period from the commencement of the Fund's operations through
October 31, 2000, the Adviser agrees to reimburse the Fund for expenses (other
than Management Fees payable pursuant to the terms of the Management Agreement
and the Fee Waiver Agreement) incurred by the Fund in excess of an annual rate
of 0.20% of the average weekly net assets of the Fund.
2. This Agreement, and the Adviser's obligation to so waive expenses hereunder,
shall terminate on the earlier of (a) October 31, 2000 or (b) termination of
the Management Agreement.
3. Except as provided in paragraph 2 above, this Agreement may be terminated
only by the vote of (a) the Board of Trustees of the Fund, including the vote
of the members of the Board who are not "interested persons" within the meaning
of the Investment Company Act of 1940, and (b) a majority of the outstanding
voting securities of the Fund.
4. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule, or otherwise, the remainder shall not be thereby
affected.
<PAGE> 2
5. The Fund's Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts. This Agreement is executed on behalf of the Fund
by the Fund's officers as officers and not individually and the obligations
imposed upon the Fund by this Agreement are not binding upon any of the Fund's
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Fund.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to be
executed on the day and year above written.
COLONIAL CALIFORNIA INSURED
MUNICIPAL FUND
By: /s/ Nancy L. Conlin
------------------------------------
Name: Nancy L. Conlin
Title: Secretary
Attest: /s/ William J. Ballou
--------------------------------
Name: William J. Ballou
Title: Assistant Secretary
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: /s/ Nancy L. Conlin
------------------------------------
Name: Nancy L. Conlin
Title: Senior Vice President
Attest: /s/ William J. Ballou
--------------------------------
Name: William J. Ballou
Title: Assistant Secretary
-2-
<PAGE> 1
Exhibit (p)
COLONIAL CALIFORNIA INSURED MUNICIPAL FUND
SUBSCRIPTION AGREEMENT
This Agreement made this 25th day of October, 1999 by and between Colonial
California Insured Municipal Fund, a Massachusetts business trust (the "Fund"),
and Colonial Management Associates, Inc., a Massachusetts corporation (the
"Subscriber");
WITNESSETH:
WHEREAS, the Fund has been formed for the purposes of carrying on business
as a closed-end non-diversified management investment company; and
WHEREAS, the Subscriber has been selected by the Fund's Board of Trustees
to serve as investment adviser to the Fund; and
WHEREAS, the Subscriber wishes to subscribe for and purchase, and the Fund
wishes to sell to the Subscriber, 6,667 common shares of beneficial interest for
a purchase price of $15.00 per share;
NOW THEREFORE, IT IS AGREED:
1. The Subscriber subscribes for and agrees to purchase from the Fund
6,667 common shares of beneficial interest for a purchase price of $15.00 per
share. Subscriber agrees to make payment for these shares at such time as demand
for payment may be made by an officer of the Fund.
2. The Fund agrees to issue and sell said shares to Subscriber promptly
upon its receipt of the purchase price.
3. To induce the Fund to accept its subscription and issue the shares
subscribed for, the Subscriber represents that it is informed as follows:
(a) That the shares being subscribed for have not been and will not
be registered under the Securities Act of 1933 ("Securities Act");
(b) That the shares will be sold by the Fund in reliance on an
exemption from the registration requirements of the Securities Act;
(c) That the Fund's reliance upon an exemption from the registration
requirements of the Securities Act is predicated in part on the representations
and agreements contained in this Subscription Agreement;
<PAGE> 2
(d) That when issued, the shares will be "restricted securities" as
defined in paragraph (a)(3) of Rule 144 of the General Rules and Regulations
under the Securities Act ("Rule 144") and cannot be sold or transferred by
Subscriber unless they are subsequently registered under the Securities Act or
unless an exemption from such registration is available;
(e) That there do not appear to be any exemptions from the
registration provisions of the Securities Act available to the Subscriber for
resale of the shares. In the future, certain exemptions may possibly become
available, including an exemption for limited sales including an exemption for
limited sales in accordance with the conditions of Rule 144.
The Subscriber understands that a primary purpose of the information
acknowledged in subparagraphs (a) through (e) above is to put it on notice as to
restrictions on the transferability of the shares.
4. To further induce the Fund to accept its subscription and issue the
shares subscribed for, the Subscriber:
(a) Represents and warrants that the shares subscribed for are being
and will be acquired for investment for its own account and not on behalf of any
other person or persons and not with a view to, or for sale in connection with,
any public distribution thereof; and
(b) Agrees that any certificates representing the shares subscribed
for may bear a legend substantially in the following form:
The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933 or any other federal or state securities law. These shares may
not be offered for sale, sold or otherwise transferred unless
registered under said securities laws or unless some exemption from
registration is available.
5. This Subscription Agreement and all of its provisions shall be binding
upon the legal representatives, heirs, successors and assigns of the parties
hereto.
6. The Fund's Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts. This Agreement is executed on behalf of the Fund
by the Fund's officers as officers and not individually and the obligations
imposed upon the Fund by this Agreement are not binding upon any of the Fund's
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Fund.
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Subscription Agreement has been executed by the
parties hereto as of the day and date first above written.
COLONIAL CALIFORNIA INSURED MUNICIPAL
FUND
By: /s/ William J. Ballou
\ ----------------------------
Title: Assistant Secretary
COLONIAL MANAGEMENT ASSOCIATES, INC.
By: /s/ William J. Ballou
----------------------------
Title: Vice President
-3-
