<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1998
SECURITIES ACT FILE NO. 333-45951
INVESTMENT COMPANY ACT FILE NO. 811-4700
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-2
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] PRE-EFFECTIVE AMENDMENT NO. 2
[ ] POST-EFFECTIVE AMENDMENT NO.
AND/OR
[X]REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 AMENDMENT NO. 3
(CHECK APPROPRIATE BOX OR BOXES)
------------------------
THE GABELLI EQUITY TRUST INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
------------------------
ONE CORPORATE CENTER
RYE, NEW YORK 10580-1434
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 422-3554
BRUCE N. ALPERT
THE GABELLI EQUITY TRUST INC.
ONE CORPORATE CENTER
RYE, NEW YORK 10580-1434
(914) 921-5100
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C> <C>
RICHARD T. PRINS, ESQ. JAMES E. MCKEE, ESQ. GARY S. SCHPERO, ESQ.
SKADDEN, ARPS, SLATE, THE GABELLI EQUITY TRUST INC. SIMPSON THACHER & BARTLETT
MEAGHER & FLOM LLP ONE CORPORATE CENTER 425 LEXINGTON AVENUE
919 THIRD AVENUE RYE, NEW YORK 10580-1434 NEW YORK, NEW YORK 10017
NEW YORK, NEW YORK 10022 (914) 921-5100 (212) 735-3000
</TABLE>
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement.
If any securities being registered on this form will be offered on a delayed
or continuous basis in reliance on Rule 415 under the Securities Act of 1933, as
amended, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [ ]
It is proposed that this filing will become effective (check appropriate
box)
[ ] When declared effective pursuant to section 8(c).
If appropriate, check the following box: [ ] this [post-effective] amendment
designates a new effective date for a previously filed [post-effective
amendment] [registration statement].
[ ] This form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act and the Securities Act
registration statement number of the earlier effective registration statement
for the same offering is .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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============================================================================================================================
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED
MAXIMUM AGGREGATE AMOUNT OF
AMOUNT BEING OFFERING PRICE OFFERING REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED PER SHARE PRICE(1) FEE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
% Cumulative Preferred Stock....... 400,000 Shares $25 $10,000,000 $2,950
============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
CROSS-REFERENCE SHEET
PURSUANT TO RULE 481(a)
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<CAPTION>
N-2 ITEM NUMBER LOCATION IN PART A (CAPTION)
--------------- ----------------------------
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PART A
1. Outside Front Cover...................... Outside Front Cover Page
2. Inside Front and Outside Back Cover
Page................................... Outside Front Cover Page; Inside Front Cover
Page
3. Fee Table and Synopsis................... Not Applicable
4. Financial Highlights..................... Financial Highlights
5. Plan of Distribution..................... Outside Front Cover Page; Prospectus Summary;
Underwriting
6. Selling Shareholders..................... Not Applicable
7. Use of Proceeds.......................... Use of Proceeds; Investment Objectives and
Policies
8. General Description of the Registrant.... Outside Front Cover Page; Prospectus Summary;
The Fund; Investment Objectives and
Policies; Other Investments; Special
Investment Methods; Risk Factors & Special
Considerations; Description of Cumulative
Preferred Stock
9. Management............................... Outside Prospectus Summary; Management of the
Fund; Custodian, Transfer Agent and
Dividend-Disbursing Agent
10. Capital Stock, Long-Term Debt, and Other
Securities............................. Outside Front Cover Page; Prospectus Summary;
Capitalization; Investment Objectives and
Policies; Description of Cumulative
Preferred Stock; Description of Capital
Stock and Other Securities; Taxation
11. Defaults and Arrears on Senior
Securities............................. Not Applicable
12. Legal Proceedings........................ Special Investment Methods
13. Table of Contents of the Statement of
Additional Information................. Table of Contents of the Statement of
Additional Information
PART B LOCATION IN STATEMENT OF ADDITIONAL
INFORMATION
-----------------------------------------
14. Cover Page............................... Outside Front Cover Page
15. Table of Contents........................ Outside Front Cover Page
16. General Information and History.......... The Fund
17. Investment Objectives and Policies....... Investment Objectives and Policies;
Investment Restrictions
18. Management............................... Management of the Fund
19. Control Persons and Principal Holders of
Securities............................. Management of the Fund; Beneficial Owner
20. Investment Advisory and Other Services... Management of the Fund
21. Brokerage Allocation and Other
Practices.............................. Portfolio Transactions
22. Tax Status............................... Taxation
23. Financial Statements..................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE> 3
Parts A and B to this Pre-effective Amendment #2 to the Registrant's
Registration Statement on Form N-2 are incorporated by reference from
Pre-effective Amendment #1 to the Registrant's Registration Statement on Form
N-2, File Nos. 333-45951 and 811-4700, Accession No. 0000950123-98-002714, as
filed with the Securities and Exchange Commission on March 19, 1998.
<PAGE> 4
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
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(1) Financial Statements(1)
(2) (a) (1) -- Articles of Incorporation(4)
(2) -- Form of Articles Supplementary(4)
(b) -- By-Laws(4)
(c) -- Not Applicable
(d) -- Specimen Stock Certificate(4)
(e) -- Automatic Dividend Reinvestment and Voluntary Cash Purchase
Plan(4)
(f) -- Not Applicable
(g) -- Investment Advisory Agreement(2)
(h) (1) -- Form of Underwriting Agreement(4)
(2) -- Form of Master Agreement Among Underwriters(4)
(i) -- Not Applicable
(j) -- Custodian Agreement(4)
(k) -- Not Applicable
(l) -- Opinion and Consent of Counsel(5)
(m) -- Not Applicable
(n) -- Consent of Price Waterhouse LLP(3)
(o) -- Not Applicable
(p) -- Not Applicable
(q) -- Not Applicable
(r) -- Financial Data Schedule(3)
</TABLE>
- ---------------
(1) Incorporated by reference from Registrant's Annual Report for the year ended
December 31, 1997, File No. 811-4700, as filed with the Securities and
Exchange Commission on March 11, 1998.
(2) Incorporated by reference from the Registrant's Registration Statement on
Form N-2, File Nos. 33-62323 and 811-4700, as filed with the Securities and
Exchange Commission on October 13, 1995.
(3) Previously filed.
(4) Filed herewith.
(5) To be filed by amendment.
ITEM 25. MARKETING ARRANGEMENTS
See Exhibit 2(h) to this Registration Statement.
C-1
<PAGE> 5
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
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SEC Registration fees....................................... $2,950
New York Stock Exchange listing fee.........................
Rating Agency fee...........................................
Printing and engraving expenses.............................
Auditing fees and expenses..................................
Legal fees and expenses.....................................
Blue Sky fees and expenses..................................
Miscellaneous...............................................
------
Total............................................. $
======
</TABLE>
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Insofar as the following have substantially identical boards of directors
or trustees they may be deemed with Registrant to be under common control: The
Gabelli Asset Fund, The Gabelli Growth Fund and The Gabelli Westwood Funds, each
a Massachusetts Business Trust, The Gabelli Money Market Funds, a Delaware
Business Trust, The Gabelli Global Multimedia Trust Inc., The Gabelli Value Fund
Inc., The Gabelli Investor Fund, Inc., Gabelli Capital Series Funds, Inc., The
Gabelli Global Series Funds, Inc., The Gabelli Convertible Securities Fund,
Inc., Gabelli International Growth Fund, Inc., Gabelli Gold Fund, Inc. and
Gabelli Equity Series Funds, Inc., each a Maryland corporation.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES AS OF , 1997
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<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
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Capital Stock, par value $.001 per share....................
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ITEM 29. INDEMNIFICATION
Under the Fund's Articles of Incorporation and Amended and Restated
By-Laws, the directors and officers of the Company and Fund will be indemnified
to the fullest extent allowed and in the manner provided by Maryland law and
applicable provisions of the Investment Company Act of 1940, as amended,
including advancing of expenses incurred in connection therewith.
Indemnification shall not be provided however to any officer or director against
any liability to the Registrant or its security-holders to which he or she would
otherwise be subject by reasons of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to the directors and officers, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is
therefore unenforceable. If a claim for indemnification against such liabilities
under the Securities Act of 1933 (other than for expenses incurred in a
successful defense) is asserted against the Company by the directors or officers
in connection with the Shares, 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 of whether such indemnification by it
is against public policy as expressed in such Act and will be governed by the
final adjudication of such issue.
C-2
<PAGE> 6
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF ADVISER
For information as to the business, profession, vocation or employment of a
substantial nature of each of the officers and directors of Gabelli Funds, Inc.,
reference is made to the Adviser's current Form ADV filed under the Investment
Advisers Act of 1940, incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Registrant are maintained in part at the
office of the Advisor at One Corporate Center, Rye, New York 10580-1434, in part
at the offices of the Custodian, State Street Bank and Trust Company, with
offices at 1776 Heritage Drive, North Quincy, MA 02171, at the offices of the
Fund's Administrator, First Data Investor Services, One Exchange Place, Boston,
MA 02109, and in part at the offices of Boston EquiServe, 150 Royall Street,
Mail Stop 45-02-62, Canton, MA 02021.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
(1) Registrant undertakes to suspend the offering of shares until the
prospectus is amended, if subsequent to the effective date of this registration
statement, its net asset value declines more than ten percent from its net asset
value, as of the effective date of the registration statement or its net asset
value increases to an amount greater than its net proceeds as stated in the
prospectus.
(2) Not applicable.
(3) Not applicable.
(4) Not applicable.
(5) Registrant undertakes that, for the purpose of determining any
liability under the Securities Act, the information omitted from the form of
prospectus filed as part of the Registration Statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 497(h) will be deemed to be a part of the Registration Statement as of the
time it was declared effective.
Registrant undertakes that, for the purpose of determining any liability
under the Securities Act, each post-effective amendment that contains a form of
prospectus will be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
will be deemed to be the initial bona fide offering thereof.
(6) Registrant undertakes 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
constituting Part B of this Registration Statement.
C-3
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Rye, State of New York on the 7th day of April, 1998.
THE GABELLI EQUITY TRUST INC.
By /s/ BRUCE N. ALPERT
------------------------------------
Bruce N. Alpert
Vice President and Treasurer
IN WITNESS WHEREOF, the undersigned officers and Directors have hereunto
set their hands this 7th Day of April, 1998.
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SIGNATURE TITLE DATE
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<S> <C> <C>
* Chairman of the Board and April 7, 1998
- --------------------------------------------------- President
Mario J. Gabelli
* Director April 7, 1998
- ---------------------------------------------------
Dr. Thomas E. Bratter
* Director April 7, 1998
- ---------------------------------------------------
Bill Callaghan
* Director April 7, 1998
- ---------------------------------------------------
Felix J. Christiana
* Director April 7, 1998
- ---------------------------------------------------
James P. Conn
* Director April 7, 1998
- ---------------------------------------------------
Karl Otto Pohl
* Director April 7, 1998
- ---------------------------------------------------
Anthony R. Pustorino
* Director April 7, 1998
- ---------------------------------------------------
Salvatore J. Zizza
</TABLE>
By /s/ BRUCE N. ALPERT
--------------------------------------------------
Bruce N. Alpert
*Attorney-in-fact
C-4
<PAGE> 8
SCHEDULE OF EXHIBITS TO FORM N-2
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EXHIBIT PAGE
NUMBER EXHIBIT NUMBER
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Exhibit A (1) Articles of Incorporation*..............................
(2) Form of Articles Supplementary*.........................
Exhibit B By-Laws*....................................................
Exhibit C Not Applicable..............................................
Exhibit D Specimen Stock Certificate*.................................
Exhibit E Automatic Dividend Reinvestment and Voluntary Cash Purchase
Plan*.......................................................
Exhibit F Not Applicable..............................................
Exhibit G Investment Advisory Agreement**.............................
Exhibit H (1) Form of Underwriting Agreement*.........................
(2) Form of Master Agreement Among Underwriters*............
Exhibit I Not Applicable..............................................
Exhibit J Custodian Agreement*........................................
Exhibit K Not Applicable..............................................
Exhibit L Opinion and Consent of Counsel***...........................
Exhibit M Not Applicable..............................................
Exhibit N Consent of Price Waterhouse LLP**...........................
Exhibit O Not Applicable..............................................
Exhibit P Not Applicable..............................................
Exhibit Q Not Applicable..............................................
Exhibit R Financial Data Schedule**...................................
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
*** To be filed by amendment.
<PAGE> 1
EXHIBIT 2(a)(1)
ARTICLES OF INCORPORATION
OF
THE GABELLI EQUITY TRUST INC.
ARTICLE I
THE UNDERSIGNED, Pamela C. Scott, whose post office address is
c/o Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022, being at least eighteen years of age, does hereby act as
an incorporator and form a corporation under and by virtue of the Maryland
General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is THE GABELLI EQUITY TRUST INC.
ARTICLE III
PURPOSES AND POWERS
The Corporation is formed for the following purposes:
(1) To conduct and carry on the business of an investment
company.
(2) To hold, invest and reinvest its assets in securities
and other investments or to hold part or all of its assets in cash.
(3) To issue and sell shares of its capital stock in such
amounts and on such terms and conditions and for such purposes and for such
amount or kind of consideration as may now or hereafter be permitted by law.
<PAGE> 2
(4) To do any and all additional acts and to exercise any
and all additional powers or rights as may be necessary, incidental,
appropriate or desirable for the accomplishment of all or any of the foregoing
purposes.
The Corporation shall be authorized to exercise and enjoy all
of the powers, rights and privileges granted to, or conferred upon,
corporations by the Maryland General Corporation Law now or hereafter in force,
and the enumeration of the foregoing shall not be deemed to exclude any powers,
rights or privileges so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Incorporated,
32 South Street, Baltimore, Maryland 21202. The name of the resident agent of
the Corporation in the State of Maryland is The Corporation Trust Incorporated.
The post office address of the resident agent is 32 South Street, Baltimore,
Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the
Corporation shall have authority to issue is fifty million (50,000,000) shares,
of the par value of one mill ($.001) per share and of the aggregate par value
of fifty thousand dollars ($50,000), all of which fifty million (50,000,000)
shares are designated Common Stock.
(2) The Corporation may issue fractional shares. Any
fractional share shall carry proportionally the rights of a whole share
including, without limitation, the right to vote and the right to receive
dividends. A fractional share shall not, however, have the right to receive a
certificate evidencing it.
(3) All persons who shall acquire stock in the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation and the By-Laws of the Corporation.
2
<PAGE> 3
(4) No holder of stock of the Corporation by virtue of
being such a holder shall have any right to purchase or subscribe for any
shares of the Corporation's capital stock or any other security that the
Corporation may issue or sell (whether out of the number of shares authorized
by these Articles of Incorporation or out of any shares of the Corporation's
capital stock that the Corporation may acquire) other than a right that the
Board of Directors its discretion may determine to grant.
(5) The Board of Directors shall have authority by
resolution to classify and reclassify any authorized but unissued shares or
capita1 stock from time to time by setting or changing in any one or more
respects the preferences, conversion of other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of the capital stock.
(6) Notwithstanding any provision of law requiring any
action to be taken or authorized by the affirmative vote of the holders of a
designated proportion of the votes of all classes or of any class of stock of
the Corporation, such action shall be effective and valid if taken or
authorized by the affirmative vote of a majority of the total number of votes
entitled to be cast thereon, except as otherwise provided in these Articles of
Incorporation.
ARTICLE VI
BOARD OF DIRECTORS
(1) The number of directors constituting the Board of
Directors shall be no less than three (3) nor more than nine (9). This number
may be changed pursuant to the By-Law's of the Corporation, but shall at no
time be less than the minimum number required under the Maryland General
Corporation Law. The names of the directors who sha11 act until the first
annual meeting of shareholders or until their successors are duly chosen and
qualified are:
Mario J. Gabe11i
Nicholas E.E. De Stefano
William J. Nutt
(2) In furtherance, and not in limitation, of the powers
conferred by the laws of the State of Maryland, the Board of Directors is
expressly authorized:
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<PAGE> 4
(i) To make, alter or repeal the By-Laws of the
Corporation, except where such power is reserved by the By-Laws to the
stockholders, and except as otherwise required by the Investment Company Act of
1940.
(ii) From time to time to determine whether and to
what extent and at what times and places and under what conditions and
regulations the books and accounts of the Corporation, or any of them other
than the stock ledger, shall be open to the inspection of the stockholders. No
stockholder shall have any right to inspect any account or book or document of
the Corporation, except as conferred by law or authorized by resolution of the
Board of Directors or of the stockholders.
(iii) Without the assent or vote of the
stockholders, to authorize the issuance from time to time of shares of the
stock of any class of the Corporation, whether name or hereafter authorized,
and securities convertible into shares of stock of the Corporation of any class
or classes, whether now or hereafter for such consideration as the Board of
Directors may deem advisable.
(iv) Without the assent or vote of the
stockholders, to authorize and issue obligations of the Corporation, secured
and unsecured, as the Board of Directors may determine, and to authorize and
cause to be executed mortgages and liens upon the real or personal property of
the Corporation.
(v) Notwithstanding anything in these Articles
of Incorporation to the contrary, to establish in its absolute discretion the
basis or method for determining the value of the assets belonging to any class,
the value of the liabilities belonging to any class and the net asset value of
each share of any class of the Corporation's stock.
(vi) No determine in accordance with generally
accepted accounting principles and practices what constitutes net profits,
earnings, surplus or net assets in excess of capital, and to determine what
accounting periods shall be used by the Corporation for any purpose; to set
apart out of any funds of the Corporation reserves Lor such purposes as it
shall determine and to abolish the same; to declare and pay any dividends and
distributions in cash, securities or other property from surplus or any funds
legally available therefor, at such intervals as it shall determine; to declare
dividends or distributions by means of a formula or other method of
determination, at meetings held less frequently than the frequency of the
effectiveness of such declarations; to establish payment dates for dividends or
any other
4
<PAGE> 5
distributions on any basis, including dates occurring less frequently than the
effectiveness of declarations thereof; and to provide for the payment of
declared dividends on a date earlier or later than the specified payment date
in the case of stockholders of the Corporation redeeming their entire ownership
of shares of any class of the Corporation.
(vii) In addition to the powers and authorities
graphed herein and by statute expressly conferred upon it, the Board of
Directors is authorized to exercise all powers and do all acts that may be
exercised or done by the Corporation pursuant to the provisions of the laws of
the State of Maryland, these Articles of Incorporation and the By-Laws of the
Corporation.
(3) Any determination made in good faith, and in
accordance with accepted accounting practices, if applicable, by or pursuant to
the direction of the Board of Directors, with respect to the amount of assets,
obligations or liabilities of the Corporation, as to the amount of net income
of the Corporation from dividends and interest for any period or amounts at any
time legally available for the payment of dividends, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
the reserves or charges have been created has been paid or discharged or is
then or thereafter required to be paid or discharged), as to the value of any
security owned by the Corporation, the determination of the net asset value of
shares of any class of the Corporation's capital stock, or as to any other
matters relating to the issuance, sale, redemption or other acquisition or
disposition of securities or shares of capital stock of the Corporation, and
any reasonable determination made in good faith by the Board of Directors
whether any transaction constitutes a purchase of securities on "margin," a
sale of securities "short," or an underwriting of the sale of, or a
participation in any underwriting or selling group in connection with the
public distribution of, any securities, shall be final and conclusive, and
shall be binding upon the Corporation and all holders of its capital stock,
past, present and future, and shares of the capital stock of the Corporation
are issued and sold on the condition and understanding, evidenced by the
purchase of shares of capital stock or acceptance of share certificates, that
any and all such determinations shall be binding as aforesaid. No provision
of these Articles of Incorporation of the Corporation shall be effective to (i)
require a waiver of compliance with any provision of the Securities Act of
1933, as amended, or the Investment Company Act of 1940, or of any valid rule,
regulation or order of the Securities and Exchange Commission under those Acts
or (ii) protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders to
which he would otherwise be subject by reason
5
<PAGE> 6
of willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
ARTICLE VII
CHANGE OF STRUCTURE
Notwithstanding any other provision of these Articles of
Incorporation, the conversion of the Corporation from a "closed-end company"
to an "open-end company," as those terms are defined in Sections 5(a)(2) and
5(a)(1), respectively, of the Investment Company Act of 1940 as in effect on
December 1, 1985, shall require the affirmative vote or consent of the holders
of sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of each
class of stock of the Corporation normally entitled to vote in elections of
directors voting for the purposes of this Article as separate classes. Such
affirmative vote or consent shall be in addition to the vote or consent of the
holders of the stock of the Corporation otherwise required by law or by the
terms of any class or series of preferred stock, whether now or hereafter
authorized, or any agreement between the Corporation and any national
securities exchange.
ARTICLE VIII
CERTAIN TRANSACTIONS
(1) Notwithstanding any other provision of these
Articles of Incorporation, and subject to the exceptions provided in Paragraph
(4) of this Article, the types of transactions described in Paragraph (3) of
this Article shall require the affirmative vote or consent of the holders of
sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of each
class of stock of the Corporation normally entitled to vote in elections of
directors voting for the purposes of this Article as separate classes, when a
Principal Shareholder (as defined in Paragraph (2) of this Article) is a party
to the transaction. Such affirmative vote or consent shall be in addition to
the vote or consent of the holders of the stock of the Corporation other wise
required by law or by the terms of any class or series of preferred stock,
whether now or hereafter authorized, or any agreement between the Corporation
and any national securities exchange.
6
<PAGE> 7
(2) The term "Principal Shareholder" shall mean any
corporation, person or other entity which is the beneficial owner, directly or
indirectly, of more than five percent (5%) of the outstanding shares of any
class of stock of the Corporation and shall include any affiliate or
associate, as such terms are defined in clause (ii) below, of a Principal
Shareholder. For the purposes of this Article, in addition to the shares of
stock which a corporation, person or other entity beneficially owns directly,
(a) any corporation, person or other entity shall be deemed to be the
beneficial owner of any shares of stock of the Corporation (i) which it has the
right to acquire pursuant to any agreement or upon exercise of conversion
rights or warrants, or otherwise (but excluding stock options granted by the
Corporation) or (ii) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (i) above), by any
other corporation, person or entity with which it or its "affiliate" or
"associate" (as defined below) has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of stock of the
Corporation, or which is its "affiliate" or "associate" as those terms are
defined in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as in effect on December 1, 1985, and (b) the outstanding
shares of any class of stock of the Corporation shall include shares deemed
owned through application of clauses (i) and (ii) above but shall not include
any other shares which may be issuable pursuant to any agreement, or upon
exercise oL conversion rights or warrants, or otherwise.
(3) This Article shall apply to the following
transactions:
(i) The merger or consolidation of the Corporation or
any subsidiary of the Corporation with or into any
Principal Share holder.
(ii) The issuance of any securities of the Corporation
to any Principal Shareholder for cash.
(iii) The sale, lease or exchange of all or any
substantial part of the assets of the Corporation
to any Principal Shareholder (except assets having
an aggregate fair market value of less than
$1,000,000, aggregating for the purpose of such
computation all assets sold, leased or exchanged
in any series of similar transactions within a
twelve-month period).
(iv) The sale, lease or exchange to the Corporation or
any subsidiary thereof, in exchange for securities
of the
7
<PAGE> 8
Corporation, of any assets of any Principal
Shareholder (except assets having an aggregate
fair market value of less than $1,000,000,
aggregating for the purposes of such computation
all assets sold, leased or exchanged in any series
of similar transactions within a twelve-month
period).
(4) The provisions of this Article shall not be
applicable to (i) any of the transactions described in Paragraph (3) of this
Article if the Board of Directors of the Corporation shall by resolution have
approved a memorandum of understand ing with such Principal Shareholder with
respect to any substantially consistent with such transaction, or (ii) any such
transaction with any corporation of which a majority of the outstanding shares
of all classes of stock normally entitled to vote in elections of directors is
owned of record or beneficially by the Corporation and its subsidiaries.
(5) The Board oL Directors shall have the power and duty
to determine for the purposes of this Article on the basis of information known
to the Corporation, whether (i) a corporation, person or entity beneficially
owns more than five percent (5%) of the outstanding shares of any class of
stock of the Corporation, (ii) a corporation, person or entity is an
"affiliate" or "associate" (as defined above) of another, (iii) the assets
being acquired or leased to or by the Corporation, or any subsidiary thereof,
constitute a substantial part of the assets of the Corporation and have an
aggregate fair market value of less than $1,000,000, and (iv) the memorandum
of understanding referred to in Paragraph (4) hereof is substantial1y
consistent with the transaction covered thereby. Any such determination shall
be conclusive and binding for all purposes of this Article.
ARTICLE IX
AMENDMENTS
(1) The Corporation reserves the right from time to time
to make any amendment to its Articles of Incorporation, now or hereafter
authorized by law, including any amendment that alters the contract rights, as
expressly set forth in its Articles of Incorporation, of any outstanding stock.
(2) Notwithstanding Paragraph (l) of this Article or any
other provision of these Articles of Incorporation, no amendment to these
Articles of Incorporation or the Corporation shall amend, alter, change or
repeal any of the
8
<PAGE> 9
provisions of Articles VII, VIII and IX unless the amendment effecting such
amendment, alteration, change or repeal shall receive the affirmative vote or
consent of sixty-six and two-thirds percent (66-2/3%) of the outstanding shares
of each class of stock of the Corporation normally entitled to vote in
elections of directors, voting for the purposes of this Article as separate
classes. Such affirmative vote or consent shall be in addition to the vote or
consent of the holders of the stock of the Corporation otherwise required by
law or by the terms of any class or series of preferred stock, whether now or
hereafter authorized, or any agreement between the Corporation and any national
securities exchange.
IN WITNESS WHEREOF, I have adopted and signed these Articles
of Incorporation and do hereby acknowledge that the adoption and signing are my
act.
Dated the 19th day of May, 1986.
/s/ Pamela C. Scott
--------------------------------------
Pamela C. Scott,
Incorporator
9
<PAGE> 10
THE GABELLI EQUITY TRUST INC.
ARTICLES OF AMENDMENT
The Gabelli Equity Trust Inc., a Maryland corporation
(hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended by
striking out Article FIFTH, Paragraph (1) and inserting in lieu thereof the
following:
(1) The total number of shares of capital stock that the
Corporation shall have authority to issue is One Hundred Million
(100,000,000) shares of the par value of One Mill ($0.001) per share,
all of the same class and of the aggregate par value of One Hundred
Thousand Dollars ($100,000), all of which one hundred million
(100,000,000) shares are designated Common Stock.
SECOND: The amendment of the charter of the Corporation as
hereinabove set forth has been approved by the entire Board of Directors and no
stock entitled to be voted on the matter was outstanding or subscribed for at
the time of approval.
THIRD: (a) The total number of shares of the classes of
stock of the Corporation heretofore authorized was 50,000,000 shares, all of
one class and of the par value of One Mill ($0.001) per share.
<PAGE> 11
(b) The total number of shares of the class of stock
of the corporation as increased is one hundred million shares, all of one class
and of the par value of One Mill ($0.001) per share.
(c) The aggregate par value of all authorized shares
of all classes of stock of the Corporation is $100,000.
THE UNDERSIGNED, President of The Gabelli Equity Trust Inc.,
who executed on behalf of said Corporation the foregoing Articles of Amendment,
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, the foregoing Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
are true in all material respects, under the penalties of perjury.
2
<PAGE> 12
IN WITNESS WHEREOF The Gabelli Equity Trust Inc. has caused
these presents to be signed in its name and its behalf by its President and its
corporate seal to be hereunto affixed and attested by its Secretary on August
7, 1986.
Attest: THE GABELLI EQUITY TRUST INC.
By: /s/ Nicholas E.E. De Stefano By: /s/ Mario J. Gabelli
---------------------------------- ---------------------------------
Nicholas E.E. De Stefano Mario J. Gabelli
Secretary President
[Affix corporate seal]
3
<PAGE> 13
CERTIFICATE OF CORRECTION
The undersigned, as sole incorporator of THE GABELLI EQUITY
TRUST INC., a Maryland corporation having its principal office in Baltimore,
Maryland (the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation of the Corporation are
hereby corrected.
SECOND: The undersigned, Pamela C. Scott, is the sole party
to the Articles of Incorporation.
THIRD: The Articles of Incorporation were filed on May 20,
1986.
FOURTH: The name of the Corporation, due to a typographical
error, was erroneously listed in Article II as:
"The Gabelli Equity Trust Inc. Inc."
The actual name of the Corporation is:
"The Gabelli Equity Trust Inc."
IN WITNESS WHEREOF, I have signed this Certificate of
Correction on the 7th day of August, 1986 and have acknowledged this
Certificate to be my act.
/s/ Pamela C. Scott
----------------------------------
Pamela C. Scott
Incorporator of The Gabelli
Equity Trust Inc.
<PAGE> 14
THE GABELLI EQUITY TRUST INC.
ARTICLES OF AMENDMENTS
The Gabelli Equity Trust Inc., a Maryland Corporation having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby files Articles of AMENDMENTS to its Articles of Incorporation and hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation is registered as a closed-end non-diversified
investment company under the Investment Company Act of 1940.
SECOND: The Charter of the Corporation is hereby amended by adding a
new Article X which shall provide as follows:
ARTICLE X
MONETARY LIABILITY OF DIRECTORS AND OFFICERS
To the fullest extent permitted by Maryland General Corporation Law,
as amended from time to time, no director or officer of the
Corporation shall be personally liable to the Corporation or its
stockholders for money damages, except to the extent such exemption
from liability or limitation thereof is not permitted by the
Investment Company Act of 1940, as amended from time to time. No
amendment to these Articles of Incorporation or repeal of any of its
provisions shall limit or eliminate the benefits provided to directors
and officers under this provision with respect to any act or omission
which occurred prior to such amendment or repeal.
THIRD: The amendment of the Charter of the Corporation as herein
above set forth has been duly advised by the Board of Directors and approved by
the stockholders of the Corporation.
IN WITNESS WHEREOF: The Gabelli Equity Trust Inc. has caused these
presents to be executed by its duly authorized officers on its behalf as of the
29th day of August, 1991, and such individuals hereby acknowledge that the
execution of these Articles of AMENDMENTS is the act of the Corporation and
that to the best of their knowledge, information and belief, the matters and
facts stated herein are true in all material respects under penalty for
perjury.
<PAGE> 15
ATTEST THE GABELLI EQUITY TRUST INC.
/s/ J. Hamilton Crawford By: /s/ Ann Marie Gilly
- ----------------------------------- ---------------------------------
Secretary Executive Vice President
2
<PAGE> 16
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
THE GABELLI EQUITY TRUST INC.
The Gabelli Equity Trust Inc., a Maryland corporation
(hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of the State of Maryland that:
FIRST: The Articles of Incorporation of the Corporation
dated May 19, 1986, as amended from time to time, are hereby amended by
striking out Article FIFTH, Paragraph (1) and inserting in lieu thereof the
following:
(1) The total number of shares of capital stock that the
Corporation shall have authority to issue is Two Hundred
Million (200,000,000) shares of the par value of $.001 per
share, all of the same class and of the aggregate par value of
Two Hundred Thousand Dollars ($200,000), all of which are
designated common stock of the Corporation.
SECOND: The foregoing amendment to the Corporation's Articles
of Incorporation was advised by the Corporation's Board of Directors and
approved by the Corporation's shareholders.
THIRD: (a) The total number of shares of common stock of
the Corporation heretofore authorized was 100,000,000 shares, all of one class
and of the par value of $.001 per share.
(b) The total number of shares of the common stock
of the Corporation as increased is 200,000,000 shares, all of the par value of
$.001 per share.
(c) The aggregate par value of all authorized of the
common stock of the Corporation is $200,000.
The undersigned, Vice President of the Gabelli Equity Trust
Inc., who executed on behalf of said Corporation the foregoing Articles of
Amendment, hereby acknowledges, in the name and on behalf of said Corporation,
the foregoing Articles of Amendment to be the corporate act of said Corporation
and further certifies that, to the best of his knowledge, information and
belief, the matters and facts set forth therein are true in all material
respects under the penalties of perjury.
<PAGE> 17
IN WITNESS WHEREOF, the Gabelli Equity Trust Inc. has caused
these Articles of Amendment to be signed in its name and on its behalf by its
Vice President and witnessed by its Secretary on this 12th day of July, 1994
ATTEST: THE GABELLI EQUITY TRUST INC.
BY:/s/ J. Hamilton Crawford, Jr. BY: /s/ Joshua Fenton
---------------------------------- ---------------------------------
J. Hamilton Crawford, Jr. Joshua Fenton
Secretary Vice President
2
<PAGE> 1
EXHIBIT 2(a)2
ARTICLES SUPPLEMENTARY
CREATING AND FIXING THE RIGHTS OF
[ ]% CUMULATIVE PREFERRED STOCK OF
THE GABELLI EQUITY TRUST INC.
THE GABELLI EQUITY TRUST INC., a Maryland corporation, having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of the State of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article FIFTH of the Charter of the Corporation, the Board of
Directors has authorized the issuance of a series of [ ] shares of preferred
stock, par value $.001 per share, of the Corporation designated as the "[ ]%
Cumulative Preferred Stock" (the "Cumulative Preferred Stock") and has provided
for the issuance of shares of such class.
SECOND: The preferences, voting powers, rights, restrictions, limitations
as to dividends, qualifications and terms and conditions of redemption of shares
of the Cumulative Preferred Stock of the Corporation as set by the Board of
Directors are as follows:
ARTICLE I
DEFINITIONS
Unless the context or use indicates another or different meaning or
intent, the following terms when used in these Articles Supplementary shall have
the meanings set forth below, whether such terms are used in the singular or
plural and regardless of their tense:
"Accountant's Confirmation" means a letter from an Independent Accountant
delivered to Moody's with respect to certain Basic Maintenance Reports
substantially to the effect that:
i. the Independent Accountant has read the Basic Maintenance
Report or Reports prepared by the Administrator during the referenced calendar
year that are referred to in such letter (the "Reports");
<PAGE> 2
ii. with respect to the issue size compliance, issuer
diversification and industry diversification calculations, such calculations
and the resulting Market Value of Moody's Eligible Assets and the Adjusted Value
of Moody's Eligible Assets are numerically correct;
iii. with respect to the excess or deficiency of the Adjusted
Value of the Corporation's Moody's Eligible Assets when compared to the Basic
Maintenance Amount calculated for Moody's the results of the calculation set
forth in the Reports have been recalculated and are numerically correct;
iv. with respect to the Moody's and S&P ratings on corporate
evidences of indebtedness, convertible corporate evidences of indebtedness and
preferred stock listed in the Reports, that information has been traced and
agrees with the information provided directly or indirectly by the respective
rating agencies (in the event such information does not agree or such
information is not listed in the accounting records of the Corporation, the
Independent Accountants will inquire of the rating agencies what such
information is, and provide a listing in their letter of such differences, if
any);
v. With respect to issuer name and coupon or dividend rate
listed in the Reports, that information has been traced and agrees with
information listed in the accounting records of the Corporation;
vi. With respect to issue size listed in the Reports, that
information has been traced and agrees with information provided by Bloomberg
Financial Service or such other services as Moody's may authorize from time to
time;
vii. with respect to the prices (or alternative permissible
factors used in calculating the Market Value as provided by these Articles
Supplementary) provided by the Administrator of the Corporation's assets for
purposes of valuing securities in the portfolio, the Independent Accountant has
traced the price used in the Reports to the price provided by such Administrator
(in accordance with the procedures provided in these Articles Supplementary)
and verified that such information agrees (in the event such information does
not agree, the Independent Accountants will provide a listing in their letter
of such differences); and
viii. with respect to the description of each security
included in the Reports, the description of Moody's Eligible Assets has been
compared to the
2
<PAGE> 3
definition of Moody's Eligible Assets contained in these Articles Supplementary,
and the description as appearing in the Reports agrees with the definition of
Moody's Eligible Assets as described in these Articles Supplementary.
Each such letter may state: such Independent Accountant has made no
independent verification of the accuracy of the description of the investment
securities listed in the Reports or the Market Value of those securities nor
have they performed any procedures other than those specifically outlined above
for the purposes of issuing such letter; unless otherwise stated in the letter,
the procedures specified therein were limited to a comparison of numbers or a
verification of specified computations applicable to numbers appearing in the
Reports and the schedule(s) thereto; the foregoing procedures do not constitute
an examination in accordance with generally accepted auditing standards and the
Reports contained in the letter do not extend to any of the Corporation's
financial statements taken as a whole; such Independent Accountant does not
express an opinion as to whether such procedures would enable such Independent
Accountant to determine that the methods followed in the preparation of the
Reports would correctly determine the Market Value or Discounted Value of the
investment portfolio; accordingly, such Independent Accountant expresses no
opinion as to the information set forth in the Reports or in the schedule(s)
thereto and make no representation as to the sufficiency of the procedures
performed for the purposes of these Articles Supplementary.
Such letter shall also state that the Independent Accountant is an
"independent accountant" with respect to the Corporation within the meaning of
the Securities Act of 1933, as amended, and the related published rules and
regulations thereunder.
"Adjusted Value" of each Moody's Eligible Asset shall be computed as
follows:
(i) Cash shall be valued at 100% of the face value thereof; and
(ii) all other Moody's Eligible Assets shall be valued at the
Discounted Value thereof; and
(iii) each asset that is not a Moody's Eligible Asset shall be
valued at zero.
3
<PAGE> 4
"Administrator" shall mean the other party to the Administration Agreement
with the Corporation which shall initially be First Data Investor Services
Group.
"Adviser" means Gabelli Funds, Inc., a New York corporation, or such other
person as shall be serving as the investment adviser of the Corporation.
"Asset Coverage" means asset coverage, as defined in Section 18(h) of the
1940 Act, of at least 200%, or such other percentage as may be required under
the 1940 Act, with respect to all Outstanding senior securities of the
Corporation constituting stock, including all Outstanding shares of Cumulative
Preferred Stock.
"Asset Coverage Cure Date" means, with respect to the failure by the
Corporation to maintain Asset Coverage (as required by paragraph 5(a)(i) of
Article II hereof) as of the last Business Day of each March, June, September
and December of each year, 60 days following such Business Day.
"Basic Maintenance Amount" means, as of any Valuation Date, the dollar
amount equal to (i) the sum of (A) the product of the number of shares of each
series of Cumulative Preferred Stock Outstanding on such Valuation Date
multiplied by the Liquidation Preference per share; (B) to the extent not
included in (A) the aggregate amount of cash dividends (whether or not earned or
declared) that will have accumulated for each Outstanding share of Cumulative
Preferred Stock from the most recent Dividend Payment Date to which dividends
have been paid or duly provided for (or, in the event the Basic Maintenance
Amount is calculated on a date prior to the initial Dividend Payment Date with
respect to a series of the Cumulative Preferred Stock, then from the Date of
Original Issue) through the Valuation Date plus all dividends to accumulate on
the Preferred Stock then Outstanding during the 70 days following such Valuation
Date or, if less, during the number of days following such Valuation Date that
shares of Preferred Stock called for redemption are scheduled to remain
Outstanding; (C) the Corporation's other liabilities due and payable as of such
Valuation Date (except that dividends and other distributions payable by the
Corporation on Common Stock shall not be included as a liability) and such
liabilities projected to become due and payable by the Corporation during the
90 days following such Valuation Date (excluding liabilities for investments to
be purchased and for dividends and other distributions not declared as of such
Valuation Date); and (D) any current liabilities of the Corporation as of such
Valuation Date to the extent not reflected in any of (i)(A) through (i)(C)
(including, without limitation, and immediately upon determination, any amounts
due and payable by the Corporation pursuant to reverse repurchase agreements and
any
4
<PAGE> 5
payables for assets purchased as of such Valuation Date) less (ii) (A) the
Adjusted Value of any of the Corporation's assets or (B) the face value of any
of the Corporation's assets if, in the case of both (ii)(A) and (ii)(B), such
assets are either cash or evidences of indebtedness which mature prior to or on
the date of redemption or repurchase of shares of Preferred Stock or payment of
another liability and are either U.S. Government Obligations or evidences of in
debtedness which have a rating assigned by Moody's of at least Aaa, P-1, VMIG-1
or MIG-1 or by S&P of at least AAA, SP-1+ or A-1+, and are irrevocably held by
the Corporation's custodian bank in a segregated account or deposited by the
Corporation with the Dividend-Disbursing Agent for the payment of the amounts
needed to redeem or repurchase Preferred Stock subject to redemption or
repurchase or any of (i)(B) through (i)(D); and provided that in the event the
Corporation has repurchased Cumulative Preferred Stock at a price of less than
the Liquidation Preference thereof and irrevocably segregated or deposited
assets as described above with its custodian bank or the Dividend-Disbursing
Agent for the payment of the repurchase price the Corporation may deduct 100% of
the Liquidation Preference of such Cumulative Preferred Stock to be repurchased
from (i) above.
"Basic Maintenance Cure Date" means 7 calendar days following a Valuation
Date, such date being the last day upon which the Corporation's failure to
comply with paragraph 5(a)(ii)(A) of Article II hereof could be cured.
"Basic Maintenance Report" means a report prepared by the Administrator of
the Corporation which sets forth, as of the related Valuation Date, the assets
of the Corporation, the Market Value and Discounted Value thereof (seriatim and
in the aggregate), and the Basic Maintenance Amount.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means a day on which the New York Stock Exchange is open
for trading and that is neither a Saturday, Sunday nor any other day on which
banks in the City of New York are authorized by law to close.
"Charter" means the Articles of Incorporation, as amended and supplemented
(including these Articles Supplementary), of the Corporation on file in the
State Department of Assessments and Taxation of the State of Maryland.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Corporation.
5
<PAGE> 6
"Corporation" means The Gabelli Equity Trust Inc., a Maryland corporation.
"Cumulative Preferred Stock" means the [ ]% Cumulative Preferred Stock,
par value $.001 per share, of the Corporation.
"Date of Original Issue" shall have the meaning set forth in paragraph
1(a) of Article II hereof.
"Deposit Assets" means cash, Short-Term Money Market Instruments and U.S.
Government Obligations. Except for determining whether the Corporation has
Moody's Eligible Assets with an Adjusted Value equal to or greater than the
Basic Maintenance Amount, each Deposit Asset shall be deemed to have a value
equal to its principal or face amount payable at maturity plus any interest
payable thereon after delivery of such Deposit Asset but only if payable on or
prior to the applicable payment date in advance of which the relevant deposit is
made.
"Discounted Value" means, with respect to a Moody's Eligible Asset, the
quotient of (A) in the case of a non-convertible fixed income instrument, the
lower of the principal amount (accreted principal to the extent such instrument
accretes interest) or liquidation preference and the Market Value thereof or (B)
in the case of any other Moody's Eligible Assets, the Market Value thereof,
divided by the applicable Moody's Discount Factor.
"Dividend-Disbursing Agent" means State Street Bank and Trust Company and
its successors or any other dividend-disbursing agent appointed by the
Corporation.
"Dividend Payment Date" means, with respect to the Preferred Stock, any
date on which dividends declared by the Board of Directors thereon are payable
pursuant to the provisions of paragraph 1(a) of Article II hereof and shall have
a correlative meaning with respect to any other class or series of Preferred
Stock.
"Dividend Period" shall have the meaning set forth in paragraph 1(a) of
Article II hereof.
"Independent Accountant" means a nationally recognized accountant, or firm
of accountants, that is with respect to the Corporation an independent public
accoun-
6
<PAGE> 7
tant or firm of independent public accountants under the Securities Act of 1933,
as amended.
"Liquidation Preference" shall, with respect to the Cumulative Preferred
Stock, have the meaning set forth in paragraph 2(a) of Article II hereof and
shall have a correlative meaning with respect to any other class or series of
Preferred Stock.
"Market Value" means the amount determined by the Administrator with
respect to specific Moody's Eligible Assets as follows: securities which are
traded on a nationally recognized stock exchange or Nasdaq National Market
System are valued at the last sale price as of the close of regular trading on
the day the securities are being valued, or lacking any sales, at the mean
between closing bid and asked prices. Other over-the-counter securities are
valued at the mean of the most recent bid and asked prices on the day the
securities are being valued as reported by Nasdaq, or in the case of securities
not quoted by Nasdaq, the National Quotation Bureau or such other comparable
sources as is determined by or under the direction of the Board of Directors
deems appropriate to reflect their fair value. If no asked prices are quoted on
such day, then the security is valued at the closing bid price on such day. If
no bid or asked prices are quoted on such day, then the security is valued by
such method as is determined by or under the direction of Board of Directors in
good faith to reflect its fair market value. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by the Adviser.
Securities traded primarily on one or more foreign exchanges are valued at the
closing price on the principal such exchange immediately prior to the close of
the New York Stock Exchange. Securities and assets for which market quotations
are not readily available are valued at fair value as determined in good faith
by or under the direction of the Board of Directors. Short-term investments that
mature in more than 60 days are valued at the highest bid price obtained from a
dealer maintaining an active market in that security or on the basis of prices
obtained from a pricing service approved as reliable by the Board of Directors.
Short-term investments that mature in 60 days or fewer are valued at amortized
cost or such amount as is determined by or under the direction of, the Board of
Directors to constitute fair value.
Notwithstanding the foregoing, "Market Value" may, at the option of the
Corporation with respect to any of its assets, mean the amount determined with
respect to specific Moody's Eligible Assets of the Corporation in the manner set
forth below:
7
<PAGE> 8
a. as to any common or preferred stock which is a Moody's Eligible Asset,
(i) if the stock is traded on a national securities exchange or quoted on the
Nasdaq System, the last sales price reported on the Valuation Date or (ii) if
there was no reported sales price on the Valuation Date, the lower of two bid
prices for such stock provided by two recognized securities dealers with a
minimum capitalization of $25,000,000 (or otherwise approved for such purpose by
Moody's) or by one such securities dealer and any other source (provided that
the utilization of such source would not adversely affect Moody's then-current
rating of the Cumulative Preferred Stock) to the Administrator of the
Corporation's assets, at least one of which shall be provided in writing or by
telecopy, telex, other electronic transcription, computer obtained quotation
reducible to written form or similar means, and in turn provided to the
Corporation by any such means by such Administrator, or, if two bid prices
cannot be obtained, such Moody's Eligible Asset shall have a Market Value of
zero;
b. as to any U.S. Government Obligation, Short Term Money Market
Instrument (other than demand deposits, federal funds, bankers' acceptances and
next Business Day's repurchase agreements) and commercial paper, with maturities
greater than 60 days, the product of (i) the principal amount (accreted
principal to the extent such instrument accretes interest) of such instrument,
and (ii) the lower of the bid prices for the same kind of instruments having, as
nearly as practicable, comparable interest rates and maturities provided by two
recognized dealers having minimum capitalization of $25,000,000 (or otherwise
approved for such purpose by Moody's) or by one such dealer and any other source
(provided that the utilization of such source would not adversely affect Moody's
then-current rating of the Cumulative Preferred Stock) to the Administrator, at
least one of which shall be provided in writing or by telecopy, telex, other
electronic transcription, computer obtained quotation reducible to written form
or similar means, and in turn provided to the Corporation by any such means by
such Administrator, or, if two bid prices cannot be obtained, such Moody's
Eligible Asset will have a Market Value of zero;
c. as to cash, demand deposits, federal funds, bankers' acceptances and
next Business Day's repurchase agreements included in Short Term Money Market
Instruments, the face value thereof;
d. as to any U.S. Government Obligation, Short Term Money Market
Instrument or commercial paper with a maturity of 60 days or fewer, amortized
cost unless the Board of Directors determines that such value does not
constitute fair value;
8
<PAGE> 9
e. as to any other evidence of indebtedness which is a Moody's Eligible
Asset, (i) the product of (A) the unpaid principal balance of such indebtedness
as of the Valuation Date and (B)(1) if such indebtedness is traded on a national
securities exchange or quoted on the Nasdaq System, the last sales price
reported on the Valuation Date or (2) if there was no reported sales price on
the Valuation Date or if such indebtedness is not traded on a national
securities exchange or quoted on the Nasdaq System, the lower of two bid prices
for such indebtedness provided by two recognized dealers with a minimum
capitalization of $25,000,000 (or otherwise approved for such purpose by
Moody's) or by one such dealer and any other source (provided that the
utilization of such source would not adversely affect Moody's then-current
rating of the Cumulative Preferred Stock) to the Administrator of the
Corporation's assets, at least one of which shall be provided in writing or by
telecopy, telex, other electronic transcription, computer obtained quotation
reducible to written form or similar means, and in turn provided to the
Corporation by any such means by such Administrator, plus (ii) accrued interest
on such indebtedness.
"Moody's" means Moody's Investors Service, Inc., or its successors and
their assigns, and if such corporation shall be dissolved or liquidated or shall
no longer perform the functions of a securities rating agency, "Moody's" shall
be deemed to refer to any other nationally recognized securities rating agency
designated by the Corporation.
"Moody's Discount Factor" means, with respect to a Moody's Eligible Asset
specified below, the following applicable number:
<TABLE>
<CAPTION>
Moody's
Type of Moody's Eligible Asset: Discount Factor:
- ------------------------------- ----------------
<S> <C>
Short Term Money Market Instruments (other than U.S.
Government Obligations set forth below) and other
commercial paper:
Demand or time deposits, certificates of deposit and
bankers' acceptances includible in Short Term
Money Market Instruments ............................................... 1.00
Commercial paper rated P-1 by Moody's maturing in 30
days or less ........................................................... 1.00
Commercial paper rated P-1 by Moody's maturing in more
than 30 days but in 270 days or less ................................... 1.15
Commercial paper rated A-1+ by S&P maturing in 270
days or less ........................................................... 1.25
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
Moody's
Type of Moody's Eligible Asset: Discount Factor:
- ------------------------------- ----------------
<S> <C>
Repurchase obligations includible in Short Term Money
Market Instruments if term is less than 30 days
and counterparty is rated at least A2 ............................... 1.00
Other repurchase obligations ........................................ Discount Factor applicable
to underlying assets
U.S. Common Stocks and Common Stocks of foreign
issuers for which ADR's are traded ..................................... 3.00
Common Stocks of foreign issuers for which no ADR's
are traded ............................................................. [ ]
Convertible Preferred Stocks ........................................... 3.00
Preferred stocks:
Auction rate preferred stocks .......................................... 3.50
Other preferred stocks issued by issuers in the
financial and industrial industries .................................... 1.62
Other preferred stocks issued by issuers in the
utilities industry ..................................................... 1.40
U.S. Government Obligations (other than U.S. Treasury
Securities Strips set forth below) with remaining
terms to maturity of:
1 year or less ......................................................... 1.04
2 years or less ........................................................ 1.09
3 years or less ........................................................ 1.12
4 years or less ........................................................ 1.15
5 years or less ........................................................ 1.18
7 years or less ........................................................ 1.21
10 years or less ....................................................... 1.24
15 years or less ....................................................... 1.25
20 years or less ....................................................... 1.26
30 years or less ....................................................... 1.26
U.S. Treasury Securities Strips with remaining terms
to maturity of:
1 year or less ......................................................... 1.04
2 years or less ........................................................ 1.10
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
Moody's
Type of Moody's Eligible Asset: Discount Factor:
- ------------------------------- ----------------
<S> <C>
3 years or less ........................................................ 1.14
4 years or less ........................................................ 1.18
5 years or less ........................................................ 1.21
7 years or less ........................................................ 1.27
10 years or less ....................................................... 1.34
15 years or less ....................................................... 1.45
20 years or less ....................................................... 1.54
30 years or less ....................................................... 1.66
Corporate evidences of indebtedness:
Corporate evidences of indebtedness rated at least
Aaa3 with remaining terms to maturity of:
1 year or less ......................................................... 1.10
2 years or less ........................................................ 1.13
3 years or less ........................................................ 1.18
4 years or less ........................................................ 1.21
5 years or less ........................................................ 1.23
7 years or less ........................................................ 1.27
10 years or less ....................................................... 1.30
15 years or less ....................................................... 1.31
20 years or less ....................................................... 1.32
30 years or less 1.33
Corporate evidences of indebtedness rated at least Aa3
with remaining terms to maturity of:
1 year or less ......................................................... 1.15
2 years of less ........................................................ 1.20
3 years or less ........................................................ 1.23
4 years or less ........................................................ 1.27
5 years or less ........................................................ 1.29
7 years or less ........................................................ 1.33
10 years or less ....................................................... 1.36
15 years or less ....................................................... 1.37
20 years or less ....................................................... 1.38
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Moody's
Type of Moody's Eligible Asset: Discount Factor:
- ------------------------------- ----------------
<S> <C>
30 years or less ....................................................... 1.39
Corporate evidences of indebtedness rated at least A3
with remaining terms to maturity of:
1 year or less ......................................................... 1.20
2 years or less ........................................................ 1.26
3 years or less ........................................................ 1.29
4 years or less ........................................................ 1.33
5 years or less ........................................................ 1.35
7 years or less ........................................................ 1.39
10 years or less ....................................................... 1.42
15 years or less ....................................................... 1.43
20 years or less ....................................................... 1.45
30 years or less ....................................................... 1.45
Corporate evidences of indebtedness rated at least
Baa3 with remaining terms of maturity of:
1 year or less ......................................................... 1.25
2 years or less ........................................................ 1.31
3 years or less ........................................................ 1.35
4 years or less ........................................................ 1.38
5 years or less ........................................................ 1.41
7 years or less ........................................................ 1.45
10 years or less ....................................................... 1.48
15 years or less ....................................................... 1.50
20 years or less ....................................................... 1.51
30 years or less ....................................................... 1.52
Corporate evidences of indebtedness rated at least Ba3
with remaining terms of maturity of:
1 year or less ......................................................... 1.36
2 years or less ........................................................ 1.42
3 years or less ........................................................ 1.46
4 years or less ........................................................ 1.50
5 years or less ........................................................ 1.53
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Moody's
Type of Moody's Eligible Asset: Discount Factor:
- ------------------------------- ----------------
<S> <C>
7 years or less ........................................................ 1.57
10 years or less ....................................................... 1.61
15 years or less ....................................................... 1.62
20 years or less ....................................................... 1.64
30 years or less ....................................................... 1.64
Corporate evidences of indebtedness rated at least B1
and B2 with remaining terms of maturity of:
1 year or less ......................................................... 1.46
2 years or less ........................................................ 1.53
3 years or less ........................................................ 1.57
4 years or less ........................................................ 1.61
5 years or less ........................................................ 1.65
7 years or less ........................................................ 1.70
10 years or less ....................................................... 1.73
15 years or less ....................................................... 1.75
20 years or less ....................................................... 1.76
30 years or less ....................................................... 1.77
Convertible corporate evidences of indebtedness with
senior debt securities rated at least Aa3 issued by
the following type of issuers:
Utility ................................................................ 1.28
Industrial ............................................................. 1.75
Financial .............................................................. 1.53
Transportation ......................................................... 2.13
Convertible corporate evidences of indebtedness with
senior debt securities rated at least A3 issued by the
following type of issuers:
Utility ................................................................ 1.33
Industrial ............................................................. 1.80
Financial .............................................................. 1.58
Transportation ......................................................... 2.18
Convertible corporate evidences of indebtedness with
senior debt securities rated at least Baa3 issued by
the
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
Moody's
Type of Moody's Eligible Asset: Discount Factor:
- ------------------------------- ----------------
<S> <C>
following type of issuers:
Utility ................................................................ 1.48
Industrial ............................................................. 1.95
Financial .............................................................. 1.73
Transportation ......................................................... 2.33
Convertible corporate evidences of indebtedness with
senior debt securities rated at least Ba3 issued by
the following type of issuers:
Utility ................................................................ 1.49
Industrial ............................................................. 1.96
Financial .............................................................. 1.74
Transportation ......................................................... 2.34
Convertible corporate evidences of indebtedness with
senior debt securities rated at least B1 or B2 issued
by the following type of issuers:
Utility ................................................................ 1.59
Industrial ............................................................. 2.06
Financial .............................................................. 1.84
Transportation ......................................................... 2.44
</TABLE>
"Moody's Eligible Assets" means:
i. cash (including, for this purpose, receivables for
investments sold to a counterparty whose senior debt securities are rated at
least Baa3 by Moody's or a counterparty approved by Moody's and payable within
five Business Days following such Valuation Date and dividends and interest
receivable within 70 days on investments);
ii. Short-Term Money Market Instruments;
iii. commercial paper that is not includible as a Short-Term
Money Market Instrument having on the Valuation Date a rating from Moody's of at
least P-1 and maturing within 270 days;
14
<PAGE> 15
iv. preferred stocks (A) which either (1) are issued by
issuers whose senior debt securities are rated at least Baa1 by Moody's or (2)
are rated at least "baa3" by Moody's (or in the event an issuer's senior debt
securities or preferred stock is not rated by Moody's, which either (1) are
issued by an issuer whose senior debt securities are rated at least A- by S&P or
(2) are rated at least A- by S&P and for this purpose have been assigned a
Moody's equivalent rating of at least "baa3"), (B) of issuers which have (or, in
the case of issuers which are special purpose corporations, whose parent
companies have) common stock listed on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market System, (C) which have a minimum
issue size (when taken together with other of the issuer's issues of similar
tenor) of $50,000,000, (D) which have paid cash dividends consistently during
the preceding three-year period (or, in the case of new issues without a
dividend history, are rated at least "a1" by Moody's or, if not rated by
Moody's, are rated at least AA- by S&P), (E) which pay cumulative cash dividends
in U.S. dollars, (F) which are not convertible into any other class of stock and
do not have warrants attached, (G) which are not issued by issuers in the
transportation industry and (H) in the case of auction rate preferred stocks,
which are rated at least "aa3" by Moody's, or if not rated by Moody's, AAA by
S&P or are otherwise approved in writing by Moody's and have never had a failed
auction; provided, however, that for this purpose the aggregate Market Value of
the Company's holdings of any single issue of auction rate preferred stock shall
not be more than 1% of the Corporation's total assets.
v. common stocks (A) (i) which are traded on a nationally
recognized stock exchange or in the over-the-counter market, (ii) which, if cash
dividend paying, pay cash dividends in U.S. dollars, and (iii) which may be sold
without restriction by the Corporation; provided, however, that (1) common stock
which, while a Moody's Eligible Asset owned by the Corporation, ceases paying
any regular cash dividend will no longer be considered a Moody's Eligible Asset
until 71 days after the date of the announcement of such cessation, unless the
issuer of the common stock has senior debt securities rated at least A3 by
Moody's and (2) the aggregate Market Value of the Corporation's holdings of the
common stock of any issuer in excess of 4% in the case of utility common stock
and 6% in the case of non-utility common stock of the aggregate Market Value
the Corporation's holdings shall not be Moody's Eligible Assets and (B) which
are securities denominated in any currency other than the U.S. dollar or
securities of issuers formed under the laws of jurisdictions other than the
United States, its states and the District of Columbia for which there are
dollar-denominated American Depository Receipts ("ADRs") or their
15
<PAGE> 16
equivalents which are traded in the United States on exchanges or
over-the-counter and are issued by banks formed under the laws of the United
States, its states or the District of Columbia; provided, however, that the
aggregate Market Value of the Corporation's holdings of securities denominated
in currencies other than the U.S. dollar and ADRs in excess of (i) 6% of the
aggregate Market Value of the Out standing shares of common stock of such issuer
thereof or (ii) 10% of the Market Value of the Corporation's Moody's Eligible
Assets with respect to issuers formed under the laws of any single such non-U.S.
jurisdiction other than Australia, Belgium, Canada, Denmark, Finland, France,
Germany, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Spain,
Sweden, Switzerland and the United Kingdom, shall not be a Moody's Eligible
Asset;
vi. U.S. Government Obligations;
vii. corporate evidences of indebtedness (A) which may be sold
without restriction by the Corporation which are rated at least B3 (Caa
subordinate) by Moody's (or, in the event the security is not rated by Moody's,
the security is rated at least BB- by S&P and which for this purpose is assigned
a Moody's equiva lent rating of one full rating category lower), with such
rating confirmed on each Valuation Date, (B) which have a minimum issue size of
at least (x) $100,000,000 if rated at least Baa3 or (y) $50,000,000 if rated B
or Ba3, (C) which are not convertible or exchangeable into equity of the
issuing corporation and have a maturity of not more than 30 years and (D) for
which, if rated below Baa3 or not rated, the aggregate Market Value of the
Company's holdings do not exceed 10% of the aggregate Market Value of any
individual issue of corporate evidences of indebtedness calculated at the time
of original issuance;
viii. convertible corporate evidences of indebtedness (A)
which are issued by issuers whose senior debt securities are rated at least B2
by Moody's (or, in the event an issuer's senior debt securities are not rated by
Moody's, which are issued by issuers whose senior debt securities are rated at
least BB by S&P and which for this purpose is assigned a Moody's equivalent
rating of one full rating category lower), (B) which are convertible into common
stocks which are traded on the New York Stock Exchange or the American Stock
Exchange or are quoted on the Nasdaq National Market System and (C) which, if
cash dividend paying, pay cash dividends in U.S. dollars; provided, however,
that once convertible corporate evidences of indebtedness have been converted
into common stock, the common stock issued upon conversion must satisfy the
criteria set forth in clause (v) above
16
<PAGE> 17
and other relevant criteria set forth in this definition in order to be a
Moody's Eligible Asset.
provided, however, that the Corporation's investments in auction rate preferred
stocks described in clause (iv) above shall be included in Moody's Eligible
Assets only to the extent that the aggregate Market Value of such stocks does
not exceed 10% of the aggregate Market Value of all of the Corporation's
investments meeting the criteria set forth in clauses (i) through (vii) above
less the aggregate Market Value of those investments excluded from Moody's
Eligible Assets pursuant to the proviso appearing after clause (ix) below; and
ix. no assets which are subject to any lien or irrevocably
deposited by the Corporation for the payment of amounts needed to meet the
obligations described in clauses (i)(A) through (i)(D) of the definition of
"Basic Maintenance Amount" may be includible in Moody's Eligible Assets.
Notwithstanding anything to the contrary in the preceding clauses
(i)-(ix), the Corporation's investment in preferred stock, common stock,
corporate evidences of indebtedness and convertible corporate evidences of
indebtedness shall not be treated as Moody's Eligible Assets except to the
extent they satisfy the following diversification requirements (utilizing
Moody's Industry and Sub-industry Categories) with respect to the Market Value
of the Corporation's holdings:
Issuer:
<TABLE>
<CAPTION>
Non-Utility Utility
Maximum Single Maximum Single
Moody's Rating(1)(2) Issuer(3)(4) Issuer(3)(4)
- -------------- ------------- -------------
<S> <C> <C>
"aaa", Aaa 100% 100%
"aa", Aa 20% 20%
"a", A 10% 10%
CS/CB, "Baa", Baa(5) 6% 4%
Ba 4% 4%
B1/B2 3% 3%
B3 (Caa subordinate) 2% 2%
</TABLE>
Industry and State:
17
<PAGE> 18
<TABLE>
<CAPTION>
Utility
Non-Utility Maximum Utility
Maximum Single Single Sub- Maximum Single
Moody's Rating(1) Industry(3) Industry(3)(6) State(3)
- ----------------- -------------- -------------- -----------
<S> <C> <C> <C>
"aaa", Aaa 100% 100% 100%
"aa", Aa 60% 60% 20%
"a", A 40% 50% 10%(7)
CS/CB, "Baa", Baa(5) 20% 50% 7%(7)
Ba 12% 12% 0%
B1/B2 8% 8% 0%
B3 (Caa subordinate) 5% 5% 0%
</TABLE>
- --------------
(1) The equivalent Moody's rating must be lowered one full rating category for
preferred stocks, corporate evidences of indebtedness and convertible
corporate evidences of indebtedness rated by S&P but not by Moody's.
(2) Corporate evidences of indebtedness from issues ranging $50,000,000 to
$100,000,000 are limited to 20% of Moody's Eligible Assets.
(3) The referenced percentages represent maximum cumulative totals only for
the related Moody's rating category and each lower Moody's rating
category.
(4) Issuers subject to common ownership of 25% or more are considered as one
name.
(5) CS/CB refers to common stock and convertible corporate evidences of
indebtedness, which are diversified independently from the rating level.
(6) In the case of utility common stock, utility preferred stock, utility
evidences of indebtedness and utility convertible evidences of
indebtedness, the definition of industry refers to sub-industries
(electric, water, hydro power, gas, diversified). Investments in other
sub-industries are eligible only to the extent that the combined sum
represents a percentage position of the Moody's Eligible Assets less than
or equal to the percentage limits in the diversification tables above.
(7) Such percentage shall be 15% in the case of utilities regulated by
California, New York and Texas.
"Moody's Industry and Sub-Industry Categories" means:
18
<PAGE> 19
Aerospace and Defense: Major Contractor, Subsystems, Research, Aircraft
Manufacturing, Arms, Ammunition
Automobile: Automotive Equipment, Auto-Manufacturing, Auto Parts
Manufacturing, Personal Use Trailers, Motor Homes, Dealers
Banking: Bank Holding, Savings and Loans, Consumer Credit, Small Loan,
Agency, Factoring, Receivables
Beverage, Food and Tobacco: Beer and Ale, Distillers, Wines and Liquors,
Distributors, Soft Drink Syrup, Bottlers, Bakery, Mill Sugar, Canned
Foods, Corn Refiners, Dairy Products, Meat Products, Poultry Products,
Snacks, Packaged Foods, Distributors, Candy, Gum, Seafood, Frozen Food,
Cigarettes, Cigars, Leaf/Snuff, Vegetable Oil
Broadcasting: Radio, T.V.
Buildings and Real Estate: Brick, Cement, Climate Controls, Contracting,
Engineering, Construction, Hardware, Forest Products (building-related
only), Plumbing, Roofing, Wallboard, Real Estate, Real Estate Development,
REITs, Land Development
Cable: Distribution, Equipment, Programming
Chemicals, Plastics and Rubber: Chemicals (non-agriculture), Industrial
Gases, Sulphur, Plastics, Plastic Products, Abrasives, Coatings, Paints,
Varnish, Fabricating
Communications (excluding companies primarily engaged in offering
Telephone services): Satellite, Wireless, Equipment
Containers, Packaging and Glass: Glass, Fiberglass, Containers made of:
Glass, Metal, Paper, Plastic, Wood, or Fiberglass
Personal and Non Durable Consumer Products (Manufacturing Only): Soaps,
Perfumes, Cosmetics, Toiletries, Cleaning Supplies, School Supplies
Diversified/Conglomerate Manufacturing
Diversified/Conglomerate Service
19
<PAGE> 20
Diversified Natural Resources, Precious Metals and Minerals: Fabricating,
Distribution, Mining and Sales
Ecological: Pollution Control, Waste Removal, Waste Treatment, Waste
Disposal
Electronics: Computer Hardware, Electric Equipment, Components,
Controllers, Motors, Household Appliances, Information Service
Communication Systems, Radios, TVs, Tape Machines, Speakers, Printers,
Drivers, Technology
Entertainment: Recording Industry, Motion Exhibition Theaters, Motion
Picture Production and Distribution
Finance: Investment Brokerage, Leasing, Syndication, Securities
Farming and Agriculture: Livestock, Grains, Produce; Agricultural
Chemicals, Agricultural Equipment, Fertilizers
Grocery: Grocery Stores, Convenience Food Stores
Healthcare, Education and Childcare: Ethical Drugs, Proprietary Drugs,
Research, Health Care Centers, Nursing Homes, HMOs, Hospitals, Hospital
Supplies, Medical Equipment
Home and Office Furnishings, Housewares, and Durable Consumer Products:
Carpets, Floor Coverings, Furniture, Cooking, Ranges
Hotels, Motels, Inns and Gaming
Insurance: Life, Property and Casualty, Broker, Agent, Surety
Leisure, Amusement, Entertainment: Boating, Bowling, Billiards, Musical
Instruments, Fishing, Photo Equipment, Records, Tapes, Sports, Outdoor
Equipment (Camping), Tourism, Resorts, Games, Toy Manufacturing
Machinery (Non-Agriculture, Non-Construction, Non-Electronic): Industrial,
Machine Tools, Steam Generators
20
<PAGE> 21
Mining, Steel, Iron and Non Precious Metals: Coal, Copper, Lead, Uranium,
Zinc, Aluminum, Stainless Steel, Integrated Steel, Ore Production,
Refractories, Steel Mill Machinery, Mini-Mills, Fabricating, Distribution
and Sales
Oil and Gas: Crude Producer, Retailer, Well Supply, Service and Drilling
Personal, Food and Miscellaneous Services
Printing and Publishing: Graphic Arts, Paper, Paper Products, Business
Forms, Magazines, Books, Periodicals, Newspapers, Textbooks
Cargo Transport: Rail, Shipping, Railroads, Rail-Car Builders, Ship
Builders, Containers, Container Builders, Parts, Overnight Mail, Trucking,
Truck Manufacturing, Trailer Manufacturing, Air Cargo, Transport
Retail Stores: Apparel, Toy, Variety, Drugs, Department, Mail Order
Catalog, Showroom
Telecommunications: Local, Long Distance, Independent, Telephone,
Telegraph, Equipment, Research
Textiles and Leather: Producer, Synthetic Fiber, Apparel Manufacturer,
Leather Shoes
Personal Transportation: Air, Bus, Rail, Car, Rental
Utilities: Electric, Water, Hydro Power, Gas, Diversified
Sovereigns: Semi-sovereigns, Canadian Provinces, Supra- national agencies
"1940 Act" means the Investment Company Act of 1940, as amended.
"Notice of Redemption" shall have the meaning set forth in paragraph
3(c)(i) of Article II hereof.
"Outstanding," when used with respect to Preferred Stock, shall mean, as
of a particular date, all Preferred Stock theretofore issued and delivered by
the Corporation, except:
21
<PAGE> 22
(1) any such share of Preferred Stock theretofore cancelled by the
Corporation or delivered to the Corporation for cancellation;
(2) any such share of Preferred Stock as to which a Notice of
Redemption shall have been given and for whose payment at the
redemption thereof Deposit Assets in the necessary amount are held
by the Corporation in trust for or were paid by the Corporation to
the holder of such share pursuant to these Articles Supplementary;
and
(3) any such share in exchange for or in lieu of which other shares
have been issued and delivered pursuant to these Articles
Supplementary.
"Preferred Stock" means the preferred stock, par value $.001 per share, of
the Corporation, and includes the Cumulative Preferred Stock.
"Quarterly Valuation Date" means the last Valuation Date in March, June,
September and December of each year, commencing June, 1998.
"Redemption Price" has the meaning set forth in paragraph 3(a) of Article
II hereof.
"Short-Term Money Market Instruments" means the following types of
instruments if, on the date of purchase or other acquisition thereof by the
Corporation (or, in the case of an instrument specified by clauses (i) and (ii)
below, on the Valuation Date), the remaining terms to maturity thereof are not
in excess of 90 days:
(i) U.S. Government Obligations;
(ii) commercial paper that is rated at the time of purchase or
acquisition and the Valuation Date at least P-1 by Moody's and is issued by an
issuer (or guaranteed or supported by a person or entity other than the issuer)
whose long-term unsecured debt obligations are rated at least Aa3 by Moody's;
(iii) demand or time deposits in, or certificates of deposit
of, or banker's acceptances issued by (A) a depository institution or trust
company incorporated under the laws of the United States of America or any state
thereof or the District of Columbia or (B) a United States branch office or
agency of a foreign depository institution (provided that such branch office or
agency is subject to banking regulation under the laws of the United States, any
state thereof or the
22
<PAGE> 23
District of Columbia) if, in each case, the commercial paper, if any, and the
long-term unsecured debt obligations (other than such obligations the ratings of
which are based on the credit of a person or entity other than such depository
institution or trust company) of such depository institution or trust company at
the time of purchase or acquisition and the Valuation Date, have (1) credit
ratings from Moody's of at least P-1 in the case of commercial paper and (2)
credit ratings from Moody's of at least Aa3 in the case of long-term unsecured
debt obligations; provided, however, that in the case of any such investment
that matures in no more than one Business Day from the date of purchase or other
acquisition by the Corporation, all of the foregoing requirements shall be
applicable except that the required long-term unsecured debt credit rating of
such depository institution or trust company from Moody's shall be at least A2;
and provided, further, however, that the foregoing credit rating requirements
shall be deemed to be met with respect to a depository institution or trust
company if (1) such depository institution or trust company is the principal
depository institution in a holding company system, (2) the commercial paper, if
any, of such depository institution or trust company is not rated below P-1 by
Moody's and (3) the holding company shall meet all of the foregoing credit
rating requirements (including the preceding proviso in the case of instruments
that mature in no more than one Business Day from the date of purchase or other
acquisition by the Corporation);
(iv) repurchase obligations with respect to any U.S.
Government Obligation entered into with a depository institution, trust company
or securities dealer (acting as principal) which is rated (A) at least Aa3 if
the maturity is three months or less, (B) at least A1 if the maturity is two
months or less and (C) at least A2 if the maturity is one month or less; and
(v) Eurodollar demand or time deposits in, or certificates of
deposit of, the head office or the London branch office of a depository
institution or trust company meeting the credit rating requirements of
commercial paper and long-term unsecured debt obligations specified in clause
(iii) above, provided that the inter est receivable by the Corporation shall be
payable in U.S. dollars and shall not be subject to any withholding or similar
taxes.
"S&P" means Standard & Poor's Ratings Group or its successors.
"U.S. Government Obligations" means direct non-callable obligations of the
United States, provided that such direct obligations are entitled to the full
faith and credit of the United States and that any such obligations, other than
United States
23
<PAGE> 24
Treasury Bills and U.S. Treasury Securities Strips, provide for the periodic
payment of interest and the full payment of principal at maturity.
"Valuation Date" means the day of the week specified by the Board of
Directors for the weekly determination of net asset value of the Corporation.
"Voting Period" shall have the meaning set forth in paragraph 4(b) of
Article II hereof.
ARTICLE II
CUMULATIVE PREFERRED STOCK
1. Dividends.
(a) Holders of shares of Cumulative Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, cumulative cash dividends at the rate of [ ]% per
annum (computed on the basis of a 360-day year consisting of twelve 30-day
months) of the Liquidation Preference on the Cumulative Preferred Stock and no
more, payable quarterly on March 26th, June 26th, September 26th and December
26th in each year (each a "Dividend Payment Date") commencing June 26, 1998 (or,
if any such day is not a Business Day, then on the next succeeding Business Day)
to holders of record of Cumulative Preferred Stock as they appear on the stock
register of the Corporation at the close of business on the fifth preceding
Business Day in preference to dividends on shares of Common Stock and any other
capital stock of the Corporation ranking junior to the Cumulative Preferred
Stock in payment of dividends. Dividends on shares of Cumulative Preferred Stock
shall accumulate from the date on which such shares are originally issued ("Date
of Original Issue"). Each period beginning on and including a Dividend Payment
Date (or the Date of Original Issue, in the case of the first dividend period
after issuance of such shares) and ending on but excluding the next succeeding
Dividend Payment Date is referred to herein as a "Dividend Period." Dividends on
account of arrears for any past Dividend Period may be declared and paid at any
time, without reference to any Dividend Payment Date, to holders of record on
such date not exceeding 30 days preceding the payment date thereof as shall be
fixed by the Board of Directors.
24
<PAGE> 25
(b)(i) No dividends shall be declared or paid or set apart for payment on
shares of Cumulative Preferred Stock for any Dividend Period or part thereof
unless full cumulative dividends have been or contemporaneously are declared and
paid on all Outstanding shares of Cumulative Preferred Stock through the most
recent Dividend Payment Dates therefor. If full cumulative dividends are not
paid on the shares of Cumulative Preferred Stock, any dividends on the shares of
Cumulative Preferred Stock shall be paid pro rata on all Outstanding shares of
Cumulative Preferred Stock. No holders of shares of Cumulative Preferred Stock
shall be entitled to any dividends, whether payable in cash, property or stock,
in excess of full cumulative dividends as provided in this paragraph 1(b)(i) on
shares of Cumulative Preferred Stock. No interest or sum of money in lieu of
interest shall be payable in respect of any dividend payments on any shares of
Cumulative Preferred Stock that may be in arrears.
(ii) For so long as shares of Cumulative Preferred Stock are Outstanding,
the Corporation 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
options, warrants or rights to subscribe for or purchase, Common Stock or other
stock, if any, ranking junior to the Cumulative Preferred Stock as to dividends
or upon liquidation) in respect of the Common Stock or any other stock of the
Corporation ranking junior to or on parity with the Cumulative Preferred Stock
as to dividends or upon liquidation, or call for redemption, redeem, purchase or
otherwise acquire for consideration any shares of Common Stock or any other
stock of the Corporation ranking junior to or on parity with the Cumulative
Preferred Stock as to dividends or upon liquidation (except by conversion into
or exchange for stock of the Corporation ranking junior to or on parity with the
Cumulative Preferred Stock as to dividends and upon liquidation), unless, in
each case, (A) immediately thereafter, the aggregate Adjusted Value of the
Corporation's Moody's Eligible Assets shall equal or exceed the Basic
Maintenance Amount and the Corporation shall have Asset Coverage, (B) full
cumulative dividends on all shares of Cumulative Preferred Stock due on or prior
to the date of the transaction have been declared and paid (or shall have been
declared and sufficient funds for the payment thereof deposited with the
Dividend-Disbursing Agent) and (C) the Corporation has redeemed the full number
of shares of Cumulative Preferred Stock required to be redeemed by any provision
contained herein for mandatory redemption.
(iii) Any dividend payment made on the shares of Cumulative Preferred
Stock shall first be credited against the dividends accumulated with respect to
the earliest Dividend Period for which dividends have not been paid.
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(c) Not later than the Business Day next preceding each Dividend Payment
Date, the Corporation shall deposit with the Dividend-Disbursing Agent Deposit
Assets having an initial combined value sufficient to pay the dividends that are
payable on such Dividend Payment Date, which Deposit Assets shall mature on or
prior to such Dividend Payment Date. The Corporation may direct the
Dividend-Disbursing Agent with respect to the investment of any such Deposit
Assets, provided that such investment consists exclusively of Deposit Assets and
provided further that the proceeds of any such investment will be available at
the opening of business on such Dividend Payment Date.
2. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the holders of
shares of Cumulative Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders, after
claims of creditors but before any distribution or payment shall be made in
respect of the Common Stock or any other stock of the Corporation ranking junior
to the Cumulative Preferred Stock as to liquidation payments, a liquidation
distribution in the amount of $25.00 per share (the "Liquidation Preference"),
plus an amount equal to all unpaid dividends accumulated to and including the
date fixed for such distribution or payment (whether or not earned or declared
by the Corporation, but excluding interest thereon), and such holders shall be
entitled to no further participation in any distribution or payment in
connection with any such liquidation, dissolution or winding up.
(b) If, upon any liquidation, dissolution or winding up of the affairs of
the Corporation, whether voluntary or involuntary, the assets of the Corporation
available for distribution among the holders of all Outstanding shares of
Cumulative Preferred Stock, and any other Outstanding class or series of
Preferred Stock of the Corporation ranking on a parity with the Cumulative
Preferred Stock as to payment upon liquidation, shall be insufficient to permit
the payment in full to such holders of Cumulative Preferred Stock of the
Liquidation Preference plus accumulated and unpaid dividends and the amounts due
upon liquidation with respect to such other Preferred Stock, then such available
assets shall be distributed among the holders of shares of Cumulative Preferred
Stock and such other Preferred Stock ratably in proportion to the respective
preferential amounts to which they are entitled. Unless and until the
Liquidation Preference plus accumulated and unpaid dividends has been paid in
full to the holders of shares of Cumulative Preferred Stock, no dividends or
distributions will be made to holders of the Common Stock or any other stock of
the Corporation ranking junior to the Cumulative Preferred Stock as to
liquidation.
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3. Redemption.
Shares of the Cumulative Preferred Stock shall be redeemed by the
Corporation as provided below:
(a) Mandatory Redemptions.
(i) If the Corporation is required to redeem any shares of Cumulative
Preferred Stock pursuant to paragraphs 5(b) or 5(c) of Article II hereof, then
the Corporation shall, to the extent permitted by the 1940 Act and Maryland law,
by the close of business on such Asset Coverage Cure Date or Basic Maintenance
Amount Cure Date (herein collectively referred to as a "Cure Date"), as the case
may be, fix a redemption date and proceed to redeem shares as set forth in
paragraph 3(c) hereof. On such redemption date, the Corporation shall redeem,
out of funds legally available therefor, the number of shares of Cumulative
Preferred Stock equal to the minimum number of shares the redemption of which,
if such redemption had occurred immediately prior to the opening of business on
such Cure Date, would have resulted in the Corporation having Asset Coverage or
an Adjusted Value of its Moody's Eligible Assets equal to or greater than the
Basic Maintenance Amount, as the case may be, immediately prior to the opening
of business on such Cure Date or, if Asset Coverage or an Adjusted Value of its
Eligible Assets equal to or greater than the Basic Maintenance Amount, as the
case may be, cannot be so restored, all of the shares of Cumulative Preferred
Stock, at a price equal to $25.00 per share plus accumulated but unpaid
dividends (whether or not earned or declared by the Corporation) through the
date of redemption (the "Redemption Price"). In the event that shares of
Cumulative Preferred Stock are redeemed pursuant to paragraph 5(b) of Article II
hereof, the Corporation may, but is not required to, redeem a sufficient number
of shares of Cumulative Preferred Stock pursuant to this paragraph 3(a) in order
that the Corporation have Asset Coverage with respect to the remaining shares of
Cumulative Preferred Stock and any other Preferred Stock remaining Outstanding
after such redemption as great as 220%. In the event that all of the shares of
Cumulative Preferred Stock then Outstanding are required to be redeemed pursuant
to paragraph 6 of Article II hereof, the Corporation shall redeem such shares at
the Redemption Price and proceed to do so as set forth in paragraph 3(c) hereof.
(b) Optional Redemptions.
Prior to [ ], 2003, the Corporation may not redeem Cumulative Preferred
Stock at its option unless such redemption is necessary, in the judgment of the
Board
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of Directors, to maintain the Corporation's status as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended.
Commencing [ ], 2003 and thereafter, and prior thereto to the extent necessary
to maintain the Corporation's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended, to the extent
permitted by the 1940 Act and Maryland law, the Corporation may at any time upon
Notice of Redemption redeem the Cumulative Preferred Stock in whole or in part
at the Redemption Price per share, which notice shall specify a redemption date
of not fewer than 30 days nor more than 45 days after the date of such notice.
(c) Procedures for Redemption.
(i) If the Corporation shall determine or be required to redeem shares of
Cumulative Preferred Stock pursuant to this paragraph 3, it shall mail a written
notice of redemption ("Notice of Redemption") with respect to such redemption by
first class mail, postage prepaid, to each holder of the shares to be redeemed
at such holder's address as the same appears on the stock books of the
Corporation on the record date in respect of such redemption established by the
Board of Directors. Each such Notice of Redemption shall state: (A) the
redemption date; (B) the number of shares of Cumulative Preferred Stock to be
redeemed; (C) the CUSIP number(s) of such shares; (D) the Redemption Price; (E)
the place or places where the certificate(s) for such shares (properly endorsed
or assigned for transfer, if the Board of Directors shall so require and the
Notice of Redemption shall so state) are to be surrendered for payment in
respect of such redemption; (F) that dividends on the shares to be redeemed will
cease to accrue on such redemption date; and (G) the provisions of this
paragraph 3 under which such redemption is made. If fewer than all shares of
Cumulative Preferred Stock held by any holder are to be redeemed, the Notice of
Redemption mailed to such holder also shall specify the number of shares to be
redeemed from such holder. No defect in the Notice of Redemption or the mailing
thereof shall affect the validity of the redemption proceedings, except as
required by applicable law.
(ii) If the Corporation shall give a Notice of Redemption, then by the
close of business on the Business Day preceding the redemption date specified in
the Notice of Redemption the Corporation shall (A) deposit with the
Dividend-Disbursing Agent Deposit Assets having an initial combined value
sufficient to effect the redemption of the shares of Cumulative Preferred Stock
to be redeemed which Deposit Assets shall mature on or prior to such redemption
date and (B) give the Dividend-Disbursing Agent irrevocable instructions and
authority to pay the Redemption Price to the holders of the shares of Cumulative
Preferred Stock called
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for redemption on the redemption date. The Corporation may direct the
Dividend-Disbursing Agent with respect to the investment of any Deposit Assets
so deposited provided that the proceeds of any such investment will be available
at the opening of business on such redemption date. Upon the date of such
deposit (unless the Corporation shall default in making payment of the
Redemption Price), all rights of the holders of the shares of Cumulative
Preferred Stock so called for redemption shall cease and terminate except the
right of the holders thereof to receive the Redemption Price thereof and such
shares shall no longer be deemed Outstanding for any purpose. The Corporation
shall be entitled to receive, promptly after the date fixed for redemption any
cash in excess of the aggregate Redemption Price of the shares of Cumulative
Preferred Stock called for redemption on such date and any remaining Deposit
Assets. Any assets so deposited that are unclaimed at the end of two years from
such redemption date shall, to the extent permitted by law, be repaid to the
Corporation, after which the holders of the shares of Cumulative Preferred Stock
so called for redemption shall look only to the Corporation for payment thereof.
The Corporation shall be entitled to receive, from time to time after the date
fixed for redemption, any interest on the Deposit Assets so deposited.
(iii) On or after the redemption date, each holder of shares of Cumulative
Preferred Stock that are subject to redemption shall surrender the certificate
evidencing such shares to the Corporation at the place designated in the Notice
of Redemption and shall then be entitled to receive the cash Redemption Price,
without interest.
(iv) In the case of any redemption of less than all of the shares of
Cumulative Preferred Stock pursuant to these Articles Supplementary, such
redemption shall be made pro rata from each holder of shares of Cumulative
Preferred Stock in accordance with the respective number of shares held by each
such holder on the record date for such redemption.
(v) Notwithstanding the other provisions of this paragraph 3, the
Corporation shall not redeem shares of Cumulative Preferred Stock unless all
accumulated and unpaid dividends on all Outstanding shares of Cumulative
Preferred Stock for all applicable past Dividend Periods (whether or not earned
or declared by the Corporation) shall have been or are contemporaneously paid
or declared and Deposit Assets for the payment of such dividends shall have been
deposited with the Dividend-Disbursing Agent as set forth in paragraph 1(c) of
Article II hereof.
(vi) If the Corporation shall not have funds legally available for the
redemption of, or is otherwise unable to redeem, all the shares of the
Cumulative Preferred Stock to be redeemed on any redemption date, the
Corporation shall redeem on such
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redemption date the number of shares of Cumulative Preferred Stock as it shall
have legally available funds, or is otherwise able, to redeem ratably from each
holder whose shares are to be redeemed and the remainder of the shares of the
Cumulative Preferred Stock required to be redeemed shall be redeemed on the
earliest practicable date on which the Corporation shall have funds legally
available for the redemption of, or is otherwise able to redeem, such shares
upon Notice of Redemption.
4. Voting Rights.
(a) General.
Except as otherwise provided by law or as specified in the Charter, each
holder of shares of Cumulative Preferred Stock and any other Preferred Stock
shall be entitled to one vote for each share held on each matter submitted to a
vote of stock holders of the Corporation, and the holders of Outstanding shares
of Preferred Stock, including Cumulative Preferred Stock, and of shares of
Common Stock shall vote together as a single class; provided, however, that at
any meeting of the stockholders of the Corporation held for the election of
directors, the holders of Outstanding shares of Preferred Stock, including
Cumulative Preferred Stock, shall be entitled, as a class, to the exclusion of
the holders of all other securities and classes of capital stock of the
Corporation, to elect two of the Corporation's directors. Subject to paragraph
4(b) of Article II hereof, the holders of Outstanding shares of capital stock of
the Corporation, including the holders of Outstanding shares of Preferred Stock,
including the Cumulative Preferred Stock, voting as a single class, shall elect
the balance of the directors.
(b) Right to Elect Majority of Board of Directors.
During any period in which any one or more of the conditions described
below shall exist (such period being referred to herein as a "Voting Period"),
the number of directors constituting the Board of Directors shall be
automatically increased by the smallest number that, when added to the two
directors elected exclusively by the holders of shares of Preferred Stock, would
constitute a majority of the Board of Directors as so increased by such smallest
number; and the holders of shares of Preferred Stock shall be entitled, voting
separately as one class (to the exclusion of the holders of all other securities
and classes of capital stock of the Corporation), to elect such smallest number
of additional directors, together with the two directors that such holders are
in any event entitled to elect. A Voting Period shall commence:
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(i) if at any time accumulated dividends (whether or not
earned or declared, and whether or not funds are then legally available in an
amount sufficient therefor) on the Outstanding shares of Cumulative Preferred
Stock 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
Dividend-Disbursing Agent for the payment of such accumulated dividends; or
(ii) if at any time holders of any other shares of Preferred
Stock are entitled to elect a majority of the directors of the Corporation under
the 1940 Act.
Upon the termination of a Voting Period, the voting rights described in
this paragraph 4(b) shall cease, subject always, however, to the reverting of
such voting rights in the holders of Preferred Stock upon the further occurrence
of any of the events described in this paragraph 4(b).
(c) Right to Vote with Respect to Certain Other Matters.
So long as any shares of Cumulative Preferred Stock are Outstanding, the
Corporation shall not, without the affirmative vote of the holders of a majority
of the shares of Preferred Stock Outstanding at the time, voting separately as
one class, amend, alter or repeal the provisions of the Charter, whether by
merger, consolidation or otherwise, so as to materially adversely affect any of
the contract rights expressly set forth in the Charter of holders of shares of
Cumulative Preferred Stock or any other Preferred Stock. To the extent permitted
under the 1940 Act, in the event shares of more than one series of Preferred
Stock are Outstanding, the Corporation shall not approve any of the actions set
forth in the preceding sentence which materially adversely affects the contract
rights expressly set forth in the Charter of a holder of shares of a series of
Preferred Stock differently than those of a holder of shares of any other series
of Preferred Stock without the affirmative vote of the holders of at least a
majority of the shares of Preferred Stock of each series materially adversely
affected and Outstanding at such time (each such materially adversely affected
series voting separately as a class). The Corporation shall notify Moody's ten
Business Days prior to any such vote described above. Unless a higher percentage
is provided for under the Charter, the affirmative vote of the holders of a
majority of the Outstanding shares of Preferred Stock, including Cumulative
Preferred Stock, voting together as a single class, will be required to approve
any plan of reorganization adversely affecting such shares or any action
requiring a vote of security holders under Section 13(a) of the 1940 Act. For
purposes of this paragraph 4(c), the phrase "vote of the holders of a majority
of the Outstanding
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shares of Preferred Stock" shall mean, in accordance with Section 2(a)(42) of
the 1940 Act, the vote, at the annual or a special meeting of the stockholders
of the Corporation duly called (A) of 67 percent or more of the shares of
Preferred Stock present at such meeting, if the holders of more than 50 percent
of the Outstanding shares of Preferred Stock are present or represented by
proxy; or (B) of more than 50 percent of the Outstanding shares of Preferred
Stock, whichever is less. The class vote of holders of shares of Preferred
Stock, including Cumulative Preferred Stock, described above will in each case
be in addition to a separate vote of the requisite percentage of shares of
Common Stock and shares of Preferred Stock, including Cumulative Preferred
Stock, voting together as a single class, necessary to authorize the action in
question. An increase in the number of authorized shares of Preferred Stock
pursuant to the Charter or the issuance of additional shares of any series of
Preferred Stock (including Cumulative Preferred Stock) pursuant to the Charter
shall not in and of itself be considered to adversely affect the contract rights
of the holders of Cumulative Preferred Stock. The provisions of this paragraph
4(c) are subject to the provisions of Paragraph 6 of Article II hereof.
(d) Voting Procedures.
(i) Unless inconsistent with the provisions of paragraph 4(b) of Article
II hereof, as soon as practicable after the accrual of any right of the holders
of shares of Preferred Stock to elect additional directors as described in
paragraph 4(b) above, the Corporation shall call a special meeting of such
holders and instruct the Dividend-Disbursing Agent to mail 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 Corporation
fails to send such notice to the Dividend-Disbursing Agent or if the Corporation
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 day on
which such notice is mailed or such other date as the Board of Directors shall
determine. At any such special meeting and at each meeting held during a Voting
Period, such holders of Preferred Stock, voting together as a class (to the
exclusion of the holders of all other securities and classes of capital stock of
the Corporation), shall be entitled to elect the number of directors prescribed
in paragraph 4(b) above. At any such meeting or adjournment thereof in the
absence of a quorum, a majority of such holders present in person or by proxy
shall have the power to adjourn the meeting without notice, other than by an
announcement at the meeting, to a date not more than 90 days after the original
record date.
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(ii) For purposes of determining any rights of the holders of Cumulative
Preferred Stock to vote on any matter or the number of shares required to
constitute a quorum, whether such right is created by these Articles
Supplementary, by the other provisions of the Charter, by statute or otherwise,
a share of Cumulative Preferred Stock which is not Outstanding shall not be
counted.
(iii) The terms of office of all persons who are directors of the
Corporation at the time of a special meeting of holders of Preferred Stock,
including Cumulative Preferred Stock, to elect directors shall continue,
notwithstanding the election at such meeting by such holders of the number of
directors that they are entitled to elect, and the persons so elected by such
holders, together with the two incumbent directors elected by the holders of
Preferred Stock, including Cumulative Preferred Stock, and the remaining
incumbent directors elected by the holders of the Common Stock and Preferred
Stock, shall constitute the duly elected directors of the Corporation.
(iv) Simultaneously with the expiration of a Voting Period, the terms of
office of the additional directors elected by the holders of Preferred Stock,
including Cumulative Preferred Stock, pursuant to paragraph 4(b) above shall
terminate, the remaining directors shall constitute the directors of the
Corporation and the voting rights of such holders of Preferred Stock, including
Cumulative Preferred Stock, to elect additional directors pursuant to paragraph
4(b) above shall cease, subject to the provisions of the last sentence of
paragraph 4(b).
(e) Exclusive Remedy.
Unless otherwise required by law, the holders of shares of Cumulative
Preferred Stock shall not have any rights or preferences other than those
specifically set forth herein. The holders of shares of Cumulative Preferred
Stock shall have no preemptive rights or rights to cumulative voting. In the
event that the Corporation fails to pay any dividends on the shares of
Cumulative Preferred Stock, the exclusive remedy of the holders shall be the
right to vote for directors pursuant to the provisions of this paragraph 4.
(f) Notification to Moody's.
In the event a vote of holders of Cumulative Preferred Stock is required
pursuant to the provisions of Section 13(a) of the 1940 Act, as long as the
Cumulative Preferred Stock is rated by Moody's, the Corporation shall, not
later than ten Business Days prior to the date on which such vote is to be
taken, notify Moody's that such vote is to be taken and the nature of the action
with respect to which such
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vote is to be taken and, not later than ten Business Days after the date on
which such vote is taken, notify Moody's of the result of such vote.
5. Coverage Tests.
(a) Determination of Compliance.
For so long as any shares of Cumulative Preferred Stock are Outstanding,
the Corporation shall make the following determinations:
(i) Asset Coverage. The Corporation shall have Asset Coverage as of
the last Business Day of each March, June, September and December of each year
in which any share of Cumulative Preferred Stock is Outstanding.
(ii) Basic Maintenance Amount Requirement.
(A) For so long as any shares of Cumulative Preferred Stock
are Outstanding and are rated by Moody's, the Corporation shall maintain, on
each Valuation Date, Moody's Eligible Assets having an Adjusted Value at least
equal to the Basic Maintenance Amount, each as of such Valuation Date. Upon any
failure to maintain Moody's Eligible Assets having an Adjusted Value at least
equal to the Basic Maintenance Amount, the Corporation shall use all
commercially reasonable efforts to reattain Moody's Eligible Assets having an
Adjusted Value at least equal to the Basic Maintenance Amount on or prior to the
Basic Maintenance Amount Cure Date, by altering the composition of its portfolio
or otherwise.
(B) The Administrator shall prepare a Basic Maintenance Report
relating to each Valuation Date. On or before 5:00 P.M., New York City time, on
the fifth Business Day after the first Valuation Date following the Date of
Original Issue of the Cumulative Preferred Stock and after each (A) Quarterly
Valuation Date, (B) Valuation Date on which the Corporation fails to satisfy the
requirements of paragraph 5(a)(ii)(A) above, (C) Basic Maintenance Amount Cure
Date following a Valuation Date on which the Corporation fails to satisfy the
requirements of paragraph 5(a)(ii)(A) above and (D) Valuation Date and any
immediately succeeding Business Day on which the Adjusted Value of the
Corporation's Moody's Eligible Assets exceeds the Basic Maintenance Amount by 5%
or less, the Corporation shall complete and deliver to Moody's a Basic
Maintenance Report, which will be deemed to have been delivered to Moody's if
Moody's receives a copy or telecopy, telex or other electronic transcription
setting forth at least the Adjusted Value of the Corporation's Moody's Eligible
Assets and the Basic
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Maintenance Amount each as of the relevant Valuation Date and on the same day
the Corporation mails to Moody's for delivery on the next Business Day the full
Basic Maintenance Report. A failure by the Corporation to deliver a Basic
Maintenance Report under this paragraph 5(a)(ii)(B) shall be deemed to be
delivery of a Basic Maintenance Report indicating an Adjusted Value of the
Corporation's Moody's Eligible Assets less than the Basic Maintenance Amount, as
of the relevant Valuation Date.
(C) Within ten Business Days after the date of delivery to
Moody's of a Basic Maintenance Report in accordance with paragraph 5(a)(ii)(B)
above relating to a Quarterly Valuation Date, the Corporation shall deliver to
Moody's an Accountant's Confirmation relating to such Basic Maintenance Report
that was prepared by the Corporation during the quarter ending on such Quarterly
Valuation Date and to another Basic Maintenance Report that was prepared by the
Corporation relating to another day during each calendar year randomly selected
by the Independent Accountants. Also, within ten Business Days after the date of
delivery to Moody's of a Basic Maintenance Report in accordance with paragraph
5(a)(ii)(B) above relating to a Valuation Date on which the Corporation fails to
satisfy the requirements of such paragraph 5(a)(ii)(B) and any Basic Maintenance
Amount Cure Date, the Corporation shall deliver to Moody's an Accountant's
Confirmation relating to such Basic Maintenance Report.
(D) In the event the Adjusted Value of the Corporation's
Moody's Eligible Assets shown in any Basic Maintenance Report prepared pursuant
to paragraph 5(a)(ii)(B) above is less than the applicable Basic Maintenance
Amount, the Corporation shall have until the Basic Maintenance Amount Cure Date
to achieve an Adjusted Value of the Corporation's Moody's Eligible Assets at
least equal to the Basic Maintenance Amount, and upon such achievement (and not
later than such Basic Maintenance Amount Cure Date) the Corporation shall inform
Moody's of such achievement in writing by delivery of a revised Basic
Maintenance Report showing an Adjusted Value of the Corporation's Moody's
Eligible Assets at least equal to the Basic Maintenance Amount as of the date of
such revised Basic Maintenance Report.
(E) On or before 5:00 P.M., New York City time, on no later
than the fifth Business Day after the next Valuation Date following each date on
which the Corporation has repurchased more than 1% of its Common Stock since the
most recent date of delivery of a Basic Maintenance Report, the Corporation
shall complete and deliver to Moody's a Basic Maintenance Report. A Basic
Maintenance
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Report delivered as provided in paragraph 5(a)(ii)(B) above also shall be deemed
to have been delivered pursuant to this paragraph 5(a)(ii)(E).
(b) Failure to Meet Asset Coverage.
If the Corporation fails to have Asset Coverage as provided in paragraph
5(a)(i) hereof and such failure is not cured as of the related Asset Coverage
Cure Date, the Corporation shall give a Notice of Redemption as described in
paragraph 3 of Article II hereof with respect to the redemption of a sufficient
number of shares of Cumulative Preferred Stock or other Preferred Stock to
enable it to meet the requirements of paragraph 5(a)(i) above, and, at the
Corporation's discretion, such additional number of shares of Cumulative
Preferred Stock or other Preferred Stock in order that the Corporation have
Asset Coverage with respect to the shares of Cumulative Preferred Stock and any
other Preferred Stock remaining Outstanding after such redemption as great as
220%, and deposit with the Dividend-Disbursing Agent Deposit Securities having
an initial combined value sufficient to effect the redemption of the shares of
Cumulative Preferred Stock or other Preferred Stock to be redeemed, as
contemplated by paragraph 3(a) of Article II hereof.
(c) Failure to Maintain Moody's Eligible Assets having an Adjusted Value
at Least Equal to the Basic Maintenance Amount.
If the Corporation fails to have Moody's Eligible Assets having an
Adjusted Value at least equal to the Basic Maintenance Amount as provided in
paragraph 5(a)(ii)(A) above and such failure is not cured, the Corporation
shall, on or prior to the Basic Maintenance Amount Cure Date, (i) give a Notice
of Redemption as described in paragraph 3 of Article II hereof with respect to
the redemption of a sufficient number of shares of Cumulative Preferred Stock or
other Preferred Stock to enable it to meet the requirements of paragraph
5(a)(ii)(A) above, and, at the Corporation's discretion, such additional number
of shares of Cumulative Preferred Stock in order that the Corporation have
Adjusted Assets with respect to the remaining shares of Cumulative Preferred
Stock and any other Preferred Stock remaining Outstanding after such redemption
as great as 110% of the Basic Maintenance Amount, and (ii) deposit with the
Dividend-Disbursing Agent Deposit Assets having an initial combined value
sufficient to effect the redemption of the shares of Cumulative Preferred Stock
or other Preferred Stock to be redeemed, as contemplated by paragraph 3(a) of
Article II hereof.
(d) Status of Shares Called for Redemption.
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For purposes of determining whether the requirements of paragraphs 5(a)(i)
and 5(a)(ii)(A) hereof are satisfied, (i) no share of the Cumulative Preferred
Stock shall be deemed to be Outstanding for purposes of any computation if,
prior to or concurrently with such determination, sufficient Deposit Assets to
pay the full Redemption Price for such share shall have been deposited in trust
with the Dividend-Disbursing Agent and the requisite Notice of Redemption shall
have been given, and (ii) such Deposit Assets deposited with the
Dividend-Disbursing Agent shall not be included in determining whether the
requirements of paragraphs 5(a)(i) and 5(a)(ii)(A) hereof are satisfied.
6. Authorization of Certain Actions by Common Stockholders
If the Board of Directors and the holders of the number of shares of
the Common Stock of the Corporation required by applicable law and the
provisions of the Charter to be cast thereon vote to authorize (a) the
dissolution of the Corporation, (b) any amendment to the Charter and any other
actions necessary to be approved by them for the Corporation to convert to
open-end status (as that term is defined in the 1940 Act), (c) any plan of
reorganization (as that term is defined in the 1940 Act) adversely affecting the
Cumulative Preferred Stock or (d) any other action requiring approval of any
class of securities holders of the Corporation as provided in Section 13(a) of
the 1940 Act, then, irrespective of the approval or failure to approve such
dissolution, amendment, plan or other action by the holders of shares of the
Cumulative Preferred Stock, the Corporation shall as promptly as practicable
redeem all shares of the Cumulative Preferred Stock then Outstanding in
accordance with the provisions of paragraphs 3(a) and 3(c) of Article II hereof.
7. Certain Other Restrictions.
(a) For so long as the Cumulative Preferred Stock is rated by Moody's, the
Corporation will not, and will cause the Adviser not to, (i) knowingly and
willfully purchase or sell any asset for the specific purpose of causing, and
with the actual knowledge that the effect of such purchase or sale will be to
cause, the Corporation to have Moody's Eligible Assets having an Adjusted Value
as of the date of such purchase or sale to be less than the Basic Maintenance
Amount as of such date, (ii) in the event that, as of the immediately preceding
Valuation Date, the Adjusted Value of the Corporation's Moody's Eligible Assets
exceeded the Basic Maintenance Amount by 5% or less, alter the composition of
the Corporation's assets in a manner reasonably expected to reduce the Adjusted
Value of the Corporation's Moody's Eligible Assets, unless the Corporation shall
have confirmed that, after giving effect to such alteration, the Adjusted Value
of the Corporation's Moody's
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Eligible Assets exceeded the Basic Maintenance Amount or (iii) declare or pay
any dividend or other distribution on any shares of Common Stock or repurchase
any shares of Common Stock, unless the Corporation shall have confirmed that,
after giving effect to such declaration, other distribution or repurchase, the
Corporation continued to satisfy the requirements of paragraph 5(a)(ii)(A) of
Article II hereof.
(b) For so long as the Cumulative Preferred Stock is rated by Moody's,
unless the Corporation shall have received written confirmation from Moody's,
the Corporation may engage in the lending of its portfolio securities only in an
amount of up to 5% of the Corporation's total assets, provided that the
Corporation receives cash collateral for such loaned securities which is
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities and, if invested, is invested only in
Short-Term Money Market Investments or in money market mutual funds meeting the
requirements of Rule 2a-7 under the 1940 Act that maintain a constant $1.00 per
share net asset value and treat the loaned securities rather than the collateral
as the assets of the Corporation for purposes of determining compliance with
Article 5 hereof.
(c) For so long as the Cumulative Preferred Stock is rated by Moody's, the
Corporation shall not consolidate the Corporation with, merge the Corporation
into, sell or otherwise transfer all or substantially all of the Corporation's
assets to another entity or adopt a plan of liquidation of the Corporation, in
each case without providing prior written notification to Moody's.
8. Limitation on Incurrence of Additional Indebtedness and Issuance of
Additional Preferred Stock
(a) So long as any shares of Cumulative Preferred Stock are Outstanding,
the Corporation may issue and sell one or more series of a class of senior
securities of the Corporation representing indebtedness under Section 18 of the
1940 Act and/or otherwise create or incur indebtedness, provided that
immediately after giving effect to the incurrence of such indebtedness and to
its receipt and application of the proceeds thereof, the Corporation shall have
an "asset coverage" for all senior securities representing indebtedness, as
defined in Section 18(h) of the 1940 Act, of at least 300% of the amount of all
indebtedness of the Corporation then Outstanding and no such additional
indebtedness shall have any preference or priority over any other indebtedness
of the Corporation upon the distribution of the assets of the Corporation or in
respect of the payment of interest. Any possible liability resulting from
lending and/or borrowing portfolio securities, entering into reverse repurchase
agreements, entering into futures contracts and writing options, to the extent
such
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transactions are made in accordance with the investment restrictions of the
Corporation then in effect, shall not be considered to be indebtedness limited
by this paragraph 7(a).
(b) So long as any shares of Cumulative Preferred Stock are Outstanding,
the Corporation may issue and sell shares of one or more other series of
Preferred Stock constituting a series of a class of senior securities of the
Corporation representing stock under Section 18 of the 1940 Act in addition to
the shares of Cumulative Preferred Stock, provided that (i) the Corporation
shall, immediately after giving effect to the issuance of such additional
Preferred Stock and to its receipt and application of the proceeds thereof,
have an "asset coverage" for all senior securities which are stock, as defined
in Section 18(h) of the 1940 Act, of at least 200% of the shares of Cumulative
Preferred Stock and all other Preferred Stock of the Corporation then
Outstanding, and (ii) no such additional Preferred Stock shall have any
preference or priority over any other Preferred Stock of the Corporation upon
the distribution of the assets of the Corporation or in respect of the payment
of dividends.
ARTICLE III
ABILITY OF BOARD OF DIRECTORS TO MODIFY THE ARTICLES
SUPPLEMENTARY
The calculation of Adjusted Value, Basic Maintenance Amount and the
elements of each of them and the definitions of such terms and elements may be
modified by action of the Board of Directors without further action by the
Stockholders if the Board of Directors determines that such modification is
necessary to prevent a reduction in rating of the shares of Preferred Stock by
Moody's or is in the best interests of the holders of shares of Common Stock and
is not adverse to the holders of Preferred Stock in view of advice to the
Corporation by Moody's that such modification would not adversely affect its
then-current rating of the shares of Cumulative Preferred Stock. To the extent
the Corporation is unable to obtain an opinion of counsel to the effect that
operation of the foregoing sentence is enforceable in the circumstances then
obtaining, the calculation of Adjusted Value, Basic Maintenance Amount and the
elements of each of them and the definitions of such terms and the elements
thereof shall be adjusted from time to time without further action by the Board
of Directors and the Stockholders only to reflect changes made thereto
independently by Moody's if Moody's has advised the Corporation in writing
separately (a) of such adjustments and (b) that the revised calculation
definition would not cause Moody's to reduce or withdraw its then-current rating
of
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the shares of Preferred Stock. The adjustments contemplated by the preceding
sentence shall be made effective upon the time the Corporation receives the
notice from Moody's to the effect specified in clause (b) of the preceding
sentence. Any such modification may be rescinded or further modified by action
of the Board of Directors and Stockholders.
Notwithstanding the provisions of the preceding paragraph, to the extent
permitted by law, the Board of Directors, without the vote of the holders of the
Cumulative Preferred Stock or any other capital stock of the Corporation, may
amend the provisions of these Articles Supplementary to resolve any
inconsistency or ambiguity or to remedy any formal defect so long as the
amendment does not materially adversely affect any of the contract rights of
holders of shares of the Cumulative Preferred Stock or any other capital stock
of the Corporation or adversely affect the then current rating on the
Cumulative Preferred Stock by Moody's.
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IN WITNESS WHEREOF, THE GABELLI EQUITY TRUST INC. Inc has
caused these presents to be signed in its name and on its behalf by a duly
authorized officer, and its corporate seal to be hereunto affixed and attested
by its Secretary, and the said officers of the Corporation further acknowledge
said instrument to be the corporate act of the Corporation, and state that to
the best of their knowledge, information and belief under penalty of perjury the
matters and facts herein set forth with respect to approval are true in all
material respects, all on April , 1998.
THE GABELLI EQUITY TRUST INC.
By_________________________________
Name: Bruce N. Alpert
Title: Vice President and Treasurer
Attest:
________________________________
Name: James E. McKee
Title: Secretary
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EXHIBIT 2(b)
BY-LAWS
OF
THE GABELLI EQUITY TRUST INC.
A Maryland Corporation
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. The annual meeting of the stockholders
of The Gabelli Equity Trust Inc. (the "Corporation") shall be held on a date
fixed from time to time by the Board of Directors within the thirty-one (31) day
period ending four (4) months after the end of the Corporation's fiscal year. An
annual meeting may be held at any place in or out of the State of Maryland as
may be determined by the Board of Directors as shall be designated in the notice
of the meeting and at the time specified by the Board of Directors. Any business
of the Corporation may be transacted at an annual meeting without being
specifically designated in the notice unless otherwise provided by statute, the
Corporation's Charter or these By-Laws.
SECTION 2. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Charter, may be held at any place within the United States, and
may be called at any time by the Board of Directors or by the President, and
shall be called by the President or Secretary at the request in writing of a
majority of the Board of Directors or at the request in writing of stockholders
entitled to cast at least twenty-five (25) percent of the votes entitled to be
cast at the meeting upon payment by such stockholders to the Corporation of the
reasonably estimated cost of preparing and mailing a notice of the meeting
(which estimated cost shall be provided to such stockholders by the Secretary of
the Corporation). Notwithstanding the foregoing, unless requested by
stockholders entitled to cast a majority of the votes entitled to be cast at the
meeting, a special meeting of the stockholders need not be called at the request
of stockholders to consider any matter that is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding
<PAGE> 2
twelve (12) months. A written request shall state the purpose or purposes of
the proposed meeting.
SECTION 3. Notice of Meetings. Written or printed notice of the
purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting, by placing the notice in
the mail at least ten (10) days, but not more than ninety (90) days, prior to
the date designated for the meeting addressed to each stockholder at his address
appearing on the books of the Corporation or supplied by the stockholder to the
Corporation for the purposes of notice. The notice of any meeting of
stockholders may be accompanied by a form of proxy approved by the Board of
Directors in favor of the actions or persons as the Board of Directors may
select. Notice of any meeting of stockholders shall be deemed waived by any
stockholder who attends the meeting in person or by proxy, or who before or
after the meeting submits a signed waiver of notice that is filed with the
records of the meeting.
SECTION 4. Quorum. Except as otherwise provided by statute or by the
Corporation's Charter, the presence in person or by proxy of stockholders of the
Corporation entitled to cast at least a majority of the votes entitled to be
cast shall constitute a quorum at each meeting of the stockholders and all
questions shall be decided by majority vote of the shares so represented in
person or by proxy at the meeting and entitled to vote. In the absence of a
quorum, the stockholders present in person or by proxy at the meeting, by
majority vote and without notice other than by announcement at the meeting, may
adjourn the meeting from time to time as provided in Section 5 of this Article
I until a quorum shall attend. The stockholders present at any duly organized
meeting may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum. The absence from
any meeting in person or by proxy of holders of the number of shares of stock of
the Corporation in excess of a majority that may be required by the laws of the
State of Maryland, the Investment Company Act of 1940, or other applicable
statute, the Corporation's Articles of Incorporation or these By-Laws, for
action upon any given matter or matters that may properly come before the
meeting, so long as there are present, in person or by proxy, holders of the
number of shares of stock of the Corporation required for action upon the
other matter or matters.
SECTION 5. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which the adjournment is taken. At any adjourned meeting at which a
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quorum shall be present any action may be taken that could have been taken at
the meeting originally called. A meeting of the stockholders may not be
adjourned to a date more than one-hundred-twenty (120) days after the original
record date.
SECTION 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the President, or
in his absence or inability to act, a Vice President, or in the absence or
inability to act of the Chairman of the Board, the President and all the Vice
Presidents, a chairman chosen by the stockholders, shall act as chairman of the
meeting. The Secretary, or in his absence or inability to act, a person
appointed by the chairman of the meeting, shall act as secretary of the meeting
and keep the minutes of the meeting.
SECTION 7. Order of Business. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.
SECTION 8. Voting. Except as otherwise provided by statute or the
Corporation's Charter, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one (1) vote for every share of stock standing in his name on
the records of the Corporation as of the record date determined pursuant to
Section 9 of this Article I.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by the
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof, unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases in which the proxy states that
it is irrevocable and in which an irrevocable proxy is permitted by law.
SECTION 9. Fixing of Record Date for Determining Stockholders
Entitled to Vote at Meeting. The Board of Directors may set a record date for
the purpose of determining stockholders entitled to vote at any meeting of the
stockholders. The record date for a particular meeting shall be not more than
ninety (90) nor fewer than ten (10) days before the date of the meeting. All
persons who were holders of record of shares as of the record date of a meeting,
and no others, shall be entitled to vote at such meeting and any adjournment
thereof.
SECTION 10. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one (1) or more inspectors to act at the
meeting or at any adjournment of the meeting. If the inspectors shall not be so
appointed or if
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any of them shall fail to appear or act, the chairman of the meeting may appoint
inspectors. Each inspector, before entertaining upon the discharge of his
duties, shall, if required by the chairman of the meeting, take and sign an oath
to execute faithfully the duties of inspector at the meeting with strict
impartiality according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting power of each share,
the number of shares represented at the meeting, the existence of a quorum and
the validity and the effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do those acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the chairman of the
meeting or any stockholder entitled to vote at the meeting, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be stockholders of the Corporation.
SECTION 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Corporation's Charter, any action required
to be taken at any annual or special meeting of stockholders, or any action that
may be taken at any annual or special meeting of the stockholders, may be taken
without a meeting, without prior notice and without a vote, if the following are
filed with the records of stockholders' meetings: (a) aunanimous written
consent that sets forth the action and is signed by each stockholder entitled to
vote on the matter and (b) a written waiver of any right to dissent signed by
each stockholder entitled to notice of the meeting but not entitled to vote at
the meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Charter, the business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by law, by the
Corporation's Charter or by these By-Laws.
SECTION 2. Number, Election and Term of Directors. The number of
directors shall be fixed from time to time by resolution of the Board of
Directors
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adopted by a majority of the directors then in office; provided, however, that
the number of directors shall in no event be fewer than three (3) nor more than
nine (9). The Board of Directors shall be divided into three classes. Within the
limits above specified, the number of directors in each class shall be
determined by resolution of the Board of Directors or by the stockholders at the
annual meeting thereof. The term of office of the first class shall expire on
the date of the first annual meeting of stockholders. The term of office of the
second class shall expire one year thereafter. The term of office of the third
class shall expire two years thereafter. Upon expiration of the term of office
of each class as set forth above, the number of directors in such class, as
determined by the Board of Directors, shall be elected for a term of three years
to succeed the directors whose terms of office expire. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
5 of this Article, and each director elected shall hold office until his
successor shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed as provided in these
By-Laws, or as otherwise provided by statute or the Corporation's Charter. Any
vacancy created by an increase in directors may be filled in accordance with
Section 5 of this Article II. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration of
his term unless the director is specifically removed pursuant to Section 4 of
this Article II at the time of the decrease. A director need not be a
stockholder of the Corporation, a citizen of the United States or a resident of
the State of Maryland.
SECTION 3. Resignation. A director of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors
or the Chairman of the Board or to the President or the Secretary of the
Corporation. Any resignation shall take effect at the time specified in it or,
should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation shall not be
necessary to make it effective unless the resignation states otherwise.
SECTION 4. Removal of Directors. Any director of the Corporation may
be removed by the stockholders with or without cause by a vote of a majority of
the votes entitled to be cast for the election of directors.
SECTION 5. Vacancies. Subject to the provisions of the Investment
Company Act of 1940, any vacancies in the Board of Directors, whether arising
from death, resignation, removal or any other cause except an increase in the
number of directors, shall be filled by a vote of the majority of the Board of
Directors then in office even though that majority is less than a quorum,
provided that no vacancy or
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vacancies shall be filled by action of the remaining directors if, after the
filling of the vacancy or vacancies, fewer than two-thirds of the directors then
holding office shall have been elected by the stockholders of the Corporation. A
majority of the entire Board may fill a vacancy that results from an increase in
the number of directors. In the event that at any time a vacancy exists in any
office of a director that may not be filled by the remaining directors, a
special meeting of the stockholders shall be held as promptly as possible and in
any event within sixty (60) days, for the purpose of filling the vacancy or
vacancies. Any director appointed by the Board of Directors to fill a vacancy
shall hold office only until the next annual meeting of stockholders of the
Corporation and until a successor has been elected and qualifies or until his
earlier resignation or removal. Any director elected by the stockholders to fill
vacancy shall hold office for the balance of the term of the directors whose
death, resignation or removal occasioned the vacancy and until a successor has
been elected and qualifies or until his earlier resignation or removal.
SECTION 6. Place of Meetings. Meetings of the Board may be held at
any place that the Board of Directors may from time to time determine or that is
specified in the notice of the meeting.
SECTION 7. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at the time and place determined by the
Board of Directors.
SECTION 8. Special Meetings. Special meetings of the Board of
Directors may be called by two (2) or more directors of the Corporation or by
the Chairman of the Board or the President.
SECTION 9. Annual Meeting. The annual meeting of the newly elected
and other directors shall be held as soon as practicable after the meeting of
stockholders at which the newly elected directors were elected. No notice of
such annual meeting shall be necessary if held immediately after the
adjournment, and at the site, of the meeting of stockholders. If not so held,
notice shall be given as hereinafter provided for special meetings of the Board
of Directors.
SECTION 10. Notice of Special Meetings. Notice of each special
meeting of the Board of Directors shall be given by the Secretary as hereinafter
provided. Each notice shall state the time and place of the meeting and shall be
delivered to each director, either personally or by telephone or other standard
form of telecommunication, at least twenty-four (24) hours before the time at
which the meeting is to be held, or by first-class mail, postage prepaid,
addressed to the director
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at his residence or usual place of business, and mailed at least three (3) days
before the day on which the meeting is to be held.
SECTION 11. Waiver of Notice of Meetings. Notice of any special
meeting need not be given to any director who shall, either before or after the
meeting, sign a written waiver of notice that is filed with the records of the
meeting or who shall attend the meeting.
SECTION 12. Quorum and Voting. One-third, but not fewer than two (2)
of the members of the entire Board of Directors shall be present in person at
any meeting of the Board so as to constitute a quorum for the transaction of
business at the meeting, and except as otherwise expressly required by statute,
the Corporation's Charter, these By-Laws, the Investment Company Act of 1940,
or any other applicable statute, the act of a majority of the directors present
at any meeting at which a quorum is present shall be the act of the Board. In
the absence of a quorum at any meeting of the Board, a majority of the directors
present may adjourn the meeting to another time and place until a quorum shall
be present. Notice of the time and place of any adjourned meeting shall be given
to the directors who were not present at the time of the adjournment and, unless
the time and place were announced at the meeting at which the adjournment was
taken, to the other directors. At any adjourned meeting at which a quorum is
present, any business may be transacted that might have been transacted at the
meeting as originally called.
SECTION 13. Organization. The Board of Directors may designate a
Chairman of the Board, who shall preside at each meeting of the Board. In the
absence or inability of the Chairman of the Board to act, the President, or, in
his absence or inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside at the
meeting. The Secretary (or, in his absence or inability to act, any person
appointed by the chairman) shall act as secretary of the meeting and keep the
minutes of the meeting.
SECTION 14. Committees. The Board of Directors may designate one (1)
or more committees of the Board of Directors, each consisting of two (2) or more
directors. To the extent provided in the resolution, and permitted by law, the
committee or committees shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation. Any
committee or committees shall have the name or names determined from time to
time by resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and provide those minutes to the Board of
Directors when required. The members of a committee present at any meeting,
whether or not
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they constitute a quorum, may appoint a director to act in the place of an
absent member.
SECTION 15. Written Consent of Directors in Lieu of a Meeting.
Subject to the provisions of the Investment Company Act of 1940, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee of the Board may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of the Board
or committee.
SECTION 16. Telephone Conference. Members of the Board of Directors
or any committee of the Board may participate in any Board or committee meeting
by means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other at the
same time. Participation by such means shall constitute presence in person at
the meeting.
SECTION 17. Compensation. Each director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by the
Corporation for all reasonable expenses incurred in traveling to and from the
place of a Board or committee meeting.
SECTION 18. Qualification. Pursuant to the authority granted by
Section 2-403 of the Maryland General Corporation Law, in order for a person
who has been elected as a director to qualify for service as a director, other
than the directors elected by the holders of the Corporation's Preferred Stock,
such person, upon the occurrence of an event which, pursuant to the terms of
the Corporation's charter, permits a class of preferred stockholders of the
Corporation to elect a certain number of directors that would otherwise be
prohibited by the limitations of Article VI of the Corporation's charter, shall
resign.
SECTION 19. Acceptance of Resignations. With respect to the
resignations of directors required by Section 18, such resignations shall be
accepted by the Corporation in the following manner: (a) the Corporation shall
accept the resignations of the least number of directors required in order to
permit such preferred stockholders to elect the appropriate number of directors
as determined by the relevant provision of the Corporation's charter; and (b)
the resignations shall be accepted in the order that they were submitted to the
Corporation (i.e., the resignation that was submitted to the Corporation first
in time shall be accepted first by the Corporation, and so on). In the event
that two or more resignations were submitted at the same time, the acceptance
of one or the other resignation shall be at the discretion of the Corporation.
SECTION 20. Restrictions on Amendment of Certain Provisions.
Provisions of Sections 18 and 19 may not be amended by the directors of the
Corporation, only by a vote of holders of a majority of shares of stock of the
Corporation.
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. Number and Qualifications. The officers of the Corporation
shall be a President, a Secretary and a Controller, each of whom shall be
elected by the Board of Directors. The Board of Directors may elect or appoint
one (1) or more Vice Presidents and may also appoint any other officers, agents
and employees it deems necessary or proper. Any two (2) or more offices may be
held by the same person, except the office of President, but no officer shall
execute, acknowledge or verify in more than one (1) capacity any instrument
required by law to be executed, acknowledged or verified in more than one
capacity. Officers shall be elected by the Board of Directors each year at its
first meeting held after the annual meeting of stockholders, each to hold office
until the meeting of the Board following the next annual meeting of the
stockholders and until his successor shall have been duly elected and shall have
qualified, or until his death, or until he shall
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have resigned or have been removed, as provided in these By-Laws. The Board of
Directors may from time to time elect such officers (including one or more
Assistant Vice Presidents, one or more Assistant Controllers and one or more
Assistant Secretaries) and may appoint, or delegate to the President the power
to appoint, such agents as may be necessary or desirable for the business of the
Corporation. Such other officers and agents shall have such duties and shall
hold their offices for such terms as may be prescribed by the Board or by the
appointing authority.
SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors,
the Chairman of the Board, the President or the Secretary. Any resignation shall
take effect at the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The acceptance
of a resignation shall not be necessary to make it effective unless otherwise
stated in the resignation.
SECTION 3. Removal of Officer, Agent or Employee. Any officer, agent
or employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate the power of removal as to
agents and employees not elected or appointed by the Board of Directors. Removal
shall be without prejudice to the person's contract rights, if any, but the
appointment of any person as an officer, agent or employee of the Corporation
shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office that shall be vacant, in the manner prescribed
in these By-Laws for the regular election or appointment to the office.
SECTION 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with any
surety or sureties as the Board may require.
SECTION 7. President. The President shall be the chief executive
officer of the Corporation In the absence or inability of the Chairman of the
Board
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(or if there is none) to act, the President shall preside at all meetings
of the stockholders and of the Board of Directors. The President shall have,
subject to the control of the Board of Directors, general charge of the business
and affairs of the Corporation, and may employ and discharge employees and
agents of the Corporation, except those elected or appointed by the Board, and
he may delegate these powers.
SECTION 8. Vice President. Each Vice President shall have the powers
and perform the duties that the Board of Directors or the President may from
time to time prescribe.
SECTION 9. Controller. Subject to the provisions of any contract that
may be entered into with any custodian pursuant to authority granted by the
Board of Directors, the Controller shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
the Corporation's funds and securities; he shall have full authority to receive
and give receipts for all money due and payable to the Corporation, and to
endorse checks, drafts, and warrants, in its name and on its behalf and to give
full discharge for the same; he shall deposit all funds of the Corporation,
except those that may be required for current use, in such banks or other places
of deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Controller and
such other duties as may from time to time be assigned to him by the Board of
Directors or the President.
SECTION 10. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the committees
of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
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<PAGE> 11
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
SECTION 11. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board may confer for the time being the powers or
duties, or any of them, of such officer upon any other officer or upon any
director.
ARTICLE IV
STOCK
SECTION 1. Stock Certificates. Unless otherwise provided by the Board
of Directors and permitted by law, each holder of stock of the Corporation shall
be entitled upon specific written request to such person as may be designated by
the Corporation to have a certificate or certificates, in a form approved by the
Board, representing the number of shares of stock of the Corporation owned by
him; provided, however, that certificates for fractional shares will not be
delivered in any case. The certificates representing shares of stock shall be
signed by or in the name of the Corporation by the Chairman of the Board, the
President or a Vice President and by the Secretary or an Assistant Secretary or
the Controller or an Assistant Controller and sealed with the seal of the
Corporation. Any or all of the signatures or the seal on the certificate may be
facsimiles. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before the certificate is
issued, it may be issued by the Corporation with the same effect as if the
officer, transfer agent or registrar was still in office at the date of issue.
SECTION 2. Stock Leger. There shall be maintained a stock leger
containing the name and address of each stockholder and the number of shares of
stock of each class the shareholder holds. The stock leger may be in written
form or any other form which can be converted within a reasonable time into
written form for visual inspection. The original or a duplicate of the stock
leger shall be kept at the principal office of the Corporation or at any office
or agency specified by the Board of Directors.
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<PAGE> 12
SECTION 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder of the shares, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or with a transfer
agent or transfer clerk, and on surrender of the certificate or certificates, if
issued, for the shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of the share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions and
to vote as the owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
SECTION 4. Regulations. The Board of Directors may authorize the
issuance of uncertificated securities if permitted by law. If stock certificates
are issued, the Board of Directors may make any additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. The Board may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
SECTION 5. Lost, Destroyed or Mutilated Certificates. The holder of
any certificate representing the shares of stock of the Corporation shall
immediately notify the Corporation of its loss, destruction or mutilation and
the Corporation may issue a new certificate of stock in the place of any
certificate issued by it that has been alleged to have been lost or destroyed or
that shall have been mutilated. The Board may, in its discretion, require the
owner (or his legal representative) of a lost, destroyed or mutilated
certificate: to give to the Corporation a bond in a sum, limited or unlimited,
and in a form and with any surety or sureties, as the Board in its absolute
discretion shall determine, to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss or destruction of any such
certificate, or issuance of a new certificate. Anything herein to the contrary
notwithstanding, the Board of Directors, in its absolute discretion, may refuse
to issue any such new certificate, except pursuant to legal proceedings under
the laws of the State of Maryland.
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<PAGE> 13
SECTION 6. Fixing of Record Date for Dividends, Distributions, etc.
The Board may fix, in advance, a date not more than ninety (90) days preceding
the date fixed for the payment of any dividend or the making of any distribution
or the allotment of rights to subscribe for securities of the Corporation, or
for the delivery of evidence of rights or evidences of interests arising out of
any change, conversion or exchange of common stock or other securities, as the
record date for the determination of the stockholders entitled to receive any
such dividend, distribution, allotment, rights or interests, and in such case
only the stockholders or record at the time so fixed shall be entitled to
receive such dividend, distribution, allotment, rights or interests.
SECTION 7. Information to Stockholders and Others. Any stockholder
of the Corporation or his agent may inspect and copy during the Corporation's
usual business hours the Corporation's By-Laws, minutes of the proceedings of
its stockholders, annual statements of its affairs and voting trust agreements
on file at its principal office.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification of Directors and Officers. Any person who
was or is a party or is threatened to be made a party in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal or
administrative or investigative, by reason of the fact that such person is a
current or former director or officer of the Corporation, or is or was serving
while a director or officer of the Corporation, at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, shall be indemnified by the Corporation against
judgements, penalties, fines, excise taxes, settlements and reasonable expenses
(including attorneys' fees) actually incurred by such person in connection with
such action, suit or proceeding to the full extent permissible under the
Maryland General Corporation Law, the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as those statues are now or hereafter in
force, except that such indemnity shall not protect any such person against any
liability to the Corporation or any stockholder thereof to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office ("disabling conduct").
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<PAGE> 14
SECTION 2. Advances. Any current or former director of officer of the
Corporation claiming indemnification within the scope of this Article V shall be
entitled to advances from the Corporation for payment of the reasonable expenses
incurred by him in connection with proceedings to which he is a party in the
manner and to the full extent permissible under the Maryland General Corporation
Law, the Securities Act of 1933, as amended, and the Investment Company Act of
1940, as those statutes are now or hereafter in force; provided however, that
the person seeking indemnification shall provide to the Corporation a written
affirmation of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking to
repay any such advance, if it should ultimately be determined that the standard
of conduct has not been met, and provided further that at least one of the
following additional conditions is met: (a) the person seeking indemnification
shall provide a security in form and amount accept able to the Corporation for
his undertaking; (b) the Corporation is insured against losses arising by reason
of the advance; or (c) a majority of a quorum of directors of the Corporation
who are neither "interested persons" as defined in Section 2(a)(19) of the
Investment Company Act of 1940 nor parties to the proceeding ("disinterested
non-party directors"), or independent legal counsel, in a written opinion, shall
determine, based on a review of facts readily available to the Corporation at
the time the advance is proposed to be made, that there is reason to believe
that the person seeking indemnification will ultimately be found to be entitled
to indemnification.
SECTION 3. Procedure. At the request of any current or former
director or officer, or any employee or agent whom the Corporation proposes to
indemnify, the Board of Directors shall determine, or cause to be determined, in
a manner consistent with the Maryland General Corporation Law, the Securities
Act of 1933, as amended, and the Investment Company Act of 1940, as those
statutes are now or hereafter in force, whether the standards required by this
Article V have been met; provided, however, that indemnification shall be made
only following: (a) a final decision on the merits by a court or other body
before whom the proceeding was brought that the person to be indemnified was not
liable by reason of disabling conduct or (b) in the absence of such a decision,
a reasonable determination, based upon a review of the facts, that the person to
be indemnified was not liable by reason of disabling conduct, by (i) the vote of
a majority of a quorum of disinterested nonparty directors or (ii) an
independent legal counsel in a written opinion.
SECTION 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of the Corporation may be indemnified,
and reasonable expenses may be advanced to such employees or agents, in
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<PAGE> 15
accordance with the procedures set forth in this Article V to the extent
permissible under Maryland General Corporation Law, the Securities Act of 1933,
as amended, and the Investment Company Act of 1940 as those statutes are now or
hereafter in force, and to such further extent, consistent with the foregoing,
as may be provided by action of the Board of Directors or by contract.
SECTION 5. Other Rights. The indemnification provided by this Article
V shall not be deemed exclusive of any other right, with respect to
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or officer
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as to
a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
SECTION 6. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint venture,
trust, enterprise or employee benefit plan, against any liability asserted
against and incurred by him in any such capacity, or arising out of his status
as such, provided that no insurance may be obtained by the Corporation for
liabilities against which it would not have the power to indemnify him under
this Article V or applicable law.
ARTICLE VI
SEAL
The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation, the year of its incorporation, the words "Corporate
Seal" and "Maryland" and any emblem or device approved by the Board of
Directors. The seal may be used by causing it or a facsimile to be impressed or
affixed or in any other manner reproduced, or by placing the word "(seal)"
adjacent to the signature of the authorized officer of the Corporation.
ARTICLE VII
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<PAGE> 16
FISCAL YEAR
SECTION 1. Fiscal Year. The Corporation's fiscal year shall be fixed
by the Board of Directors.
SECTION 2. Accountant.
(a) The Corporation shall employ an independent public accountant or
a firm of independent public accountants of national reputation as its
Accountant to examine the accountants of the Corporation and to sign and certify
the financial statements filed by the Corporation. The Accountant's certificates
and reports shall be addressed both to the Board of Directors and to the
stockholders. The employment of the Accountant shall be conditioned upon the
right of the Corporation to terminate the employment forthwith without any
penalty by vote of a majority of the outstanding voting securities at any
stockholders' meeting called for that purpose.
(b) A majority of the members of the Board of Directors who are not
"interested persons" (as such term is defined in the Investment Company Act of
1940, as amended) of the Corporation shall select the Accountant at any meeting
held within 30 days before or after the beginning of the fiscal year of the
Corporation or before the annual stockholders' meeting in that year. Such
selection shall be submitted for ratification or rejection at the next
succeeding annual stockholders' meeting. If such meeting shall reject such
selection, the Accountant shall be selected by majority vote of the
Corporation's outstanding voting securities, either at the meeting at which the
rejection occurred or at a subsequent meeting of stockholders called for that
purpose.
(c) Any vacancy occurring between annual meetings, due to the
resignation of the Accountant, may be filled by the vote of a majority of the
members of the Board of Directors who are not "interested persons" of the
Corporation, as that term is defined in the Investment Company Act of 1940, at a
meeting called for the purpose of voting such action.
ARTICLE VIII
CUSTODY OF SECURITIES
SECTION 1. Employment of a Custodian. The Corporation shall place and
at all times maintain in the custody of a Custodian (including any sub-
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<PAGE> 17
custodian for the Custodian) all funds, securities and similar investments
owned by the Corporation. The Custodian (and any sub-custodian) shall be an
institution conforming to the requirements of Section 17(f) of the Investment
Company Act of 1940 and the rules of the Securities and Exchange Commission
thereunder. The Custodian shall be appointed from time to time by the Board of
Directors, which shall fix its remuneration.
SECTION 2. Termination of Custodian Agreement. Upon termination of
the Custodian Agreement or inability of the Custodian to continue to serve, the
Board of Directors shall promptly appoint a successor Custodian, but in the
event that no successor Custodian can be found who has the required
qualifications and is willing to serve, the Board of Directors shall call as
promptly as possible a special meeting of the stockholders to determine whether
the Corporation shall function without a Custodian or shall be liquidated. If so
directed by vote of the holders of a majority of the outstanding shares of stock
entitled to vote of the Corporation, the Custodian shall deliver and pay over
all property of the Corporation held by it as specified in such vote.
ARTICLE IX
AMENDMENTS
These By-Laws may be amended or repealed by the affirmative vote of a
majority of the Board of Directors at any regular or special meeting of the
Board of Directors, subject to the requirements of the Investment Company Act of
1940.
As adopted, June 6, 1986
and as amended, March 19, 1998
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<PAGE> 1
EXHIBIT 2(d)
TEMPORARY CERTIFICATE; EXCHANGEABLE FOR DEFINITIVE
ENGRAVED CERTIFICATE WHEN READY FOR DELIVERY
CUMULATIVE PREFERRED STOCK
PAR VALUE $.001
PER SHARE
THE GABELLI EQUITY TRUST INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MASSACHUSETTS AND NEW YORK, NEW YORK
CUSIP 362397200
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
THE GABELLI EQUITY TRUST INC.
transferable on the books of the Corporation by the holder hereto in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued and
shall be subject to all the provisions of the Articles of Incorporation and
By-Laws of the Corporation, each as from time to time amended, copies of which
are on file with the Transfer Agent, to all of which the holder by acceptance
hereof assents.
This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
DATED:
COUNTERSIGNED AND REGISTERED:
STATE STREET BANK AND TRUST COMPANY
(BOSTON, MASS.) Chairman of the Board
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE Vice President & Treasurer
<PAGE> 2
THE GABELLI EQUITY TRUST INC.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT______Custodian_______
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right Act____________________________________
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For value Received, ______________________ hereby sell, assign and transfer unto
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________Attorney
to transfer the said stock on the books of the within-named Corporation, with
full power of substitution in the premises.
Dated_______________
________________________________________
<PAGE> 1
EXHIBIT 2(e)
Summary Brochure
Automatic Dividend
Reinvestment and
Voluntary Cash
Purchase Plan
<PAGE> 2
Dear Shareholder,
We have prepared this brochure to summarize the details of the Automatic
Dividend Reinvestment and Voluntary Cash Purchase Plan (the "Plan"). This
summary is qualified by reference to the Terms and Conditions of the Plan that
follows the summary. The Plan is available to all shareholders of The Gabelli
Equity Trust Inc. (the "Fund") and provides a convenient way to acquire
additional shares of the Fund's common stock by automatic reinvestment of net
investment income and capital gains distributions paid on such shares. State
Street Bank and Trust Company ("State Street") serves as the administrator for
the Plan.
We hope this brochure will prove helpful in addressing any questions concerning
the Plan.
Respectfully,
Joshua W. Fenton
Vice President
<PAGE> 3
HOW DO I ENROLL IN THE PLAN?
No enrollment is necessary. Each registered shareholder is automatically
enrolled in the Plan (unless the shareholder elects otherwise). All
distributions of dividends and capital gains will be automatically reinvested
by State Street, as the Plan agent, in whole or fractional shares of the Fund,
as the case may be.
WHAT IF MY SHARES ARE HELD BY A BROKER, BANK OR NOMINEE?
If your shares are held in the name of a broker, bank or nominee, you should
instruct such institution to participate in the Plan on your behalf. If such
institution will not participate in the Plan, your account will be credited
with a cash dividend. In order to participate in the Plan through such
institution it may be necessary for you to have your shares taken out of
"street name" and re-registered in your own name. Once registered in your own
name your dividends will be automatically reinvested.
HOW DOES THE DIVIDEND REINVESTMENT PLAN WORK?
When a dividend is declared, nonparticipants in the Plan will receive cash.
Participants in the Plan will receive the equivalent in shares of the Fund
valued at the lower of market price or net asset value as described below:
If at the time of reinvestment, the market price of the Fund's Shares
is equal to or exceeds net asset value, participants are issued Shares valued
at the greater of (i) the net asset value as most recently determined or (ii)
95% of the then current market price of the Fund's Shares. If the net asset
value of the Shares at the time of valuation exceeds the market price of the
Shares, participants will receive shares from the Fund valued at market price.
WILL THE ENTIRE AMOUNT OF MY DISTRIBUTION BE REINVESTED?
YES. For any balance that is insufficient to purchase a whole share, State
Street will credit your account with a fractional share interest computed to
four decimal places. The fractional share interest is included in all
subsequent distributions, and you have voting rights on all full and
fractional shares acquired under the Plan. However, if your shares are held by
a broker, bank or nominee, that participates in the Plan on your behalf, any
amounts not sufficient to purchase a whole share may be credited to your
account in cash in lieu of the fractional share interest.
WILL I BE ISSUED STOCK CERTIFICATES FOR TRANSACTIONS IN THE PLAN?
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<PAGE> 4
NO. Shares purchased under the Plan will automatically be held for safe
keeping by State Street. Also, as a safeguard against loss or theft of stock
certificates held in your possession, you may send those certificates to State
Street for deposit into your account. Each transaction will be fully detailed
in a comprehensive statement which will provide immediate confirmation of the
current status of your account. All of the paperwork will be done for you by
State Street's computers, simplifying your record-keeping. If a stock
certificate is desired, it must be requested in writing for each transaction.
Certificates will be issued only for whole shares.
ARE DISTRIBUTIONS THAT ARE REINVESTED SUBJECT TO INCOME TAXES?
YES. The automatic reinvestment of distributions will not relieve participants
of any income tax which may be payable on such distributions. If you
participate in the Plan, you will receive Form 1099 concerning the Federal tax
status of distributions paid during the year.
IS THERE ANY CHARGE TO PARTICIPATE IN THE PLAN?
NO. State Street's fees for handling the reinvestment of distributions will be
paid by the Fund. There will be no brokerage charges for shares issued
directly by the Fund. However, each participant will pay a pro rata share of
brokerage commissions incurred with respect to State Street's open market
purchases in connection with the voluntary cash payments.
WHAT SHOULD I DO IF I RECEIVE FORM 2439, NOTICE OF UNDISTRIBUTED LONG-TERM
CAPITAL GAINS?
If at year end, the Fund retains a portion of realized long-term capital gains,
you will receive Form 2439. If you are a registered shareholder you will
receive this Form directly from State Street on or about February 15th. If
your shares are held by a broker, bank or nominee you will receive this Form
from the broker, bank or nominee on or about March 15th. Form 2439 reports
your proportionate amount of undistributed long-term capital gains and taxes
paid thereon. This information must be reflected on your Federal Income Tax
Return. Refer to the Fund's Annual Report for detailed filing information.
For IRA accounts, custodians will receive Form 2439. The custodian is required
to file Form 990-T (Exempt Organization Income Tax Return) in order to claim a
refund of your pro rata share of taxes paid by the Fund. Tax-exempt accounts
should file Form 990-T to receive a refund as well.
2
<PAGE> 5
HOW DOES THE VOLUNTARY CASH PURCHASE PLAN WORK?
Participants in the Plan have the option of making additional cash payments on
a semi-annual basis for investment in Fund shares. Such payments can be made
in any amount from $250 to $3,000. State Street will use all funds received to
purchase Fund shares in the open market on or about February 15 or August 15 of
each year.
To avoid unnecessary cash accumulations and also to allow ample time
for receipt and processing by State Street, registered shareholders should send
voluntary cash payments directly to State Street in a manner which ensures that
State Street will receive such payments approximately 10 days before February
15 and August 15, as the case may be. State Street will charge each
shareholder who participates $0.75 per transaction, plus a pro rata share of
the brokerage commissions. Brokerage charges for such purchases are expected
to be less than the usual brokerage charge for such transactions. It is
suggested that any voluntary cash payments be sent directly to State Street
Bank and Trust Company, P.O. Box 8200, Boston, MA 02266-8200.
HOW DO I REQUEST A CASH DIVIDEND OR DISCONTINUE PARTICIPATION IN THE PLAN?
PLEASE USE THE ATTACHED AUTHORIZATION CARD TO REQUEST A CASH DIVIDEND. Should
you wish to discontinue your participation in the Plan, you must choose one of
two options as indicated on the card. (1) you may request to receive a
certificate for the number of full shares then held in your Plan account along
with a check in payment for any fractional share interest you may have. The
payment for the fractional share interest will be valued at the opening price
of the Fund on the date your discontinuance is effective or, (2) you may wish
to liquidate your reinvestment shares. Please make the appropriate selection on
the attached Authorization Card. If you wish to liquidate your reinvestment
shares, the cost is $2.50 per transaction as well as the brokerage commission
incurred. Brokerage charges are expected to be less than the usual brokerage
charge for such transactions.
Other Questions and correspondence concerning the Plan should be directed to:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Tel: 1-800-426-5523
3
<PAGE> 6
If your shares are not held in your name, "customer name," you should contact
your broker, bank or nominee for further assistance.
The Fund and/or State Street may amend or terminate the Plan with at least 90
days written notice prior to the record date before such change becomes
effective.
4
<PAGE> 7
TERMS AND CONDITIONS OF
AUTOMATIC DIVIDEND REINVESTMENT
AND
VOLUNTARY CASH PURCHASE PLAN
1. Each shareholder ("Shareholder") holding shares of common stock
("Shares") of The Gabelli Equity Trust Inc. (the "Fund") will automatically be
participants in the Dividend Reinvestment Plan (the "Plan"), unless the
Shareholder specifically elects to receive all dividends and capital gains in
cash paid by check mailed directly to the Shareholder by State Street Bank and
Trust Company as agent under the Plan (the "Agent"). The Agent will open an
account for each Shareholder under the Plan in the same name in which such
Shareholder's shares of Common Stock are registered.
2. Whenever the Fund declares a capital gains distribution or an income
dividend payable in Shares or cash, participating Shareholders will take the
distribution or dividend entirely in Shares and the Agent will automatically
receive the Shares, including fractions, for the Shareholders account. The
process is as follows:
3. Whenever the market price per Share is equal to or exceeds net asset
value at the time Shares are valued for the purpose of determining the number
of Shares equivalent to the cash dividend or capital gains distribution (the
"Valuation Date"), participants will be issued Shares at the greater of (i) net
asset value or (ii) 95% of the then current market price of the Shares. The
Valuation Date is the dividend or distribution payment date or, if that date is
not a New York Stock Exchange trading day, the next trading day. If the net
asset value of the Shares on the Valuation Date exceeds the market price of the
Shares at that time, participants will receive shares from the Fund valued at
market price. If the Fund should declare a dividend or capital gains
distribution payable only in cash, the Agent will, as purchasing agent for the
participants buy Shares in the open market, on the New York Stock Exchange (the
"Exchange") or elsewhere, for the participants account after the payment date,
except that the Agent will endeavor to terminate purchases in the open market
and cause the Fund to issue the remaining Shares if, following the
commencement of the purchases, the market value of the Shares exceeds net asset
value. These remaining shares will be issued by the Fund at a price equal to
the greater of (i) net asset value or (ii) 95% of then current market price.
In a case where the Agent has terminated open market purchases and caused the
issuance of remaining Shares by the Fund, the number of shares received by the
participant in respect of the cash dividend or distribution will be based on
the weighted average of prices paid for Shares purchased in the open market and
the price at which the Fund issues remaining Shares. To the extent that the
Agent is unable to terminate purchases
5
<PAGE> 8
in the open market before the Agent has completed its purchases, or remaining
Shares cannot be issued by the Fund because the Fund declared a dividend or
distribution payable only in cash, and the market price exceeds the net asset
value of the Shares, the average Share purchase price paid by the Agent may
exceed the net asset value of the Shares, resulting in the acquisition of fewer
Shares than if the dividend or capital gains distribution had been paid in
Shares issued by the Fund.
The Agent will apply all cash received as a dividend or capital gains
distribution to purchase shares of common stock on the open market as soon as
practicable after the payment date of the dividend or capital gains
distribution, but in no event later than 45 days after that date, except when
necessary to comply with applicable provisions of the federal securities laws.
4. For all purposes of the Plan: (a) the market price of Fund Shares on a
particular date shall be the last sales price on the Exchange on that date or,
if no sale occurred on the Exchange on that date, then the mean between the
closing bid and asked quotations for the Shares on the Exchange on such date
and (b) net asset value per share on a particular date shall be as determined
by or on behalf of the Fund.
5. The open-market purchases provided for above may be made on any
securities exchange on which the Shares of the Fund are traded, in the
over-the-counter market or in negotiated transactions, and may be on such terms
as to price, delivery and otherwise as the Agent shall determine. Funds held
by the Agent uninvested will not bear interest, and it is understood that, in
any event, the Agent shall have no liability in connection with any inability
to purchase Shares within 45 days after the initial date of such purchase as
herein provided, or with the timing of any purchases effected. The Agent shall
have no responsibility as to the value of the Shares of the Fund acquired for
the Shareholder's account.
6. The Agent will hold Shares acquired pursuant to the Plan in
noncertificated form in the Agent's name or that of its nominee. At no
additional cost, as a participant in the Plan you may send to the Agent for
deposit into your Plan account those certificate shares of the Fund now in your
possession. These shares will be combined with those unissued full and
fractional shares acquired under the Plan and held by the Agent. Shortly
thereafter, you will receive a statement showing your combined holdings. The
Agent will forward to the Shareholder any proxy solicitation material and will
vote any Shares so held for the Shareholder only in accordance with the proxy
returned by her or him to the Fund. Upon the Shareholder's written request,
the Agent will deliver to her or him, without charge, a certificate or
certificates for the full Shares.
6
<PAGE> 9
7. The Agent will confirm to the Shareholder each acquisition made for
her or his account as soon as practicable but not later than 60 days after the
date thereof. Although the Shareholder may from time to time have an individual
fractional interest (computed to four decimal places) in a Share of the Fund,
no certificates for a fractional Share will be issued. However, dividends and
distributions on fractional Shares will be credited to the Shareholder's
account. In the event of a termination of a Shareholder's account under the
Plan, the Agent will adjust for any such undivided fractional interest in cash
at the opening market value of the Shares at the time of termination.
8. Any stock dividends or split Shares distributed by the Fund on Shares
held by The Agent for the Shareholder will be credited to the Shareholder's
account. In the event that the Fund makes available to the Shareholder rights
to purchase additional Shares or other securities, the Shares held for a
Shareholder under the Plan will be added to other shares held by the
Shareholder in calculating the number of rights to be issued to such
Shareholder.
9. The Agent's service fee for handling capital gains distributions or
income dividends will be paid by the Fund. The Shareholder will be charged a
pro rata share of brokerage commissions on all open market purchases.
10. The Shareholder may terminate her or his account under the Plan by
notifying the Agent in writing. A termination will be effective immediately if
notice is received by the Agent not less than 10 days prior to any dividend or
distribution record date; otherwise such termination will be effective, with
respect to any subsequent dividend or distribution, on the first trading day
after a dividend paid for the record date has been credited to the
Shareholder's account. Upon any termination the Agent will cause a certificate
or certificates for the full Shares held for the Shareholder under the Plan and
cash adjustment for any fraction to be delivered to her or him. If, the
Shareholder elects by notice to the Agent in writing in advance of such
termination to have the Agent sell part or all of her or his shares and remit
the proceeds to her or him, the Agent is authorized to deduct $2.50 per
transaction plus brokerage commissions for this transaction from the proceeds.
11. Shareholders have the option of sending additional funds,
semi-annually, in any amount from $250 to $3,000, for the purchase on the open
market of shares of the common stock of the Fund for Shareholder's accounts.
Voluntary payments will be invested on or shortly after the 15th of February
and August, and in no event more than 45 days after such dates except where
temporary curtailment or suspension of purchases is necessary to comply with
applicable provisions of federal securities law. Funds received more than 30
days prior to the 15th of February or August will be returned
7
<PAGE> 10
uninvested. Shareholders may withdraw their entire voluntary cash payment by
written notice not less than 48 hours before such payment is to be invested.
12. Investments of voluntary cash payment and other open market
purchases provided for above may be made on any securities exchange where the
Fund's common stock is traded, in the over-the-counter-market or in negotiated
transactions and may be on such terms as to price, delivery and otherwise as
the Agent shall determine. Funds held by the Agent uninvested will not bear
interest, and it is understood that, in any event, the Agent shall have no
liability in connection with any inability to purchase shares within 45 days
after the initial date of such purchase as herein provided, or with the timing
of any purchases effected. The Agent shall have no responsibility as to the
value of the common stock of the Fund acquired for the Shareholders' account.
For the purposes of cash investments the Agent may commingle Shareholder funds
with those of other Shareholders of the Fund for whom the Agent also acts as
Agent, and the average price (including brokerage commissions) of all shares
purchased by the Agent shall be the price per share allocable to the
Shareholder in connection therewith. The cost per transaction is $0.75.
13. The Agent may hold Shareholder's shares acquired pursuant to
Shareholder authorization, together with the shares of other Shareholders of
the Fund acquired pursuant to similar authorization, in noncertificated form in
the name of the Agent or that of the Agent's nominee. The Agent will forward
to each Shareholder any proxy solicitation material and will vote any shares
held for the Shareholder only in accordance with the proxy returned by the
Shareholder to the Fund. Upon written request, the Agent will deliver to the
Shareholder, without charge, a certificate or certificates for the full shares.
14. These terms and conditions may be amended or supplemented by the Agent
or the Fund at any time or times but, except when necessary or appropriate to
comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to the
Shareholder appropriate written notice at least 90 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by
the Shareholder unless, prior to the effective date thereof, the Agent receives
written notice of the termination of the Shareholder account under the Plan.
Any such amendment may include an appointment by the Fund of a successor agent
in its place and stead under these terms and conditions, with full power and
authority to perform all or any of the acts to be performed by the Agent. Upon
any such appointment of an Agent for the purpose of receiving dividends and
distributions, the Fund will be authorized to pay to such successor Agent, for
Shareholders' accounts, all dividends and distributions payable on Shares held
in the Shareholder's name or
8
<PAGE> 11
under the Plan for retention or application by such successor Agent as provided
in these terms and conditions.
15. ln the case of Shareholders, such as banks, brokers or nominees, which
hold Shares for others who are the beneficial owners, the Agent will administer
the Plan on the basis of the number of Shares certified from time to time by
the Shareholders as representing the total amount registered in the
Shareholder's name and held for the account of beneficial owners who are to
participate in the plan.
16. The Agent shall at all times act in good faith and agree to use the
best efforts within reasonable limits to insure the accuracy of all services
performed under this agreement and to comply with applicable law, but assumes
no responsibility and shall not be liable for loss or damage due to errors
unless the errors caused by its negligence, bad faith or willful misconduct or
that of its employees.
9
<PAGE> 12
THE GABELLI EQUITY TRUST INC.
The following describes certain changes, effective as of March 31,
1996, to the Fund's Automatic Dividend Reinvestment and Voluntary Cash Purchase
Plan (the "Plan"):
1. Shareholders may now make purchases under the voluntary cash purchase
portion of the plan on a monthly, rather than a semi-annual basis. Investments
will be made by the Fund on or shortly after the 15th day of each month. Funds
not received at least five days before such investment shall be held for
investment in the following month.
2. The maximum amount of a voluntary cash purchase by a shareholder under
the plan has been increased to $10,000 from $3,000.
3. A shareholder wishing to terminate his or her account may do so by
written or telephone notification to the Plan Agent of such intent. If such
notice is received less than 10 days prior to any dividend or distribution
record date, then such termination shall be immediately effective with respect
to all shares then held in such shareholder's account except that shares to be
received pursuant to the reinvestment of dividends or distributions shall be
sold by the Agent on the first trading day after such shares have been posted
to such terminating shareholder's account.
<PAGE> 13
THE GABELLI EQUITY TRUST INC.
c/o STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8200
BOSTON, MA 02266-8200
<PAGE> 14
AUTHORIZATION FOR CASH*
PLEASE TERMINATE MY REINVESTMENT PLAN AND . . . (CHECK ONE)
[ ] Issue a certificate for all full shares and sell any fractional shares
remaining in my reinvestment account.
[ ] Sell all shares currently being held in my reinvestment account, and
remit a check for the proceeds.
<TABLE>
<S> <C>
DO NOT MAIL IF YOU WISH TO RECEIVE
BOTH YOUR DIVIDEND AND CAPITAL PRINT
GAINS DISTRIBUTIONS IN ADDITIONAL SHARES. NAME(S)
-------------------------------------------------------
--------------------------------------------------------------
DATE
----------------------------------------------------------
ACCOUNT #
-----------------------------------------------------
TAX
IDENTIFICATION
NUMBER
--------------------------------------------------------
SIGNATURE(S)
--------------------------------------------------
--------------------------------------------------------------
</TABLE>
* NOTIFICATION MUST BE RECEIVED BY STATE STREET
BANK AND TRUST COMPANY AT LEAST 10 BUSINESS
DAYS PRIOR TO THE RECORD DATE FOR A DISTRIBUTION.
<PAGE> 1
EXHIBIT 2(h)(1)
_________ Shares
THE GABELLI EQUITY TRUST INC.
____% Cumulative Preferred Stock
Liquidation Preference $25 Per Share
UNDERWRITING AGREEMENT
_______ __, 1998
SALOMON SMITH BARNEY INC.
GABELLI & COMPANY, INC.
As Representatives of the Several Underwriters
c/o SALOMON SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
The Gabelli Equity Trust Inc., a Maryland corporation (the
"Fund"), proposes, upon the terms and conditions set forth herein, to issue and
sell an aggregate of ___________ shares (the "Initial Shares") of its ____%
cumulative preferred stock, liquidation preference $25 per share, $.001 par
value per share (the "Cumulative Preferred Stock"), to the several Underwriters
named in Schedule I hereto. In addition, the Fund agrees to grant to the
Underwriters an option to purchase _________ additional shares to cover
over-allotments, if any (the "Option Shares", and together with the Initial
Shares, the "Shares"). The Cumulative Preferred Stock will be authorized by,
and subject to the terms and conditions of, the Articles Supplementary to be
adopted in connection with the issuance of the Cumulative Preferred Stock (the
"Articles Supplementary").
The Fund and its investment adviser, Gabelli Funds, Inc., a
New York corporation (the "Adviser"), wish to confirm as follows their
agreement with you (the "Representatives") and the other several Underwriters
on whose behalf you are acting, in connection with the several purchases of the
Shares by the Underwriters.
The Fund has entered into an investment advisory agreement
dated ___________ with the Adviser, a custodian agreement dated ___________
with State Street Bank and Trust Company, a Massachusetts corporation, and a
registrar, transfer agency and service agreement dated __________ with State
Street Bank and Trust Company. Such agreements are hereinafter referred to as
the "Investment Advisory Agreement", the "Custodian Agreement" and the
"Transfer Agency Agreement", respectively. Collectively, the Investment
Advisory Agreement, the Custodian Agreement and the Transfer Agency Agreement
are hereinafter
<PAGE> 2
2
referred to as the "Fund Agreements". This Underwriting Agreement is
hereinafter referred to as the "Agreement".
1. Registration Statement and Prospectus. The Fund 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 (File Nos. 333-_____ and
811-4700) 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 1940 Act. The
Fund also has filed a notification of registration of the Fund 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 Fund 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 Registrations
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 or, if the prospectus and statement of additional
information included in the Registration Statement omit information in reliance
on Rule 430A under the 1933 Act Rules and Regulations and such information is
included in a prospectus and statement of additional information filed with the
Commission pursuant to Rule 497(h) under the 1933 Act, 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. 1 to the registration statement with the
Commission on _______ __, 1998 and as such prospectus and statement of
additional information shall have
<PAGE> 3
3
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 Fund other than the Prospectus, approved in writing by or directly or
indirectly prepared by the Fund or the Adviser; it being understood that the
definition of Prepricing Prospectus above shall not include any Prepricing
Prospectus prepared by any Underwriter unless approved in writing by the Fund
or Adviser. The terms "Registration Statement", "Prospectus" and "Prepricing
Prospectus" shall also include any financial statements incorporated by
reference therein.
The Fund has furnished the Representatives 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. The Fund hereby
agrees, subject to all the terms and conditions set forth herein, to issue and
sell to each Underwriter and, upon the basis of the representations, warranties
and agreements of the Fund and the Adviser herein contained and subject to all
the terms and conditions set forth herein, each Underwriter agrees, severally
and not jointly, to purchase from the Fund, at a purchase price of $_________
per Initial Share, the number of Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Shares increased as set
forth in Section 11 hereof). In addition, subject to the conditions herein set
forth, the Fund grants an option to the Underwriters, severally and not
jointly, to purchase up to the number or aggregate principal amount, as the
case may be, of the Option Shares at a price per Option Share equal to the
price per Initial Share, less an amount equal to any dividends or distributions
declared by the Fund and paid or payable on the Initial Shares but not payable
on the Option Shares. Such option, will expire 30 days after the
Representation Date relating to the Initial Shares, and may be exercised in
whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial Shares upon notice by Salomon Smith Barney Inc. to
the Fund setting forth the number or aggregate principal amount, as the case
may be, of Option Shares as to which the several Underwriters are then
exercising the option and the time, date and place of payment and delivery for
such Option Shares. Any such time and date of payment and delivery (each, a
"Date of Delivery") shall be determined by Salomon Smith Barney Inc., but shall
not be later than seven full business days after the exercise of said option,
nor in any event prior to the Closing Date, unless otherwise agreed upon by
Salomon Smith Barney Inc. and the Fund. If the option is exercised as to all
or any portion of the Option Shares, each of the Underwriters, severally and
not jointly, will purchase that proportion of the total number or aggregate
principal amount, as the case may be, of Option Shares then being purchased
which the number or principal amount, as the case may be, of Initial Shares
each such
<PAGE> 4
4
Underwriter has severally agreed to purchase as set forth in Schedule I hereto
bearing the total number or aggregate principal amount, as the case may be, of
Initial Shares, subject to such adjustments as Salomon Smith Barney Inc. in its
discretion shall make to eliminate any sales or purchases of a fractional
number or aggregate principal amount, as the case may be, of Option Shares.
3. Terms of Public Offering. The Fund and the Adviser
have been advised by you that the Underwriters propose to make a public
offering of their respective portions of the 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.
4. Delivery of the Shares and Payment Therefor.
Delivery to the Underwriters of and payment for the Shares shall be made at the
office of Salomon Smith Barney Inc., 388 Greenwich Street, New York, NY 10013,
at 10:00 A.M., New York City time, on _______ __, 1998 (the "Closing Date").
The place of closing for the Shares and the Closing Date may be varied by
agreement between you and the Fund. In addition, in the event that the
Underwriters have exercised their option to purchase any or all of the Option
Shares, payment of the purchase price for, and delivery of such Option Shares,
shall be made at the above-mentioned offices of Salomon Smith Barney Inc. or at
such other place as shall be agreed upon by Salomon Smith Barney Inc. and the
Fund, on the relevant Date of Delivery as specified in the notice from Salomon
Smith Barney Inc. to the Fund.
Certificates for the Shares 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. 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. The certificates evidencing the Shares shall
be delivered to you on the Closing Date against payment of the purchase price
therefor in immediately available funds.
5. Agreements of the Fund and the Adviser. The Fund and
the Adviser, 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 Fund 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 Fund 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, 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 Fund, the Adviser, any affiliate of the Fund or the Adviser
or any representative or attorney of the Fund or the Adviser 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 Fund (if such communication relating to the Fund 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 hereinafter defined) (or any
amendment or supplement to any of the foregoing), this Agreement or any of the
Fund 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
Fund or the Adviser or of the happening of any event which makes any statement
of a material fact made in the Registration Statement, the Prospectus or any
sales material (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, the Prospectus, 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, 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
<PAGE> 6
6
issue any order suspending the effectiveness of the Registration Statement,
prohibiting or suspending the use of the Prospectus or any sales material (as
hereinafter 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 Fund will make every reasonable effort to obtain the
withdrawal of such order at the earliest possible time.
(c) The Fund will furnish to you, without charge, three
copies of the registration statement and the 1940 Act Notification as
originally filed with the Commission and of each amendment thereto, including
financial statements and all exhibits thereto, one copy of each of which shall
be signed, and will also furnish to you, without charge, such number of
additional copies of the registration statement and of each amendment thereto,
but without exhibits, as you may request.
(d) The Fund will not (i) file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus,
or any sales material (as hereinafter defined) of which you shall not
previously have been advised or to which you shall 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 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 Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this
Agreement, the Fund has delivered to you, without charge, in such quantities as
you have requested, copies of each form of the Prepricing Prospectus. The Fund
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 Fund.
(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 dealer,
the Fund 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 request. The Fund 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
<PAGE> 7
7
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 dealer. If during
such period of time any event shall occur that in the judgment of the Fund 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 Fund 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. In the event that the Fund and you, as
Representatives of the several Underwriters, agree that the Registration
Statement or the Prospectus should be amended or supplemented, the Fund, 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 Fund 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 state 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 Fund be obligated to qualify to do
business 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.
(h) The Fund will make generally available to its
security holders an earnings statement, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as
practicable after the end of such period, which earnings statement shall
satisfy the provisions of Section 11(a) of the Act and Rule 158 of the 1933 Act
Rules and Regulations.
(i) During the period of five years hereafter, the Fund
will furnish to you (i) as soon as available, a copy of each report of the Fund
mailed to stockholders or filed with the Commission or furnished to the New
York Stock Exchange (the "NYSE") other than reports on Form N-SAR, and (ii)
from time to time such other information concerning the Fund as you may
request.
<PAGE> 8
8
(j) If this Agreement shall terminate or shall be
terminated after execution pursuant to any provisions hereof (otherwise than
pursuant to the second paragraph of Section 11 hereof or by notice given by you
terminating this Agreement pursuant to Section 11 or Section 12 hereof) or if
this Agreement shall be terminated by the Underwriters because of any failure
or refusal on the part of the Fund or the Adviser to comply with the terms or
fulfill any of the conditions of this Agreement required to be complied with or
fulfilled by them, the Fund or, in the case of a failure or refusal by the
Fund, the Adviser, agrees to reimburse the Representatives for all
out-of-pocket expenses (including fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
(k) The Fund will apply the net proceeds from the sale of
the Shares 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 Fund as described in the Prospectus.
(l) The Fund 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 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 Fund will
not sell, contract to sell, or otherwise dispose of any senior securities of
the Fund, or grant any options or warrants to purchase senior securities of the
Fund, for a period of 180 days after the date of the Prospectus, without the
prior written consent of Salomon Smith Barney Inc.
(n) Except as stated in this Agreement and in the
Prepricing Prospectus and Prospectus, neither the Fund nor the Adviser 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 any securities issued by the Fund to facilitate
the sale or resale of the Shares; it being understood that the Underwriters
include certain affiliates of the Adviser and that stabilization or other
activity by the Representatives on behalf of the Underwriters shall not be
deemed to be violative of this representation.
(o) The Fund will use its best efforts to have the Shares
listed, subject to notice of issuance, on the NYSE on or before _______ __,
1998.
(p) The Fund will use its best efforts to cause the
Cumulative Preferred Stock, prior to the Closing Date, to be assigned a rating
of 'aaa' by Moody's Investors Service, Inc. (the "Rating Agency").
<PAGE> 9
9
(q) The Fund and the Adviser will use their best efforts
to perform all of the agreements required of them and discharge all conditions
to closing as set forth in this Agreement.
(r) The Fund will furnish to you, on the date on which
delivery is made to the Rating Agency, the Accountant's Confirmation (as
defined in the Articles Supplementary) corresponding to the Basic Maintenance
Report (as defined in the Articles Supplementary) for the first Valuation Date
(as defined in the Articles Supplementary) following the Closing Date.
6. Representations and Warranties of the Fund and the
Adviser. The Fund and the Adviser, 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 provisions of the 1933 Act, the 1940 Act and the Rules and
Regulations and did not or will not at any such times contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except that this representation and warranty does not apply to 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 Fund in writing by or on behalf of any Underwriter through you expressly
for use therein.
(c) All the outstanding shares of Common Stock of the
Fund have been duly authorized and validly issued, are fully paid and
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 nonassessable and free of any preemptive or similar rights 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 capital
stock of the Fund
<PAGE> 10
10
conforms to the description thereof in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them).
(d) The Fund is a corporation duly organized and validly
existing in good standing under the laws of the State of Maryland 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 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 Fund; and the Fund has no subsidiaries.
(e) There are no legal or governmental proceedings
pending or, to the knowledge of the Fund, threatened, against the Fund, or to
which the Fund 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.
(f) The Fund is not in violation of its articles of
incorporation or by-laws, or other organizational documents, or of any law,
ordinance, administrative or governmental rule or regulation applicable to the
Fund 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 Fund, or in
default in any material respect in the performance of any obligation, agreement
or condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other instrument
to which the Fund is a party or by which it or any of its properties may be
bound.
(g) Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement or any of the Fund
Agreements by the Fund, nor the consummation by the Fund 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
<PAGE> 11
11
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 articles of incorporation, including the Articles
Supplementary, or by-laws, or other organizational documents, of the Fund 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 Fund 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 Fund 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 Fund 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 Fund is not subject to any order
of any court or of any arbitrator, governmental authority or administrative
agency.
(h) The accountants, Price Waterhouse 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.
(i) 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 Fund 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 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
Fund.
(j) The execution and delivery of, and the performance by
the Fund of its obligations under, this Agreement and the Fund Agreements have
been duly and validly authorized by the Fund, and this Agreement and the Fund
Agreements have been duly executed and delivered by the Fund and constitute the
valid and legally binding agreements of the Fund, enforceable against the Fund
in accordance with their terms, except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws.
<PAGE> 12
12
(k) 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 Fund 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 Fund, and there has not been any change in
the capital stock, or material increase in the short-term debt or long-term
debt, of the Fund, 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 Fund, whether or not arising in the
ordinary course of business, it being understood that a change of up to 15% of
the aggregate market value of the Fund's assets shall not cause this
representation to be untrue.
(l) The Fund 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.
(m) The Fund 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), subject
to such qualifications as may be set forth in the Prospectus; the Fund 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 Fund 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, 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 Fund.
(n) The Fund 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 Internal Revenue Code of 1986, as amended (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
<PAGE> 13
13
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.
(o) To the Fund's knowledge, neither the Fund nor any
employee or agent of the Fund has made any payment of funds of the Fund or
received or retained any funds, which payment, receipt or retention of funds is
of a character required to be disclosed in the Prospectus.
(p) The Fund has filed all tax returns required to be
filed, which returns are complete and correct, and the Fund is not in default
in the payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
(q) No holder of any security of the Fund has any right
to require registration of shares of common stock, Cumulative Preferred Stock
or any other security of the Fund because of the filing of the registration
statement or consummation of the transactions contemplated by this Agreement.
(r) The Fund, subject to the registration statement
having been declared effective and the filing of the Prospectus under Rule 497
under the 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.
(s) The conduct by the Fund 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.
(t) The Fund 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 Rules and
Regulations. The Fund is, 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 Fund 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").
(u) Except as stated in this Agreement and in the
Prospectus (and any amendment or supplement thereto), the Fund has not taken,
nor will it take, directly or indirectly, any
<PAGE> 14
14
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 Fund
to facilitate the sale or resale of the Shares, and the Fund is not aware of
any such action taken or to be taken by any affiliates of the Fund.
(v) The Fund has filed in a timely manner each document
or report required to be filed by it pursuant to the 1934 Act and the rules and
regulations of Commission promulgated thereunder (the "1934 Act Rules and
Regulations"); each such document or report at the time it was filed conformed
to the requirements of the 1934 Act and the 1934 Act Rules and Regulations; and
none of such documents or reports contained an untrue statement of any material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(w) All advertising, sales literature or other
promotional material (including "prospectus wrappers," "broker kits," "road
show slides" and "road show scripts") authorized in writing by or prepared by
the Fund or the Adviser 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.
(x) Each of the Fund Agreements and the Fund's and the
Adviser's obligations under this Agreement and each of the Fund Agreements
comply in all material respects with all applicable provisions of the 1940 Act,
the 1940 Act Rules and Regulations, the Advisers Act the Advisers Act Rules and
Regulations.
(y) At all times since its inception, as required by
Subchapter M of the Code, the Fund has complied with the requirements to
qualify as a regulated investment company under the Code.
(z) Except as disclosed in the Registration Statement and
the Prospectus (or any amendment or supplement to either of them), no director
of the Fund is an "interested person" (as defined in the 1940 Act) of the Fund
or an "affiliated person" (as defined in the 1940 Act) of any Underwriter.
7. Representations and Warranties of the Adviser. The
Adviser represents and warrants to each Underwriter as follows:
(a) The Adviser is a corporation duly organized and
validly existing in good standing under the laws of the State of New York, with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as
<PAGE> 15
15
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 Adviser and its subsidiaries, taken as a whole, or on the ability of the
Adviser to perform its obligations under this Agreement and the Investment
Advisory Agreement.
(b) The Adviser 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 Investment Advisory Agreement
for the Fund 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 Adviser with the Commission.
(c) There are no legal or governmental proceedings
pending or, to the knowledge of the Adviser, threatened against the Adviser, or
to which the Adviser 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 Adviser and its subsidiaries, taken as a whole, or
on the ability of the Adviser to perform its obligations under this Agreement
and the Investment Advisory Agreement.
(d) Neither the execution, delivery or performance of
this Agreement or the Investment Advisory Agreement by the Adviser, nor the
consummation by the Adviser of the transactions contemplated hereby or thereby
(A) requires the Adviser 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 Adviser 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 Adviser
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 Adviser or any of its properties or
<PAGE> 16
16
will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Adviser 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 Adviser is subject. The Adviser
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 Adviser of its obligations under, this Agreement and the Investment
Advisory Agreement have been duly and validly authorized by the Adviser, and
this Agreement and the Investment Advisory Agreement have been duly executed
and delivered by the Adviser and each constitutes the valid and legally binding
agreement of the Adviser, enforceable against the Adviser in accordance with
its terms except as rights to indemnity and contribution hereunder may be
limited by federal or state securities laws.
(f) The Adviser has the financial resources available to
it necessary for the performance of its services and obligations as
contemplated in the Prospectus (or any amendment or supplement thereto) and
under this Agreement and the Investment Advisory Agreement.
(g) The description of the Adviser in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) complied
and comply in all material respects with the provisions 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.
(h) 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 Adviser 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 Adviser and its subsidiaries, taken
as a whole, and that is required to be disclosed in the Registration Statement
or in the Prospectus and there has not been 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
Adviser and its subsidiaries, taken as a whole, 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 Adviser to perform its obligations under
this Agreement and the Investment Advisory
<PAGE> 17
17
Agreement.
(i) The Adviser 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); the Adviser 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 Adviser under any such permit; and,
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 Adviser.
(j) Except as stated in this Agreement and in the
Prospectus (and in any amendment or supplement thereto), the Adviser 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 Fund to facilitate
the sale or resale of the Shares, and the Adviser is not aware of any such
action taken or to be taken by any affiliates of the Adviser; it being
understood that the Underwriters include certain affiliates of the Adviser and
that stabilization or other activity by the Representatives on behalf of the
Underwriters shall not be deemed to be violative of this representation.
(k) Mario J. Gabelli is the validly appointed Chairman,
President, Chief Investment Officer and Director of the Adviser and the
portfolio manager of the Fund; Mr. Gabelli has not given notice nor made known
an intention to give notice of termination of his employment and the Adviser
knows of no reason why Mr. Gabelli should be unable to serve as portfolio
manager to the Fund.
8. Indemnification and Contribution. (a) The Fund and
the Adviser, jointly and severally, agree to indemnify and hold harmless each
of 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, joint and several (including reasonable costs of investigation)
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 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 such Underwriter furnished in
<PAGE> 18
18
writing to the Fund by or on behalf of any Underwriter through you expressly
for use in connection therewith; provided, however, that the indemnification
contained in this paragraph (a) with respect to any Prepricing Prospectus 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 shall not have been delivered or sent to
such person within the time required by the 1933 Act and 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, provided that the Fund has delivered the
Prospectus 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 Fund or the Adviser may otherwise have.
(b) 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 Fund or the Adviser, such Underwriter
or such controlling person shall promptly notify the Fund or the Adviser, and
the Fund or the Adviser 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 Fund or the Adviser
has agreed in writing to pay such fees and expenses, (ii) the Fund and the
Adviser 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 Fund
or the Adviser and such Underwriter or such controlling person shall have been
advised by its counsel that representation of such indemnified party and the
Fund or the Adviser 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 Fund and the Adviser 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
Fund and the Adviser 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 Salomon Smith Barney Inc.,
<PAGE> 19
19
and that all such fees and expenses shall be reimbursed as they are incurred.
The Fund and the Adviser shall not be liable for any settlement of any such
action, suit or proceeding effected without its written consent, but if settled
with such written consent, or if there be a final judgment for the plaintiff in
any such action, suit or proceeding, the Fund and the Adviser 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 Fund and the Adviser, their directors, any
officers who sign the Registration Statement, and any person who controls the
Fund or the Adviser 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 Fund
and the Adviser to each Underwriter, but only with respect to information
relating to such Underwriter furnished in writing by or on behalf of such
Underwriter through you 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 Fund
or the Adviser, any of their 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
Fund and the Adviser by paragraph (b) above (except that if the Fund or the
Adviser 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 Fund and the Adviser, their 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 Fund and the Adviser 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
<PAGE> 20
20
(i) above but also the relative fault of the Fund and the Adviser 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 Fund and the
Adviser on the one hand (treated jointly for this purpose as one person) and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received
by the Fund 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 Fund and the Adviser on the one
hand (treated jointly for this purpose as one person) and the Underwriters 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 Fund and the Adviser 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.
(e) The Fund, the Adviser 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 the
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 Shares
set forth opposite their names in Schedule I hereto (or such numbers of 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
<PAGE> 21
21
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.
(g) 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 Fund and the Adviser 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 Fund, the Adviser, their directors or
officers, or any person controlling the Fund or the Adviser, (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 Fund, the Adviser, their directors or officers, or any
person controlling the Fund or the Adviser, 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 Shares 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 Fund, the Adviser 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 (other than a change of up to 15%
of the aggregate market value of the Fund's assets) or any development
involving a prospective change, in or affecting the condition (financial or
other), business,
<PAGE> 22
22
prospects, properties, net assets, or results of operations of the Fund or the
Adviser and its subsidiaries, taken as a whole, 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 Fund or the Adviser
or any officer or director of the Fund or the Adviser which makes any statement
made in the Prospectus untrue or which, in the opinion of the Fund 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) The Fund shall have furnished to you a report showing
compliance with the asset coverage requirements of the 1940 Act and a Basic
Maintenance Report (as defined in the Articles Supplementary), each dated the
Closing Date and in form and substance satisfactory to you. Each such report
may use portfolio holdings and valuations as of the close of business of the
sixth business day preceding the Closing Date; provided, however, that the Fund
represents in such report that its total net assets as of the Closing Date have
not declined by 5% or more from such valuation date.
(d) You shall have received on the Closing Date, an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Fund,
dated the Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
(i) The Fund is duly registered and qualified
to conduct its business and is in good standing in the State of New
York (which is the only jurisdiction identified by management of the
Fund to such counsel in which the Fund owns property, has operations
or conducts business);
(ii) The authorized and outstanding capital
stock of the Fund is as set forth under the caption "Capitalization"
in the Prospectus; and the authorized capital stock of the Fund
(including the Cumulative Preferred Stock) conforms in all material
respects as to legal matters to the description thereof contained in
the Prospectus under the captions "Description of Capital Stock and
Other Securities" and "Description of Cumulative Preferred Stock";
(iii) 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 nonassessable;
<PAGE> 23
23
(iv) Such counsel has been orally advised that
the Registration Statement has become effective under the 1933 Act
and, to the best knowledge of such counsel after reasonable inquiry,
no stop order suspending the effectiveness of the Registration
Statement or order pursuant to Section 8(e) of the 1940 Act has been
issued and no proceedings for that purpose are pending before or
contemplated by the Commission; and any required filing of the
Prospectus pursuant to Rule 497 has been made in accordance with Rule
497;
(v) Each of this Agreement and the Fund
Agreements has been duly executed and delivered by the Fund and is a
valid, legal and binding agreement of the Fund, enforceable against
the Fund in accordance with its terms, except to the extent that (A)
enforcement hereof and thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, or (ii)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity) and (B) enforcement of
rights to indemnity and contribution hereunder and thereunder may be
limited by Federal or state securities laws or principles of public
policy;
(vi) Neither the offer, sale or delivery of the
Shares, the execution, delivery or performance of this Agreement and
the Fund Agreements by the Fund, compliance by the Fund with the
provisions hereof or thereof nor consummation by the Fund of the
transactions contemplated hereby or thereby conflicts or will conflict
with or constitutes or will constitute a breach of, or a default
under, any contract included as an exhibit to the Registration
Statement (each, a "Material Fund Agreement"), or will result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Fund under any Material Fund Agreement, nor
will any such action result in any violation of (a) any provision of
the New York Business Corporation Law and those laws, rules and
regulations of the State of New York and the United States of America
that, in the experience of such counsel, are normally applicable to
entities such as the Fund and transactions of the type contemplated by
this Agreement, but without having made any special investigation
concerning any other laws, rules or regulations (collectively,
"Applicable Fund Laws"); provided, that the term "Applicable Fund
Laws" does not include (1) the rules and regulations of the NASD, (2)
any federal or state securities or blue sky laws, (3) any antifraud
laws or (4) any law, rule or regulation that may have become
applicable to the Fund as a result of the Underwriters' involvement
with the transactions contemplated hereby or because of any facts
specifically pertaining to the Underwriters, or (b) any judgment,
order or decree of any New York or federal executive, legislative,
judicial, administrative or regulatory body under Applicable Fund Laws
<PAGE> 24
24
and the NYSE (each, a "Governmental Fund Authority") identified in an
officer's certificate;
(vii) No consent, approval, license,
authorization, order or validation of, or filing, recording or
registration with, any Governmental Fund Authority pursuant to
Applicable Fund Laws (each, a "Governmental Fund Approval") is
required for the valid issuance and sale of the Shares to the
Underwriters or the execution, delivery and performance by the Fund of
this Agreement and the Fund Agreements or the consummation of the
transactions contemplated hereby and thereby except such Governmental
Fund Approvals as have been obtained;
(viii) The 1940 Act Notification, the
Registration Statement, the Prospectus and the Fund's Registration
Statement on Form 8-A under the 1934 Act and any supplements or
amendments thereto (except for the financial statements and the notes
thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any
opinion) comply as to form in all material respects with the
requirements of the 1933 Act, the 1940 Act, the Rules and Regulations,
the 1934 Act and the rules and regulations promulgated thereunder;
(ix) To the actual knowledge of such counsel
after reasonable inquiry, other than as described or contemplated in
the Registration Statement or Prospectus (or any supplement thereto),
(A) there are no legal or governmental proceedings in the State of New
York or, to the actual knowledge of such counsel, any other state,
pending or threatened against the Fund, or to which the Fund or any of
its properties is subject, which are required to be described in the
Registration Statement or Prospectus (or any amendment or supplement
to either of them) and (B) there are no agreements, contracts,
indentures, leases or other instruments that are required to be
described in the Registration Statement or the Prospectus (or 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, as the case may be;
(x) We have reviewed the proxy statement of the
Fund dated May 12, 1997 and the complaints, answers and other
materials relating to the actions styled Opportunity Partners, L.P. v.
Gabelli Global Multimedia Trust Inc. et al, 97 Civ. 6392 (SDNY), and
Carter v. Global Multimedia Trust Inc. et al, 97 Civ. ____, (SDNY) and
Stein v. __________ et al, 97 Civ. ____ (SDNY). Even if a court were
to find that the proxy statement at issue in the foregoing actions
misstated or omitted the facts that would be relevant to the issuance
of Cumulative Preferred stock by the Fund and that are claimed by the
plaintiffs to be materially misstated or omitted, we are of the
opinion that a court would not find those misstatements or omissions
to
<PAGE> 25
25
be material in an action involving the proxy statement of the Fund
dated May 12, 1997;
(xi) The statements in the Registration
Statement, Prospectus and statement of additional information under
the caption "Taxation", insofar as they refer to statements of law or
legal conclusions, are accurate and present fairly the information
required to be shown;
(xii) Each of the Fund Agreements and the Fund's
and the Adviser's obligations under each of this Agreement and the
Fund Agreements comply as to form in all material respects with all
applicable provisions of the 1933 Act, the 1940 Act, the Advisers Act,
the Rules and Regulations and the Advisers Act Rules and Regulations;
(xiii) The Fund is duly registered with the
Commission under the 1940 Act as a closed-end non-diversified
management investment company; and the provisions of the Fund's
articles of incorporation, including the Articles Supplementary, and
by-laws, and the investment policies and restrictions described in the
Registration Statement and the Prospectus under the captions "The
Fund", "Investment Objectives and Policies", " Special Investment
Methods", "Risk Factors and Special Considerations" and "Investment
Restrictions" (in the Prospectus and the statement of additional
information) comply in all material respects with the requirements of
the 1940 Act, and all action has been taken by the Fund as is required
of the Fund by the 1933 Act and the 1940 Act and the Rules and
Regulations in connection with the issuance and sale of the Shares to
make the public offering and consummate the sale of the Shares as
contemplated by this Agreement;
(xiv) The Fund has all necessary governmental
authorizations, approvals, orders, licenses, certificates, franchises
and permits of and from all governmental regulatory officials and
bodies required under Applicable Fund Law (except where the failure so
to have any such authorizations, approvals, orders, licenses,
certificates, franchises or permits, individually or in the aggregate,
would not have a material adverse effect on the business, properties,
operations or financial condition of the Fund), to own its properties
and to conduct business, as described in the Prospectus;
(xv) Except as described in the Prospectus,
there is no holder of any security of the Fund or any other person who
has the right, contractual or otherwise pursuant to any Material Fund
Agreement, to cause the Fund to sell or otherwise issue to them, or to
permit them to underwrite the sale of, the Shares or the right to have
any securities of the Fund included in the registration statement or
the
<PAGE> 26
26
right, as a result of the filing of the registration statement, to
require registration under the 1933 Act of any securities of the Fund;
(xvi) If the Fund operates as described in the
Prospectus, the Fund will qualify as a regulated investment company
under the Code; and
(xvii) Such counsel shall also state that they
have participated in conferences with officers and employees of the
Fund, representatives of the independent accountants for the Fund,
Maryland counsel to the Fund, the Underwriters and counsel for the
Underwriters at which the contents of the Registration Statement and
the Prospectus and related matters were discussed and, although they
are not passing upon, and do not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus except to the limited extent
otherwise covered by paragraphs (ii), (ix), (x) and (xiii), and have
made no independent check or verification thereof, on the basis of the
foregoing, no facts have come to their attention that would have led
them to believe that the Registration Statement or any amendment or
supplement thereto, at the time it became effective, contained an
untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements
contained therein not misleading or that the Prospectus or any
amendment or supplement thereto, as of its issue date and as of the
Closing Date, 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 contained therein,
in light of the circumstances under which they were made, not
misleading, except that they express no belief with respect to the
financial statements, schedules and other financial information and
statistical data included therein or excluded therefrom or the
exhibits to the Registration Statement.
(e) You shall have received on the Closing Date, an
opinion of Miles & Stockbridge, Maryland counsel for the Fund, dated the
Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
(i) The Fund is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Maryland with full corporate power 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);
(ii) The authorized capital stock of the Fund is
as set forth under the caption "Capitalization" in the Prospectus; and the
authorized capital stock of the Fund conforms
<PAGE> 27
27
in all material respects as to legal matters to the description thereof
contained in the Prospectus under the caption "Description of Capital Stock and
Other Securities";
(iii) 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
nonassessable. The issuance of the Shares will not be subject to preemptive or
other similar rights entitling any person to purchase or acquire any of the
Shares upon the issuance thereof by the Fund which arise by operation of the
laws of the State of Maryland or under the articles of incorporation or by-laws
of the Fund;
(iv) The Shares conform in all material respects
to the description thereof contained in the Prospectus under the caption
"Description of Cumulative Preferred Stock";
(v) The form of certificates for the Shares
conforms to the requirements of the Maryland General Corporation Law;
(vi) The Fund has the requisite corporate power
and authority to enter into and execute and deliver this Agreement and to
issue, sell and deliver the Shares to the Underwriters as provided for herein;
(vii) This Agreement has been duly authorized by
the Fund. Neither the offer, sale or delivery of the Shares, the execution,
delivery or performance of this Agreement by the Fund, compliance by the Fund
with the provisions hereof nor consummation by the Fund of the transactions
contemplated hereby conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the articles of incorporation,
including the Articles Supplementary, or by-laws of the Fund;
(viii) The Fund has full corporate power and, to
the knowledge of such counsel, all governmental authorizations, approvals,
orders, licenses, certificates, franchises and permits necessary or required
under the laws of the State of Maryland for the Fund to own its properties and
to conduct its business as it now is being conducted as described in the
Prospectus (except in cases where the failure so to have any such
authorizations, approvals, orders, licenses, certificates, franchises or
permits, individually or in the aggregate, would not have a material adverse
effect on the business, properties, operations or financial conditions of the
Fund); and
(ix) No consent, approval, authorization or
other order of, or registration or filing with, any securities commission,
court, regulatory body, administrative agency or other governmental body,
agency, or official of the State of Maryland is required on the part of the
Fund for the valid issuance and sale of the Shares to the Underwriters as
contemplated by this Agreement, the execution and delivery by the
<PAGE> 28
28
Fund of this Agreement and the performance by the Fund of its obligations
hereunder or the consummation of the transactions contemplated hereby by the
Fund, except those as may be required under the securities or blue sky laws of
the State of Maryland; it being understood that such counsel do not express any
opinion as to any such consent, approval, authorization or other order of, or
registration or filing, which may be required as a result of the involvement of
any other parties to this Agreement.
(f) You shall have received on the Closing Date an
opinion of James E. McKee, general counsel for the Fund, dated the Closing Date
and addressed to you, as Representatives of the several Underwriters, to the
effect that:
(i) The Fund is not in violation of its
articles of incorporation, including the Articles Supplementary, or by-laws
and, to the actual knowledge of such counsel after reasonable inquiry, is not
in default in the performance of any material obligation, agreement or
condition in any bond, debenture, note or other evidence of indebtedness,
except as may be disclosed in the Prospectus;
(ii) The Fund is not in violation of any
Material Fund Agreement; and
(iii) To the actual knowledge of such counsel
after reasonable inquiry, the Fund is not in violation of (A) any provision of
the New York Business Corporation Law and those laws, rules and regulations of
the State of New York and the United States of America that, in the experience
of such counsel, are normally applicable to entities such as the Fund and
transactions of the type contemplated by this Agreement, but without having
made any special investigation concerning any other laws, rules or regulations;
provided, that such laws, rules and regulations do not include (1) the rules
and regulations of the NASD, (2) any federal or state securities or blue sky
laws other than the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder to the extent not excluded by item (3) below, (3) any
antifraud laws under the 1933 Act or the 1934 Act as they apply to the
Prospectus and the Registration Statement or (4) any law, rule or regulation
that may have become applicable to the Fund as a result of the Underwriters'
involvement with the transactions contemplated by this Agreement or because of
any facts specifically pertaining to the Underwriters or (B) any order,
judgment or decree of any New York or federal executive, legislative, judicial,
administrative or regulatory body under the laws, rules and regulations
referred to in clause (A) of this paragraph and the NYSE.
(g) You shall have received on the Closing Date an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the
Adviser, dated the Closing Date and addressed to you, as Representatives of the
several Underwriters, to the effect that:
<PAGE> 29
29
(i) The Adviser is a corporation duly
incorporated and validly existing in good standing under the laws of the State
of New York 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), it being understood that the opinion with respect to good standing is
based solely upon such counsel's review of a certificate of the Secretary of
State and a telephonic confirmation;
(ii) The Adviser 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 Investment
Advisory Agreement for the Fund as contemplated by the Prospectus (or any
amendment or supplement thereto);
(iii) The Adviser has corporate power and
authority to enter into this Agreement and the Investment Advisory Agreement,
and this Agreement and the Investment Advisory Agreement have been duly
authorized, executed and delivered by the Adviser and each is a valid, legal
and binding agreement of the Adviser, enforceable against the Adviser in
accordance with its terms except to the extent that enforcement hereof and
thereof may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity);
(iv) Neither the execution, delivery or
performance of this Agreement or the Investment Advisory Agreement by the
Adviser, compliance by the Adviser with the provisions hereof or thereof nor
consummation by the Adviser of the transactions contemplated hereby or thereby
conflicts or will conflict with, or constitutes or will constitute a breach of
or default under, the certificate of incorporation or by-laws, or other
organizational documents, of the Adviser or any contract or agreement to which
the Adviser is a party which has been identified to such counsel by the Adviser
as material or as one which could have an effect on the types of transactions
contemplated by this Agreement (each, an "Material Adviser Agreement"), or will
result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Adviser under any Material Adviser Agreement, nor
will any such action result in any violation of any provision of the New York
Business Corporation Law and those laws, rules and regulations of the State of
New York and the United States of America that, in the experience of such
counsel, are normally applicable to entities such as the Adviser and
transactions of the type contemplated by this Agreement, but without having
made any special investigation concerning any other laws, rules or
<PAGE> 30
30
regulations (collectively, "Applicable Adviser Laws"); provided, that the term
"Applicable Adviser Laws" does not include (1) the rules and regulations of the
NASD, (2) any federal or state securities or blue sky laws, (3) any antifraud
laws or (4) any law, rule or regulation that may have become applicable to the
Adviser as a result of the Underwriters' involvement with the transactions
contemplated hereby or because of any facts specifically pertaining to the
Underwriters;
(v) No consent, approval, license,
authorization or validation of, or filing, recording or registration with, any
New York or federal executive, legislative, judicial, administrative or
regulatory body under Applicable Adviser Laws (each, a "Governmental Adviser
Approval") is required on the part of the Adviser for the execution, delivery
and performance by it of this Agreement and the Investment Advisory Agreement
to which it is a party or the consummation by it of the transactions
contemplated hereby and thereby except such Governmental Adviser Approvals as
have been obtained;
(vi) To the actual knowledge of such counsel
after reasonable inquiry, there are no legal or governmental proceedings
pending or threatened against the Adviser or to which the Adviser or any of its
properties is subject, which 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 which could reasonably be expected to
adversely affect the ability of the Adviser to perform its obligations under
this Agreement or the Investment Advisory Agreement;
(vii) The obligations of the Adviser under this
Agreement and the Investment Advisory Agreement comply in all material respects
with all applicable provisions of the 1940 Act, the 1940 Act Rules and
Regulations, the Advisers Act and the Advisers Act Rules and Regulations;
(viii) The Adviser has full corporate power and
authority, and all necessary governmental authorizations, approvals, orders,
licenses, certificates, franchises and permits of and from all governmental
regulatory officials and bodies required under Applicable Adviser Law (except
where the failure so to have any such authorizations, approvals, orders,
licenses, certificates, franchises or permits, individually or in the
aggregate, would not have a material adverse effect on the business,
properties, operations or financial condition of the Adviser and its
subsidiaries), to own its properties and to conduct its business, including
specifically its business of acting as investment adviser to registered
investment companies and as otherwise described in the Prospectus, and to
perform its obligations under the Investment Advisory Agreement;
(ix) Such counsel shall also state that such
counsel has been advised by the Adviser that it is not registered or
<PAGE> 31
31
qualified to conduct its business as a foreign corporation in any jurisdiction
and that it believes there is no such jurisdiction where the nature of its
properties or the conduct of its business requires such registration or
qualification and where the failure to register or qualify would have a
material adverse effect on the operations of the Adviser or on the ability of
the Adviser to perform its obligations under this Agreement or the Investment
Advisory Agreement; and
(x) Such counsel shall also state that they have
participated in conferences with officers and employees of the Adviser and the
Fund, representatives of the independent accountants for the Adviser and the
Fund and the Underwriters and counsel for the Underwriters at which the
contents of the Registration Statement and the Prospectus and related matters
were discussed and, although they are not passing upon, and do not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus and have made no
independent check or verification thereof, on the basis of the foregoing, no
facts have come to their attention that would have led them to believe that the
Registration Statement or any amendment or supplement thereto, at the time it
became effective, contained an untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements contained therein not misleading or that the Prospectus or any
amendment or supplement thereto, as of its issue date and as of the Closing
Date, 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 contained therein, in light of the circumstances under
which they were made, not misleading, except that they express no belief with
respect to the financial statements, schedules and other financial information
and statistical data included therein or excluded therefrom or the exhibits to
the Registration Statement.
(h) 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, as Representatives of the several
Underwriters, with respect to such matters as the Underwriters may reasonably
request.
(i) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Price Waterhouse LLP, independent certified public
accountants, substantially in the forms heretofore approved by you.
(j) (i) No order suspending the effectiveness of the
registration statement or 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
<PAGE> 32
32
action against the Fund, the Adviser 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 Fund, the Adviser 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
Representatives; (ii) there shall not have been any change in the capital stock
of the Fund nor any material increase in the short-term or long-term debt of
the Fund (other than in the ordinary course of business) from that set forth or
contemplated in 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 thereto), except as may
otherwise be stated in the Registration Statement and Prospectus (or any
amendment or supplement thereto), any material adverse change in the condition
(financial or other), business, prospects, properties, net assets or results of
operations of the Fund or the Adviser; (iv) the Fund shall not have any
liabilities or obligations, direct or contingent (whether or not in the
ordinary course of business), that are material to the Fund, other than those
reflected in the Registration Statement or the Prospectus (or any amendment or
supplement to either of them) and other than liabilities for payment for
securities in accordance with the Fund's investment objective and policies; and
(v) all the representations and warranties of the Fund and the Adviser
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, dated the Closing Date and
signed by the chief executive officer and the chief financial officer of each
of the Fund and the Adviser (or such other officers as are acceptable to you),
to the effect set forth in this Section 9(j) and in Section 9(k) hereof.
(k) That neither the Fund nor the Adviser shall have
failed at or prior to the Closing Date to have performed or complied 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.
(l) The Fund shall have delivered and you shall have
received evidence satisfactory to you that the shares of Cumulative Preferred
Stock are rated at least 'aaa' by the Rating Agency as of the Closing Date, and
there shall not have been given any notice of any intended or potential
downgrading, or of any review for a potential downgrading, in the rating
accorded to the shares of Cumulative Preferred Stock by the Rating Agency.
(m) In the event that the Underwriters exercise their
<PAGE> 33
33
option to purchase all or any portion of the Option Shares, the representations
and warranties of the Fund contained herein and the statements in any
certificates furnished by the Fund or any of its subsidiaries hereunder shall
be true and correct as of each Date of Delivery, and, at the relevant Date of
Delivery, Salomon Smith Barney Inc. shall have received:
(i) A certificate, dated such Date of Delivery
of the President and Chief Executive Officer or a Vice President of
the Fund and of the chief financial or chief accounting officer of the
Fund on behalf of the Fund confirming that the certificate delivered
at the Closing Date pursuant to Section 9(n) hereof remains true and
correct as of such Date of Delivery.
(ii) The favorable opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Fund, in form and substance
reasonably satisfactory to counsel for the Underwriters, dated such
Date of Delivery relating to the Option Shares to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion
required by Section 9(d) hereof.
(iii) The favorable opinion of Miles &
Stockbridge, Maryland counsel for the Fund, in form and substance
reasonably satisfactory to counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Shares and otherwise to the
same extent as the opinion required by Section 9(e) hereof.
(iv) The favorable opinion of James E. McKee,
general counsel of the Fund, in form and substance reasonably
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Shares and otherwise to the same
extent as the opinion required by Section 9(f) hereof.
(v) The favorable opinion of Simpson Thacher &
Bartlett, counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Shares to be purchased on such Date of Delivery
and otherwise to the same effect as the opinion required by Section
9(h) hereof.
(vi) A letter from Price Waterhouse LLP, in form
and substance satisfactory to Salomon Smith Barney Inc. and dated such
Date of Delivery, substantially the same in scope and substance as the
letter furnished to Salomon Smith Barney Inc. pursuant to Section 9(i)
hereof, except that the "specified date" in the letter furnished
pursuant to this Section 9(m)(vi) shall be a date not more than three
days prior to such Date of Delivery.
(n) The Fund and the Adviser shall have furnished or
caused to be furnished to you such further certificates and documents as you
shall have requested.
<PAGE> 34
34
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are satisfactory
in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Fund
or the Adviser and delivered to you, as Representatives of the Underwriters, or
to counsel for the Underwriters, shall be deemed a representation and warranty
by the Fund or the Adviser to each Underwriter as to the statements made
therein.
10. Expenses. The Fund 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 printing (or reproduction) and delivery of this Agreement, any
dealer agreements, the preliminary and supplemental blue sky memoranda and all
other agreements or documents printed (or reproduced) and delivered in
connection with the offering of the Shares; (v) the registration of the Shares
under the Exchange Act and the listing of the Shares on the New York Stock
Exchange; (vi) the registration or qualification of the Shares for offer and
sale under the state 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) fees paid to the
Rating Agency; (viii) the transportation and other expenses incurred by or on
behalf of Fund representatives in connection with presentations to prospective
purchasers of the Shares; and (ix) the fees and expenses of the Fund's
accountants and the fees and expenses of counsel (including local and special
counsel) for the Fund and of the transfer agent.
Except as provided in this Section 10, the Underwriters agree
to pay their own costs and expenses of the underwriting, including the fees and
expenses of their counsel.
<PAGE> 35
35
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
Fund, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Fund.
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 Underwriters
are obligated to purchase on the Closing Date, each non-defaulting Underwriter
shall be obligated, severally, in the proportion which the number of Shares set
forth opposite its name in Schedule I hereto bears to the aggregate number of
Shares set forth opposite the names of all non-defaulting Underwriters or in
such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Salomon Smith Barney Inc., 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 (or, with
respect to the Underwriters' exercise of any applicable over-allotment option
for the purchase of Option Shares on a Date of Delivery after the Closing Date,
the obligations of the Fund to sell, such Option Shares on such Date of
Delivery) and arrangements satisfactory to you and the Fund for the purchase of
such Shares by one or more non-defaulting Underwriters or other party or
parties approved by you and the Fund 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 Fund. In any such case which does not result
in (i) a termination of this Agreement or (ii) in the case of a Date of
Delivery after the Closing Date, a termination of the obligations of the
Underwriters and the Fund with respect to the related Option Shares, as the
case may be, either you or the Fund 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
<PAGE> 36
36
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
Fund, 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 Fund or the Adviser, by notice to the Fund or
the Adviser, if prior to the Closing Date (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 such as 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 Fund 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 paragraph on the cover page, the stabilization
legend on the inside cover page, and the statements in the first, third and
fifth paragraphs under the caption "Underwriting" in any Prepricing Prospectus
and in the Prospectus, constitute the only information furnished by or on
behalf of the Underwriters through you as such information is referred to in
Sections 6(b) and 8 hereof.
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 Fund or the
Adviser, at the office of the Fund at One Corporate Center, Rye, New York
10580-1434, Attention: Bruce N. Alpert; or (ii) if to you, as Representatives
of the several Underwriters, care of Salomon Smith Barney Inc., 388 Greenwich
Street, New York, New York 10013, Attention: Adviser, Investment Banking
Division.
This Agreement has been and is made solely for the benefit of
the several Underwriters, the Fund, the Adviser, 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
<PAGE> 37
37
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. Applicable Law; Counterparts. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York applicable to contracts made and to be performed within the State of New
York.
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.
<PAGE> 38
Please confirm that the foregoing correctly sets forth the
agreement between the Fund and the several Underwriters.
Very truly yours,
THE GABELLI EQUITY
TRUST INC.
By:
GABELLI FUNDS, INC.
By:
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.
GABELLI & COMPANY, INC.
As Representatives of the
Several Underwriters
By SALOMON SMITH BARNEY INC.
By:
Managing Director
<PAGE> 39
SCHEDULE I
THE GABELLI EQUITY TRUST INC.
<TABLE>
<S> <C>
Underwriter Number of Shares
----------- ----------------
</TABLE>
<PAGE> 1
EXHIBIT 2(h)(2)
MASTER AGREEMENT AMONG UNDERWRITERS
July 18, 1985
Smith Barney Inc.
388 Greenwich Street
New York, New York
Dear Sirs:
We understand that from time to time you may act as
Representative or as one of the Representatives of several underwriters of
offerings of various issuers. This Agreement shall apply to any offering of
securities handled by your Corporate Syndicate Department in which we elect to
act as an underwriter after receipt of an invitation from your Corporate
Syndicate Department which shall identify issuer, contain information regarding
certain terms of the securities to be offered and specify the amount of our
proposed participation and the names of the other Representatives, if any, and
that our participation as an underwriter in the offering shall be subject to the
provisions of this Agreement. Your invitation will include instructions for our
acceptance of such invitation. At or prior to the time of an offering, you will
advise us, to the extent applicable, as to the expected offering date, the
expected closing date, the initial public offering price, the interest or
dividend rate (or the method by which such rate is to be determined), the
conversion price, the underwriting discount, the management fee, the selling
concession and the reallowance, except that if the public offering price of the
securities is to be determined by a formula based upon the market price of
certain securities (such procedure being hereinafter referred to as "Formula
Pricing"), you shall specify the maximum underwriting discount, management fee
and selling concession. Such information may be conveyed by you in one or more
communications (such communications received by us with respect to the offering
are hereinafter collectively referred to as the "Invitation"). If the
Underwriting Agreement (as hereinafter defined) provides for the granting of an
option to
<PAGE> 2
purchase additional securities to cover over-allotments, you will notify us, in
the Invitation, of such option.
This Agreement, as amended or supplemented by the Invitation,
shall become effective with respect to our participation in an offering of
securities if your Corporation Syndicate Department receives our oral or written
acceptance and does not subsequently receive a written communication revoking
our acceptance prior to the time and date specified in the Invitation (our
unrevoked acceptance after expiration of such time and date being hereinafter
referred to as our "Acceptance"). Our Acceptance will constitute our
confirmation that, except as otherwise stated in such Acceptance, each statement
included in the Master Underwriters' Questionnaire set forth as Exhibit A hereto
(or otherwise furnished to us) is correct. The issuer of the securities in any
offering of securities made pursuant to this Agreement is hereinafter referred
to as the "Issuer." If the Underwriting Agreement does not provide for an
over-allotment option, the securities to be purchased are hereinafter to as the
"Securities," if the Underwriting Agreement provides for an over-allotment
option, the securities the Underwriters (as hereinafter defined) are initially
obligated to purchase pursuant to the Underwriting Agreement are hereinafter
called the "Firm Securities" and any additional securities which may be
purchased upon exercise of the over-allotment option are hereinafter called the
"Additional Securities," with the Firm Securities and all or any part of the
Additional Securities being hereinafter collectively referred to as the
"Securities." Any underwriters of Securities under this Agreement, including the
Representatives (as hereinafter defined), are hereinafter collectively referred
to as the "Underwriters." All references herein to "you" or to this
"Representatives" shall mean Smith Barney, Harris Upham & Co. Incorporated and
the other firms, if any, which are named as Representatives in the Invitation.
The Securities to be offered may, but need not, be registered for a delayed or
continuous offering pursuant to Rule 415 under the Securities Act of 1933 (the
"1933 Act").
The following provisions of this Agreement shall apply
separately to each individual offering of Securities. This Agreement may be
supplemented or amended by you by written notice to us and, except for
supplements or amendments set forth in an Invitation relating
2
<PAGE> 3
to a particular offering of Securities, any such supplement or amendment to this
Agreement shall be effective with respect to any offering of Securities to which
this Agreement applies after this Agreement is so amended or supplemented.
1. UNDERWRITING AGREEMENT; AUTHORITY OF REPRESENTATIVES. We
authorize you to execute and deliver an underwriting of purchase agreement and
any amendment or supplement thereto and any associated Terms Agreement or other
similar agreement (collectively, the "Underwriting Agreement") on our behalf
with the Issuer and/or any selling securityholder with respect to the Securities
in such form as you determine. We will be bound by all terms of the Underwriting
Agreement as executed. We understand that changes may be made in those who are
to be Underwriters and in the amount of Securities to be purchased by them, but
the amount of Securities to be purchased by us in accordance with the terms of
this Agreement and the Underwriting Agreement, including the amount of
Additional Securities, if any, which we may become obligated to purchase by
reason of the exercise of any over-allotment option provided in the Underwriting
Agreement, shall not be changed without our consent.
As Representatives of the Underwriters, you are authorized to
take such action as you deem necessary or advisable to carry out this Agreement,
the Underwriting Agreement, and the purchase, sale and distribution of the
Securities, and to agree to any waiver or modification of any provision of the
Underwriting Agreement. The extent applicable, you are also authorized to
determine (i) the amount of Additional Securities, if any, to be purchased by
the Underwriters pursuant to any over-allotment option and (ii) with respect to
offerings using Formula Pricing, the initial public offering price and the price
at which the Securities are to be purchased in accordance with the Underwriting
Agreement. It is understood and agreed that Smith Barney, Harris Upham & Co.
Incorporated may act on behalf of all Representatives.
It is understood that, if so specified in the Invitation,
arrangements may be made for the sale of Securities by the Issuer pursuant to
delayed delivery contracts (hereinafter referred to as "Delayed Delivery
Contract"). References herein to delayed delivery and Delayed Delivery Contracts
apply only to offerings to
3
<PAGE> 4
which delayed delivery is applicable. The term "underwriting obligation," as
used in this Agreement with respect to any Underwriting, shall refer to the
amount of Securities, including any Additional Securities (plus such additional
Securities as may be required by the Underwriting Agreement in the event of a
default by one or more of the Underwriters) which such Underwriter is obligated
to purchase pursuant to the provisions of the Underwriting Agreement, without
regard to any reduction in such obligation as a result of Delayed Delivery
Contracts which may be entered into by the Issuer.
If the Securities consist in whole or in part of debt
obligations maturing serially, the serial Securities being purchased by each
Underwriter pursuant to the Underwriting Agreement will consist, subject to
adjustment as provided in the Underwriting Agreement, of serial Securities of
each maturity in a principal amount which bears the same proportion to the
aggregate principal amount of the serial Securities of such maturity to be
purchased by all the Underwriters as the principal amount of serial Securities
set forth opposite such Underwriter's name in the Underwriting Agreement bears
to the aggregate principal amount of the serial Securities to be purchased by
all the Underwriters.
2. REGISTRATION STATEMENT AND PROSPECTUS; OFFERING CIRCULAR. In
the case of an Invitation regarding an offer of Securities registered under the
1933 Act (a "Registered Offering"), you will furnish to us, to the extent made
available to you and the Issuer, copies of any registration statement or
registration statements relating to the Securities which may be filed with the
Securities and Exchange Commission) the "Commission") pursuant to the 1933 Act
and each amendment thereto (excluding exhibits but including any documents
incorporated by reference therein). Such registration statement(s) as amended,
and the prospectus(es) relating to the sale of Securities by the Issuer
constituting a part thereof, including all documents incorporated therein by
reference, as from time to time amended or supplemented by the filing of
documents pursuant to the Securities Exchange Act of 1934 (the "1934 Act"), the
1933 Act or otherwise, are referred to herein as the "Registration Statement"
and the "Prospectus," respectively, provided however, that a supplement to the
Prospectus filed with the Commission pursuant to Rule 424 under the 1933 Act
4
<PAGE> 5
with respect to an offering of Securities (a "Prospectus Supplement") shall be
deemed to have supplemented the Prospectus only with respect to the offering of
Securities to which it relates.
With respect to Securities for which no Registration Statement
if filed with the Commission, you will furnish to us, to the extent made
available to you by the Issuer, copies of any offering circular or other
offering materials to be used in connection with the offering of the Securities
and of each amendment thereto (the "Offering Circular").
3. PUBLIC OFFERING. The sale of the Securities shall commence
as soon as you deem advisable. We will not sell any Securities until they are
released by you for that purpose. When notified by you that the Securities are
released for sale, we will offer to the public in conformity with the terms of
offering set forth in the Prospectus or Offering Circular, such of the
Securities to be purchased by us ("our Securities") as are not reserved for our
account for sale to Selected Dealers and others pursuant to Section 5. After the
initial public offering, the public offering price and the concession and
discount therefrom may be changed by you by notice to the Underwriters, and we
agree to be bound by any such change.
If, in accordance with the terms of offering set forth in the
Prospectus or Offering Circular, the offering of the Securities is not at a
fixed price but at varying prices set by individual Underwriters based on market
prices or at negotiated prices, the provisions above relating to your right to
change the public offering price and concession and discount to dealers shall
not apply, and other references in this Section and elsewhere in this Agreement
to the public offering price or Selected Dealers' concession shall be deemed to
mean the prices and concessions determined by you from time to time in your
discretion.
If so directed in the Invitation, we will not sell any
Securities to any account over which we have discretionary authority. We will
also comply with any other restrictions which may be set forth in the
Invitation.
5
<PAGE> 6
The initial public advertisement with respect to the Securities
shall appear on such date, and shall include the names of such of the
Underwriters, as you may determine. Thereafter, any Underwriter may advertise at
its own expense.
4. DELAYED DELIVERY ARRANGEMENTS. We authorize you to act on
our behalf in making all arrangements for the solicitation of offers to purchase
Securities from the Issuer pursuant to Delayed Delivery Contracts, and we agree
that all such arrangements will be made only through you (directly or through
Underwriters or Selected Dealers). You may allow to Selected Dealers in respect
of such Securities a commission equal to the concession allowed to Selected
Dealers pursuant to Section 5.
The obligations of the Underwriters shall be reduced in the
aggregate by the principal amount of Securities covered by Delayed Delivery
Contracts made by the Issuer, the obligations of each Underwriter to be reduced
by the principal amount of such Securities, if any, allocated by you to such
Underwriter. Your determination of the allocation of Securities covered by
Delayed Delivery Contracts among the several Underwriters shall be final and
conclusive, and we agree to be bound by any notice delivered by you to the
Issuer setting forth the amount of the reduction in our obligation as a result
of Delayed Delivery Contracts.
Upon receiving payment from the fee for arranging Delayed
Delivery Contracts, you will credit our account with the portion of such fee
applicable to the Securities covered by Delayed Delivery Contracts allocated to
us. You will charge our account with any commission allocated to Selected
Dealers in respect of Securities covered by Delayed Delivery Contracts allocated
to us.
5. OFFERING TO SELECTED DEALERS AND OTHERS; MANAGEMENT OF
OFFERING. We authorize you, for our account, to reserve for sale and to sell to
dealers ("Selected Dealers"), among whom any of the Underwriters may be
included, such amount of our Securities as you shall determine. Reservations for
sales to Selected Dealers for our account need not be in proportion to our
under-writing obligation, but sales of Securities reserved for our account for
sale to Selected Dealers shall be made as
6
<PAGE> 7
nearly as practicable in the ratio which the amount of Securities reserved for
our account bears to the aggregate amount of Securities reserved for the account
of all Underwriters, as calculated from day to day. The price to Selected
Dealers initially shall be the public offering price less a concession not in
excess of the Selected Dealers concession set forth in the Invitation. Selected
Dealers shall be actually engaged in the investment banking or securities
business and shall be either members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") or dealers with their
principal place of business located outside the United States, its territories
and its possessions and not registered under the 1934 Act who agree to make no
sales within the United States, its territories or its possessions or to persons
who are nationals thereof or residents therein. Each Selected Dealer shall agree
to comply with the provisions of Section 24 of Article III of the Rules of Fair
Practice of the NASD, and each foreign Selected Dealer who is not a member of
the NASD also shall agree to comply with the NASD's interpretation with respect
to free-riding and withholding, to comply, as though it were a member of the
NASD, with the provisions of Section 8 and 36 of Article III of such Rules of
Fair Practice, and to comply with Section 25 of Article III thereof as that
Section applies to a non-member foreign dealer.
With your consent, the Underwriters may allow, and Selected
Dealers may reallow, a discount on sales to any dealer who meets the above NASD
requirements in an amount not in excess of the amount set forth in the
Invitation. Upon your request, we will advise you of the identity of any dealer
to whom we allow such a discount and any Underwriter or Selected Dealer from
whom we receive such a discount.
We also authorize you, for our account, to reserve for sale and
to sell our Securities at the public offering price to others, including
institutions and retail purchasers. Except for such sales which are designated
by a purchaser to be for the account of a particular Underwriter, such
reservations and sales shall be made as nearly as practicable in proportion to
our underwriting obligations, unless you agree to smaller proportion at our
request.
7
<PAGE> 8
At or before the time the Securities are released for sale, you
shall notify us of the amount of our Securities which have not been reserved for
our account for sale to Selected Dealers and others and which is to be retained
by us for direct sale.
We will from time to time, upon your request, report to you the
amount of securities retained by us for direct sale which remains unsold and,
upon your request, deliver to you for our account, or sell to you for the
account of one or more of the Underwriters, such amount of our unsold Securities
as you may designate at the public offering price less an amount determined by
you not in excess of the concession to Selected Dealers. You may also repurchase
Securities from other Underwriters and Selected Dealers, for the account of one
or more of the Underwriters, at prices determined by you not in excess of the
public offering price less the concession to Selected Dealers.
You may from time to time deliver to any Underwriter, for
carrying purposes or for sale by such Underwriter, any of the securities then
reserved for sale to, but not purchased and paid for by, Selected Dealers or
others as above provided, but to the extent that Securities are so delivered for
sale by such Underwriter, the amount of Securities then reserved for the account
of such Underwriter shall be correspondingly reduced. Securities delivered for
carrying purposes only shall be redelivered to you upon demand.
The Underwriters and Selected Dealers may, with your consent,
purchase Securities from and sell Securities to each other at the public
offering price less a concession not in excess of the concession to Selected
Dealers.
6. REPURCHASE OF SECURITIES NOT EFFECTIVELY PLACED. In
recognition of the importance of distributing the Securities to bona fide
investors, we agree to repurchase on demand any Securities sold by us, except
through you, which are purchased by you in the open market or otherwise during a
period terminating as provided in Section 16, at a price equal to the cost of
such purchase, including accrued interest, amortization of original issue
discount or dividends, commissions and transfer and other taxes, if any, on
redelivery. The certificates
8
<PAGE> 9
delivered to us need not be the identical certificates delivered to you in
respect of the Securities purchased. In lieu of requiring repurchase, you may,
in your discretion, sell such Securities for our account at such prices, upon
such terms and to such persons, including any of the other Underwriters, as you
may determine, charging the amount of any loss and expense, or crediting the
amount of any net profit, resulting from such sale, to our account, or you may
charge our account with an amount determined by you not in excess of the
concession to Selected Dealers.
7. STABILIZATION AND OVER-ALLOTMENT. In order to facilitate the
distribution of the Securities, we authorize you, in your discretion, to
purchase and sell Securities, any securities into which the Securities are
convertible or for which the securities are exchangeable, and any other
securities of the Issuer or any guarantor of the Securities specified in the
Invitation, in the open market or otherwise, for long or short account, at such
prices as you may determine, and, in the arranging for sales to Selected Dealers
or others, to over-allot. You may liquidate any long position or cover any short
position incurred pursuant to this Section as such prices as you may determine.
You shall make such purchases and sales (including over-allotments) for the
accounts of the Underwriters as nearly as practicable in proportion to their
respective underwriting obligations. It is understood that, in connection with
any particular offering of Securities to which this Agreement applies, you may
have made purchases of any such securities for stabilizing purposes prior to the
time when we became one of the Underwriters, and we agree that any such
securities so purchased shall be treated as having been purchased for the
respective accounts of the Underwriters pursuant to the foregoing authorization.
At the close of business on any day our net commitment, either for long or short
account, resulting from such purchases or sales (including over-allotments)
shall not exceed 15% (or such other amount as may be specified in the
Invitation) of our underwriting obligation, except that such percentage may be
increased with the approval of a majority in interest of the Underwriters. We
will take up at cost on demand any Securities or any such other securities so
sold or over-allotted for our account, including accrued interest, amortization
of original issue discount or dividend, and we will pay to you on demand the
amount of any losses
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<PAGE> 10
or expenses incurred for our account pursuant to this Section. In the event of
default by any Underwriter in respect of its obligations under this section,
each non-defaulting Underwriter shall assume its share of the obligations of
such defaulting Underwriter in the proportion that its underwriting obligation
bears to the underwriting obligations of all non-defaulting Underwriters without
relieving such defaulting Underwriter of its liability thereunder.
If you effect any stabilizing purchase pursuant to this
Section, you shall promptly notify us of the date and time of the first
stabilizing purchase and the date and time when stabilizing was terminated. You
shall prepare and maintain such records as are required to be maintained by you
as manager pursuant to Rule 17a-2 under the 1934 Act.
8. RULE 10B-6. We represent and agree that in connection with
the offering of Securities we have complied and will comply with the provisions
of Rule 10b-6 under the 1934 Act as they apply to the offering of the
Securities.
9. PAYMENT AND DELIVERY. As or before such time, on such dates
and at such places as you may specify in the Invitation, we will deliver to you
a certified or official bank check in such funds as are specified in the
Invitation, payable to the order of Smith Barney, Harris Upham & Co.
Incorporated (unless otherwise specified in the Invitation) in an amount equal
to, as you direct, either (i) the public offering price or prices plus accrued
interest, amortization of original issue discount or dividends, if any, set
forth in the Prospectus or Offering Circular less the concession to Selected
Dealers in respect of the amount of Securities to be purchased by us in
accordance with the terms of this Agreement, or (ii) the amount set forth in the
Invitation with respect to the Securities to be purchased by us. We authorize
you to make payment for our account of the purchase price for the Securities to
be purchased by us against delivery to you of such Securities (which, in the
case of Securities which are debt obligations, may be in temporary form), and
the difference between such purchase price of the securities and the amount of
our funds delivered to you therefor shall be credited to our account.
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<PAGE> 11
Delivery to us of Securities retained by us for direct sale
shall be made by you as soon as practicable after your receipt of the
Securities. Upon termination of the provisions of this Agreement as provided in
Section 16, you shall deliver to us any Securities reserved for our account for
sale to Selected Dealers and others which remain unsold at that time. If, upon
termination of the provisions of this Agreement specified in Section 16 hereof,
an aggregate of not more than 10% of the Securities remains unsold, you may, in
your discretion, sell such Securities at such prices as you may determine.
If we are a member of The Depository Trust Company or any other
depository or similar facility, you are authorized to make appropriate
arrangements for payment for and/or delivery through its facilities of the
Securities to be purchased by us, or, if we are not a member, settlement may be
made through a correspondent that is a member pursuant to our timely
instructions to you.
Upon receiving payment for Securities sold for our account to
Selected Dealers and others, you shall remit to us an amount equal to the amount
paid by us to you in respect of such Securities and credit or charge our account
with the difference, if any, between such amount and the price at which such
Securities were sold.
In the event that the Underwriting Agreement for an offering
provides for the payment of a commission or other compensation to the
Underwriters, we authorize you to receive such commission or other compensation
for our account.
10. MANAGEMENT COMPENSATION. As compensation for your services in the
management of the offering, we will pay you an amount equal to the management
fee specified in the Invitation in respect of the Securities to be purchased by
us pursuant to the Underwriting Agreement, and we authorize you to charge our
account with such amount. If there is more than one Representative, such
compensation shall be divided among the Representatives in such proportion as
they may determine.
11. AUTHORITY TO BORROW. We authorize you to advance your own funds for
our account, charging current interest rates, or to arrange loans for our
account or
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<PAGE> 12
the account of the Underwriters, as you may deem necessary or advisable for the
purchase, carrying, sale and distribution of the Securities. You may execute and
deliver any notes or other instruments required in connection therewith and may
hold or pledge as security therefor all or any part of the Securities which we
or such Underwriters have agreed to purchase. The obligations of the
Underwriters under loans arranged on their behalf shall be several in proportion
to their respective participations in such loans, and not joint. Any lender is
authorized to accept you instruction as to the disposition of the proceeds of
any such loans. You shall credit each Underwriter with the proceeds of any loans
made for its account.
12. BLUE SKY QUALIFICATION. You shall inform us, upon request, of the
states and other jurisdictions of the United States in which it is believed that
the Securities are qualified for sale under, or are exempt from the requirements
of, their respective securities laws, but you assume no responsibility with
respect to our right to sell Securities in any jurisdiction. You are authorized
to file with the Department of State of the State of New York a further State
Notice with respect to the Securities, if necessary.
If we propose to offer Securities outside the United States,
its territories or its possessions, we will take, at our own expense, such
action, if any, as may be necessary to comply with the laws of each foreign
jurisdiction in which we propose to offer Securities.
13. MEMBERSHIP IN NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.:
FOREIGN UNDERWRITERS: We understand that you are a member in good standing of
the NASD. We confirm that we are actually engaged in the investment banking or
securities business and are either (i) a member in good standing of the NASD or
(ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered under the 1934
Act who hereby agrees to make no sales within the United States, its territories
or its possessions or to persons who are nationals thereof or residents therein
(except that we may participate in sales to Selected Dealers and others under
Section 5 of this Agreement). We hereby agree to comply with Section 24 of
Article III of the Rules of fair Practice
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<PAGE> 13
of the NASD, and if we are a foreign dealer and not a member of the NASD we also
hereby agree to comply with the NASD's interpretation with respect to
free-riding and withholding, to comply, as though we were a member of the NASD,
with the provisions of Sections 5 and 36 of Article III of such Rules of Fair
Practice, and to comply with Section 25 of Article III thereof as that Section
applies to a non-member foreign dealer.
14. DISTRIBUTION OF PROSPECTUSES; OFFERING CIRCULARS. We are familiar
with Securities Act of 1933 Release No. 4968 and Rule 15c2-8 under the 1934 Act,
relating to the distribution of preliminary and final prospectuses, and we
confirm that we will comply therewith, to the extent applicable, in connection
with any sales of Securities. You shall cause to be made available to us, to the
extent made available to you by the Issuer, such number of copies of the
Prospectus as we may reasonably request for purposes contemplated by the 1933
Act, the 1934 Act and the rules and regulations thereunder.
If an Invitation states that the offering is subject to the
48-hour prospectus delivery requirement set forth in Rule 15c2-8(b), our
Acceptance of the Invitation shall be deemed to constitute confirmation that we
have delivered (or we will deliver) a copy of the preliminary prospectus to all
persons to whom we expect to confirm a sale of Securities and that such delivery
was affected (or will be affected) at least 48 hours prior to the mailing of
such confirmation of sale.
Our Acceptance of an Invitation relating to an offering made
pursuant to an Offering Circular shall constitute our agreement that, if
requested by you, we will furnish a copy of any amendment to a preliminary or
final Offering Circular to each person to whom we shall have furnished a
previous preliminary of final Offering Circular. Our Acceptance shall constitute
our confirmation that we have delivered and our agreement that we will deliver
all preliminary and final Offering Circulars required for compliance with the
applicable federal and state laws and the applicable rules and regulations of
any regulatory body promulgated thereunder governing the use and distribution of
offering circulars by underwriters and, to the extent consistent with such laws,
rules and regulations, our Acceptance shall constitute our
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<PAGE> 14
confirmation that we have delivered and our agreement that we will deliver all
preliminary and final Offering circulars which would be required if the
provisions of Rule 15c2-8 (or any successor provision) under the 1934 Act
applied to such offering.
15. NET CAPITAL. The incurrence by us of our obligations hereunder and
under the Underwriting Agreement in connection with the offering of the
Securities will not place us in violation of the capital requirements of Rule
15c3-1 under the 1934 Act.
16. TERMINATION. With respect to each offering of Securities to which
this Agreement applies, all limitations in this Agreement on the price at which
the Securities may be sold, the period of time referred to in Section 6, the
authority granted by the first sentence of Section 7, and the restrictions
contained in Section B shall terminate at the close of business on the 45th day
after the commencement of the offering of such Securities. You may terminate any
or all of such provisions at any time prior thereto by notice to the
Underwriters. All other provisions of this Agreement shall remain operative and
in full force and effect with respect to such offering.
17. EXPENSES AND SETTLEMENT. You may charge our account with any
transfer taxes on sales of Securities made for our account and with our
proportionate share (based upon our underwriting obligation) of all other
expenses incurred by you under this Agreement or otherwise in connection with
the purchase, carrying, sale or distribution of the Securities. With respect to
each offering of Securities to which this Agreement applies, the respective
accounts of the Underwriters shall be settled as promptly as practicable after
the termination of all the provisions of this Agreement as provided in Section
16, but you may reserve such amount as you may deem advisable for additional
expenses. Your determination of the amount to be paid to or by us shall be
conclusive. You may at any time make partial distributions of credit balances or
call for payment of debit balances. Any of our funds in your hands may beheld
with your general funds without accountability for interest. Notwithstanding any
settlement, we will remain liable for any taxes on transfers for our account and
for our proportionate share (based upon our underwriting obligation)
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<PAGE> 15
of all expenses and liabilities which may be incurred by or for the accounts of
the Underwriters with respect to each offering of Securities to which this
Agreement applies.
18. INDEMNIFICATION. With respect to each offering of Securities
pursuant to this Agreement, we will indemnify and hold harmless each other
Underwriter and each person, if any, who controls each other Underwriter within
the meaning of Section 15 of the 1933 Act, to the extent that and on the terms
upon which we agree to indemnify and hold harmless the Issuer and other
specified persons as set forth in the Underwriting Agreement.
19. CLAIMS AGAINST UNDERWRITERS. With respect to each offering of
Securities to which this Agreement applies, if at any time any person other than
an Underwriter asserts a claim (including any commenced or threatened
investigation or proceeding by any government agency or body) against on or more
of the Underwriters or against you as Representative(s) of the Underwriters
arising out of an alleged untrue statement or omission in the Registration
Statement (or any amendment thereto) or in any preliminary prospectus or the
Prospectus or any amendment or supplement thereto, or in any preliminary or
final Offering Circular, or relating to any transaction contemplated by this
Agreement, we authorize you to make such investigation, to retain such counsel
for the Underwriters and to take such action in the defense of such claim as you
may deem necessary or advisable. You may settle such claim with the approval of
a majority in interest of the Underwriters. We will pay our proportionate share
(based upon our underwriting obligations of all expenses incurred by you
(including the fees and expenses of counsel for the Underwriters) in
investigating and defending against such claim and our proportionate share of
the aggregate liability incurred by all Underwriters in respect of such claim
(after deducting any contribution or indemnification obtained pursuant to the
Underwriting Agreement, or otherwise, from persons other than Underwrites),
whether such liability is the result of a judgment against one or more of the
Underwriters or the result of any settlement. Any Underwriter may retain
separate counsel at its own expense. A claim against or liability incurred by a
person who controls an Underwriter shall be deemed to have been made against or
incurred by such Underwriter. In the event of default by
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<PAGE> 16
any Underwriter in respect of its obligations under this Section, the
non-defaulting Underwriters shall be obligated to pay the full amount thereof in
the proportions that their respective underwriting obligations bear to the
underwriting obligations of all non-defaulting Underwriters without relieving
such defaulting Underwriter of its liability hereunder.
20. DEFAULT BY UNDERWRITERS. Default by any Underwriter in respect of
its obligations hereunder or under the Underwriting Agreement shall not release
us from any of our obligations or in any way affect the liability of such
defaulting Underwriter to the other Underwriters for damages resulting from such
default. If one or more Underwriters default under the Underwriting Agreement,
if provided in the Underwriting Agreement you may (but shall not be obligated
to) arrange for the purchase by others, which may include yourselves or other
non-defaulting Underwriters, of all or a portion of the Securities no taken up
by the defaulting Underwriters.
In the event that such arrangements are made, the respective
underwriting obligations of the non-defaulting Underwriters and the amounts of
the Securities to be purchased by others, if any, shall be taken as the basis
for all rights and obligations hereunder, but this shall not in any way affect
the liability of any defaulting Underwriter to the other Underwriters for damage
resulting from its default, nor shall any such default relieve any other
Underwriter of any of its obligations hereunder or under the Underwriting
Agreement except as herein or therein provided. In addition, in the event of
default by one or more Underwriters in respect of their obligations under the
Underwriting Agreement to purchase the Securities agreed to be purchased by them
thereunder and, to the extent that arrangements shall not have been made by you
for any person to assume the obligations of such defaulting Underwriter or
Underwriters, we agree, if provided in the Underwriting Agreement, to assume our
proportionate share, based upon our underwriting obligation, of the obligations
of each defaulting Underwriter without relieving any such defaulting Underwriter
of its liability therefor.
21. LEGAL RESPONSIBILITY. As Representative(s) of the Underwriters, you
shall have no liability to us, except for your lack of good faith and for
obligations
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assumed by you in this Agreement and except that we do not waive any rights that
we may have under the 1933 or the 1934 Act or the rules and regulations
thereunder. No obligations not expressly assumed by you in this Agreement shall
be implied herefrom.
Nothing herein contained shall constitute the Underwriters an
association, or partners, with you, or with each other, or, except as otherwise
provided herein or in the Underwriting Agreement, render any Underwriter liable
for the obligations of any other Underwriter, and the rights, obligations and
liabilities of the Underwriters are several in accordance with their respective
underwriting obligations, and not joint.
If the Underwriters are deemed to constitute a partnership for
federal income tax purposes, we elect to be excluded from the application of
Subchapter K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1954, as
amended, and agrees not to take any position inconsistent with such election,
and you, as Representative(s), are authorized, in your discretion, to execute on
behalf of the Underwriters such evidence of such election as may be required by
the Internal Revenue Service.
Unless we have promptly notified you in writing otherwise, our
name as it should appear in the Prospectus or Offering circular and our address
are set forth below.
22. NOTICES. Any notices from you shall be deemed to have been duly
given if mailed or transmitted to us at our address appearing below.
23. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York applicable to agreements made and to be performed in said
State.
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Please confirm this Agreement and deliver a copy to us.
Very truly yours,
Name of Firm:
By:__________________________
Authorized Officer or Partner
Address:
_____________________________
_____________________________
_____________________________
Confirmed as of the date first above written.
Smith Barney Inc.
By:___________________________
Managing Director
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<PAGE> 19
EXHIBIT A
MASTER UNDERWRITERS' QUESTIONNAIRE
In connection with each offering of Securities pursuant to the
Smithy Barney, Harris Upham & Co. Incorporated Master Agreement Among
Underwriters, dated July 18, 1985 (the "Agreement"), each Underwriter confirms
the following information, except as indicated in such Underwriter's Acceptance
or other written communication furnished to Smith Barney, Harris Upham & Co.
Incorporated. Defined terms used herein have the same meaning as defined terms
in the Master Agreement Among Underwriters.
(a) Neither such Underwriter nor any of its directors, officers or
partners have any material (as defined in Regulation C under the 1933 Act)
relationship with the Issuer, its parent (if any), any other seller of the
Securities or any guarantor of the Securities.
(b) Except as described or to be described in the Agreement, the
Underwriting Agreement or the Invitation, such Underwriter does not know: (i) of
any discounts or commissions to be allowed or paid to dealers, including all
cash, securities, contracts, or other consideration to be received by any dealer
in connection with the sale of the Securities, or of any other discounts or
commissions to be allowed or paid to the Underwriters or of any other items that
would be deemed by the NASD to constitute underwriting compensation for purposes
of the NASD's Rules of Fair Practice, (ii) of any intention to over-allot, or
(iii) that the price of any security may be stabilized to facilitate the
offering of the Securities.
(c) No report or memorandum has been prepared for external use (i.e.,
outside such Underwriter's organization) by such Underwriter in connection with
the proposed offering of Securities and, in the case of a Registered Offering,
where the Registration Statement is on Form S-1, such Underwriter has not
prepared or had prepared for it any engineering, management or similar report or
memorandum relating to the broad aspects of the business, operations or products
of the Issuer, its parent (if any) or any guarantor of the Securities within the
past twelve months. If any such report or memorandum has been pre-
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pared, furnish to Smith Barney, Harris Upham & Co. Incorporated three copies
thereof, together with a statement as to the distribution of the report or
memorandum, identifying each class of persons to whom the report or memorandum
was distributed, the number of copies distributed to each class and the period
of distribution.
(d) If the Securities are debt securities to be issued under an
indenture to be qualified under the Trust Indenture Act of 1939, neither such
Underwriter nor any of its directors, officers or partners is an "affiliate", as
that term is defined under the Trust Indenture Act of 1939, of the Trustee for
the Securities as specified in the Invitation, or its parent (if any); neither
the Trustee nor its parent (if any) nor any of their directors or executive
officers is a director, officer, partner, employee, appointee or representative
of such Underwriter as those terms are defined in the Trust Indenture Act of
1939 or in the relevant instruction to Form T-1; neither such Underwriter nor
any of its directors, partners or executive officers, separate or as a group,
owns beneficially 1% or more of the shares of any class of voting securities of
the Trustee or of its parent (if any); and if such Underwriter is a corporation,
it does not have outstanding nor has it assumed or guaranteed any securities
issued otherwise than in its present corporate name, and neither the Trustee nor
its parent (if any) is a holder of any such securities.
(e) If the Issuer is a public utility, such Underwriter is not a
"holding company" or a "subsidiary company" or an "affiliate" of a "holding
company" or of a "public utility company", each as defined in the Public Utility
Holding Company Act of 1935.
(f) Neither such Underwriter nor any "group" (as that term is defined
in Section 13(d)(3) of the 1934 Act) of which it is a member is the beneficial
owner (determined in accordance with Rule 13d-3 under the 1934 Act) of more than
5% of any class of voting securities of the Issuer, its parent (if any), any
other seller of the Securities or any guarantor of the Securities nor does it
have any knowledge that more than 5% of any class of voting securities of the
Issuer is held or to be held subject to any voting trust or other similar
agreement.
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EXHIBIT 2(j)
CUSTODY AGREEMENT
AGREEMENT dated as of August 12, 1986 between THE GABELLI EQUITY TRUST
INC. (the "Fund"), a Maryland Corporation, having its principal office and place
of business at 8 Sound Shore Drive, Greenwich, Connecticut 06830, and BOSTON
SAFE DEPOSIT AND TRUST COMPANY (the "Custodian"), a Massachusetts trust company
with its principal place of business at One Boston Place, Boston, Massachusetts
02108.
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to
this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings:
(a) "Authorized Person" shall be deemed to include the President,
and any Vice President, the Secretary, the Treasurer, or any
other person, whether or not any such person is an officer or
employee of the Fund, duly authorized by the Board of Directors
of the Fund to give Oral Instructions and Written Instructions on
behalf of the Fund and listed in the certification annexed hereto
as Appendix A or such other certification as may be received by
the Custodian from time to time.
(b) "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency
Securities, its successor or successors and its nominee or
nominees.
(c) "Certificate" shall mean any notice, instruction or other
instrument in writing, authorized or required by this Agreement
to be given to the Custodian, which is actually received by the
Custodian and signed on behalf of the Fund by any two Authorized
Persons or any two officers thereof.
<PAGE> 2
(d) "Articles of Incorporation" shall mean the Articles of
Incorporation of the Fund dated May 20, 1986 as the same may be
amended from time to time.
(e) "Depository" shall mean The Depository Trust Company ("DTC"),
a clearing agency registered with the Securities and Exchange
Commission under Section 17(a) of the Securities Exchange Act of
1934, as amended, its successor or successors and its nominee or
nominees, in which the Custodian is hereby specifically
authorized to make deposits. The term "Depository" shall further
mean and include any other person to be named in a Certificate
authorized to act as a depository under the 1940 Act, its
successor or successors and its nominee or nominees.
(f) "Money Market Security" shall be deemed to include, without
limitation, debt obligations issued or guaranteed as to interest
and principal by the Government of the United States or agencies
or instrumentalities thereof, commercial paper, bank certificates
of deposit, bankers, acceptances and short-term corporate
obligations, where the purchase or sale of such securities
normally requires settlement in federal funds on the same day as
such purchase or sale, and repurchase and reverse repurchase
agreements with respect to any of the foregoing types of
securities.
(g) "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from a person reasonably believed by
the Custodian to be an Authorized Person.
(h) "Portfolio" refers to any separate and distinct portfolio as
may from time to time be created and designated by the Fund in
accordance with the provisions of the Articles of Incorporation.
Should the Fund have only one Portfolio, then for purposes of
this Agreement, the term "Portfolio" should be read as the
"Fund."
(i) "Prospectus" shall mean the Fund's current prospectus and
statement of additional information relating to the registration
of the Fund's Shares under the Securities Act of 1933, as
amended.
(j) "Shares" refers to the shares of common stock, $.001 par
value per share of the Fund.
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<PAGE> 3
(k) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and
other securities and investments from time to time owned by each
Portfolio.
(l) "Transfer Agent" shall mean the person which performs the
transfer agent, dividend disbursing agent and shareholder
servicing agent functions for the Fund.
(m) "Written Instructions" shall mean a written communication
actually received by the Custodian from a person reasonably
believed by the Custodian to be an Authorized Person by any
system whereby the receiver of such communication is able to
verify through codes or otherwise with a reasonable degree of
certainty the authenticity of the sender of such communication.
(n) The "1940 Act" refers to the Investment Company Act of 1940,
and the Rules and Regulations thereunder, all as amended from
time to time.
2. Appointment of Custodian.
(a) The Fund hereby constitutes and appoints the Custodian as
custodian of all the Securities and moneys at the time owned by
or in the possession of the Fund and specifically allocated to a
Portfolio during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian
for each Portfolio and agrees to perform the duties thereof as
hereinafter set forth.
3. Compensation.
(a) The Fund will compensate the Custodian for its services
rendered under this Agreement in accordance with the fees set
forth in the Fee Schedule annexed hereto as Schedule A and
incorporated herein for the existing Portfolios. Such Fee
Schedule does not include out-of-pocket disbursements of the
Custodian for which the Custodian shall be entitled to bill
separately. Out-of-pocket disbursements shall include, but shall
not be limited to, the items specified in the Schedule
3
<PAGE> 4
of out-of-pocket charges annexed hereto as Schedule B and
incorporated herein, which schedule may be modified by the
Custodian upon not less than thirty days prior written notice
to the Fund.
(b) The parties hereto will agree upon the compensation for
acting as custodian for any Portfolio hereafter established and
designated, and at the time that the Custodian commences serving
as such for said Portfolio, such agreement shall be reflected in
a Fee Schedule for that Portfolio, dated and signed by an officer
of each party hereto, which shall be attached to Schedule A of
this Agreement.
(c) Any compensation agreed to hereunder may be adjusted from
time to time by attaching to Schedule A of this Agreement a
revised Fee Schedule, dated and signed by an Authorized Officer
of each party hereto.
(d) The Custodian will bill the Fund for each Portfolio as soon
as practicable after the end of each calendar month, and said
billings will be detailed in accordance with the Fee Schedule for
each Portfolio. The Fund will promptly pay to the Custodian the
amount of such billing.
4. Custody of Cash and Securities.
(a) Receipt and Holding of Assets. The Fund will deliver or cause
to be delivered to the Custodian all Securities and moneys owned
by it at any time during the period of this Agreement and shall
specify the Portfolio to which the Securities and moneys are to
be specifically allocated. The Custodian will not be responsible
for such Securities and moneys until actually received by it. The
Fund shall instruct the Custodian from time to time in its sole
discretion, by means of a Certificate, or, in connection with the
purchase or sale of Money Market Securities, by means of Oral
Instructions or a Certificate, as to the manner in which and in
what amounts Securities and moneys of a Portfolio are to be
deposited on behalf of such Portfolio in the Book-Entry System or
the Depository and specifically allocated on the books of the
Custodian to such Portfolio; provided, however, that prior to the
deposit of Securities of a Portfolio in the Book-Entry System or
the Depository, including a deposit in connection with the
4
<PAGE> 5
settlement of a purchase or sale, the Custodian shall have
received a Certificate specifically approving such deposits by
the Custodian in the Book-Entry System or the Depository.
Securities and moneys of the Fund deposited in the Book-Entry
System or the Depository will be represented in accounts which
include only assets held by the Custodian for customers,
including but not limited to accounts in which the Custodian acts
in a fiduciary or representative capacity.
(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account for each Portfolio and shall credit
to the separate account of each Portfolio all moneys received by
it for the account of such Portfolio and shall disburse the same
only:
1. In payment for Securities purchased for such
Portfolio, as provided in Section 5 hereof;
2. In payment of dividends or distributions with respect
to the Shares of such Portfolio, as provided in Section 7
hereof;
3. In payment of original issue or other taxes with
respect to the Shares of such Portfolio, as provided in
Section 8 hereof;
4. In payment for Shares which have been redeemed by such
Portfolio, as provided in Section 8 hereof;
5. Pursuant to Certificates, or with respect to Money
Market Securities, Oral Instructions or Certificates,
setting forth the name of such Portfolio, the name and
address of the person to whom the payment is to be made,
the amount to be paid and the purpose for which payment
is to be made; or
6. In payment of fees and in reimbursement of the expenses
and liabilities of the Custodian attributable to such
Portfolio, as provided in Section 12(h) hereof.
(c) Confirmation and Statements. Promptly after the close of
business on each day, the Custodian shall furnish the Fund with
confirmations and a summary of all transfers to or from the
account of each Portfolio during said day. Where securities
purchased by a
5
<PAGE> 6
Portfolio are in a fungible bulk of securities registered in the
name of the Custodian (or its nominee) or shown on the
Custodian's account on the books of the Depository or the
Book-Entry System, the Custodian shall by book entry or
otherwise identify the quantity of those securities belonging to
such Portfolio. At least monthly, the Custodian shall furnish
the Fund with a detailed statement of the Securities and moneys
held for each Portfolio under this Agreement.
(d) Registration of Securities and Physical Separation. All
Securities held for a Portfolio which are issued or issuable
only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form;
all other Securities held for a Portfolio may be registered in
the name of that Portfolio, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from
time to time determine, or in the name of the Book-Entry System
or the Depository or their successor or successors, or their
nominee or nominees. The Fund reserves the right to instruct the
Custodian as to the method of registration and safekeeping of the
Securities of each Portfolio. The Fund agrees to furnish to the
Custodian appropriate instruments to enable the Custodian to
hold or deliver in proper form for transfer, or to register in
the name of its registered nominee or in the name of the
Book-Entry System or the Depository, any Securities which it may
hold for the account of a Portfolio and which may from time to
time be registered in the name of a Portfolio. The Custodian
shall hold all such Securities specifically allocated to a
Portfolio which are not held in the Book-Entry System or the
Depository in a separate account for such Portfolio in the name
of such Portfolio physically segregated at all times from those
of any other person or persons.
(e) Segregated Accounts. Upon receipt of a Certificate the
Custodian will establish segregated accounts on behalf of any
Portfolio or Portfolios to hold liquid or other assets as it
shall be directed by a Certificate and shall increase or decrease
the assets in such Segregated Account only as it shall be
directed by a subsequent Certificate.
(f) Collection of Income and Other Matters Affecting Securities.
Unless otherwise instructed to the contrary by a Certificate, the
Custodian by itself, or through the use of the Book-Entry System
or
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<PAGE> 7
the Depository with respect to Securities therein deposited,
shall with respect to all Securities held for a Portfolio in
accordance with this Agreement:
1. Collect all income due or payable;
2. Present for payment and collect the amount payable upon
all Securities which may mature or be called, redeemed or
retired, or otherwise become payable;
3. Surrender Securities in temporary form for definitive
Securities;
4. Execute any necessary declarations or certificates of
ownership under the Federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter
in effect; and
5. Hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited,
for the account of each Portfolio all rights and similar
Securities issued with respect to any Securities held by
the Custodian hereunder for each Portfolio.
(g) Delivery of Securities and Evidence of Authority. Upon
receipt of a Certificate and not otherwise, except for
subparagraphs 5, 6, 7, and 8 which may be effected by Oral or
Written Instructions and confirmed by Certificates, the
Custodian, directly or through the use of the Book-Entry System
or the Depository, shall:
1. Execute and deliver or cause to be executed and
delivered to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any
other instruments whereby the authority of the Fund as
owner of any Securities may be exercised;
2. Deliver or cause to be delivered any Securities held
for a Portfolio in exchange for other Securities or cash
issued or paid in connection with the liquidation,
reorganization,
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<PAGE> 8
refinancing, merger, consolidation or recapitalization of
any corporation, or the exercise of any conversion
privilege;
3. Deliver or cause to be delivered any Securities held
for a Portfolio to any protective committee,
reorganization committee or other person in connection
with the reorganization, refinancing, merger,
consolidation or recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement in the separate account for each Portfolio such
certificates of deposit, interim receipts or other
instruments or documents as may be issued to it to
evidence such delivery;
4. Make or cause to be made such transfers or exchanges of
the assets specifically allocated to the separate account
of a Portfolio and take such other steps as shall be
stated in said Certificate to be for the purpose of
effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization
of the Fund;
5. Deliver Securities owned by any Portfolio upon sale of
such Securities for the account of such Portfolio pursuant
to Section 5;
6. Deliver Securities owned by any Portfolio upon the
receipt of payment in connection with any repurchase
agreement related to such Securities entered into by such
Portfolio;
7. Deliver Securities owned by any Portfolio to the issuer
thereof or its agent when such Securities are called,
redeemed, retired or otherwise become payable; provided,
however, that in any such case the cash or other
consideration is to be delivered to the Custodian;
8. Deliver Securities owned by any Portfolio for delivery
in connection with any loans of securities made by such
Portfolio but only against receipt of adequate collateral
as agreed upon from time to time by the Custodian and the
Fund
8
<PAGE> 9
which may be in the form of cash or obligations issued by
the United States government, its agencies or
instrumentalities;
9. Deliver Securities owned by any Portfolio for delivery
as security in connection with any borrowings by such
Portfolio requiring a pledge of Portfolio assets, but
only against receipt of amounts borrowed;
10. Deliver Securities owned by any Portfolio upon receipt
of Written Instructions from such Portfolio for delivery
to the Transfer Agent or to the holders of Shares in
connection with distributions in kind, as may be described
from time to time in the Fund's Prospectus, in
satisfaction of requests by holders of Shares for
repurchase or redemption;
11. Deliver Securities owned by any Portfolio as
collateral in connection with short sales by that
Portfolio of common stock for which such Portfolio owns
the stock or owns preferred stocks or debt securities
convertible or exchangeable, without payment of further
consideration, into shares of the common stock sold short;
12. Deliver Securities owned by any Portfolio for any
purpose expressly permitted by and in accordance with
procedures described in the Fund's Prospectus; and
13. Deliver Securities owned by any Portfolio for any
other proper business purpose, but only upon receipt of,
in addition to Written Instructions, a certified copy of a
resolution of the Board of Directors signed by an
Authorized Person and certified by the Secretary of the
Fund, specifying the Securities to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper business purpose,
and naming the person or persons to whom delivery of such
Securities shall be made.
(h) Endorsement and Collection of Checks, Etc. The Custodian is
hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received by the Custodian
for the account of a Portfolio.
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<PAGE> 10
5. Purchase and Sale of Investments of the Portfolios.
(a) Promptly after each purchase of Securities for a Portfolio,
the Fund shall deliver to the Custodian (i) with respect to each
purchase of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each purchase of Money
Market Securities, either a Certificate or Oral Instructions, in
either case specifying with respect to each purchase: (1) the
name of the Portfolio to which such Securities are to be
specifically allocated; (2) the name of the issuer and the title
of the Securities; (3) the number of shares or the principal
amount purchased and accrued interest, if any; (4) the date of
purchase and settlement; (5) the purchase price per unit; (6)
the total amount payable upon such purchase; (7) the name of the
person from whom or the broker though whom the purchase was made,
if any; (8) whether or not such purchase is to be settled through
the Book-Entry System or the Depository; and (9) whether the
Securities purchased are to be deposited in the Book-Entry System
or the Depository. The Custodian shall receive all Securities
purchased by or for a Portfolio and upon receipt of such
Securities shall pay out of the moneys held for the account of
such Portfolio the total amount payable upon such purchase,
provided that the same conforms to the total amount payable as
set forth in such Certificate or Oral Instructions.
(b) Promptly after each sale of Securities of a Portfolio, the
Fund shall deliver to the Custodian (i) with respect to each sale
of Securities which are not Money Market Securities, a
Certificate, and (ii) with respect to each sale of Money Market
Securities, either a Certificate or Oral Instructions, in either
case specifying with respect to such sale: (1) the name of the
Portfolio to which the Securities sold were specifically
allocated; (2) the name of the issuer and the title of the
Securities; (3) the number of shares or principal amount sold,
and accrued interest, if any; (4) the date of sale; (5) the
sale price per unit; (6) the total amount payable to the
Portfolio upon such sale; (7) the name of the broker through
whom or the person to whom the sale was made; and (8) whether
or not such sale is to be settled through the Book-Entry System
or the Depository. The Custodian shall deliver or cause to be
delivered the Securities to the broker or other person
designated by the Fund upon receipt of the total amount payable
to such Portfolio upon such sale, provided that the same
conforms to the total amount
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<PAGE> 11
payable to such Portfolio as set forth in such Certificate or
such Oral Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it,
and may deliver Securities and arrange for payment in accordance
with the customs prevailing among dealers in Securities.
6. Lending of Securities.
If the Fund or any Portfolio is permitted by the terms of its
Articles of Incorporation and as disclosed in its Prospectus to
lend Securities specifically allocated to that Portfolio, within
24 hours after each loan of Securities, the Fund shall deliver to
the Custodian Written Instructions specifying with respect to
each such loan: (a) the Portfolio to which the loaned Securities
are specifically allocated; (b) the name of the issuer and the
title of the Securities; (c) the number of shares or the
principal amount loaned; (d) the date of loan and delivery; (e)
the total amount to be delivered to the Custodian, and
specifically allocated to such Portfolio against the loan of the
Securities, including the amount of cash collateral and the
premium, if any, separately identified; (f) the name of the
broker, dealer or financial institution to which the loan was
made; and (g) whether the Securities loaned are to be delivered
through the Book-Entry System or the Depository.
Promptly after each termination of a loan of Securities
specifically allocated to a Portfolio, the Fund shall deliver to
the
11
<PAGE> 12
Custodian Written Instructions specifying with respect to each
such loan termination and return of Securities: (a) the name of
the Portfolio to which such loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the
Securities to be returned; (c) the number of shares or the
principal amount to be returned; (d) the date of termination;
(e) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting
credits as described in said Written Instructions); (f) the name
of the broker, dealer or financial institution from which the
Securities will be returned; and (g) whether such return is to
be effected through the Book-Entry System or the Depository. The
Custodian shall receive all Securities returned from the broker,
dealer or financial institution to which such Securities were
loaned and upon receipt thereof shall pay, out of the moneys
specifically allocated to such Portfolio, the total amount
payable upon such return of Securities as set forth in the
Written Instructions. Securities returned to the Custodian shall
be held as they were prior to such loan.
7. Payment of Dividends or Distributions.
(a) The Fund shall furnish to the Custodian the resolution of the
Board of Directors of the Fund certified by the Secretary (i)
authorizing the declaration of dividends with respect to a
Portfolio on a specified periodic basis and authorizing the
Custodian to rely on Oral or Written Instructions specifying the
date of the declaration of such dividend or distribution, the
date of payment thereof, the record date as of which shareholders
entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of the record date and the
total amount payable to the Transfer Agent on the payment date,
or (ii) setting forth the date of declaration of any dividend or
distribution by a Portfolio, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be
determined, the amount payable per share to the shareholders of
record as of the record date and the total amount payable to the
Transfer Agent on the payment date.
(b) Upon the payment date specified in such resolution, Oral
Instructions, or Written Instructions, as the case may be, the
Custodian shall pay out the moneys specifically allocated to and
held
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<PAGE> 13
for the account of the appropriate Portfolio the total amount
payable to the Transfer Agent of the Fund.
8. Sale and Redemption of Shares of the Portfolios.
(a) Whenever the Fund shall sell any Shares of a Portfolio, the
Fund shall deliver or cause to be delivered to the Custodian a
Certificate duly specifying:
1. The name of the Portfolio whose Shares were sold;
2. The number of Shares sold, trade date, and price; and
3. The amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to such
Portfolio.
The Custodian understands and agrees that the Certificate
may be furnished subsequent to the purchase of Shares of a
Portfolio and that the information contained therein will be
derived from the sales of Shares of such Portfolio as reported to
the Fund by the Transfer Agent.
(b) Upon receipt of such money from the Transfer Agent, the
Custodian shall credit such money to the separate account of the
Portfolio specified in subparagraph (1) of paragraph (a) of this
Section 8.
(c) Upon issuance of any Shares of a Portfolio in accordance with
the foregoing provisions of this Section 8, the Custodian shall
pay, out of the moneys specifically allocated and held for the
account of such Portfolio, all original issue or other taxes
required to be paid in connection with such issuance upon the
receipt of a Certificate specifying the amount to be paid.
(d) Except as provided hereafter, whenever any Shares of a
Portfolio are redeemed, the Fund shall cause the Transfer Agent
to promptly furnish to the Custodian Written Instructions,
specifying:
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<PAGE> 14
1. The name of the Portfolio whose Shares were redeemed;
2. The number of Shares redeemed; and
3. The amount to be paid for the Shares redeemed.
Any such Written Instructions shall be confirmed by a
Certificate which the Custodian understands and agrees may be
furnished subsequent to the redemption of Shares of a Portfolio.
The Custodian further understands that the information contained
in such Certificate will be derived from the redemption of Shares
as reported to the Fund by the Transfer Agent.
(e) Upon receipt from the Transfer Agent of advice setting forth
the number of Shares of a Portfolio received by the Transfer
Agent for redemption and that such Shares are valid and in good
form for redemption, the Custodian shall make payment to the
Transfer Agent out of the moneys specifically allocated to and
held for the account of the Portfolio specified in subparagraph
(1) of paragraph (d) of this Section 8 of the total amount
specified in the Certificate issued pursuant to paragraph (d) of
this Section 8.
(f) Notwithstanding the above provisions regarding the redemption
of Shares, whenever such Shares are redeemed pursuant to any check
redemption privilege which may from time to time be offered by the
Fund, the Custodian, unless otherwise instructed by a Certificate
shall, upon receipt of advice from the Fund or its agent stating
that the redemption is in good form for redemption in accordance
with the check redemption procedure, honor the check presented as
part of such check redemption privilege out of the moneys
specifically allocated to the Fund in such advice for such
purpose.
9. Indebtedness.
(a) The Fund will cause to be delivered to the Custodian by any
bank (excluding the Custodian) from which the Fund borrows money
for temporary administrative or emergency purposes using
Securities as collateral for such borrowings, a notice or
undertaking in the form
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<PAGE> 15
currently employed by any such bank setting forth the amount
which such bank will loan to the Fund against delivery of a
stated amount of collateral. The Fund shall promptly deliver to
the Custodian Written or Oral Instructions stating with respect
to each such borrowing: (1) the name of the Portfolio for
which the borrowing is to be made; (2) the name of the bank;
(3) the amount and terms of the borrowing, which may be set
forth by incorporating by reference an attached promissory note,
duly endorsed by the Fund, or other loan agreement; (4) the
time and date, if known, on which the loan is to be entered
into (the "borrowing date"); (5) the date on which the loan
becomes due and payable; (6) the total amount payable to the
Fund for the separate account of the Portfolio on the borrowing
date; (7) the market value of Securities to be delivered as
collateral for such loan, including the name of the issuer, the
title and the number of shares or the principal amount of any
particular Securities; (8) whether the Custodian is to deliver
such collateral through the Book-Entry System or the Depository;
and (9) a statement that such loan is in conformance with the
1940 Act and the Fund's Prospectus.
(b) Upon receipt of the Certificate referred to in subparagraph
(a) above, the Custodian shall deliver on the borrowing date the
specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the
loan payable, provided that the same conforms to the total amount
payable as set forth in the Written or Oral Instructions. The
Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be
subject to all rights therein given the lending bank by virtue of
any promissory note or loan agreement. The Custodian shall
deliver as additional collateral in the manner directed by the
Fund from time to time such Securities specifically allocated to
such Portfolio as may be specified in Written or Oral
Instructions to collateralize further any transaction described
in this Section 9. The Fund shall cause all Securities released
from collateral status to be returned directly to the Custodian,
and the Custodian shall receive from time to time such return of
collateral as may be tendered to it. In the event that the Fund
fails to specify in Written or Oral Instructions all of the
information required by this Section 9, the Custodian shall not
be under any obligation to deliver any Securities. Collateral
returned to the Custodian shall be held hereunder as it was prior
to being used as collateral.
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<PAGE> 16
10. Persons Having Access to Assets of the Portfolios.
(a) No Director, officer, employee or agent of the Fund, and no
officer, director, employee or agent of the Adviser, shall have
physical access to the assets of the Fund held by the Custodian
or be authorized or permitted to withdraw any investments of the
Fund, nor shall the Custodian deliver any assets of the Fund to
any such person. No officer, director, employee or agent of the
Custodian who holds any similar position with the Fund or the
Adviser shall have access to the assets of the Fund.
(b) The individual employees of the Custodian duly authorized by
the Board of Directors of the Custodian to have access to the
assets of the Fund are listed in the certification annexed hereto
as Appendix C. The Custodian shall advise the Fund of any change
in the individuals authorized to have access to the assets of the
Fund by written notice to the Fund accompanied by a certified
copy of the authorizing resolution of the Custodian's Board of
Directors approving such change.
(c) Nothing in this Section 10 shall prohibit any officer,
employee or agent of the Fund, or any officer, director, employee
or agent of the Adviser, from giving Oral Instructions or Written
Instructions to the Custodian or executing a Certificate so long
as it does not result in delivery of or access to assets of the
Fund prohibited by paragraph (a) of this Section 10.
11. Concerning the Custodian.
(a) Standard of Conduct. Except as otherwise provided herein,
neither the Custodian nor its nominee shall be liable for any
loss or damage, including counsel fees, resulting from its action
or omission to act or otherwise, except for any such loss or
damage arising out of its own negligence or willful misconduct.
The Custodian may, with respect to questions of law, apply for
and obtain the advice and opinion of counsel to the Fund or of
its own counsel, at the expense of the Fund, and shall be fully
protected with respect to anything done or omitted by it in good
faith in conformity with such advice or opinion. The Custodian
shall be liable to the Fund for any loss or damage resulting from
the use of the Book-Entry System or the Depository
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<PAGE> 17
arising by reason of any negligence, misfeasance or misconduct on
the part of the Custodian or any of its employees or agents.
(b) Limit of Duties. Without limiting the generality of the
foregoing, the Custodian shall be under no duty or obligation to
inquire into, and shall not be liable for:
1. The validity of the issue of any Securities purchased
by any Portfolio, the legality of the purchase thereof, or
the propriety of the amount paid therefor;
2. The legality of the sale of any Securities by any
Portfolio, or the propriety of the amount for which the
same are sold;
3. The legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any
dividend or other distribution of any Portfolio;
6. The legality of any borrowing for temporary or emergency
administrative purposes.
(c) No Liability Until Receipt. The Custodian shall not be liable
for, or considered to be the Custodian of, any money, whether or
not represented by any check, draft, or other instrument for the
payment of money, received by it on behalf of any Portfolio until
the Custodian actually receives and collects such money directly
or by the final crediting of the account representing the Fund's
interest in the Book-Entry System or the Depository.
(d) Amounts Due from Transfer Agent. The Custodian shall not be
under any duty or obligation to take action to effect collection
of any amount due to any Portfolio from the Transfer Agent nor to
take any action to effect payment or distribution by the Transfer
Agent of
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<PAGE> 18
any amount paid by the Custodian to the Transfer Agent in
accordance with this Agreement.
(e) Collection Where Payment Refused. The Custodian shall not be
under any duty or obligation to take action to effect collection
of any amount, if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand
or presentation, unless and until (a) it shall be directed to
take such action by a Certificate and (b) it shall be assured to
its satisfaction of reimbursement of its costs and expenses in
connection with any such action.
(f) Appointment of Agents and Sub-Custodians. The Custodian may
appoint one or more banking institutions, including but not
limited to banking institutions located in foreign countries, to
act as Depository or Depositories or as Sub-Custodian or as
Sub-Custodians of Securities and moneys at any time owned by any
Portfolio, upon terms and conditions specified in a Certificate.
The Custodian shall use reasonable care in selecting a Depository
and/or Sub-Custodian located in a country other than the United
States ("Foreign Sub-Custodian"), and shall oversee the
maintenance of any Securities or moneys of the Fund by any
Foreign Sub-Custodian. In addition, the Custodian shall hold the
Fund harmless from, and indemnify the Fund against, any loss that
occurs as a result of the failure of any Foreign Sub-Custodian to
exercise reasonable care with respect to the safekeeping of
Securities and moneys of the Fund.
(g) No Duty to Ascertain Authority. The Custodian shall not be
under any duty or obligation to ascertain whether any Securities
at any time delivered to or held by it for the Fund and
specifically allocated to a Portfolio are such as may properly be
held by the Fund and specifically allocated to such Portfolio
under the provisions of the Articles of Incorporation and the
Prospectus.
(h) Compensation of the Custodians. The Custodian shall be
entitled to receive, and the Fund agrees to pay to the Custodian,
such compensation as may be agreed upon from time to time between
the Custodian and the Fund. The Custodian may charge against any
moneys specifically allocated to a Portfolio such compensation
and any expenses incurred by the Custodian in the performance of
its
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<PAGE> 19
duties pursuant to such agreement with respect to such Portfolio.
The Custodian shall also be entitled to charge against any money
held by it and specifically allocated to a Portfolio the amount
of any loss, damage, liability or expense incurred with respect
to such Portfolio, including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement.
The expenses which the Custodian may charge against such
account include, but are not limited to, the expenses of
Sub-Custodians and foreign branches of the Custodian incurred in
settling transactions outside of Boston, Massachusetts or New
York City, New York involving the purchase and sale of Securities
of any Portfolio.
(i) Reliance on Certificates and Instructions. The Custodian
shall be entitled to rely upon any Certificate, notice or other
instrument in writing received by the Custodian and reasonably
believed by the Custodian to be genuine and to be signed by two
officers of the Fund. The Custodian shall be entitled to rely
upon any Written Instructions or Oral Instructions actually
received by the Custodian pursuant to the applicable Sections of
this Agreement and reasonably believed by the Custodian to be
genuine and to be given by an Authorized Person. The Fund agrees
to forward to the Custodian Written Instructions from an
Authorized Person confirming such Oral Instructions in such
manner so that such Written Instructions are received by the
Custodian, whether by hand delivery, telex or otherwise, by the
close of business on the same day that such Oral Instructions are
given to the Custodian. The Fund agrees that the fact that such
confirming instructions are not received by the Custodian shall
in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund.
The Fund agrees that the Custodian shall incur no liability to
the Fund in acting upon Oral Instructions given to the Custodian
hereunder concerning such transactions provided such instructions
reasonably appear to have been received from a duly Authorized
Person.
(j) Inspection of Books and Records. The books and records of the
Custodian shall be open to inspection and audit at reasonable
times by officers and auditors employed by the Fund and by
employees of the Securities and Exchange Commission.
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<PAGE> 20
The Custodian shall provide the Fund with any report
obtained by the Custodian on the system of internal accounting
control of the Book-Entry System or the Depository and with such
reports on its own systems of internal accounting control as the
Fund may reason ably request from time to time.
12. Term and Termination.
(a) This Agreement shall become effective on the date first set
forth above (the "Effective Date") and shall continue in effect
thereafter as the parties may mutually agree.
(b) Either of the parties hereto may terminate this Agreement with
respect to any Portfolio by giving to the other party a notice in
writing specifying the date of such termination, which shall be
not less than 60 days after the date of receipt of such notice. In
the event such notice is given by the Fund, it shall be
accompanied by a certified resolution of the Board of Directors of
the Fund, electing to terminate this Agreement with respect to any
Portfolio and designating a successor custodian or custodians,
which shall be a person qualified to so act under the 1940 Act. In
the event such notice is given by the Custodian, the Fund shall,
on or before the termination date, deliver to the Custodian a
certified resolution of the Board of Directors of the Fund,
designating a successor custodian or custodians. In the absence of
such designation by the Fund, the Custodian may designate a
successor custodian, which shall be a person qualified to so act
under the 1940 Act. If the Fund fails to designate a successor
custodian for any Portfolio, the Fund shall upon the date
specified in the notice of termination of this Agreement and upon
the delivery by the Custodian of all Securities (other than
Securities held in the Book-Entry Systems which cannot be
delivered to the Fund) and moneys then owned by such Portfolio, be
deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this
Agreement, other than the duty with respect to Securities held in
the Book-Entry System which cannot be delivered to the Fund.
(c) Upon the date set forth in such notice under paragraph (b) of
this Section 12, this Agreement shall terminate to the extent
specified in such notice, and the Custodian shall upon receipt of
a notice of acceptance by the successor custodian on that date
deliver directly to
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<PAGE> 21
the successor custodian all Securities and moneys then held by
the Custodian and specifically allocated to the Portfolio or
Portfolios specified, after deducting all fees, expenses and
other amounts for the payment or reimbursement of which it shall
then be entitled with respect to such Portfolio or Portfolios.
13. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by two
of the present officers of the Fund setting forth the names and
the signatures of the present Authorized Persons. The Fund agrees
to furnish to the Custodian a new certification in similar form
in the event that any such present Authorized Person ceases to be
such an Authorized Person or in the event that other or
additional Authorized Persons are elected or appointed. Until
such new certification shall be received, the Custodian shall be
fully protected in acting under the provisions of this Agreement
upon Oral Instructions or signatures of the present Authorized
Persons as set forth in the last delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by two
of the present officers of the Fund setting forth the names and
the signatures of the present officers of the Fund. The Fund
agrees to furnish to the Custodian a new certification in similar
form in the event any such present officer ceases to be an
officer of the Fund or in the event that other or additional
officers are elected or appointed. Until such new certification
shall be received, the Custodian shall be fully protected in
acting under the provisions of this Agreement upon the signature
of the officers as set forth in the last delivered certification.
(c) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Custodian, shall be
sufficiently given if addressed to the Custodian and mailed or
delivered to it at its offices at One Boston Place, Boston,
Massachusetts 02108 or at such other place as the Custodian may
from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to the Fund, shall be
21
<PAGE> 22
sufficiently given if addressed to the Fund and mailed or
delivered to it at its offices at One Boston Place, Boston,
Massachusetts 02108, or at such other place as the Fund may from
time to time designate in writing.
(e) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties with the
same formality as this Agreement, (i) authorized and approved by
a resolution of the Board of Directors of the Fund, including a
majority of the members of the Board of Directors of the Fund
who are not "interested persons" of the Fund (as defined in the
1940 Act), or (ii) authorized and approved by such other
procedures as may be permitted or required by the 1940 Act.
(f) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable by
the Fund without the written consent of the Custodian, or by the
Custodian without the written consent of the Fund authorized or
approved by a resolution of the Board of Directors of the Fund,
and any attempted assignment without such written consent shall
be null and void.
(g) This Agreement shall be construed in accordance with the laws
of the Commonwealth of Massachusetts.
(h) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
(i) This Agreement may be executed in any number of counter
parts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunder duly authorized as of the day and year
first above written.
THE GABELLI EQUITY TRUST INC.
By: /s/ Nicholas E.E. De Stefano
----------------------------
Attest:
- ----------------------------
BOSTON SAFE DEPOSIT AND
TRUST COMPANY
By: /s/ Jane C. Tempel
----------------------------
Attest:
/s/ Ronald G. Sampson
- -----------------------------
23
<PAGE> 24
APPENDIX A
We, Mario J. Gabelli, President, and Nicholas E.E. De Stefano, Secretary,
of The Gabelli Equity Trust Inc., a Maryland corporation (the "Fund"), do hereby
certify that:
The following individuals have been duly authorized as Authorized Persons
to give Oral Instructions and Written Instructions on behalf of the Fund and the
signatures set forth opposite their respective names are their true and correct
signatures:
Name Signature
Robert E. Mulligan /s/ Robert E. Mulligan
-----------------------------------
Irene Frangiadakis /s/ Irene Frangiadakis
-----------------------------------
/s/ Mario J. Gabelli
------------------------------------
Mario J. Gabelli, President
/s/ Nicholas E.E. De Stefano
------------------------------------
Nicholas E.E. De Stefano, Secretary
24
<PAGE> 25
AFFIDAVIT OF SIGNATURES
I, Peter Meenan, Executive Vice President and General Counsel of The
Boston Company Advisors, Inc. do hereby certify that the signatures set forth
opposite the respective names of Robert E. Mulligan and Irene Frangiadakis are
their true and correct signatures.
Name Signature
Robert E. Mulligan /s/ Robert E. Mulligan
----------------------------
Irene Frangiadakis /s/ Irene Frangiadakis
----------------------------
/s/ Peter Meenan
- --------------------- ----------------------------
Witness Peter Meenan
Date: 8/19/86 Date: 8/19/86
---------------- -----------------------
25
<PAGE> 26
APPENDIX B - OFFICERS
I, Mario J. Gabelli, President, and I, Nicholas E.E. De Stefano,
Secretary, of The Gabelli Equity Trust Inc., a Maryland corporation (the
"Fund"), do hereby certify that:
The following individuals serve in the following positions with the Fund
and each individual has been duly elected or appointed to each such position and
qualified therefor in conformity with the Fund's Articles of Incorporation and
the signatures set forth opposite their respective names are their true and
correct signatures:
<TABLE>
<CAPTION>
Name Position Signature
---- -------- ---------
<S> <C> <C>
Mario J. Gabelli President /s/ Mario J. Gabelli
----------------------------
Nicholas E.E. De Stefano Executive Vice
President and
Secretary /s/ Nicholas E.E. De Stefano
----------------------------
Edward A. Leskowicz, Jr. Treasurer /s/ Edward A. Leskowicz, Jr.
----------------------------
Douglas Jamieson Assistant Secretary /s/ Douglas Jamieson
----------------------------
Irene Smolicz Assistant Secretary /s/ Irene Smolicz
----------------------------
/s/ Mario J. Gabelli
----------------------------------------------------
Mario J. Gabelli, President
/s/ Nicholas E.E. De Stefano
----------------------------------------------------
Nicholas E.E. De Stefano, Secretary
</TABLE>
26
<PAGE> 27
APPENDIX C - INDIVIDUALS WITH ACCESS
I, Ronald G. Sampson, Secretary of Boston Safe Deposit and Trust
Company, a Massachusetts corporation (the "Custodian"), do hereby certify that:
The following seven named individuals have been duly authorized by the
Executive Committee of the Board of Directors of the Custodian to have access to
the assets of the THE GABELLI EQUITY TRUST INC., a Maryland corporation, held by
the Custodian in its capacity as such:
Karen D. DeVitto
Peter DiCerbo
Margaret E. Ford
Carolyn F. Kiess
Russell G. McAdams, II
Virginia Shea
S. Elizabeth Tindley
/s/ Ronald G. Sampson
-----------------------------
Ronald G. Sampson
27
<PAGE> 28
Schedule A
CUSTODY FEES
<TABLE>
<S> <C>
Annual Fee Rate as a Percentage
of Month-End Market Value
----------------------------------
General Custody:
Domestic Custody .02% or minimum $5,000 per month,
whichever is greater
International Custody .23% for the first $100
million and .19% in excess of $100
million per month for global
custody; .02% for domestic custody
Custody Transaction Charges
International Transactions $20.00
Domestic:
- -- Portfolio Trades Depository Eligible $12.00
Non-Depository Eligible $25.00
- -- Option charge for each option
written or closing contract,
per issue, per broker $25.00
- -- Option expiration charge,
per issue, per broker $10.00
- -- Option exercised charge, per
issue, per broker $10.00
Securities Lending Charges
- --------------------------
- -- Deliver securities against
collateral $25.00
- -- Deliver collateral against
receipt of securities $20.00
- -- Marking-to-market $ 5.00/day
</TABLE>
28
<PAGE> 29
Schedule B
The Fund will pay to the Custodian as soon as possible after the end of
each month all out-of-pocket expenses reasonably incurred in connection with the
assets of the Fund.
These out-of-pocket expenses would include, but are not necessarily
limited to, the following:
- Federal wire fees
- Registered mail costs
- Armored car fees
- Certificate fees
- Costs of Exception Processing of corporate action items
- All other miscellaneous expenses reasonably incurred by the
Custodian
29
