Exhibit h.1
PIMCO California Municipal Income Fund III
[ ] Common Shares of Beneficial Interest
Par Value $0.00001 per Share
UNDERWRITING AGREEMENT
October [ ], 2002
UNDERWRITING AGREEMENT
October [ ], 2002
UBS Warburg LLC
X.X. Xxxxxxx & Sons, Inc.
RBC Xxxx Xxxxxxxx Incorporated
Wachovia Securities, Inc.
Xxxxx Fargo Securities, LLC
Xxxxxxx, Xxxxxx & Co.
H&R Block Financial Advisors, Inc.
Quick & Xxxxxx, Inc.
Wedbush Xxxxxx Securities Inc.
UBS Warburg LLC
as Managing Underwriters
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
PIMCO California Municipal Income Fund III, a voluntary association
with transferable shares organized and existing under and by virtue of the laws
of The Commonwealth of Massachusetts (commonly referred to as a Massachusetts
business trust) (the "Fund"), proposes to issue and sell to the underwriters
named in Schedule A annexed hereto (the "Underwriters") an aggregate of [ ]
common shares of beneficial interest (the "Firm Shares"), par value $0.00001 per
share (the "Common Shares"), of the Fund. In addition, solely for the purpose of
covering over-allotments, the Fund proposes to grant to the Underwriters the
option to purchase from the Fund up to an additional [ ] Common Shares (the
"Additional Shares"). The Firm Shares and the Additional Shares are hereinafter
collectively sometimes referred to as the Shares. The Shares are described in
the Prospectus which is referred to below.
The Fund has filed, in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively called the "Act"), and with the provisions of the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder
(collectively called the "Investment Company Act"), with the Securities and
Exchange Commission (the "Commission") a registration statement on Form N-2
(File Nos. 333-98585 and 811-21188), including a prospectus and a statement of
additional information, relating to the Shares. The Fund has furnished to you,
for use by the Underwriters and by dealers, copies of one or more preliminary
prospectuses (including a preliminary statement of additional information) (each
thereof, including such preliminary statement of additional information, being
herein called a
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"Preliminary Prospectus") relating to the Shares. Except where the context
otherwise requires, the registration statement, as amended when it becomes
effective (the "Effective Date"), including all documents filed as a part
thereof or incorporated by reference therein, and including any information
contained in a prospectus subsequently filed with the Commission pursuant to
Rule 497 under the Act and deemed to be part of the registration statement at
the time of effectiveness pursuant to Rule 430A under the Act is herein called
the Registration Statement, and the prospectus (including the statement of
additional information), in the form filed by the Fund with the Commission
pursuant to Rule 497 under the Act or, if no such filing is required, the form
of final prospectus (including the form of final statement of additional
information) included in the Registration Statement at the time it became
effective, is herein called the Prospectus. In addition, the Fund has filed a
Notification of Registration on Form N-8A (the "Notification") pursuant to
Section 8 of the Investment Company Act. UBS Warburg LLC (the "Managing
Representative") will act as managing representative for the Underwriters.
PIMCO Funds Advisors LLC (the name of which entity is expected to be
changed to "PIMCO Advisors Fund Management LLC," effective October 31, 2002)
("PIMCO Funds Advisors," or the "Investment Manager") will act as the Fund's
investment manager pursuant to an Investment Management Agreement by and between
the Fund and the Investment Manager, dated as of September 17, 2002 (the
"Investment Management Agreement"). Pacific Investment Management Company LLC
("PIMCO," or the "Portfolio Manager") will act as the Fund's portfolio manager
pursuant to a Portfolio Management Agreement by and between the Investment
Manager and PIMCO, as accepted and agreed to by the Fund, dated as of September
20, 2002. State Street Bank & Trust Co. will act as the custodian (the
"Custodian") of the Fund's cash and portfolio assets pursuant to a Custodian
Agreement, dated as of October [ ], 2002 (the "Custodian Agreement"). PFPC Inc.
will act as the Fund's transfer agent, registrar, shareholder servicing agent
and dividend disbursing agent (the "Transfer Agent") pursuant to a Transfer
Agency Services Agreement, dated as of October 31, 2002 (the "Transfer Agency
Agreement"). UBS Warburg LLC will act as a shareholder servicing agent for the
Fund pursuant to a Shareholder Servicing Agreement by and between UBS Warbrug
LLC and the Invetsment Manager, dated as of October 31, 2002 (the "Shareholder
Servicing Agreement"). In addition, the Fund has adopted a dividend reinvestment
plan (the "Dividend Reinvestment Plan") pursuant to which holders of Shares
shall have their dividends automatically reinvested in additional Common Shares
of the Fund unless they elect to receive such dividends in cash.
The Fund, the Investment Manager and the Underwriters agree as
follows:
1. Sale and Purchase. Upon the basis of the warranties and representations and
subject to the terms and conditions herein set forth, the Fund agrees to
sell to the respective Underwriters and each of the Underwriters, severally
and not jointly, agrees to purchase from the Fund the aggregate number of
Firm Shares set forth opposite the name of such Underwriter in Schedule A
attached hereto in each case at a purchase price of $14.325 per Share. The
Fund is advised that the Underwriters intend (i) to make a public offering
of their respective portions of
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the Firm Shares as soon after the effective date of the Registration
Statement as is advisable and (ii) initially to offer the Firm Shares upon
the terms set forth in the Prospectus. The Underwriters may from time to
time increase or decrease the public offering price after the initial
public offering to such extent as they may determine.
In addition, the Fund hereby grants to the several Underwriters the
option to purchase, and upon the basis of the warranties and
representations and subject to the terms and conditions herein set forth,
the Underwriters shall have the right to purchase, severally and not
jointly, from the Fund, ratably in accordance with the number of Firm
Shares to be purchased by each of them, all or a portion of the Additional
Shares as may be necessary to cover over-allotments made in connection with
the offering of the Firm Shares, at the same purchase price per share to be
paid by the Underwriters to the Fund for the Firm Shares. This option may
be exercised by you on behalf of the several Underwriters at any time and
from time to time on or before the forty-fifth day following the date
hereof, by written notice to the Fund. Such notice shall set forth the
aggregate number of Additional Shares as to which the option is being
exercised, and the date and time when the Additional Shares are to be
delivered (such date and time being herein referred to as the "Additional
Time of Purchase"); provided, however, that the Additional Time of Purchase
shall not be earlier than the Time of Purchase (as defined below) nor
earlier than the second business day after the date on which the option
shall have been exercised nor later than the tenth business day after the
date on which the option shall have been exercised. The number of
Additional Shares to be sold to each Underwriter shall be the number which
bears the same proportion to the aggregate number of Additional Shares
being purchased as the number of Firm Shares set forth opposite the name of
such Underwriter on Schedule A hereto bears to the total number of Firm
Shares (subject, in each case, to such adjustment as you may determine to
eliminate fractional shares).
The Fund also agrees, subject to the terms and conditions set forth
herein, to sell to the Investment Manager, and, upon the basis of the
representations, warranties and agreements of the Fund contained herein,
the Investment Manager shall have the right to purchase from the Fund, at
the same purchase price per share as the Underwriters shall pay for the
Additional Shares, up to an aggregate of 1,000 Shares (the "Investment
Manager Shares").
2. Payment and Delivery. Payment of the purchase price for the Firm Shares
shall be made by the Underwriters to the Fund by Federal Funds wire
transfer, against delivery of the certificates for the Firm Shares to you
through the facilities of the Depository Trust Company ("DTC") for the
respective accounts of the Underwriters. Such payment and delivery shall be
made at 10:00 A.M., New York City time on the third business day following
the date of this Underwriting Agreement (unless another date or time shall
be agreed to by you and the Fund). The time at which such payment and
delivery are actually made is hereinafter sometimes called the Time of
Purchase. Certificates for the Firm Shares shall be delivered to you in
definitive form in such names and in such denominations as
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you shall specify on the second business day preceding the Time of
Purchase. For the purpose of expediting the checking of the certificates
for the Firm Shares by you, the Fund agrees to make such certificates
available to you for such purpose at least one full business day preceding
the Time of Purchase.
Payment of the purchase price for the Additional Shares shall be made
at the Additional Time of Purchase in the same manner and at the same
office as the payment for the Firm Shares. Certificates for the Additional
Shares shall be delivered to you in definitive form in such names and in
such denominations as you shall specify no later than the second business
day preceding the Additional Time of Purchase. For the purpose of
expediting the checking of the certificates for the Additional Shares by
you, the Fund agrees to make such certificates available to you for such
purpose at least one full business day preceding the Additional Time of
Purchase. The Time of Purchase and the Additional Time of Purchase are
sometimes referred to herein as the Closing Dates.
The place and time of the closing for the Investment Manager Shares
shall be as agreed upon by the Investment Manager and the Fund; provided,
however, that the date of such closing for the Investment Manager Shares
shall in no event be earlier than the Time of Purchase.
3. Representations and Warranties of the Fund and the Investment Manager. Each
of the Fund and the Investment Manager jointly and severally represents and
warrants to each Underwriter as follows:
(a) On (A) the Effective Date and the date on which the Prospectus is
first filed with the Commission pursuant to Rule 497(b), (h) or (j)
under the Act, as the case may be, (B) the date on which any
post-effective amendment to the Registration Statement (except any
post-effective amendment which is filed with the Commission after the
later of (x) one year from the date of this Underwriting Agreement or
(y) the date on which the distribution of the Shares is completed)
became or becomes effective or any amendment or supplement to the
Prospectus was or is filed with the Commission and (C) the Closing
Dates, the Registration Statement, the Prospectus and any such
amendment or supplement thereto and the Notification complied or will
comply in all material respects with the requirements of the Act and
the Investment Company Act, as the case may be. On the Effective Date
and on the date that any post-effective amendment to the Registration
Statement (except any post-effective amendment which is filed with the
Commission after the later of (x) one year from the date of this
Underwriting Agreement or (y) the date on which the distribution of
the Shares is completed) became or becomes effective, neither the
Registration Statement nor any such amendment did or will contain any
untrue statement of a material fact or omit to state a material fact
required to be stated in it or necessary to make the statements in it
not misleading. At the Effective Date and, if applicable, the date the
Prospectus or any amendment or supplement to the Prospectus was or is
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filed with the Commission and at the Closing Dates, the Prospectus did
not or will not, as the case may be, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
in it or necessary to make the statements in it, in light of the
circumstances under which they were made, not misleading. The
foregoing representations in this Section 3(a) do not apply to
statements or omissions relating to the Underwriters made in reliance
on and in conformity with information furnished in writing to the Fund
by the Underwriters expressly for use in the Registration Statement,
the Prospectus, or any amendments or supplements thereto, as described
in Section 9(f) hereof.
(b) The Fund has been duly formed, is validly existing as an
unincorporated voluntary association under the laws of The
Commonwealth of Massachusetts (commonly known as a "Massachusetts
business trust"), with full power and authority to conduct all the
activities conducted by it, to own or lease all assets owned or leased
by it and to conduct its business as described in the Registration
Statement and Prospectus, and the Fund is duly licensed and qualified
to do business and in good standing in each jurisdiction in which its
ownership or leasing of property or its conducting of business
requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Fund, and the Fund owns, possesses or has obtained and
currently maintains all governmental licenses, permits, consents,
orders, approvals and other authorizations, whether foreign or
domestic, necessary to carry on its business as contemplated in the
Prospectus. The Fund has no subsidiaries.
(c) The capitalization of the Fund is as set forth in the Registration
Statement and the Prospectus. The Common Shares conform in all
material respects to the description of them in the Prospectus. All
the outstanding Common Shares have been duly authorized and are
validly issued, fully paid and nonassessable (except as described in
the Registration Statement). The Shares to be issued and delivered to
and paid for by the Underwriters in accordance with this Underwriting
Agreement against payment therefor as provided by this Underwriting
Agreement have been duly authorized and when issued and delivered to
the Underwriters will have been validly issued and will be fully paid
and nonassessable (except as described in the Registration Statement).
Other than the right of the Investment Manager to purchase Shares as
set forth in Section 1 hereof, no person is entitled to any preemptive
or other similar rights with respect to the Shares.
(d) The Fund is duly registered with the Commission under the Investment
Company Act as a non-diversified, closed-end management investment
company, and, subject to the filing of any final amendment to the
Registration Statement (a "Final Amendment"), if not already filed,
all action under the Act and the Investment Company Act, as the case
may be, necessary to make the public offering and consummate the sale
of the
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Shares as provided in this Underwriting Agreement has or will have
been taken by the Fund.
(e) The Fund has full power and authority to enter into each of this
Underwriting Agreement, the Investment Management Agreement, the
Custodian Agreement, the Transfer Agency Agreement and the Dividend
Reinvestment Plan (collectively, the "Fund Agreements") and to perform
all of the terms and provisions hereof and thereof to be carried out
by it and (i) each Fund Agreement has been duly and validly
authorized, executed and delivered by or on behalf of the Fund, (ii)
each Fund Agreement does not violate in any material respect any of
the applicable provisions of the Investment Company Act or the
Investment Advisers Act of 1940, as amended, and the rules and
regulations thereunder (collectively called the "Advisers Act"), as
the case may be, and (iii) assuming due authorization, execution and
delivery by the other parties thereto, each Fund Agreement constitutes
the legal, valid and binding obligation of the Fund enforceable in
accordance with its terms, (A) subject, as to enforcement, to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity
or at law) and (B) except as rights to indemnity thereunder may be
limited by federal or state securities laws.
(f) None of (i) the execution and delivery by the Fund of the Fund
Agreements, (ii) the issue and sale by the Fund of the Shares as
contemplated by this Underwriting Agreement and (iii) the performance
by the Fund of its obligations under any of the Fund Agreements or
consummation by the Fund of the other transactions contemplated by the
Fund Agreements conflicts with or will conflict with, or results or
will result in a breach of, the Agreement and Declaration of Trust or
the Bylaws of the Fund, each as amended from time to time, or any
agreement or instrument to which the Fund is a party or by which the
Fund is bound, except where such violation does not have a material
adverse effect on the condition (financial or other), business
prospects, properties, net assets or results of operations of the
Fund, or any law, rule or regulation, or order of any court,
governmental instrumentality, securities exchange or association or
arbitrator, whether foreign or domestic, applicable to the Fund, other
than state securities or "blue sky" laws applicable in connection with
the purchase and distribution of the Shares by the Underwriters
pursuant to this Underwriting Agreement.
(g) The Fund is not currently in breach of, or in default under, any
written agreement or instrument to which it is a party or by which it
or its property is bound or affected, except where such violation does
not have a material adverse effect on the condition (financial or
other), business prospects, properties, net assets or results of
operations of the Fund.
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(h) No person has any right to the registration of any securities of
the Fund because of the filing of the Registration Statement.
(i) No consent, approval, authorization or order of any court or
governmental agency or body or securities exchange or
association, whether foreign or domestic, is required by the Fund
for the consummation by the Fund of the transactions to be
performed by the Fund or the performance by the Fund of all the
terms and provisions to be performed by or on behalf of it in
each case as contemplated in the Fund Agreements, except such as
(i) have been obtained under the Act, the Investment Company Act
or the Advisers Act, and (ii) may be required by the New York
Stock Exchange or under state securities or "blue sky" laws, in
connection with the purchase and distribution of the Shares by
the Underwriters pursuant to this Underwriting Agreement.
(j) The Shares are duly authorized for listing, subject to official
notice of issuance, on the New York Stock Exchange and the Fund's
Registration Statement on Form 8-A, under the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder
(collectively called the "Exchange Act"), has become effective.
(k) PricewaterhouseCoopers LLP, whose report appears in the
Prospectus, are independent public accountants with respect to
the Fund as required by the Act and the Investment Company Act.
(l) To the knowledge of the Fund and the Investment Manager after due
inquiry, based on representations from PricewaterhouseCoopers
LLP, the statement of assets and liabilities included in the
Registration Statement and the Prospectus presents fairly in all
material respects, in accordance with generally accepted
accounting principles in the United States applied on a
consistent basis, the financial position of the Fund as of the
date indicated.
(m) The Fund will maintain 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; (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; (iii) access to assets is permitted
only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with existing assets through an asset reconciliation
procedure or otherwise at reasonable intervals and appropriate
action is taken with respect to any differences.
(n) Since the date as of which information is given in the
Registration Statement and the Prospectus, except as otherwise
stated therein, (i) there has been no material adverse change in
the condition, financial or
8
otherwise, business affairs or business of the Fund, whether or not
arising in the ordinary course of business, (ii) there have been no
transactions entered into by the Fund other than those in the ordinary
course of its business and (iii) there has been no dividend or
distribution of any kind declared, paid or made on any class of its
capital shares.
(o) There is no action, suit or proceeding before or by any court,
commission, regulatory body, administrative agency or other
governmental agency or body, foreign or domestic, now pending, or, to
the knowledge of the Fund, threatened against or affecting the Fund,
which (i) might result in any material adverse change in the
condition, financial or otherwise, business affairs or business
prospects of the Fund or might materially adversely affect the
properties or assets of the Fund or (ii) is of a character required to
be described in the Registration Statement or the Prospectus; and
there are no contracts, franchises or other documents that are of a
character required to be described in, or that are required to be
filed as exhibits to, the Registration Statement that have not been
described or filed as required.
(p) Except for stabilization transactions conducted by the Managing
Representative, and except for tender offers, Share repurchases and
the issuance or purchase of Shares pursuant to the Dividend
Reinvestment Plan effected following the date on which the
distribution of the Shares is completed in accordance with the
policies of the Fund as set forth in the Prospectus, the Fund has not
taken and will not take, directly or indirectly, any action designed
or which might be reasonably expected to cause or result in, or which
will constitute, stabilization or manipulation of the price of the
Common Shares in violation of applicable federal securities laws,
provided that, for the sake of clarity, no action taken by an
Underwriter that is an affiliate of the Fund shall be deemed to be
action taken, directly or indirectly, by the Fund for purposes of this
Section 3(p).
(q) The Fund intends to direct the investment of the proceeds of the
offering of the Shares in such a manner as to comply with the
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code").
(r) No advertising, sales literature or other promotional materials
(excluding road show slides or road show tapes) were authorized or
prepared by or on behalf of the Fund, the Investment Manager or the
Portfolio Manager or any representative thereof for use in connection
with the public offering or sale of the Shares other than the
definitive client brochure and the broker selling memo which were
filed with the National Association of Securities Dealers, Inc. (the
"NASD") on September 13, 2002 (collectively referred to as the "sales
materials"); the sales materials and any road show slides or road show
tapes complied and comply in all material respects with the applicable
requirements of the Act and the rules and interpretations of the
9
NASD; and no broker kits, road show slides, road show tapes or sales
materials authorized or prepared by the Fund or authorized or prepared
on behalf of the Fund by the Investment Manager, the Portfolio Manager
or any representative thereof for use in connection with the public
offering or sale of the Shares contained or contains any untrue
statement of a material fact or omitted or omits to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading.
4. Representations and Warranties of the Investment Manager. The Investment
Manager represents to each Underwriter and, in the case of paragraph (f)
also to the Fund, as follows:
(a) The Investment Manager has been duly formed, is validly existing as a
limited liability company under the laws of the State of Delaware with
full power and authority to conduct all of the activities conducted by
it, to own or lease all of the assets owned or leased by it and to
conduct its business as described in the Registration Statement and
Prospectus, and the Investment Manager is duly licensed and qualified
to do business and in good standing in each jurisdiction in which it
is required to be so qualified, except to the extent that failure to
be so qualified or be in good standing would not have a material
adverse effect on the Investment Manager's ability to provide services
to the Fund; and the Investment Manager owns, possesses or has
obtained and currently maintains all governmental licenses, permits,
consents, orders, approvals and other authorizations, whether foreign
or domestic, necessary to carry on its business as contemplated in the
Registration Statement and the Prospectus.
(b) The Investment Manager is (i) duly registered as an investment adviser
under the Advisers Act and (ii) not prohibited by the Advisers Act or
the Investment Company Act from acting as the investment adviser for
the Fund as contemplated by the Investment Advisory Agreement, the
Registration Statement and the Prospectus.
(c) The Investment Manager has full power and authority to enter into each
of this Underwriting Agreement, the Investment Management Agreement,
the Shareholder Servicing Agreement and the Portfolio Management
Agreement (collectively, this Underwriting Agreement, the Investment
Management Agreement and the Portfolio Management Agreement being
referred to as the "Investment Manager Agreements") and to carry out
all the terms and provisions hereof and thereof to be carried out by
it; and each Investment Manager Agreement has been duly and validly
authorized, executed and delivered by the Investment Manager; none of
the Investment Manager Agreements violate in any material respect any
of the applicable provisions of the Investment Company Act or the
Advisers Act; and assuming due authorization, execution and delivery
by the other parties thereto, each Investment Manager Agreement
constitutes a legal,
10
valid and binding obligation of the Investment Manager, enforceable in
accordance with its terms, (i) subject, as to enforcement, to
applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles
(regardless of whether enforcement is sought in a proceeding in equity
or at law) and (ii) except as rights to indemnity thereunder may be
limited by federal or state securities laws.
(d) Neither (i) the execution and delivery by the Investment Manager of
any Investment Manager Agreement nor (ii) the consummation by the
Investment Manager of the transactions contemplated by, or the
performance of its obligations under, any Investment Manager Agreement
conflicts or will conflict with, or results or will result in a breach
of, the limited liability company agreement or other organizational
documents of the Investment Manager or any agreement or instrument to
which the Investment Manager is a party or by which the Investment
Manager is bound, or any law, rule or regulation, or order of any
court, governmental instrumentality, securities exchange or
association or arbitrator, whether foreign or domestic, applicable to
the Investment Manager.
(e) No consent, approval, authorization or order of any court,
governmental agency or body or securities exchange or association,
whether foreign or domestic, is required for the consummation of the
transactions contemplated in, or the performance by the Investment
Manager of its obligations under, any Investment Manager Agreement, as
the case may be, except such as (i) have been obtained under the Act,
the Investment Company Act or the Advisers Act, and (ii) may be
required by the New York Stock Exchange or under state securities or
"blue sky" laws, in connection with the purchase and distribution of
the Shares by the Underwriters pursuant to this Underwriting
Agreement.
(f) The description of the Investment Manager and its business, and the
statements attributable to the Investment Manager, in the Registration
Statement and the Prospectus comply with the requirements of the Act
and the Investment Company Act and do not contain any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein
not misleading.
(g) There is no action, suit or proceeding before or by any court,
commission, regulatory body, administrative agency or other
governmental agency or body, foreign or domestic, now pending or, to
the knowledge of the Investment Manager, threatened against or
affecting the Investment Manager of a nature required to be disclosed
in the Registration Statement or Prospectus or that might reasonably
be expected to result in any material adverse change in the ability of
the Investment Manager to fulfill its respective obligations under any
Investment Manager Agreement.
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(h) Except for stabilization activities conducted by the Managing
Representative and except for tender offers, Share repurchases and the
issuance or purchase of Shares pursuant to the Dividend Reinvestment
Plan effected following the date on which the distribution of the
Shares is completed in accordance with the policies of the Fund as set
forth in the Prospectus, the Investment Manager has not taken and will
not take, directly or indirectly, any action designed, or which might
reasonably be expected to cause or result in, or which will
constitute, stabilization or manipulation of the price of the Common
Shares in violation of applicable federal securities laws, provided
that, for the sake of clarity, no action taken by an Underwriter that
is an affiliate of the Investment Manager shall be deemed to be action
taken, directly or indirectly, by the Investment Manager for purposes
of this Section 4(h).
(i) In the event that the Fund or the Investment Manager has made
available any promotional materials (other than the sales materials)
intended for use only by qualified broker-dealers and registered
representatives thereof by means of an Internet web site or similar
electronic means, pre-qualification and password-protection or similar
procedures were used effectively prohibiting access to such
promotional materials by persons other than qualified broker-dealers
and registered representatives thereof.
(j) The Portfolio Manager has been duly formed, is validly existing as a
limited liability company under the laws of Delaware with full power
and authority to conduct all of the activities conducted by it, to own
or lease all of the assets owned or leased by it and to conduct its
business as described in the Registration Statement and Prospectus,
and the Portfolio Manager is duly licensed and qualified to do
business and in good standing in each jurisdiction in which it is
required to be so qualified, except to the extent that failure to be
so qualified or be in good standing would not have a material adverse
affect on the Portfolio Manager's ability to provide services to the
Fund; and the Portfolio Manager owns, possesses or has obtained and
currently maintains all governmental licenses, permits, consents,
orders, approvals and other authorizations, whether foreign or
domestic, necessary to carry on its business as contemplated in the
Registration Statement and the Prospectus.
(k) The Portfolio Manager is (i) duly registered as an investment adviser
under the Advisers Act and (ii) not prohibited by the Advisers Act or
the Investment Company Act from acting as the investment sub-adviser
for the Fund as contemplated by the Portfolio Management Agreement,
the Registration Statement and the Prospectus.
(l) The Portfolio Manager has full power and authority to enter into the
Portfolio Management Agreement and to carry out all the terms and
provisions hereof and thereof to be carried out by it; and the
Portfolio
12
Management Agreement has been duly and validly authorized, executed
and delivered by the Portfolio Manager; the Portfolio Management
Agreement does not violate in any material respect any of the
applicable provisions of the Investment Company Act or the Advisers
Act; and assuming due authorization, execution and delivery by the
other parties thereto, the Portfolio Management Agreement constitutes
a legal, valid and binding obligation of the Portfolio Manager,
enforceable in accordance with its terms, (i) subject, as to
enforcement, to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general equitable
principles (regardless of whether enforcement is sought in a
proceeding in equity or at law) and (ii) except as rights to
indemnity thereunder may be limited by federal or state securities
laws.
(m) Neither (i) the execution and delivery by the Portfolio Manager of
the Portfolio Management Agreement nor (ii) the consummation by the
Portfolio Manager of the transactions contemplated by, or the
performance of its obligations under, the Portfolio Management
Agreement conflicts or will conflict with, or results or will result
in a breach of, the limited liability company agreement or other
organizational documents of the Portfolio Manager or any agreement or
instrument to which the Portfolio Manager is a party or by which the
Portfolio Manager is bound, or any law, rule or regulation, or order
of any court, governmental instrumentality, securities exchange or
association or arbitrator, whether foreign or domestic, applicable to
the Portfolio Manager.
(n) No consent, approval, authorization or order of any court,
governmental agency or body or securities exchange or association,
whether foreign or domestic, is required for the consummation of the
transactions contemplated in, or the performance by the Portfolio
Manager of its obligations under, the Portfolio Management Agreement,
as the case may be, except such as (i) have been obtained under the
Act, the Investment Company Act or the Advisers Act, and (ii) may be
required by the New York Stock Exchange or under state securities or
"blue sky" laws, in connection with the purchase and distribution of
the Shares by the Underwriters pursuant to this Underwriting
Agreement.
(o) The description of the Portfolio Manager and its business, and the
statements attributable to the Portfolio Manager, in the Registration
Statement and the Prospectus comply with the requirements of the Act
and the Investment Company Act and do not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading.
(p) There is no action, suit or proceeding before or by any court,
commission, regulatory body, administrative agency or other
governmental agency or body, foreign or domestic, now pending or, to
the knowledge of the
13
Portfolio Manager, threatened against or affecting the Portfolio
Manager of a nature required to be disclosed in the Registration
Statement or Prospectus or that might reasonably be expected to
result in any material adverse change in the ability of the Portfolio
Manager to fulfill its respective obligations under the Portfolio
Management Agreement.
(q) Except for stabilization activities conducted by the Managing
Representative and except for tender offers, Share repurchases and
the issuance or purchase of Shares pursuant to the Dividend
Reinvestment Plan effected following the date on which the
distribution of the Shares is completed in accordance with the
policies of the Fund as set forth in the Prospectus, the Portfolio
Manager has not taken and will not take, directly or indirectly, any
action designed, or which might reasonably be expected to cause or
result in, or which will constitute, stabilization or manipulation of
the price of the Common Shares in violation of applicable federal
securities laws.
5. Agreements of the Parties.
(a) If the registration statement relating to the Shares has not yet
become effective, the Fund will promptly file any Final Amendment, if
not previously filed, with the Commission, and will use its best
efforts to cause such registration statement to become effective and,
as soon as the Fund is advised, will advise the Managing
Representative when the Registration Statement or any amendment
thereto has become effective. If the Registration Statement has
become effective and the Prospectus contained therein omits certain
information at the time of effectiveness pursuant to Rule 430A under
the Act, the Fund will file a 430A Prospectus pursuant to Rule 497(h)
under the Act as promptly as practicable, but no later than the
second business day following the earlier of the date of the
determination of the offering price of the Shares or the date the
Prospectus is first used after the Effective Date. If the
Registration Statement has become effective and the Prospectus
contained therein does not so omit such information, the Fund will
file a Prospectus pursuant to Rule 497(b) or a certification pursuant
to Rule 497(j) under the Act as promptly as practicable, but no later
than the fifth business day following the date of the later of the
Effective Date or the commencement of the public offering of the
Shares after the Effective Date. In either case, the Fund will
provide you satisfactory evidence of the filing. The Fund will not
file with the Commission any Prospectus or any other amendment
(except any post-effective amendment which is filed with the
Commission after the later of (x) one year from the date of this
Underwriting Agreement or (y) the date on which distribution of the
Shares is completed) or supplement to the Registration Statement or
the Prospectus unless a copy has first been submitted to the Managing
Representative a reasonable time before its filing and the Managing
Representative has not objected to it in writing within a reasonable
time after receiving the copy.
14
(b) For the period of three years from the date hereof, the Fund will
advise the Managing Representative promptly (1) of the issuance by
the Commission of any order in respect of the Fund, the Investment
Manager or the Portfolio Manager which relates to the Fund, or which
relates to any material arrangements or proposed material
arrangements involving the Fund, the Investment Manager or the
Portfolio Manager, (2) of the initiation or threatening of any
proceedings for, or receipt by the Fund of any notice with respect
to, any suspension of the qualification of the Shares for sale in any
jurisdiction or the issuance of any order by the Commission
suspending the effectiveness of the Registration Statement, (3) of
receipt by the Fund, or any representative or attorney of the Fund,
of any other communication from the Commission relating in any
material way to the Fund, the Registration Statement, the
Notification, any Preliminary Prospectus, the Prospectus or to the
transactions contemplated by this Underwriting Agreement and (4) the
issuance by any court, regulatory body, administrative agency or
other governmental agency or body, whether foreign or domestic, of
any order, ruling or decree, or the threat to initiate any
proceedings with respect thereto, regarding the Fund, which relates
in any material way to the Fund or any material arrangements or
proposed material arrangements involving the Fund. The Fund will make
every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement and, if
any such order is issued, to obtain its lifting as soon as possible.
(c) If not delivered prior to the date of this Underwriting Agreement,
the Fund will deliver to the Managing Representative, without charge,
a signed copy of the Registration Statement and the Notification and
of any amendments (except any post-effective amendment which is filed
with the Commission after the later of (x) one year from the date of
this Underwriting Agreement or (y) the date on which the distribution
of the Shares is completed) to either the Registration Statement or
the Notification (including all exhibits filed with any such
document) and as many conformed copies of the Registration Statement
and any amendments thereto (except any post-effective amendment which
is filed with the Commission after the later of (x) one year from the
date of this Underwriting Agreement or (y) the date on which the
distribution of the Shares is completed) (excluding exhibits) as the
Managing Representative may reasonably request.
(d) During such period as a prospectus is required by law to be delivered
by an underwriter or a dealer, the Fund will deliver, without charge,
to you, the Underwriters and any dealers, at such office or offices
as you may designate, as many copies of the Prospectus as you may
reasonably request, and, if any event occurs during such period as a
result of which it is necessary to amend or supplement the
Prospectus, in order to make the statements therein, in light of the
circumstances under which they were made, not misleading in any
material respect, or if during such period it is
15
necessary to amend or supplement the Prospectus to comply with the
Act or the Investment Company Act, the Fund promptly will prepare,
submit to the Managing Representative, file with the Commission and
deliver, without charge, to the Underwriters and to dealers (whose
names and addresses the Managing Representative will furnish to the
Fund) to whom Shares may have been sold by the Underwriters, and to
other dealers on request, amendments or supplements to the Prospectus
so that the statements in such Prospectus, as so amended or
supplemented, will not, in light of the circumstances under which
they were made, be misleading in any material respect and will comply
with the Act and the Investment Company Act; provided that if the
amendment or supplement is required exclusively as a result of a
misstatement in or omission from the information provided to the Fund
in writing by the Underwriters expressly for use in the Prospectus,
the Fund may deliver such amendment or supplement to the Underwriters
and dealers at a reasonable charge not to exceed the actual cost
thereof to the Fund. Delivery by the Underwriters of any such
amendments or supplements to the Prospectus will not constitute a
waiver of any of the conditions in Section 6 hereof.
(e) The Fund will make generally available to holders of the Fund's
securities, as soon as practicable but in no event later than the
last day of the 18th full calendar month following the calendar
quarter in which the Effective Date falls, an earnings statement, if
applicable, satisfying the provisions of the last paragraph of
Section 11(a) of the Act and, at the option of the Fund, Rule 158
under the Act.
(f) If the transactions contemplated by this Underwriting Agreement are
consummated, the Fund shall pay all costs and expenses incident to
the performance of the obligations of the Fund under this
Underwriting Agreement (to the extent such expenses do not, in the
aggregate, exceed $0.03 per Share), including but not limited to
costs and expenses of or relating to (1) the preparation, printing
and filing of the Registration Statement and exhibits to it, each
Preliminary Prospectus, the Prospectus and all amendments and
supplements thereto, (2) the issuance of the Shares and the
preparation and delivery of certificates for the Shares, (3) the
registration or qualification of the Shares for offer and sale under
the securities or "blue sky" laws of the jurisdictions referred to in
the foregoing paragraph, including the fees and disbursements of
counsel for the Underwriters in that connection, and the preparation
and printing of any preliminary and supplemental "blue sky"
memoranda, (4) the furnishing (including costs of design, production,
shipping and mailing) to the Underwriters and dealers of copies of
each Preliminary Prospectus relating to the Shares, the sales
materials, the Prospectus, and all amendments or supplements to the
Prospectus, and of the other documents required by this Section to be
so furnished, (5) the filing requirements of the NASD, in connection
with its review of the financing, including filing fees and the
disbursements of counsel for the Underwriters in that
16
connection, (6) all transfer taxes, if any, with respect to the sale
and delivery of the Shares to the Underwriters, (7) the listing of
the Shares on the New York Stock Exchange, and (8) the transfer agent
for the Shares. To the extent the foregoing costs and expenses
incident to the performance of the obligations of the Fund under this
Underwriting Agreement exceed, in the aggregate, $0.03 per Share, the
Investment Manager or an affiliate will pay all such excess costs and
expenses.
(g) If the transactions contemplated by this Underwriting Agreement are
not consummated, except as otherwise provided herein, no party will
be under any liability to any other party, except that (i) if this
Underwriting Agreement is terminated (A) by the Fund or the
Investment Manager pursuant to any of the provisions hereof or (B) by
you or the Underwriters because of any inability, failure or refusal
on the part of the Fund or the Investment Manager to comply with any
material terms or because any of the conditions in Section 6 are not
satisfied, the Investment Manager or an affiliate and the Fund,
jointly and severally, will reimburse the Underwriters for all
out-of-pocket expenses (including the reasonable fees, disbursements
and other charges of their counsel) reasonably incurred by them in
connection with the proposed purchase and sale of the Shares and (ii)
no Underwriter who has failed or refused to purchase the Shares
agreed to be purchased by it under this Underwriting Agreement, in
breach of its obligations pursuant to this Underwriting Agreement,
will be relieved of liability to the Fund, the Investment Manager and
the other Underwriters for damages occasioned by its default.
(h) Without the prior written consent of the Managing Representative, the
Fund will not offer, sell or register with the Commission, or
announce an offering of, any equity securities of the Fund, within
180 days after the Effective Date, except for the Shares as described
in the Prospectus and any issuances of Common Shares pursuant to the
Dividend Reinvestment Plan and except in connection with any offering
of preferred shares of beneficial interest as contemplated by the
Prospectus.
(i) The Fund will use its best efforts to cause the Shares to be duly
authorized for listing by the New York Stock Exchange prior to the
date the Shares are issued.
(j) The Fund will direct the investment of the net proceeds of the
offering of the Shares in such a manner as to comply with the
investment objective and policies of the Fund as described in the
Prospectus.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters to purchase the Shares are subject to the accuracy on the date
of this Underwriting Agreement, and on each of the Closing Dates, of the
representations of the Fund and the Investment Manager in this Underwriting
Agreement, to the accuracy and completeness of all material statements made
by the Fund and the
17
Investment Manager or any of their respective officers in any certificate
delivered to the Managing Representative or its counsel pursuant to this
Underwriting Agreement, to performance by the Fund and the Investment
Manager of their respective obligations under this Underwriting Agreement
and to each of the following additional conditions:
(a) The Registration Statement must have become effective by 5:30 p.m.,
New York City time, on the date of this Underwriting Agreement or
such later date and time as the Managing Representative consents to
in writing. The Prospectus must have been filed in accordance with
Rule 497(b) or (h) or a certificate must have been filed in
accordance with Rule 497(j), as the case may be, under the Act.
(b) No order suspending the effectiveness of the Registration Statement
may be in effect and no proceedings for such purpose may be pending
before or, to the knowledge of counsel to the Underwriters,
threatened by the Commission, and any requests for additional
information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) must be
complied with or waived to the reasonable satisfaction of the
Managing Representative.
(c) Since the dates as of which information is given in the Registration
Statement and the Prospectus, (i) there must not have been any
material change in the Common Shares or liabilities of the Fund
except as set forth in or contemplated by the Prospectus; (ii) there
must not have been any material adverse change in the general
affairs, prospects, management, business, financial condition or
results of operations of the Fund, the Investment Manager or the
Portfolio Manager whether or not arising from transactions in the
ordinary course of business as set forth in or contemplated by the
Prospectus which in the opinion of the Managing Representative would
materially adversely affect the market for the Shares; (iii) the Fund
must not have sustained any material loss or interference with its
business from any court or from legislative or other governmental
action, order or decree, whether foreign or domestic, or from any
other occurrence not described in the Registration Statement and
Prospectus; and (iv) there must not have occurred any event that
makes untrue or incorrect in any material respect any statement or
information contained in the Registration Statement or Prospectus or
that is not reflected in the Registration Statement or Prospectus but
should be reflected therein in order to make the statements or
information therein (in the case of the Prospectus, in light of the
circumstances in which they were made) not misleading in any material
respect.
(d) The Managing Representative must have received on each Closing Date a
certificate, dated such date, of the President, a Vice-President or
Managing Director and the chief financial or accounting officer of
each of the Fund and the Investment Manager certifying that (i) the
signers have carefully
18
examined the Registration Statement, the Prospectus, and this
Underwriting Agreement, (ii) the representations of the Fund
(with respect to the certificates from such Fund officers) and
the representations of the Investment Manager (with respect to
the certificates from such officers of the Investment Manager) in
this Underwriting Agreement are accurate on and as of the date of
the certificate, (iii) there has not been any material adverse
change in the general affairs, prospects, management, business,
financial condition or results of operations of the Fund (with
respect to the certificates from such Fund officers) or the
Investment Manager (with respect to the certificates from such
officers of the Investment Manager), which change would
materially and adversely affect the ability of the Fund or the
Investment Manager, as the case may be, to fulfill its
obligations under this Underwriting Agreement or the Investment
Management Agreement, whether or not arising from transactions in
the ordinary course of business, (iv) with respect to the Fund
only, to the knowledge of such officers after reasonable
investigation, no order suspending the effectiveness of the
Registration Statement, prohibiting the sale of any of the Shares
or otherwise having a material adverse effect on the Fund has
been issued and no proceedings for any such purpose are pending
before or threatened by the Commission or any other regulatory
body, whether foreign or domestic, (v) to the knowledge of the
officers of the Investment Manager, after reasonable
investigation, no order having a material adverse effect on the
ability of the Investment Manager to fulfill its obligations
under this Underwriting Agreement or the Investment Management
Agreement, as the case may be, has been issued and no proceedings
for any such purpose are pending before or threatened by the
Commission or any other regulatory body, whether foreign or
domestic, and (vi) each of the Fund (with respect to the
certificates from such Fund officers) and the Investment Manager
(with respect to the certificates from such officers of the
Investment Manager) has performed all of its respective
agreements that this Underwriting Agreement requires it to
perform by such Closing Date (to the extent not waived in writing
by the Managing Representative).
(e) You must have received on each Closing Date the opinions dated
such Closing Date substantially in the form of Schedules B, C, D
and E to this Underwriting Agreement from the counsel identified
in each such Schedules, or in such other form as is acceptable to
counsel for the Underwriters.
(f) You must have received on each Closing Date from Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP and its affiliated entities an opinion
dated such Closing Date with respect to the Fund, the Shares, the
Registration Statement and the Prospectus, this Underwriting
Agreement and the form and sufficiency of all proceedings taken
in connection with the sale and delivery of the Shares. Such
opinion and proceedings shall fulfill the requirements of this
Section 6(f) only if such opinion and proceedings are
19
satisfactory in all respects to the Managing Representative. The
Fund, the Investment Manager and the Portfolio Manager must have
furnished to such counsel such documents as counsel may
reasonably request for the purpose of enabling them to render
such opinion.
(g) The Managing Representative must have received on the date this
Underwriting Agreement is signed and delivered by you a signed
letter, dated such date, substantially in the form of Schedule F
to this Underwriting Agreement from the firm of accountants
designated in such Schedule. The Managing Representative also
must have received on each Closing Date a signed letter from such
accountants, dated as of such Closing Date, confirming on the
basis of a review in accordance with the procedures set forth in
their earlier letter that nothing has come to their attention
during the period from a date not more than five business days
before the date of this Underwriting Agreement, specified in the
letter, to a date not more than five business days before such
Closing Date, that would require any change in their letter
referred to in the foregoing sentence.
All opinions, letters, evidence and certificates mentioned above
or elsewhere in this Underwriting Agreement will comply only if they
are in form and scope reasonably satisfactory to counsel for the
Underwriters, provided that any such documents, forms of which are
annexed hereto, shall be deemed satisfactory to such counsel if
substantially in such form.
7. Termination. This Underwriting Agreement may be terminated by the
Managing Representative by notifying the Fund at any time:
(a) before the later of the effectiveness of the Registration
Statement and the time when any of the Shares are first generally
offered pursuant to this Underwriting Agreement by the Managing
Representative to dealers by letter or telegram;
(b) at or before any Closing Date if, in the sole judgment of the
Managing Representative, payment for and delivery of any Shares
is rendered impracticable or inadvisable because (i) trading in
the equity securities of the Fund is suspended by the Commission
or by the principal exchange that lists the Shares, (ii) trading
in securities generally on the New York Stock Exchange or the
Nasdaq Stock Market shall have been suspended or limited or
minimum or maximum prices shall have been generally established
on such exchange or over-the-counter market, (iii) additional
material governmental restrictions, not in force on the date of
this Underwriting Agreement, have been imposed upon trading in
securities or trading has been suspended on any U.S. securities
exchange, (iv) a general banking moratorium has been established
by U.S. federal or New York authorities or (v) any material
adverse change in the financial or securities markets in the
United States or in political, financial or economic
20
conditions in the United States or any outbreak or material
escalation of hostilities or declaration by the United States of
a national emergency or war or other calamity or crisis shall
have occurred the effect of any of which is such as to make it,
in the sole judgment of the Managing Representative,
impracticable or inadvisable to market the Shares on the terms
and in the manner contemplated by the Prospectus; or
(c) at or before any Closing Date, if any of the conditions specified
in Section 6 have not been fulfilled when and as required by this
Underwriting Agreement.
8. Substitution of Underwriters. If one or more of the Underwriters fails
(other than for a reason sufficient to justify the termination of this
Underwriting Agreement) to purchase on any Closing Date the Shares
agreed to be purchased on such Closing Date by such Underwriter or
Underwriters, the Managing Representative may find one or more
substitute underwriters to purchase such Shares or make such other
arrangements as the Managing Representative deems advisable, or one or
more of the remaining Underwriters may agree to purchase such Shares
in such proportions as may be approved by the Managing Representative,
in each case upon the terms set forth in this Underwriting Agreement.
If no such arrangements have been made within 36 hours after such
Closing Date, and
(a) the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date does not exceed 10% of the
Shares that the Underwriters are obligated to purchase on such
Closing Date, each of the nondefaulting Underwriters will be
obligated to purchase such Shares on the terms set forth in this
Underwriting Agreement in proportion to their respective
obligations under this Underwriting Agreement, or
(b) the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date exceeds 10% of the Shares to be
purchased by all the Underwriters on such Closing Date, the Fund
will be entitled to an additional period of 24 hours within which
to find one or more substitute underwriters reasonably
satisfactory to the Managing Representative to purchase such
Shares on the terms set forth in this Underwriting Agreement.
Upon the occurrence of the circumstances described in the
foregoing paragraph (b), either the Managing Representative or the
Fund will have the right to postpone the applicable Closing Date for
not more than five business days in order that necessary changes and
arrangements (including any necessary amendments or supplements to the
Registration Statement or the Prospectus) may be effected by the
Managing Representative and the Fund. If the number of Shares to be
purchased on such Closing Date by such defaulting Underwriter or
Underwriters exceeds 10% of the Shares that the Underwriters are
obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the
21
Fund makes arrangements pursuant to this Section within the period
stated for the purchase of the Shares that the defaulting Underwriters
agreed to purchase, this Underwriting Agreement will terminate without
liability on the part of any nondefaulting Underwriter, the Fund, the
Investment Manager or the Portfolio Manager, except as provided in
Sections 5(g) and 9 hereof. Any action taken under this Section will
not affect the liability of any defaulting Underwriter to the Fund or
the Investment Manager or to any nondefaulting Underwriters arising
out of such default. A substitute underwriter will become an
Underwriter for all purposes of this Underwriting Agreement.
9. Indemnity and Contribution.
(a) Each of the Fund and the Investment Manager, jointly and
severally, agrees to indemnify, defend and hold harmless each
Underwriter, its partners, directors and officers, and any person
who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, and the successors and
assigns of all of the foregoing persons from and against any
loss, damage, expense, liability or claim (including the
reasonable cost of investigation) which, jointly or severally,
any such Underwriter or any such person may incur under the Act,
the Exchange Act, the Investment Company Act, the Advisers Act,
the common law or otherwise, insofar as such loss, damage,
expense, liability or claim arises out of or is based upon any
untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by
the Fund) or in a Prospectus (the term "Prospectus" for the
purpose of this entire Section 9 being deemed to include any
Preliminary Prospectus, the sales materials, the Prospectus and
the Prospectus as amended or supplemented by the Fund), or arises
out of or is based upon any omission or alleged omission to state
a material fact required to be stated in either such Registration
Statement or Prospectus or necessary to make the statements made
therein (with respect to the Prospectus, in light of the
circumstances under which they were made) not misleading, except
insofar as any such loss, damage, expense, liability or claim
arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact contained in and in
conformity with information furnished in writing by or on behalf
of any Underwriter to the Fund, the Investment Manager or the
Portfolio Manager expressly for use with reference to any
Underwriter in such Registration Statement or such Prospectus or
arises out of or is based upon any omission or alleged omission
to state a material fact in connection with such information
required to be stated in such Registration Statement or such
Prospectus or necessary to make such information (with respect to
the Prospectus, in light of the circumstances under which they
were made) not misleading, provided, however, that the indemnity
agreement contained in this subsection (a) with respect to any
Preliminary Prospectus or amended Preliminary Prospectus shall
not inure to the benefit of any Underwriter (or to the benefit of
any person
22
controlling such Underwriter) from whom the person asserting any such
loss, damage, expense, liability or claim purchased the Shares which
is the subject thereof if the Prospectus corrected any such alleged
untrue statement or omission and if such Underwriter failed to send or
give a copy of the Prospectus to such person at or prior to the
written confirmation of the sale of such Shares to such person, unless
the failure is the result of noncompliance by the Fund with Section
5(d) hereof.
If any action, suit or proceeding (together, a "Proceeding") is
brought against an Underwriter or any such person in respect of which
indemnity may be sought against the Fund or the Investment Manager
pursuant to the foregoing paragraph, such Underwriter or such person
shall promptly notify the Fund and the Investment Manager in writing
of the institution of such Proceeding and the Fund or the Investment
Manager shall assume the defense of such Proceeding, including the
employment of counsel reasonably satisfactory to such indemnified
party and payment of all fees and expenses; provided, however, that
the omission to so notify the Fund or the Investment Manager shall not
relieve the Fund or the Investment Manager from any liability which
the Fund or the Investment Manager may have to any Underwriter or any
such person or otherwise. Such Underwriter or such person shall have
the right to employ its or their own counsel in any such case, but the
reasonable fees and expenses of such counsel shall be at the expense
of such Underwriter or of such person unless the employment of such
counsel shall have been authorized in writing by the Fund or the
Investment Manager, as the case may be, in connection with the defense
of such Proceeding or the Fund or the Investment Manager shall not
have, within a reasonable period of time in light of the
circumstances, employed counsel to have charge of the defense of such
Proceeding or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are
different from, additional to or in conflict with those available to
the Fund or the Investment Manager (in which case the Fund, the
Investment Manager shall not have the right to direct the defense of
such Proceeding on behalf of the indemnified party or parties), in any
of which events such reasonable fees and expenses shall be borne by
the Fund or the Investment Manager and paid as incurred (it being
understood, however, that the Fund or the Investment Manager shall not
be liable for the expenses of more than one separate counsel (in
addition to any local counsel) in any one Proceeding or series of
related Proceedings in the same jurisdiction representing the
indemnified parties who are parties to such Proceeding). Neither the
Fund nor the Investment Manager shall be liable for any settlement of
any Proceeding effected without its written consent but if settled
with the written consent of the Fund or the Investment Manager, the
Fund or the Investment Manager, as the case may be, agrees to
indemnify and hold harmless any Underwriter and any such person from
and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an
23
indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for reasonable fees and expenses of
counsel as contemplated by the second sentence of this paragraph, then
the indemnifying party agrees that it shall be liable for any
settlement of any Proceeding effected without its written consent if
(i) such settlement is entered into more than 60 business days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement and
(iii) such indemnified party shall have given the indemnifying party
at least 30 days' prior notice of its intention to settle. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
Proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that
are the subject matter of such Proceeding and does not include an
admission of fault, culpability or a failure to act, by or on behalf
of such indemnified party.
(b) Each Underwriter severally agrees to indemnify, defend and hold
harmless the Fund and the Investment Manager, and each of their
respective shareholders, partners, managers, members, trustees,
directors and officers, and any person who controls the Fund or the
Investment Manager within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and the successors and assigns of all
of the foregoing persons from and against any loss, damage, expense,
liability or claim (including the reasonable cost of investigation)
which, jointly or severally, the Fund or the Investment Manager or any
such person may incur under the Act, the Exchange Act, the Investment
Company Act, the Advisers Act, the common law or otherwise, insofar as
such loss, damage, expense, liability or claim arises out of or is
based upon any untrue statement or alleged untrue statement of a
material fact contained in and in conformity with information
furnished in writing by or on behalf of such Underwriter to the Fund
or the Investment Manager expressly for use with reference to such
Underwriter in the Registration Statement (or in the Registration
Statement as amended by any post-effective amendment thereof by the
Fund) or in a Prospectus, or arises out of or is based upon any
omission or alleged omission to state a material fact in connection
with such information required to be stated in such Registration
Statement or such Prospectus or necessary to make such information not
misleading (with respect to the Prospectus, in light of the
circumstances under which they were made).
If any Proceeding is brought against the Fund, the Investment
Manager or any such person in respect of which indemnity may be sought
against any Underwriter pursuant to the foregoing paragraph, the Fund,
the
24
Investment Manager or such person shall promptly notify such
Underwriter in writing of the institution of such Proceeding and such
Underwriter shall assume the defense of such Proceeding, including the
employment of counsel reasonably satisfactory to such indemnified
party and payment of all fees and expenses; provided, however, that
the omission to so notify such Underwriter shall not relieve such
Underwriter from any liability which such Underwriter may have to the
Fund, the Investment Manager or any such person or otherwise. The
Fund, the Investment Manager or such person shall have the right to
employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Fund, the Investment
Manager or such person, as the case may be, unless the employment of
such counsel shall have been authorized in writing by such Underwriter
in connection with the defense of such Proceeding or such Underwriter
shall not have, within a reasonable period of time in light of the
circumstances, employed counsel to have charge of the defense of such
Proceeding or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to it or them which are
different from or additional to or in conflict with those available to
such Underwriter (in which case such Underwriter shall not have the
right to direct the defense of such Proceeding on behalf of the
indemnified party or parties, but such Underwriter may employ counsel
and participate in the defense thereof but the fees and expenses of
such counsel shall be at the expense of such Underwriter), in any of
which events such fees and expenses shall be borne by such Underwriter
and paid as incurred (it being understood, however, that such
Underwriter shall not be liable for the expenses of more than one
separate counsel (in addition to any local counsel) in any one
Proceeding or series of related Proceedings in the same jurisdiction
representing the indemnified parties who are parties to such
Proceeding). No Underwriter shall be liable for any settlement of any
such Proceeding effected without the written consent of such
Underwriter but if settled with the written consent of such
Underwriter, such Underwriter agrees to indemnify and hold harmless
the Fund, the Investment Manager and any such person from and against
any loss or liability by reason of such settlement. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for
fees and expenses of counsel as contemplated by the second sentence of
this paragraph, then the indemnifying party agrees that it shall be
liable for any settlement of any Proceeding effected without its
written consent if (i) such settlement is entered into more than 60
business days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior
to the date of such settlement and (iii) such indemnified party shall
have given the indemnifying party at least 30 days' prior notice of
its intention to settle. No indemnifying party shall, without the
prior written consent of the
25
indemnified party, effect any settlement of any pending or threatened
Proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that
are the subject matter of such Proceeding and does not include an
admission of fault, culpability or a failure to act, by or on behalf
of such indemnified party.
(c) If the indemnification provided for in this Section 9 is unavailable
to an indemnified party under subsections (a) and (b) of this Section
9 in respect of any losses, damages, expenses, liabilities or claims
referred to therein, then each applicable 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,
damages, expenses, liabilities or claims (i) in such proportion as is
appropriate to reflect the relative benefits received by the Fund and
the Investment Manager on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault
of the Fund and the Investment Manager on the one hand and of the
Underwriters on the other in connection with the statements or
omissions which resulted in such losses, damages, expenses,
liabilities or claims, as well as any other relevant equitable
considerations. The relative benefits received by the Fund and the
Investment Manager on the one hand and the Underwriters on the other
shall be deemed to be in the same respective proportions as the total
proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Fund and
the total underwriting discounts and commissions received by the
Underwriters, bear to the aggregate public offering price of the
Shares. The relative fault of the Fund and the Investment Manager on
the one hand and of the Underwriters on the other shall be determined
by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or omission or alleged
omission relates to information supplied by the Fund or the Investment
Manager or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a
result of the losses, damages, expenses, liabilities and claims
referred to in this subsection shall be deemed to include any legal or
other fees or expenses reasonably incurred by such party in connection
with investigating, preparing to defend or defending any Proceeding.
(d) The Fund, the Investment Manager and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this
Section 9 were determined by pro rata allocation (even if the
Underwriters were
26
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 subsection (c) above. Notwithstanding the provisions of
this Section 9, no Underwriter shall be required to contribute any
amount in excess of the fees and commissions received by such
Underwriter. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 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 9 are several in proportion to their
respective underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained in this Section 9
and the covenants, warranties and representations of the Fund
contained in this Agreement shall remain in full force and effect
regardless of any investigation made by or on behalf of any
Underwriter, its partners, directors or officers or any person
(including each partner, officer or director of such person) who
controls any Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, or by or on behalf of the Fund or
the Investment Manager, its shareholders, partners, managers, members,
trustees, directors or officers or any person who controls the Fund or
the Investment Manager within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and shall survive any termination of
this Agreement or the issuance and delivery of the Shares. The Fund
and the Investment Manager and each Underwriter agree promptly to
notify each other of the commencement of any Proceeding against it
and, in the case of the Fund or the Investment Manager, against any of
the Fund's or the Investment Manager's shareholders, partners,
managers, members, trustees, directors or officers in connection with
the issuance and sale of the Shares, or in connection with the
Registration Statement or Prospectus.
(f) The Fund and the Investment Manager each acknowledge that the
statements with respect to (1) the public offering of the Shares as
set forth on the cover page of and (2) stabilization and selling
concessions and reallowances of selling concessions and payment of
fees to Underwriters that meet certain minimum sales thresholds under
the caption "Underwriting" in the Prospectus constitute the only
information furnished in writing to the Fund by the Underwriters
expressly for use in such document. The Underwriters severally confirm
that these statements are correct in all material respects and were so
furnished by or on behalf of the Underwriters severally for use in the
Prospectus.
(g) Notwithstanding any other provisions in this Section 9, no party shall
be entitled to indemnification or contribution under this Underwriting
Agreement against any loss, claim, liability, expense or damage
arising by
27
reason of such person's willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties in the performance of
its duties hereunder.
10. Notices. Except as otherwise herein provided, all statements, requests,
notices and agreements shall be in writing or by telegram and, if to the
Underwriters, shall be sufficient in all respects if delivered or sent to
UBS Warburg LLC, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000-0000, Attention:
Syndicate Department and, if to the Fund or the Investment Manager, shall
be sufficient in all respects if delivered or sent to the Fund or the
Investment Manager, as the case may be, at the offices of the Fund or the
Investment Manager at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
11. Governing Law; Construction. This Agreement and any claim, counterclaim or
dispute of any kind or nature whatsoever arising out of or in any way
relating to this Agreement ("Claim"), directly or indirectly, shall be
governed by, and construed in accordance with, the laws of the State of New
York. The Section headings in this Agreement have been inserted as a matter
of convenience of reference and are not a part of this Agreement.
12. Submission to Jurisdiction. Except as set forth below, no Claim may be
commenced, prosecuted or continued in any court other than the courts of
the State of New York located in the City and County of New York or in the
United States District Court for the Southern District of New York, which
courts shall have jurisdiction over the adjudication of such matters, and
the Fund and UBS Warburg LLC each consent to the jurisdiction of such
courts and personal service with respect thereto. The Fund and UBS Warburg
hereby consent to personal jurisdiction, service and venue in any court in
which any Claim arising out of or in any way relating to this Agreement is
brought by any third party against UBS Warburg LLC or any indemnified
party. Each of UBS Warburg LLC, the Fund (on its behalf and, to the extent
permitted by applicable law, on behalf of its stockholders and affiliates)
and the Investment Manager (on its behalf and, to the extent permitted by
applicable law, on behalf of its unitholders and affiliates) waives all
right to trial by jury in any action, proceeding or counterclaim (whether
based upon contract, tort or otherwise) in any way arising out of or
relating to this Agreement. Each of the Fund and the Investment Manager
agrees that a final judgment in any such action, proceeding or counterclaim
brought in any such court shall be conclusive and binding upon the Fund and
the Investment Manager, as the case may be, and may be enforced in any
other courts in the jurisdiction of which the Fund or the Investment
Manager, as the case may be, is or may be subject, by suit upon such
judgment.
13. Parties at Interest. The Agreement herein set forth has been and is made
solely for the benefit of the Underwriters, the Fund and the Investment
Manager and to the extent provided in Section 9 hereof the controlling
persons, shareholders, partners, members, trustees, managers, directors and
officers referred to in such section, and their respective successors,
assigns, heirs, personal representatives and executors and administrators.
No other person, partnership, association or
28
corporation (including a purchaser, as such purchaser, from any of the
Underwriters) shall acquire or have any right under or by virtue of this
Agreement.
14. Counterparts. This Agreement may be signed by the parties in one or more
counterparts which together shall constitute one and the same agreement
among the parties.
15. Successors and Assigns. This Agreement shall be binding upon the
Underwriters, the Fund and the Investment Manager, and any successor or
assign of any substantial portion of the Fund's, the Investment Manager's,
or any of the Underwriters' respective businesses and/or assets.
16. Disclaimer of Liability of Trustees and Beneficiaries. A copy of the
Agreement and Declaration of Trust of the Fund is on file with the
Secretary of State of The Commonwealth of Massachusetts, and notice hereby
is given that this Underwriting Agreement is executed on behalf of the Fund
by an officer or Trustee of the Fund in his or her capacity as an officer
or Trustee of the Fund and not individually and that the obligations under
or arising out of this Underwriting Agreement are not binding upon any of
the Trustees, officers or shareholders individually but are binding only
upon the assets and properties of the Fund.
29
If the foregoing correctly sets forth the understanding among the Fund, the
Investment Manager and the Underwriters, please so indicate in the space
provided below, whereupon this letter and your acceptance shall constitute a
binding agreement among the Fund, the Investment Manager and the Underwriters,
severally.
Very truly yours,
PIMCO CALIFORNIA MUNICIPAL INCOME
FUND III
___________________________________
By:
Title:
PIMCO FUNDS ADVISORS LLC
___________________________________
By:
Title:
30
Accepted and agreed to as of the
date first above written, on
behalf of themselves and
the other several Underwriters
named in Schedule A
UBS WARBURG LLC
X.X. XXXXXXX & SONS, INC.
RBC XXXX XXXXXXXX INCORPORATED
WACHOVIA SECURITIES, INC.
XXXXX FARGO SECURITIES, LLC
XXXXXXX, XXXXXX & CO.
H&R BLOCK FINANCIAL ADVISORS, INC.
QUICK & XXXXXX, INC.
WEDBUSH XXXXXX SECURITIES INC.
By: UBS WARBURG LLC
_________________________
By: Xxxxx Xxxxxxxx
Title: Managing Director
_________________________
By: Xxxx X. Xxxx
Title: Executive Director
31
SCHEDULE A
--------------------------------------------------------------------------------
Number of Shares to be
Name Purchased
---- ---------
--------------------------------------------------------------------------------
UBS Warburg LLC
--------------------------------------------------------------------------------
X.X. Xxxxxxx & Sons, Inc.
--------------------------------------------------------------------------------
RBC Xxxx Xxxxxxxx Incorporated
--------------------------------------------------------------------------------
Wachovia Securities, Inc.
--------------------------------------------------------------------------------
Xxxxx Fargo Securities, LLC
--------------------------------------------------------------------------------
Xxxxxxx, Xxxxxx & Co.
--------------------------------------------------------------------------------
H&R Block Financial Advisors, Inc.
--------------------------------------------------------------------------- ----
Quick & Xxxxxx, Inc.
--------------------------------------------------------------------------- ----
Wedbush Xxxxxx Securities Inc.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
--------------------------------------------------------------------------------
A-1
SCHEDULE B
FORM OF OPINION OF
ROPES & XXXX REGARDING THE FUND
October [ ], 2002
UBS Warburg LLC
X.X. Xxxxxxx & Sons, Inc.
RBC Xxxx Xxxxxxxx Incorporated
Wachovia Securities, Inc.
Xxxxx Fargo Securities, LLC
Xxxxxxx, Xxxxxx & Co.
H&R Block Financial Advisors, Inc.
Quick & Xxxxxx, Inc.
Wedbush Xxxxxx Securities Inc.
c/o UBS Warburg LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
We have acted as counsel to PIMCO California Municipal Income Fund III (the
"Fund") in connection with the proposed issuance of [ ] common shares of
beneficial interest (the "Shares"). This opinion is furnished to you pursuant to
Section 7(e) of the Underwriting Agreement dated as of October [___], 2002 (the
"Underwriting Agreement") among the Fund, e Funds Advisors LLC (the name of
which entity is expected to be changed to "PIMCO Advisors Fund Management LLC,"
effective October 31, 2002) (the "Investment Manager") and UBS Warburg LLC, X.X.
Xxxxxxx & Sons, Inc., RBC Xxxx Xxxxxxxx Incorporated, Wachovia Securities, Inc.,
Xxxxx Fargo Securities, LLC, Xxxxxxx, Xxxxxx & Co., H&R Block Financial
Advisors, Inc., Quick & Xxxxxx, Inc., and Wedbush Xxxxxx Securities Inc., as
representatives of the underwriters listed on Schedule A thereto (the
"Underwriters"). Capitalized terms used in this opinion, unless otherwise
defined, have the meanings specified in the Underwriting Agreement.
We have examined signed copies of the Registration Statement of the Fund on
Form N-2 (File No. 333-98585) under the Securities Act of 1933, as amended (the
B-1
"Securities Act") (which also constitutes the Fund's Registration Statement on
Form N-2 (File No. 811-21188) under the Investment Company Act of 1940, as
amended (the "Investment Company Act")), including all exhibits thereto, as
filed with the Securities and Exchange Commission (the "Commission") on [ ],
2002 (the "Original Registration Statement"), Pre-Effective Amendment No. 1 to
the Original Registration Statement, including all exhibits thereto, as filed
with the Commission on [ ], 2002 ("Pre-Effective Amendment No. 1"),
Pre-Effective Amendment No. 2 to the Original Registration Statement, including
all exhibits thereto, as filed with the Commission on [ ], 2002 ("Pre-
Effective Amendment No. 2") and Pre-Effective Amendment No. 3 to the Original
Registration Statement, including all exhibits thereto, as filed with the
Commission on [ ], 2002 ("Pre-Effective Amendment No. 3," and together with
Pre-Effective Amendment No. 1, Pre-Effective Amendment No. 2 and the Original
Registration Statement, the "Registration Statement"); the Fund's Notification
of Registration on Form N-8A under the Investment Company Act, as filed with the
Commission on [ ], 2002 (the "Notification of Registration"); the Fund's
Registration Statement on Form 8-A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as filed with the Commission on [ ], 2002 (the
"Exchange Act Registration Statement"); the Fund's Agreement and Declaration of
Trust, as amended to the date hereof (the "Declaration of Trust"), on file in
the offices of the Secretary of State of The Commonwealth of Massachusetts and
the Clerk of the City of Boston; the By-laws of the Fund, as amended to the date
hereof (the "By-laws"); a copy of the Prospectus dated [ ], 2002, relating
to the Shares and the Statement of Additional Information of the Fund dated
[ ], 2002, each as filed with the Commission pursuant to Rule 497 under the
Securities Act on [ ], 2002 (together, the "Prospectus"); the Investment
Management Agreement dated as of [ ], 2002, between the Fund and the
Investment Manager (the "Investment Management Agreement"); the Portfolio
Management Agreement dated as of [ ], 2002, between Pacific Investment
Management Company LLC (the "Portfolio Manager") and the Investment Manager (the
"Portfolio Management Agreement"); the Custodian Agreement dated as of [ ],
2002, between the Fund and State Street Bank and Trust Company (the "Custodian
Agreement") and the Transfer Agency Services Agreement dated as of [ ],
2002, between the Fund and PFPC Inc. (the "Transfer Agency Agreement," and
together with the Custodian Agreement, the "Fund Agreements"); the Terms and
Conditions of the Fund's Dividend Reinvestment Plan; and the Underwriting
Agreement. Additionally, we have relied upon the oral representation of Mr.
Xxxxx X'Xxxxxx of the Commission staff to the effect that the Registration
Statement and the Exchange Act Registration Statement became effective as of
[___ a.m./p.m.] on [ ], 2002; a letter dated [ ], 2002, from Xx.
Xxxxxxxxx Xxxxxx, Executive Vice President of the New York Stock Exchange,
authorizing the Shares for listing on such Exchange; and the oral representation
by the [ ] of the Commission [staff] that as of [ ] [a.m.], no stop
order suspending the effectiveness of the Registration Statement had been issued
and no proceeding for any such purpose was pending or threatened.
We have also examined and relied upon the original or copies of minutes of
the meetings or written consents of the sole shareholder and the Board of
Trustees of the
B-2
Fund, the documents delivered to the Underwriters by the Fund and the Investment
Manager dated as of the date hereof pursuant to the Underwriting Agreement and
such other documents, including certificates of officers of the Fund and
certificates of the Secretary of State of the State of New York as to the
qualification and good standing of the Fund as a foreign entity in New York and
the Secretary of State of the State of California as to the qualification and
good standing of the Fund as a foreign entity in California, as we have deemed
necessary for purposes of rendering our opinions below. We have assumed the
genuineness of the signatures on all documents examined by us, the authenticity
of all documents submitted to us as originals and the conformity to the
corresponding originals of all documents submitted to us as copies.
We express no opinion as to the laws of any jurisdiction other than The
Commonwealth of Massachusetts and the United States of America. We call your
attention to the fact that the Underwriting Agreement provides that it is to be
governed by and construed in accordance with the laws of the State of New York
and the Transfer Agency Agreement provides that it is to be governed by and
construed in accordance with the laws of the State of Delaware, and to the fact
that the Investment Management Agreement does not provide that it is to be
governed by the laws of any particular jurisdiction. In rendering the opinion as
to enforceability expressed in paragraph [5] below, we have limited the scope of
our opinion to the conclusions that would be reached by a Massachusetts court
that had determined that each of the Underwriting Agreement, the Investment
Management Agreement and the Fund Agreements would be governed by, and construed
in accordance with, the internal laws of The Commonwealth of Massachusetts.
Further, we express no opinion as to the state securities or Blue Sky laws of
any jurisdiction, including The Commonwealth of Massachusetts.
For purposes of our opinion set forth in paragraph [2] below with respect
to the power and authority of the Fund to own, lease and operate its properties
and conduct its business, we have relied upon certificates of officers of the
Fund as to the states in which the Fund leases or owns real property or in which
it conducts material operations.
Insofar as this opinion relates to factual matters, we have made inquiries
to officers of the Fund, the Investment Manager and the Portfolio Manager to the
extent we believe reasonable with respect to such matters and have relied upon
representations made by the Fund and the Investment Manager in the Underwriting
Agreement, representations made by the Portfolio Manager to the Investment
Manager and representations made to us by one or more officers of the Fund, the
Investment Manager or the Portfolio Manager. We have not independently verified
the accuracy of such representations. In respect of our opinions set forth in
paragraphs [7], [9] and [11] below, we have not searched the dockets of any
court, administrative body or other filing office in any jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that:
B-3
1. The Registration Statement and all post-effective amendments on or
before the Closing Date, if any, are effective under the Securities Act; the
filing of the Prospectus pursuant to Rule 497 under the Securities Act has been
made in the manner and within the time period required by Rule 497; and based
upon oral inquiries to the Commission staff on [ ], 2002, and on this date,
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for any such purpose is pending or threatened by
the Commission.
2. The Fund has been duly organized and is validly existing and in good
standing as an unincorporated voluntary association under and by virtue of the
laws of The Commonwealth of Massachusetts and has full power and authority to
own or lease its properties and to conduct its business as described in the
Registration Statement and the Prospectus. The Fund is duly qualified to do
business and is in good standing as a foreign [entity] in New York and
California.
3. The Fund's authorized capitalization is as set forth in the Registration
Statement and the Prospectus. The Fund has an indefinite number of authorized
common shares of beneficial interest, par value $0.00001 per share. The Shares
conform in all material respects as to legal matters to the description of them
under the captions "Description of shares" in the Prospectus. All outstanding
common shares of beneficial interest of the Fund have been duly authorized and
are validly issued, fully paid and, subject to the penultimate paragraph below,
non-assessable. The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance with the
terms of the Underwriting Agreement, will be validly issued, fully paid and,
subject to the penultimate paragraph below, non-assessable. Except as
contemplated by the Underwriting Agreement, no person is entitled to any
preemptive or other similar rights with respect to the Shares.
4. To the best of our knowledge after due inquiry, including oral inquiries
of the Commission staff on [ ], 2002, the Fund is duly registered with the
Commission under the Investment Company Act as a closed-end management
investment company, and all required action has been taken by the Fund under the
Securities Act, the Investment Company Act and the rules and regulations
thereunder in connection with the issuance and sale of the Shares to make the
public offering and consummate the sale of the Shares pursuant to the
Underwriting Agreement.
5. The Fund has full power and authority to enter into each of the Fund
Agreements and to perform all of the terms and provisions thereof to be carried
out by it. Each Fund Agreement has been duly and validly authorized, executed
and delivered by the Fund. Each Fund Agreement complies in all material respects
with all applicable provisions of the Investment Company Act and the Investment
Advisers Act of 1940, as amended, as the case may be. Assuming due
authorization, execution and delivery by the other parties thereto, each Fund
Agreement constitutes the legal, valid and binding obligation of the Fund
enforceable in accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, moratorium, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles (regardless of whether enforceability is considered in a proceeding
in equity or at law).
B-4
6. The Fund has full power and authority to enter into each of the
Investment Management Agreement and the Underwriting Agreement and to perform
all of the terms and provisions thereof to be carried out by it. The Investment
Management Agreement and the Underwriting Agreement have been duly and validly
authorized, executed and delivered by the Fund.
7. None of (a) the execution and delivery by the Fund of the Investment
Management Agreement, the Underwriting Agreement or any of the Fund Agreements,
(b) the issue and sale by the Fund of the Shares as contemplated by the
Underwriting Agreement and (c) the performance by the Fund of its obligations
under the Investment Management Agreement, the Underwriting Agreement or any of
the Fund Agreements or consummation by the Fund of the other transactions
contemplated by the Investment Management Agreement, the Underwriting Agreement
or any of the Fund Agreements conflicts or will conflict with, or results or
will result in a breach of, the Declaration of Trust or the By-laws or, to our
knowledge, any agreement or instrument to which the Fund is a party or by which
the Fund is bound, or violates or will violate any federal statute, law or
regulation or any judgment, injunction, order or decree of any federal
governmental agency or body that is applicable to the Fund and that is known to
us, which violation would have a material adverse effect on the condition or
business of the Fund.
8. To the best of our knowledge, the Fund is not currently in breach of,
or in default under, any material written agreement or instrument to which it is
a party or by which it or its property is bound or affected.
9. No consent, approval, authorization or order of any court or
governmental agency or body or securities exchange or securities association is
required by the Fund for the consummation by the Fund of the transactions
contemplated in the Investment Management Agreement, the Underwriting Agreement
and the Fund Agreements, except such as (a) have been obtained under the
Securities Act, the Investment Company Act or the Exchange Act and (b) may be
required by the New York Stock Exchange or the National Association of
Securities Dealers, Inc. or under state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the Underwriters
pursuant to the Underwriting Agreement.
10. To the best of our knowledge after due inquiry, including oral
inquiries of an employee of the New York Stock Exchange on [ ], 2002, the
Shares have been authorized for listing on the New York Stock Exchange, subject
to official notice of issuance, and to the best of our knowledge after due
inquiry, including oral inquiries of the Commission staff on [ ], 2002, the
Exchange Act Registration Statement has become effective.
11. To our knowledge, there are no legal or governmental proceedings
pending or 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 but are not described therein as required.
B-5
12. To the best of our knowledge after due inquiry, there are no
agreements, contracts, indentures, leases or other instruments that are required
to be described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement which have not been so described or
filed as an exhibit or incorporated therein by reference.
13. Each of the sections in the Prospectus entitled "Tax matters," to the
extent that it states matters of United States law or legal conclusions with
respect thereto, presents a fair summary of the principal federal income tax
rules currently in effect applicable to the Fund and to the purchase, ownership
and disposition of the Shares.
14. The Registration Statement (except for the financial statements and
schedules, the notes thereto and any schedules and other financial data
contained or incorporated by reference therein or omitted therefrom, as to which
we express no opinion), at the time it became effective, and the Prospectus
(except as aforesaid), as of the date thereof, complied as to form in all
material respects to the applicable requirements of the Securities Act and the
Investment Company Act.
We have not independently verified the accuracy, completeness or fairness
of the statements made or the information contained in the Registration
Statement or the Prospectus and, except in the respects and to the extent set
forth in paragraphs [3] and [14] above, we are not passing upon and do not
assume any responsibility therefor. In the course of the preparation by the Fund
of the Registration Statement and the Prospectus, we have participated in
discussions with your representatives and employees and officers of the Fund,
the Investment Manager and the Portfolio Manager and in discussions with the
Fund's independent accountants, in which the business and the affairs of the
Fund, the Investment Manager and the Portfolio Manager and the contents of the
Registration Statement and the Prospectus were discussed. There is no assurance
that all material facts as to the Fund, the Investment Manager, the Portfolio
Manager and their affairs were disclosed to us or that our familiarity with the
Fund and the Investment Manager or any familiarity with the Portfolio Manager is
such that we have necessarily recognized the materiality of such facts as were
disclosed to us, and we have to a large extent relied upon statement of
representatives of the Fund, the Investment Manager and the Portfolio Manager as
to the materiality of the facts disclosed to us. On the basis of information
that we have gained in the course of our representation of the Fund in
connections with its preparation of the Registration Statement and the
Prospectus and our participation in the discussions referred to above, no facts
have come to our attention that would lead us to believe that as of [ ],
2002, the Registration Statement contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, or that as of
the date of the Prospectus and the date hereof the Prospectus contained an
untrue statement of material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light, in
each case, of the circumstances under which they were made, not misleading (in
each case, other than the financial statements and schedules, the notes thereto
and any schedules and other financial data
B-6
contained or incorporated by reference therein or omitted therefrom, as to which
we express no opinion).
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Fund's
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Fund and requires that notice of such disclaimer be given in each agreement,
obligation, and instrument entered into or executed by the Fund or the Trustees.
The Declaration of Trust provides for indemnification out of the property of the
Fund for all loss and expense of any shareholder held personally liable solely
by reason of being or having been a shareholder of the Fund. Thus, the risk of a
shareholder's incurring financial loss on account of being a shareholder is
limited to circumstances in which the Fund itself would be unable to meet its
obligations.
This letter and the opinions expressed herein are furnished by us to you
and are solely for benefit of the Underwriters, except that Xxxxxxx, Arps,
Slate, Xxxxxxx & Xxxx (Illinois) may rely on this letter as to all matters
governed by the laws of The Commonwealth of Massachusetts in delivering its
opinion to you on the date hereof.
Very truly yours,
Ropes & Gray
B-7
SCHEDULE C
FORM OF OPINION OF INTERNAL COUNSEL
REGARDING PIMCO FUNDS ADVISORS LLC
October [_], 2002
UBS Warburg LLC
X.X. Xxxxxxx & Sons, Inc.
RBC Xxxx Xxxxxxxx Incorporated
Wachovia Securities, Inc.
Xxxxx Fargo Securities, LLC
Xxxxxxx, Xxxxxx & Co.
H&R Block Financial Advisors, Inc.
Quick & Xxxxxx, Inc.
Wedbush Xxxxxx Securities Inc.
UBS Warburg LLC
as Managing Underwriter
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Re: PIMCO Funds Advisors LLC
------------------------
Ladies and Gentlemen:
I am the General Counsel of PIMCO Funds Advisors LLC, a
Delaware limited liability company (the name of which entity is expected to be
changed to "PIMCO Advisors Fund Management LLC," effective October 31, 2002)
("PIMCO Funds Advisors"), and have counseled PIMCO Funds Advisors in such
capacity in connection with the sale to you by PIMCO California Municipal Income
Fund III, a voluntary association with transferable shares organized and
existing under and by virtue of the laws of The Commonwealth of Massachusetts
(commonly referred to as a Massachusetts business trust) (the "Fund"), of an
aggregate of [____] common shares of beneficial interest, of the Fund, pursuant
to a registration statement on Form N-2 under the Securities Act of 1933, as
amended (the "Act") and the Investment Company Act of 1940, as amended (the
"Investment Company Act"), filed with the Securities and Exchange Commission
(the "Commission") on [ ], 2002 (Securities Act File No. 333-[ ], and
Investment Company Act File No. 811-[ ]), as amended by Amendment No. 1 filed
with the Commission on [ ], 2002, Amendment No. 2 filed with the Commission
on June __, 2002 and Amendment No. 3 filed with the Commission on [ ], 2002
[, and a registration statement on Form N-2 under the Act and the Investment
Company Act, filed with the Commission on [ ], 2002 pursuant to Rule 462(b)
under the Act ([such registration statements collectively referred to herein as]
the "Registration Statement"), and an underwriting agreement dated [ ], 2002
by and among you, the Fund and PIMCO Funds Advisors (the "Underwriting
Agreement").
C-1
This opinion is rendered to you pursuant to Section 6(e) of
the Underwriting Agreement. Capitalized terms used herein without definition
have the meanings assigned to them in the Underwriting Agreement.
As such counsel, I have examined such matters of fact and
questions of law as I have considered appropriate for purposes of rendering the
opinions expressed below, except where a statement is qualified as to knowledge
or awareness, in which case I have made no or limited inquiry as specified
below. I have examined, among other things, the following:
(a) the Underwriting Agreement;
(b) that certain Investment Management Agreement by and
between the Fund and the PIMCO Funds Advisors, dated
as of [___], 2002;
(c) that certain Portfolio Management Agreement by and
among Pacific Investment Management Company LLC and
PIMCO Funds Advisors, as accepted and agreed to by
the Fund, dated as of [___], 2002; and
(d) that certain Shareholder Servicing Agreement by and
between PIMCO Funds Advisors and UBS Warburg LLC,
dated as of October 31, 2002.
The documents described in subsection (a)-(d) above are
referred to herein collectively as the "Transaction Documents."
In my examination, I have assumed the genuineness of all
signatures (other than those of officers of PIMCO Funds Advisors on the
Transaction Documents), the authenticity of all documents submitted to me as
originals, and the conformity to authentic original documents of all documents
submitted to me as copies.
I have been furnished with, and with your consent have relied
upon, certificates of officers of PIMCO Funds Advisors with respect to certain
factual matters. In addition, I have obtained and relied upon such certificates
and assurances from public officials as I have deemed necessary.
I am opining herein as to the effect of the federal laws of
the United States, the internal laws of the State of New York and the internal
laws of the State of Delaware, and I express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or country or as to any matters of municipal law or the laws of any
other local agencies within any state or country. My opinions set forth in
paragraph 3 below are based upon my consideration of only those statutes, rules
and regulations which, in my experience, are normally applicable to transactions
similar to those contemplated by the Transaction Documents, generally.
Whenever a statement herein is qualified by "to my knowledge"
or a similar phrase, it is intended to indicate that I do not have current
actual knowledge of the
C-2
inaccuracy of such statement. However, except as otherwise expressly indicated,
I have not undertaken any independent investigation to determine the accuracy of
any such statement, and no inference that I have any knowledge of any matters
pertaining to such statement should be drawn from my position as General Counsel
of PIMCO Funds Advisors.
Subject to the foregoing and the other matters set forth
herein, it is my opinion that, as of the date hereof:
1. PIMCO Funds Advisors is a limited liability company and is
validly existing and in good standing under the Delaware Limited Liability
Company Act (6 Del. C (S)18-101, et seq.) with all necessary power and
authority to enter into and deliver the Transaction Documents and perform its
obligations thereunder and to carry on its business as it is now being conducted
and as described in the Registration Statement. Based solely on certificates
from public officials, I confirm that PIMCO Funds Advisors is qualified to do
business in the following States: California, New York, Connecticut, Texas and
Washington, such States being those jurisdictions in which its ownership or
leasing of property or its conducting of business requires such qualification
and where failure to so qualify would have a material adverse effect on the
ability of the Investment Manager to perform its obligations under the
Investment Management Agreement and the Portfolio Management Agreement.
2. The execution, delivery and performance of the Transaction
Documents by PIMCO Funds Advisors have been duly authorized by all necessary
action of PIMCO Funds Advisors and no other actions on the part of PIMCO Funds
Advisors or its unitholders or any subsidiary of PIMCO Funds Advisors or its
unitholders is necessary to authorize and consummate the transactions
contemplated thereby, and the Transaction Documents have been duly executed and
delivered by PIMCO Funds Advisors.
3. Each of the Investment Management Agreement, the Portfolio
Management Agreement and the Shareholder Servicing Agreement constitutes a
legally valid and binding agreement of PIMCO Funds Advisors, enforceable against
PIMCO Funds Advisors in accordance with its terms.
4. Neither the execution and delivery of the Transaction
Documents by PIMCO Funds Advisors, nor the consummation by PIMCO Funds Advisors
of transactions contemplated thereby, nor compliance by PIMCO Funds Advisors
with any of the terms and provisions thereof will:
(i) violate any provision of the Second Amended and
Restated Agreement of Limited Liability Company Agreement of PIMCO
Funds Advisors LLC, effective [ ],
(ii) violate any federal, California or New York statute,
rule or regulation applicable to PIMCO Funds Advisors (other than
federal and state securities or blue sky laws, the Investment Company
Act of 1940, as amended,
C-3
and the Investment Advisers Act of 1940, as amended, as to which I
express no opinion),
(iii) violate any agreement to which PIMCO Funds
Advisors is a party or by which it is bound and which is material to
PIMCO Funds Advisors' businesses taken as a whole (the "Material
Agreements"),
(iv) violate any order, writ, injunction or decree,
known to me and applicable to PIMCO Funds Advisors, or
(v) to the best of my knowledge, require any
consents, approvals, authorizations, registrations, declarations or
filings by PIMCO Funds Advisors under any federal statute, rule or
regulation applicable to PIMCO Funds Advisors, except as have been
obtained under the Act, the Investment Company Act or the Investment
Advisers Act of 1940.
No opinion is expressed in this paragraph 4 as to the
application of Section 548 of the federal Bankruptcy Code and comparable
provisions of state or foreign law or of any antifraud laws, antitrust or trade
regulation laws. No opinion is expressed in this paragraph 4 with respect to the
operating licenses necessary for PIMCO Funds Advisors' businesses.
5. PIMCO Funds Advisors is duly registered as an investment
adviser under the Advisers Act and is not prohibited by the Advisers Act or the
Investment Company Act from acting as investment adviser for the Fund as
contemplated by the Investment Advisory Agreement, the Registration Statement
and the Prospectus.
6. The description of PIMCO Funds Advisors and its business,
and the statements attributable to PIMCO Funds Advisors, set forth in the
Registration Statement and the Prospectus under the headings "Prospectus Summary
- Investment Manager" and "Management of the Fund" do not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
7. There is no action, suit or proceeding before or by any
court, commission, regulatory body, administrative agency or other governmental
agency or body, foreign or domestic, now pending or, to my knowledge, threatened
against PIMCO Funds Advisors of a nature required to be disclosed in the
Registration Statement or Prospectus or the ability of PIMCO Funds Advisors to
fulfill its obligations under the Investment Management Agreement or the
Portfolio Management Agreement.
The opinions expressed in paragraph 3 above are subject to the
following limitations, qualifications and exceptions:
(a) the effect of bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights or remedies of creditors generally;
C-4
(b) the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be brought;
(c) the unenforceability under certain circumstances under law
or court decisions of provisions providing for the indemnification of or
contribution to a party with respect to a liability where such indemnification
or contribution is contrary to public policy; and
(d) the unenforceability of any provision requiring the
payment of attorney's fees, except to the extent that a court determines such
fees to be reasonable.
In rendering the opinions expressed in paragraph 4 insofar as
they require interpretation of the Material Agreements (i) I have assumed with
your permission that all courts of competent jurisdiction would enforce such
agreements as written but would apply the internal laws of the State of New York
without giving effect to any choice of law provisions contained therein or any
choice of law principles which would result in application of the internal laws
of any other state and (ii) to the extent that any questions of legality or
legal construction have arisen in connection with my review, I have applied the
laws of the State of New York in resolving such questions. I advise you that
certain of the Material Agreements may be governed by other laws, that such laws
may vary substantially from the law assumed to govern for purposes of this
opinion, and that this opinion may not be relied upon as to whether or not a
breach or default would occur under the law actually governing such Material
Agreements.
To the extent that the obligations of PIMCO Funds Advisors may
be dependent upon such matters, I assume for purposes of this opinion that: (i)
all parties to the Transaction Documents other than PIMCO Funds Advisors are
duly incorporated or organized, validly existing and in good standing under the
laws of their respective jurisdictions of incorporation or organization; (ii)
all parties to the Transaction Documents other than PIMCO Funds Advisors have
the requisite power and authority and, in the case of natural persons, legal
capacity to execute and deliver the Transaction Documents and to perform their
respective obligations under the Transaction Documents to which they are a
party; and (iii) the Transaction Documents to which such parties other than
PIMCO Funds Advisors are a party have been duly authorized, executed and
delivered by such parties and, other than PIMCO Funds Advisors, constitute their
legally valid and binding obligations, enforceable against them in accordance
with their terms. I express no opinion as to compliance by any parties to the
Transaction Documents with any state or federal laws or regulations applicable
to the subject transactions because of the nature of their business and I
express no opinion as to compliance by any parties to the Transaction Documents
with any foreign laws or regulations applicable to the transactions contemplated
by the Transaction Documents or which may affect the Transaction Documents'
enforceability.
This opinion is rendered only to you and is solely for your
benefit in connection with the transactions covered hereby. This opinion may not
be relied upon by
C-5
you for any other purpose, or furnished to, quoted to or relied upon by any
other person, firm or corporation for any purpose, without my prior written
consent.
Very truly yours,
* * *
Special Counsel for the Investment Adviser shall separately opine that, assuming
the Investment Manager is duly registered as an investment adviser under the
Advisers Act and is not prohibited by the Advisers Act or the Investment Company
Act from acting as investment adviser for the Fund as contemplated by the
Investment Management Agreement, the Registration Statement and the Prospectus,
neither the execution and delivery of the Underwriting Agreement, the Investment
Management Agreement, the Shareholder Servicing Agreement or the Portfolio
Management Agreement by the Investment Manager, nor the consummation by the
Investment Manager of the transactions contemplated thereby, nor compliance by
the Investment Manager with any of the terms and provisions thereof will violate
the provisions of the Investment Company Act or the Advisers Act; provided,
however, that such opinion may specifically disclaim any opinion as to (a) the
reasonableness of the fees to be paid to the Investment Manager under the
Investment Management Agreement and (b) the compliance by the Investment Manager
with its indemnification and contribution obligations set forth in the
Underwriting Agreement.
C-6
SCHEDULE D
FORM OF OPINION OF INTERNAL COUNSEL
REGARDING PIMCO
October [ ], 2002
UBS Warburg LLC
X.X. Xxxxxxx & Sons, Inc.
RBC Xxxx Xxxxxxxx Incorporated
Wachovia Securities, Inc.
Xxxxx Fargo Securities, LLC
Xxxxxxx, Xxxxxx & Co.
H&R Block Financial Advisors, Inc.
Quick & Xxxxxx, Inc.
Wedbush Xxxxxx Securities Inc.
UBS Warburg LLC
as Managing Underwriter
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Re: Pacific Investment Management Company LLC
Ladies and Gentlemen:
I am the General Counsel of PIMCO Funds Advisors LLC, a Delaware limited
liability company (the name of which entity is expected to be changed to "PIMCO
Advisors Fund Management LLC," effective October 31, 2002) ("PIMCO Funds
Advisors"). PIMCO Funds Advisors is a wholly-owned subsidiary of PIMCO Advisory
Services Holdings LLC, which is a wholly-owned subsidiary of Allianz Dresdner
Asset Management of America L.P. ("XXXX"). Pacific Investment Management Company
LLC, a Delaware limited liability company ("PIMCO") is a subsidiary partnership
of XXXX. I have counseled PIMCO and PIMCO Funds Advisors in connection with the
sale to you by PIMCO California Municipal Income Fund III, a voluntary
association with transferable shares organized and existing under and by virtue
of the laws of The Commonwealth of Massachusetts (commonly referred to as a
Massachusetts business trust) (the "Fund"), of an aggregate of [____] common
shares of beneficial interest, of the Fund, pursuant to a registration statement
on Form N-2 under the Securities Act of 1933, as amended (the "Act") and the
Investment Company Act of 1940, as amended (the "Investment Company Act"), filed
with the Securities and Exchange Commission (the "Commission") on [ ], 2002
(Act File No. 333-[ ], and Investment Company Act File No. 811-[ ]), as
amended by Amendment No. 1 filed with the Commission on [ ], 2002,
Amendment No. 2 filed with the Commission on [ ], 2002 and Amendment No. 3 filed
with the Commission on [
D-1
], 2002 [, and a registration statement on Form N-2 under the Act and the
Investment Company Act, filed with the Commission on [ ], 2002 pursuant to
Rule 462(b) under the Act ([such registration statements collectively referred
to herein as] the "Registration Statement"), and an underwriting agreement dated
[ ], 2002 by and among you, the Fund and PIMCO Funds Advisors (the
"Underwriting Agreement").
This opinion is rendered to you pursuant to Section 6(e) of the
Underwriting Agreement. Capitalized terms used herein without definition have
the meanings assigned to them in the Underwriting Agreement.
As such counsel, I have examined such matters of fact and questions of law
as I have considered appropriate for purposes of rendering the opinions
expressed below, except where a statement is qualified as to knowledge or
awareness, in which case I have made no or limited inquiry as specified below. I
have examined, among other things, that certain Portfolio Management Agreement
by and between PIMCO and the PIMCO Funds Advisors LLC, as accepted and agreed to
by the Fund, dated as of [ ], 2002 (the "Portfolio Management Agreement").
In my examination, I have assumed the genuineness of all signatures
(other than those of officers of PIMCO on the Portfolio Management Agreement),
the authenticity of all documents submitted to me as originals, and the
conformity to authentic original documents of all documents submitted to me as
copies.
I have been furnished with, and with your consent have relied upon,
certificates of officers of PIMCO with respect to certain factual matters. In
addition, I have obtained and relied upon such certificates and assurances from
public officials as I have deemed necessary.
I am opining herein as to the effect of the federal laws of the United
States, the internal laws of the State of New York and the internal laws of the
State of Delaware, and I express no opinion with respect to the applicability
thereto, or the effect thereon, of the laws of any other jurisdiction or country
or as to any matters of municipal law or the laws of any other local agencies
within any state or country. My opinions set forth in paragraph 3 below are
based upon my consideration of only those statutes, rules and regulations which,
in my experience, are normally applicable to transactions similar to those
contemplated by the Portfolio Management Agreement, generally.
Whenever a statement herein is qualified by "to my knowledge" or a
similar phrase, it is intended to indicate that I do not have current actual
knowledge of the inaccuracy of such statement. However, except as otherwise
expressly indicated, I have not undertaken any independent investigation to
determine the accuracy of any such statement, and no inference that I have any
knowledge of any matters pertaining to such statement should be drawn from my
position as General Counsel of PIMCO Funds Advisors.
Subject to the foregoing and the other matters set forth herein, it is
my opinion that, as of the date hereof:
D-2
1. PIMCO is a limited liability company and is validly existing and in
good standing under the Delaware Limited Liability Company Act (6 Del. C (S).
18-101, et seq.) with all necessary partnership power and authority to enter
into and deliver the Portfolio Management Agreement and perform its obligations
thereunder and to carry on its business as it is now being conducted and as
described in the Registration Statement. Based solely on certificates from
public officials, I confirm that PIMCO is qualified to do business in the
following States: ______________, such States being those jurisdictions in which
its ownership or leasing of property or its conducting of business requires such
qualification and where failure to so qualify would have a material adverse
effect on the ability of the Investment Manager to perform its obligations under
the Investment Management Agreement and the Portfolio Management Agreement.
2. The execution, delivery and performance of the Portfolio Management
Agreement by PIMCO have been duly authorized by all necessary partnership action
of PIMCO and no other actions on the part of PIMCO or its unitholders or any
subsidiary of PIMCO or its unitholders is necessary to authorize and consummate
the transactions contemplated thereby, and the Portfolio Management Agreement
has been duly executed and delivered by PIMCO.
3. The Portfolio Management Agreement constitutes a legally valid and
binding agreement of PIMCO, enforceable against PIMCO in accordance with its
terms.
4. Neither the execution and delivery of the Portfolio Management
Agreement by PIMCO, nor the consummation by PIMCO of transactions contemplated
thereby, nor compliance by PIMCO with any of the terms and provisions thereof
will:
(i) violate any provision of the [Limited Liability Company
Agreement] of PIMCO, effective [ ],
(ii) violate any federal, California or New York statute, rule
or regulation applicable to PIMCO (other than federal and state
securities or blue sky laws, the Investment Company Act of 1940, as
amended, and the Investment Advisers Act of 1940, as amended, as to
which I express no opinion),
(iii) violate any agreement to which PIMCO is a party or by which
it is bound and which is material to PIMCO's businesses taken as a
whole (the "Material Agreements"),
(iv) violate any order, writ, injunction or decree, known to me
and applicable to PIMCO, or
(v) to the best of my knowledge, require any consents,
approvals, authorizations, registrations, declarations or filings by
PIMCO under any federal statute, rule or regulation applicable to
PIMCO, except as have been obtained under the Act, the Investment
Company Act or the Investment Advisers Act of 1940.
D-3
No opinion is expressed in this paragraph 4 as to the application of
Section 548 of the federal Bankruptcy Code and comparable provisions of state or
foreign law or of any antifraud laws, antitrust or trade regulation laws. No
opinion is expressed in this paragraph 4 with respect to the operating licenses
necessary for PIMCO's businesses.
5. PIMCO is duly registered as an investment adviser under the
Advisers Act and is not prohibited by the Advisers Act or the Investment Company
Act from acting as investment sub-adviser for the Fund as contemplated by the
Portfolio Management Agreement, the Registration Statement and the Prospectus.
6. The description of PIMCO and its business, and the statements
attributable to PIMCO, set forth in the Registration Statement and the
Prospectus under the headings "Prospectus Summary - Portfolio Manager" and
"Management of the Fund" do not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
7. There is no action, suit or proceeding before or by any court,
commission, regulatory body, administrative agency or other governmental agency
or body, foreign or domestic, now pending or, to my knowledge, threatened
against PIMCO of a nature required to be disclosed in the Registration Statement
or Prospectus or the ability of PIMCO to fulfill its obligations under the
Portfolio Management Agreement.
The opinions expressed in paragraph 3 above are subject to the
following limitations, qualifications and exceptions:
(a) the effect of bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to or affecting the
rights or remedies of creditors generally;
(b) the effect of general principles of equity, whether enforcement is
considered in a proceeding in equity or at law, and the discretion of the court
before which any proceeding therefor may be brought;
(c) the unenforceability under certain circumstances under law or
court decisions of provisions providing for the indemnification of or
contribution to a party with respect to a liability where such indemnification
or contribution is contrary to public policy; and
(d) the unenforceability of any provision requiring the payment of
attorney's fees, except to the extent that a court determines such fees to be
reasonable.
In rendering the opinions expressed in paragraph 4 insofar as they
require interpretation of the Material Agreements (i) I have assumed with your
permission that all courts of competent jurisdiction would enforce such
agreements as written but would apply the internal laws of the State of New York
without giving effect to any choice of law provisions contained therein or any
choice of law principles which would result in
D-4
application of the internal laws of any other state and (ii) to the extent that
any questions of legality or legal construction have arisen in connection with
my review, I have applied the laws of the State of New York in resolving such
questions. I advise you that certain of the Material Agreements may be governed
by other laws, that such laws may vary substantially from the law assumed to
govern for purposes of this opinion, and that this opinion may not be relied
upon as to whether or not a breach or default would occur under the law actually
governing such Material Agreements.
To the extent that the obligations of PIMCO may be dependent upon such
matters, I assume for purposes of this opinion that: (i) all parties to the
Portfolio Management Agreement other than PIMCO are duly incorporated or
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation or organization; (ii) all parties to
the Portfolio Management Agreement other than PIMCO have the requisite power and
authority and, in the case of natural persons, legal capacity to execute and
deliver the Portfolio Management Agreement and to perform their respective
obligations under the Portfolio Management Agreement to which they are a party;
and (iii) the Portfolio Management Agreement has been duly authorized, executed
and delivered by such parties other than PIMCO and, other than PIMCO, constitute
their legally valid and binding obligations, enforceable against them in
accordance with their terms. I express no opinion as to compliance by any
parties to the Portfolio Management Agreement with any state or federal laws or
regulations applicable to the subject transactions because of the nature of
their business and I express no opinion as to compliance by any parties to the
Portfolio Management Agreement with any foreign laws or regulations applicable
to the transactions contemplated by the Portfolio Management Agreement or which
may affect the Portfolio Management Agreement's enforceability.
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be relied
upon by you for any other purpose, or furnished to, quoted to or relied upon by
any other person, firm or corporation for any purpose, without my prior written
consent.
Very truly yours,
D-5
SCHEDULE E
FORM OF [LOCAL COUNSEL] OPINION
October [ ], 2002
UBS Warburg LLC
X.X. Xxxxxxx & Sons, Inc.
RBC Xxxx Xxxxxxxx Incorporated
Wachovia Securities, Inc.
Xxxxx Fargo Securities, LLC
Xxxxxxx, Xxxxxx & Co.
H&R Block Financial Advisors, Inc.
Quick & Xxxxxx, Inc.
Wedbush Xxxxxx Securities Inc.
UBS Warburg LLC
as Managing Underwriters
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Re: PIMCO California Municipal Income Fund III
Registration Statement on Form N-2
Ladies and Gentlemen:
We have acted as special California counsel to the PIMCO California
Municipal Income Fund III, a Massachusetts business trust (the "Fund"), in
connection with the Fund's sale to you of an aggregate of [ ] common shares
of beneficial interest of the Fund, pursuant to a registration statement on Form
N-2 under the Securities Act of 1933, as amended (the "Act") and the Investment
Company Act of 1940, as amended (the "Investment Company Act"), filed with the
Securities and Exchange Commission (the "Commission") on [ ], 2002 (Act File
No. 333-[ ], and Investment Company Act File No. 811-[ ]), as amended by
Amendment No. 1 filed with the Commission on [ ], 2002 (the "Registration
Statement"), and an underwriting agreement dated October [ ], 2002 by and
between you, the Fund, PIMCO Funds Advisors and Pacific Investment Management
Company LLC (the "Underwriting Agreement").
This opinion is rendered to you pursuant to Section 6(e) of the
Underwriting Agreement. Capitalized terms used herein without definition have
the meanings assigned to them in the Underwriting Agreement.
E-1
In our capacity as special California counsel to the Fund, we have relied
as to matters of fact, to the extent we deem proper, on statements contained in
the Registration Statement, Prospectus and Statement of Additional Information
and on publicly available sources of information published by the State of
[New York] [California]. In addition, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction of such documents,
corporate records and other instruments as we have deemed necessary or
appropriate for purposes of this opinion. For purposes of our opinion, we have
not conducted an independent investigation or audit of the facts set forth in
the foregoing certificates or documents. In our examination, we have assumed the
authenticity of all documents submitted to us as originals, the genuineness of
all signatures thereon, the legal capacity of natural persons executing such
documents and the conformity to authentic original documents of all documents
submitted to us as copies.
No opinion is expressed as to any matter not discussed herein. We are
opining herein only as to the effect of the California tax laws, and we express
no opinion with respect to the applicability or effect of federal laws, other
California laws, the laws of any other state or jurisdiction or as to any
matters of municipal law or the laws of any other local agencies within any
state.
Based upon such facts, assumptions and representations, including the facts
set forth in the Registration Statement, Prospectus, and Statement of Additional
Information, the statements contained in the Prospectus under the heading "Tax
Matters - California Tax Matters" and in Appendix B to the Statement of
Additional Information under the heading "Factors Pertaining to California -
California Tax Matters," to the extent that such statements constitute matters
of law or legal conclusions, are correct in all material respects. This opinion
is based on current California tax laws and interpretations thereof by courts
having jurisdiction over such matters, both of which are subject to change
either prospectively or retroactively.
Although we do not pass upon or assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, and have not made any independent check or
verification thereof, no facts have come to our attention which would lead us to
believe that the material contained in the Prospectus under the heading "Tax
Matters - California Tax Matters" and in Appendix B to the Statement of
Additional Information under the heading "Factors Pertaining to California," at
the time the Registration Statement became effective, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
that the Prospectus, as of its date and as of the date hereof, contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading or that any
amendment or supplement to the Prospectus, as of its respective date, and as of
the date hereof, contained any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order
E-2
to make the statements in the Prospectus, in the light of the circumstances
under which they were made, not misleading.
This opinion is rendered to you as of the date of this letter, and we
undertake no obligation to update this information subsequent to the date
hereof. Any variation or difference in the facts from those set forth in the
representations described above, including in the Registration Statement,
Prospectus and Statement of Additional Information, may affect the conclusions
stated herein.
This opinion is rendered to you and is for your benefit in connection with
the filing of the Registration Statement with the Commission. This opinion may
not be relied upon by you for any other purpose, or furnished to, quoted to or
relied upon by any other person, firm or corporation for any purpose, without
prior written consent.
Very truly yours,
E-3
SCHEDULE F
FORM OF ACCOUNTANT'S LETTER
October [ ], 2002
The Board of Trustees of
PIMCO California Municipal Income Fund III
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
UBS Warburg LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
as Managing Representative of the Underwriters
Ladies and Gentlemen:
We have audited the statement of assets and liabilities of PIMCO
California Municipal Income Fund III (the "Fund") as of [ ], 2002 included
in the Registration Statement on Form N-2 filed by the Fund under the Securities
Act of 1933 (the "Act") (File No. 333-[ ]) and under the Investment Company
Act of 1940 (the "1940 Act") (File No. 811-[ ]); such statement and our
report with respect to such statement are included in the Registration
Statement.
In connection with the Registration Statement:
1. We are independent public accountants with respect to the Fund
within the meaning of the Act and the applicable rules and regulations
thereunder.
2. In our opinion, the statement of assets and liabilities
included in the Registration Statement and audited by us complies as
to form in all respects with the applicable accounting requirements of
the Act, the 1940 Act and the respective rules and regulations
thereunder.
3. For purposes of this letter we have read the minutes of all
meetings of the Shareholders, the Board of Trustees and all Committees
of the Board of Trustees of the Fund as set forth in the minute books
at the offices of the Fund, officials of the Fund having advised us
that the minutes of all such meetings through [ ], 2002, were set
forth therein.
4. Fund officials have advised us that no financial statements as
of any date subsequent to [ ], 2002, are available. We have made
inquiries of certain officials of the Fund who have responsibility for
financial and accounting matters
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regarding whether there was any change at [ ], 2002, in the capital
shares or net assets of the Fund as compared with amounts shown in the
[ ], 2002, statement of assets and liabilities included in the
Registration Statement, except for changes that the Registration
Statement discloses have occurred or may occur. On the basis of our
inquiries and our reading of the minutes as described in Paragraph 3,
nothing came to our attention that caused us to believe that there
were any such changes.
The foregoing procedures do not constitute an audit made in accordance
with generally accepted auditing standards. Accordingly, we make no
representations as to the sufficiency of the foregoing procedures for your
purposes.
This letter is solely for the information of the addressees and to
assist the underwriters in conducting and documenting their investigation of the
affairs of the Fund in connection with the offering of the securities covered by
the Registration Statement, and is not to be used, circulated, quoted or
otherwise referred to within or without the underwriting group for any other
purpose, including but not limited to the registration, purchase or sale of
securities, nor is it to be filed with or referred to in whole or in part in the
Registration Statement or any other document, except that reference may be made
to it in the underwriting agreement or in any list of closing documents
pertaining to the offering of the securities covered by the Registration
Statement.
Very Truly Yours,
PRICEWATERHOUSECOOPERS LLP
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