Amended and Restated VMTP Purchase Agreement

CONTENTS

SECTION

PAGE

ARTICLE I DEFINITIONS

1

1.1

Incorporation of Certain Definitions by Reference and Interpretation

7

ARTICLE II PURCHASE AND TRANSFERS, COSTS AND EXPENSES; ADDITIONAL FEE

7

2.1

Purchase and Transfer of the VMTP Shares

7

2.2

Fees

9

2.3

Operating Expenses

9

2.4

Additional Fee for Failure to Comply with Reporting Requirement or Registration Rights Failure

9

ARTICLE III CONDITIONS TO AMENDMENT AND RESTATEMENT DATE

10

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE ISSUER

11

4.1

Existence

11

4.2

Authorization; Contravention

11

4.3

Binding Effect

11

4.4

Financial Information

12

4.5

Litigation

12

4.6

Consents

12

4.7

Placement of VMTP Shares

13

4.8

Complete and Correct Information

15

4.9

1940 Act Registration

16

4.10

Effective Leverage Ratio; Asset Coverage

16

4.11

Credit Quality

16

4.12

Due Diligence

16

4.13

Certain Fees

17

4.14

Eligible Assets

17

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

17

5.1

Existence

17

5.2

Authorization; Contravention

17

5.3

Binding Effect

18

5.4

Restricted Securities; Own Account

18

5.5

Litigation

18

5.6

Consents

18

5.7

Purchaser Status

19

5.8

Experience of the Purchaser

19

5.9

Certain Transactions

19

5.10

Due Diligence

19

5.11

Certain Fees

19

ARTICLE VI COVENANTS OF THE ISSUER

19

6.1

Information

20

6.2

No Amendment or Certain Other Actions Without Consent of the Purchaser

22

6.3

Maintenance of Existence

22

6.4

Tax Status of the Issuer

23

6.5

Payment Obligations

23

6.6

Compliance With Law

23

6.7

Maintenance of Approvals: Filings, Etc.

23

6.8

Inspection Rights

23

6.9

Litigation, Etc

24

6.10

1940 Act Registration

24

6.11

Credit Quality

24

6.12

Maintenance of Effective Leverage Ratio

24

6.13

Redemption and Paying Agent

25

6.14

Cooperation in the Sale of the VMTP Shares

25

6.15

Use of Proceeds

25

6.16

Securities Depository

25

6.17

Future Agreements

25

6.18

Eligible Assets

26

6.19

Placement of VMTP Shares

26

ARTICLE VII MISCELLANEOUS

26

7.1

Notices

26

7.2

No Waivers

28

7.3

Expenses and Indemnification

28

7.4

Amendments and Waivers

31

7.5

Successors and Assigns

31

7.6

Term of this Agreement

31

7.7

Governing Law

32

7.8

Waiver of Jury Trial

32

7.9

Counterparts

32

7.10

Beneficiaries

32

7.11

Entire Agreement

32

7.12

Relationship to the Articles Supplementary

32

7.13

Confidentiality

33

7.14

Severability

33

7.15

Consent Rights of the Majority Participants to Certain Actions

34

SCHEDULE I

Schedule 1-1

SCHEDULE 2

Schedule 2-1

EXHIBIT A

FORMS OF OPINIONS OF COUNSEL FOR THE ISSUER

A-1

EXHIBIT A-1

FORM OF CORPORATE AND 1940 ACT OPINION

▇-▇-▇

▇▇▇▇▇▇▇ ▇-▇

FORM OF TAX OPINION

▇-▇-▇

▇▇▇▇▇▇▇ ▇-▇

FORM OF LOCAL COUNSEL OPINION

▇-▇-▇

▇▇▇▇▇▇▇ ▇-▇

FORM OF NEGATIVE ASSURANCE LETTER

A-4-1

EXHIBIT B

ELIGIBLE ASSETS

B-1

EXHIBIT C

TRANSFEREE CERTIFICATE

C-1

EXHIBIT D

INFORMATION TO BE PROVIDED BY THE ISSUER

D-1

ANNEX A

MATERIAL LITIGATION STATEMENT

ANNEX A

1.1

Incorporation of Certain Definitions by Reference and Interpretation

2.1

Purchase and Transfer of the VMTP Shares

(a)

(i) On the Effective Date, BAPFC acquired 345 of the VMTP Shares and Blue Ridge acquired 245 of the VMTP Shares, sold on initial issuance in a transaction (which, based upon the representations of the Issuer, BAPFC and Blue Ridge, is exempt from registration under the Securities Act), in each case, by payment of the Purchase Price in immediately available funds to the Issuer through the account of its Custodian or its agent at the Securities Depository.

(b)

The Purchaser agrees that it may offer, sell, transfer or otherwise dispose of the VMTP Shares in compliance with the Securities Act and applicable state securities laws only in whole shares and only (i)(1) to Persons that it reasonably believes are QIBs that are: (a) registered closed-end management investment companies, the shares of which are traded on a national securities exchange and registered open-end management investment companies, in each case, that (X) are either sponsored or managed by an entity listed on Schedule 2 of this Purchase Agreement or any other entity that is controlled by, controlling or under common control with an entity listed on Schedule 2 of this Purchase Agreement and (Y) invest primarily in municipal obligations (each, a "Registered Investment Company"); (b) banks or entities that are 100% direct or indirect subsidiaries of banks' publicly traded parent holding companies (collectively, "Banks"); or (c) insurance companies, in each case, pursuant to Rule 144A or another available exemption from registration under the Securities Act, in a manner not involving any public offering within the meaning of Section 4(a)(2) of the Securities Act, (2) to tender option bond trusts in which all investors are Persons that the Purchaser reasonably believes are QIBs that are Registered Investment Companies, Banks or insurance companies (or, in the case of a tender option bond trust in which the Holder or an affiliate of the Holder retains a residual interest), or (3) to other investors with the prior written consent of the Issuer and (ii) unless the prior written consent of each of the Issuer and the Majority Participants has been obtained, not to Neuberger Persons if such Neuberger Persons would, after such sale and transfer, own more than 20% of the Outstanding VMTP Shares.  Any transfer in violation of the foregoing restrictions shall be void ab initio.  In the event that the Purchaser intends to transfer the VMTP Shares, the Purchaser shall provide written notice to the Fund, which notice shall be signed by the Purchaser, indicating the Purchaser's intent to transfer the VMTP Shares and the name of the intended transferee at least three (3) Business Days in advance of the transfer. In connection with any transfer of the VMTP Shares, each transferee (including, in the case of a tender option bond trust, the depositor or trustee or other Person thereunder acting on behalf of such transferee) will be required to deliver to the Issuer a transferee certificate set forth as Exhibit C to this Agreement no later than the date of the transfer.  The foregoing restrictions on transfer shall not apply to any VMTP Shares registered under the Securities Act pursuant to the Registration Rights Agreement or any subsequent transfer of such registered VMTP Shares thereafter.

(c)

In the event that the Purchaser transfers, in accordance with Section 2.1(b), VMTP Shares to a tender option bond trust in which the Purchaser retains a residual interest, for so long as no event has occurred that results in the termination of such tender option bond trust, for purposes of each of the Applicable Sections (as defined below) that requires, permits or provides for (i) notice or the delivery of information to or (ii) voting of the VMTP Shares or the giving of any consent by or (iii) payment of fees, in each case, to the Purchaser or the Majority Participants, the Purchaser, and not such tender option bond trust, shall be deemed to be the actual owner of such VMTP Shares.  For the avoidance of doubt, the deemed ownership provided for in this Section 2.1(c) shall be limited to the following sections of this Agreement:  2.1(b), 2.4, 6.1, 6.2, 6.8, 6.9, 6.12, 6.14, 6.17, 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.8, 7.10, 7.12 and 7.15 (collectively, the "Applicable Sections").  The deemed ownership provided for in this Section 2.1(c) shall last until the earliest of (A) the termination of such tender option bond trust; (B) the agreement by the Issuer and the Purchaser to terminate such deemed ownership; and (C) with respect to some or all of the Applicable Sections, the good-faith determination by the Purchaser that such deemed ownership has adverse tax, legal or other regulatory consequences or is otherwise no longer consistent with applicable law.

(d)

Anything herein to the contrary notwithstanding, except with respect to the deemed ownership provided for above in respect of the Applicable Sections, the tender option bond trust to which VMTP Shares are transferred and each of the beneficial owners thereof shall retain all of its other rights in respect of the Issuer and the VMTP Shares pursuant to this Agreement and the Articles Supplementary or under law, including, for the avoidance of doubt, its rights under any of the Applicable Sections to the extent necessary for the protection or exercise of such other rights retained pursuant to this Section 2.1(d) or that are otherwise applicable as a result of the exercise of such other rights.

2.2

Fees

2.3

Operating Expenses

2.4

Additional Fee for Failure to Comply with Reporting Requirement or Registration Rights Failure

(a)

For so long as the Purchaser is a Holder or Designated Owner of any Outstanding VMTP Shares, if the Issuer fails to comply with the reporting requirements set forth in Sections 6.1(o) and 6.1(p) (except as a result of a Force Majeure Exception) and such failure is not cured within seven (7) Business Days after written notification to the Issuer by the Purchaser of such failure (a "Reporting Failure") or a Registration Rights Failure occurs, and such failure is not cured within seven (7) Business Days after written notification to the Issuer by the Purchaser of such failure, the Issuer shall pay to the Purchaser on the Dividend Payment Date occurring in the month immediately following a month in which either such Reporting Failure or Registration Failure (either, a "Failure") continues a fee, calculated in respect of each Week (or portion thereof) during such month in respect of a Failure and beginning on the date of such Failure, equal to the product of (i) the Fee Rate, times (ii) the aggregate average daily Liquidation Preference of the VMTP Shares held by the Purchaser during such Week or portion thereof, times (iii) the quotient of the number of days in such Week or portion thereof divided by the number of calendar days in the year in which such Week or portion thereof occurs.  Notwithstanding the foregoing, in no event shall (i) the fee payable pursuant to this Section 2.4 hereunder for any Week plus the Applicable Spread on the VMTP Shares for such Week exceed an amount (exclusive of any Gross-Up Payment or Gross-Up State Payment, as applicable) equal to the product of (x) 15%, times (y) the aggregate average daily Liquidation Preference of the VMTP Shares held by the Purchaser during such Week or portion thereof, times (z) the quotient of the number of days in such Week or portion thereof divided by the number of calendar days in the year in which such Week or portion thereof occurs; (ii) the fee payable pursuant to this Section 2.4 for any Week plus the amount of dividends payable at the Dividend Rate for the VMTP Shares for such Week exceed an amount equal to the product of (aa) 15%, times (bb) the aggregate average daily Liquidation Preference of the VMTP Shares held by the Purchaser during such Week or portion thereof, times (cc) the quotient of the number of days in such Week or portion thereof divided by the number of calendar days in the year in which such Week or portion thereof occurs; or (iii) the Issuer be required to calculate or pay a fee in respect of more than one Failure in any Week.

(a)

this Agreement shall have been duly executed and delivered by the parties hereto;

(b)

the VMTP Shares shall have a long-term issue credit rating of at least AA- (or its equivalent) from Fitch on the Amendment and Restatement Date;

(c)

receipt by the Purchaser of executed originals, or copies certified by a duly authorized officer of the Issuer to be in full force and effect and not otherwise amended, of all Related Documents, as in effect on the Effective Date (or the Amendment and Restatement Date, as the case may be), and an incumbency certificate with respect to the authorized signatories thereto;

(d)

receipt by the Purchaser of opinions of counsel for the Issuer, substantially to the effect of Exhibit A;

(e)

except as disclosed in Annex A hereto, there shall not be any pending or overtly threatened material litigation against the Issuer (unless such pending or threatened litigation has been determined by the Purchaser to be acceptable);

(f)

the fees and expenses and all other amounts payable on the Amendment and Restatement Date pursuant to Section 2.2 hereof shall have been paid;

(g)

the Purchaser, in its reasonable discretion, shall be satisfied that no change in law, rule or regulation (or their interpretation or administration), in each case, shall have occurred which will adversely affect the consummation of the transaction contemplated by this Agreement;

(h)

there shall have been delivered to the Purchaser any additional documentation and financial information, including satisfactory responses to the Due Diligence Request, as it deems relevant; and

(i)

there shall have been delivered to the Purchaser such information and copies of documents, approvals (if any) and records certified, where appropriate, of corporate proceedings as the Purchaser may have requested relating to the Issuer's entering into and performing this Agreement and the other Related Documents to which the Issuer is a party, and the transactions contemplated hereby and thereby.

4.1

Existence

4.2

Authorization; Contravention

4.3

Binding Effect

4.4

Financial Information

4.5

Litigation

4.6

Consents

4.7

Placement of VMTP Shares

(a)

The terms of the VMTP Shares conform in all material respects to those set forth in the Articles Supplementary.

(b)

As of the date of this Agreement, the VMTP Shares will satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act, and no securities of the same class (within the meaning of Rule 144A(d)(3) under the Securities Act) as the VMTP Shares are listed on any national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system.

(c)

Neither the Issuer, nor any Person acting on its behalf, has, directly or indirectly, made offers or sales of any security (as defined in the Securities Act), or solicited offers to buy any security, under circumstances that would require the registration of the VMTP Shares under the Securities Act (except for the circumstances set forth in the Registration Rights Agreement).

(d)

The Issuer's directors and officers, errors and omissions insurance policy and its fidelity bond required by Rule 17g-1 under the 1940 Act are in full force and effect; the Issuer is in compliance with the terms of such policy and fidelity bond in all material respects; and there are no claims by the Issuer under any such policy or fidelity bond as to which any insurance company is denying liability or defending under a reservation of rights clause; the Issuer has not been refused any insurance coverage sought or applied for; and the Issuer has no reason to believe that it will not be able to renew its existing insurance coverage and fidelity bond as and when such coverage and fidelity bond expires or to obtain similar coverage and fidelity bond from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on the condition (financial or otherwise), business prospects, earnings, business, properties, net assets or results of operations of the Issuer (other than as a result of a change in the financial markets generally), whether or not arising from transactions in the ordinary course of business.

(e)

The Issuer maintains and 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 and with the investment objectives, policies and restrictions of the Issuer and the applicable requirements of the 1940 Act, the rules and regulations thereunder and the Code; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles in the United States, to calculate net asset value, to maintain accountability for assets, and to maintain material compliance with the books and records requirements under the 1940 Act and rules and regulations thereunder; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals, and appropriate action is taken with respect to any differences.  The Issuer employs "internal controls over financial reporting" (as such term is defined in Rule 30a-3 under the ▇▇▇▇ ▇▇▇) and such internal controls over financial reporting are effective as required the 1940 Act and the rules and regulations thereunder.  The Issuer is not aware of any material weakness in its internal control over financial reporting.

(f)

The Issuer maintains "disclosure controls and procedures" (as such term is defined in Rule 30a-3 under the 1940 Act); such disclosure controls and procedures are effective as required under the 1940 Act and the rules and regulations thereunder.

(g)

The Issuer has not taken, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in violation of federal securities laws, in stabilization or manipulation of the price of any security of the Issuer to facilitate the sale or resale of the VMTP Shares, and the Issuer is not aware of any such action taken or to be taken by any affiliates of the Issuer.

(h)

Each of the Custodian Agreement, the investment management agreement between with Adviser and the Issuer (the "Investment Management Agreement"), the Redemption and Paying Agent Agreement and the other Related Documents complies in all material respects with all applicable provisions of the 1940 Act and the rules and regulations thereunder and the Advisers Act of 1940 and the rules and regulations thereunder, and the Issuer's directors and stockholders have approved the Investment Management Agreement in accordance with Sections 15(a) and 15(c), respectively, of the 1940 Act.

(i)

The Issuer has adopted and implemented written policies and procedures reasonably designed to prevent violation of the Federal Securities Laws (as that term is defined in Rule 38a-1 under the ▇▇▇▇ ▇▇▇) by the Issuer, including policies and procedures that provide oversight of compliance by each investment adviser and transfer agent of the Issuer.

(j)

The Issuer has taken all reasonable measures to ensure that any Bloomberg screen containing information about the VMTP Shares includes the following (or similar) language:

(i)

the "Note Box" on the bottom of the "Security Display" page describing the VMTP Shares will state: "Iss'd Under 144A."

(ii)

the "Security Display" page will have flashing a red indicator "See Other Available Information."

(iii)

the indicator will link to the "Additional Security Information" page, which will state that the securities "are being offered in reliance on the exemption from registration under Rule 144A of the Securities Act to persons who are qualified institutional buyers (as defined in Rule 144A under the Securities Act)."

(k)

The Issuer has instructed The Depository Trust Company ("DTC") to take these or similar steps with respect to the VMTP Shares:  the DTC 20-character security descriptor and 48-character additional descriptor will indicate that sales are limited to QIBs.

(l)

The Issuer has confirmed that CUSIP has established a "fixed field" attached to the CUSIP number for the VMTP Shares containing the "144A" indicator.

(m)

The Issuer is not in violation or default of any provision of its Charter or the Articles Supplementary, or in material violation of (i) the terms of any material indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject or (ii) any material statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Issuer or any of its properties, except to the extent that the same could not be reasonably expected to give rise to a Material Adverse Effect.

4.8

Complete and Correct Information

4.9

1940 Act Registration

4.10

Effective Leverage Ratio; Asset Coverage

4.11

Credit Quality

4.12

Due Diligence

4.13

Certain Fees

4.14

Eligible Assets

5.1

Existence

5.2

Authorization; Contravention

5.3

Binding Effect

5.4

Restricted Securities; Own Account

5.5

Litigation

5.6

Consents

5.7

Purchaser Status

5.8

Experience of the Purchaser

5.9

Certain Transactions

5.10

Access to Information

6.1

Information

(a)

as promptly as practicable after the preparation and filing thereof with the Securities and Exchange Commission, each annual and semi-annual report prepared with respect to the Issuer, which delivery may be made by notice of the electronic availability of any such document on a public website;

(b)

notice of any change in (including being put on Credit Watch or Watchlist), or suspension or termination of, the rating on the VMTP Shares by any Rating Agency (and any corresponding change in the Rating Agency Guidelines applicable to the VMTP Shares associated with any such change in the rating from any Rating Agency) or any change of a Rating Agency rating the VMTP Shares as promptly as practicable upon the occurrence thereof;

(c)

notice of any redemption or other repurchase of any or all of the VMTP Shares as provided in the Articles Supplementary;

(d)

notice of any proposed amendments to any of the Related Documents at such time as the amendments are sent to other parties (other than the Board of Directors) whose approval is required for such amendment and in any event not less than ten (10) Business Days prior to any proposed amendment and copies of all actual amendments thereto within ten (10) Business Days of being signed or, in each case, as provided in the relevant document;

(e)

notice of any missed, reduced or deferred dividend payment on the VMTP Shares that remains uncured for more than three (3) Business Days as soon as reasonably practicable, but in no event later than one (1) Business Day after expiration of the foregoing grace period;

(f)

notice of the failure to make any deposit provided for under Section 11 of the Articles Supplementary in respect of a properly noticed redemption as soon as reasonably practicable, but in no event later than two (2) Business Days after discovery of such failure to make any such deposit;

(g)

notice of noncompliance with the basic maintenance amount requirements or material noncompliance with other requirements comprising the Rating Agency Guidelines (if applicable) for more than five (5) Business Days as soon as reasonably practicable, but in no event later than one (1) Business Day after expiration of the foregoing grace period;

(h)

notice of the distribution of net capital gains or ordinary income one (1) Business Day in advance of the Rate Period that such net capital gains or ordinary income will or may be distributed, which notice shall be in addition to any notice provided by the Redemption and Paying Agent to Designated Owners or their Agent Members;

(i)

notice of any change to any investment adviser or sub-adviser of the Issuer within two (2) Business Days after a resignation or a notice of removal has been sent by or to any investment adviser or sub-adviser;

(j)

notice of any proxy solicitation of stockholders by the Issuer, which may be satisfied by delivery of the proxy statement itself, as soon as reasonably practicable, but in no event later than five (5) Business Days after the mailing thereof to all stockholders;

(k)

notice no later than two (2) Business Days after the occurrence thereof of (i) the failure of the Issuer to pay the amount due on any "senior securities" (as defined under the ▇▇▇▇ ▇▇▇) or other debt issued by the Issuer at the time outstanding, and any period of grace or cure with respect thereto shall have expired; (ii) the failure of the Issuer to pay, or admitting in writing its inability to pay, its debts generally as they become due; or (iii) the failure of the Issuer to pay accumulated dividends on any additional preferred stock ranking pari passu with the VMTP Shares, after any period of grace or cure with respect thereto shall have expired;

(l)

notice of a material breach of any representation, warranty or covenant of the Issuer contained in this Agreement, the Registration Rights Agreement or the Articles Supplementary, in each case, only if an officer of the Issuer has actual knowledge of such breach as soon as reasonably practicable, but in no event later than five (5) Business Days after actual knowledge of an officer of the Issuer;

(m)

notice of any litigation, administrative proceeding or business development which may reasonably be expected to materially adversely affect the Issuer's business, properties or affairs, or the ability of the Issuer to perform its obligations as set forth hereunder or under any of the other Related Documents to which it is a party as soon as reasonably practicable, but in no event later than ten (10) Business Days after actual knowledge of an officer of the Issuer thereof;

(n)

upon request of the Purchaser, copies of any material that the Issuer has delivered to each Rating Agency which is then rating VMTP Shares at such times and containing such information as set forth in the respective Rating Agency Guidelines as soon as reasonably practicable after such material has been sent;

(o)

on the fifteenth (15^th) Business Day following each Calculation Date (each a "Portfolio Reporting Date"), a report of portfolio holdings of the Issuer as of the Calculation Date immediately preceding each such Portfolio Reporting Date, prepared on a basis substantially consistent with the periodic reports of portfolio holdings of the Issuer prepared for financial reporting purposes;

(p)

on the fifteenth (15^th)  Business Day following each Calculation Date and last day of each month, the information set forth in Exhibit D to this Agreement and a calculation of the Effective Leverage Ratio and the Asset Coverage of the Issuer in each case, as of the Calculation Date; and upon the failure of the Issuer to maintain Asset Coverage as provided in Section 6(a) of the Articles Supplementary or the Effective Leverage Ratio as required by Section 6(c) of the Articles Supplementary, notice of such failure within one (1) Business Day of the occurrence thereof provided that the methodology for determining Market Value for purposes of the Effective Leverage Ratio and Asset Coverage that is reported to the Purchaser shall be consistent with the methodology for determining Market Value that is utilized for Asset Coverage that is reported to a Rating Agency and regulators; and

(q)

from time to time such additional information regarding the financial position, results of operations or prospects of the Issuer as the Purchaser may reasonably request including, without limitation, copies of offering materials with respect to the sale of any securities of the Issuer as soon as reasonably practicable, but in no event later than seven (7) Business Days after such a request.

6.2

No Amendment or Certain Other Actions Without Consent of the Purchaser

6.3

Maintenance of Existence

6.4

Tax Status of the Issuer

6.5

Payment Obligations

6.6

Compliance With Law

6.7

Maintenance of Approvals: Filings, Etc.

6.8

Inspection Rights

6.9

Litigation, Etc.

6.10

1940 Act Registration

6.11

Credit Quality

6.12

Maintenance of Effective Leverage Ratio

6.13

Redemption and Paying Agent

6.14

Cooperation in the Sale of the VMTP Shares

6.15

Securities Depository

6.16

Future Agreements

6.17

Eligible Assets

6.18

Placement of VMTP Shares

7.1

Notices

(a)

if to the Issuer:

(b)

if to the Purchaser:

7.2

No Waivers

(a)

The obligations of the Issuer hereunder shall not in any way be modified or limited by reference to any other document, instrument or agreement (including, without limitation, the VMTP Shares or any other Related Document).  The rights of the Purchaser hereunder are separate from and in addition to any rights that any Holder or Designated Owner of any VMTP Share may have under the terms of such VMTP Share or any Related Document or otherwise.

(b)

No failure or delay by the Issuer or the Purchaser in exercising any right, power or privilege hereunder or under the VMTP Shares shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  No failure or delay by the Issuer or the Purchaser in exercising any right, power or privilege under or in respect of the VMTP Shares or any other Related Document shall affect the rights, powers or privileges of the Issuer or the Purchaser hereunder or shall operate as a limitation or waiver thereof.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

7.3

Expenses and Indemnification

(a)

The Issuer shall upon demand either, as the Purchaser may require, pay in the first instance or reimburse the Purchaser (to the extent that payments for the following items are not made under the other provisions hereof) for all reasonable out-of-pocket expenses (including reasonable fees and costs of outside counsel, and reasonable consulting, accounting, appraisal, investment banking, and similar professional fees and charges) incurred by the Purchaser in connection with the enforcement of or preservation of rights under this Agreement. The Issuer shall not be responsible under this Section 7.3(a) for the fees and costs of more than one law firm in any one jurisdiction with respect to any one proceeding or set of related proceedings for the Purchaser, unless the Purchaser shall have reasonably concluded that there are legal defenses available to it that are different from or additional to those available to the Issuer.

(b)

The Issuer agrees to indemnify and hold harmless the Purchaser and each other Indemnified Person of the Purchaser from and against any losses, claims, damages, liabilities and reasonable out-of-pocket expenses incurred by them (including reasonable fees and disbursements of outside counsel) that are related to or arise out of) any claim by any third party relating to the offering or sale of the VMTP Shares by the Issuer or the holding of the VMTP Shares by the Purchaser (A) that the Purchaser aided and abetted a breach of a fiduciary duty by the Issuer or any director or officer of the Issuer or (B) arising from any act by the Issuer or any director or officer of the Issuer (excluding in any such case clauses (i) or (ii), claims, losses, liabilities or expenses arising out of or resulting from the gross negligence or willful misconduct of any Indemnified Person as determined by a court of competent jurisdiction).

(c)

The indemnifying party also agrees that if any indemnification sought by an Indemnified Person pursuant to this Agreement is unavailable or insufficient, for any reason, to hold harmless the Indemnified Persons of such other party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), then the indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, liabilities, damages and expenses (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the Issuer on the one hand and the Purchaser on the other hand from the actual transactions giving rise to or contemplated by this Agreement or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the Issuer on the one hand and the Purchaser on the other, in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable considerations; provided that in any event the aggregate contribution of the Purchaser and its Indemnified Persons to all losses, claims, damages, liabilities and expenses with respect to which contributions are available hereunder will not exceed the amount of dividends to be received by the Purchaser from the Issuer pursuant to the transactions giving rise to this Agreement. For purposes of determining the relative benefits to the Issuer on the one hand, and the Purchaser on the other, under the transactions giving rise to or contemplated by this Agreement, such benefits shall be deemed to be in the same proportion as (i) the total value received by the Issuer pursuant to the transactions, whether or not consummated bears to (ii) the dividends and Optional Redemption Premium paid by the Issuer to the Purchaser in connection with the transactions giving rise to or contemplated by this Agreement.  The relative fault of the parties shall be determined by reference to, among other things, whether the actions taken or omitted to be taken in connection with the transactions contemplated by this Agreement (including any misstatement of a material fact or the omission to state a material fact) relates to information supplied by the Issuer on the one hand, or the Purchaser on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action, misstatement or alleged omission, and any other equitable considerations appropriate in the circumstances. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for such fraudulent misrepresentation. The indemnity, reimbursement and contribution obligations under this Agreement shall be in addition to any rights that any Indemnified Person may have at common law or otherwise.

(d)

If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Person proposes to demand indemnification, it shall notify the indemnifying party with reasonable promptness; provided, however, that any failure by such Indemnified Person to notify the indemnifying party shall not relieve the indemnifying party from its obligations hereunder (except to the extent that the indemnifying party is materially prejudiced by such failure to promptly notify). The indemnifying party shall be entitled to assume the defense of any such action, suit, proceeding or investigation, including the employment of counsel reasonably satisfactory to the Indemnified Person. The Indemnified Person shall have the right to counsel of its own choice to represent it, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the indemnifying party has failed promptly to assume the defense and employ counsel reasonably satisfactory to the Indemnified Person in accordance with the preceding sentence or (ii) the Indemnified Person shall have been advised by counsel that there exist actual or potential conflicting interests between the indemnifying party and such Indemnified Person, including situations in which one or more legal defenses may be available to such Indemnified Person that are different from or additional to those available to the indemnifying party; provided, however, that the indemnifying party shall not, in connection with any one such action or proceeding or separate but substantially similar actions or proceedings arising out of the same general allegations be liable for fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Persons of such other party; and such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the indemnifying party and any counsel designated by the indemnifying party.

(e)

Nothing in this Section 7.3 is intended to limit any party's obligations contained in other parts of this Agreement or the VMTP Shares.

7.4

Amendments and Waivers

7.5

Successors and Assigns

7.6

Term of this Agreement

7.7

Governing Law

7.8

Waiver of Jury Trial

7.9

Counterparts

7.10

Beneficiaries

7.11

Entire Agreement

7.12

Relationship to the Articles Supplementary

7.13

Confidentiality

7.14

Severability

7.15

Consent Rights of the Majority Participants to Certain Actions.

(a)

The termination by the Issuer of any Rating Agency or the selection of any Other Rating Agency, either in replacement for a Rating Agency or as an additional Rating Agency with respect to the VMTP Shares unless (i) immediately following such termination, there would be at least one Rating Agency with respect to such VMTP Shares or (ii) it replaces the terminated Rating Agency with another Rating Agency and provides notice thereof to the Holders of such VMTP Shares; provided that such replacement shall not occur unless such replacement Other Rating Agency shall have at the time of such replacement (i) published a rating for the VMTP Shares and (ii) entered into an agreement with the Issuer to continue to publish such rating subject to the Rating Agency's customary conditions.

(b)

The Issuer issuing or suffering to exist any "senior security" (as defined in the 1940 Act as of the date hereof, but not including a Derivative Contract, or, in the event such definition shall be amended, with such changes to the definition thereof as consented to by the Majority Participants) other than the VMTP Shares issued on the Effective Date or indebtedness for borrowed money of the Issuer, except (i) borrowings for temporary purposes in an amount not to exceed 5% of the assets of the Issuer, which borrowings are repaid within sixty (60) days, (ii) the issuance of senior securities or the incurrence of indebtedness for borrowed money, the proceeds of which will be used for the redemption or repurchase of the VMTP Shares and costs incurred in connection therewith, (iii) the Issuer's issuance of tender option bonds or creation or a tender option bond trust, if any, and (iv) as may be otherwise approved or consented to by the Majority Participants, provided that if any such "senior security" is created or incurred by the Issuer it shall not require the approval of the Majority Participants if the Issuer redeems, retires or terminates such "senior security" or otherwise cures such non-compliance within five (5) Business Days of receiving notice of the existence thereof.

(c)

The Issuer (i) creating or incurring or suffering to be incurred or to exist any lien on any other funds, accounts or other property held under the Charter or the Articles Supplementary, except as permitted by the Charter or the Articles Supplementary or (ii) except for any lien for the benefit of the Custodian of the Issuer on the assets of the Issuer held by such Custodian or any lien arising by operation of law, pledging any portfolio security to secure any senior securities or other liabilities to be incurred by the Issuer unless the securities pledged pursuant to all such pledges or other security arrangements are valued, for purposes of determining the value of the collateral required to be posted or otherwise provided under all such security arrangements, (x) with respect to pledges to secure senior securities under any tender option bond trust of which the residual floating rate trust certificates will be owned by the Issuer, in an aggregate amount not less than 70% of their aggregate market value at the time of inception of the trust (by references to prices determined by an independent third-party pricing service) and (y) with respect to all other pledges to secure senior securities, in an aggregate amount not less than 70% of their aggregate market value from time to time (by reference to prices determined by an independent third-party pricing service); provided, that the required collateral value (determined in accordance with clause (x) and/or (y) above, as applicable) under such security arrangements shall not exceed the market value of the exposure of each secured party to the credit of the Issuer; and provided further, that it shall not require the approval of the Majority Participants if any such pledge or security interest in violation of the preceding sentence is created or incurred by the Issuer and the Issuer cures such violation within five (5) Business Days of receiving notice of the existence thereof.

(d)

Approval of any amendment, alteration or repeal of any provision of the Charter or the Articles Supplementary, whether by merger, consolidation or otherwise, that would materially and negatively affect any preference, right or power of the VMTP Shares differentially from the rights of the holders of the Common Shares; or

(e)

Approval of any action to be taken pursuant to Section 5(c) of the Articles Supplementary.

550 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ California Municipal Fund Inc. VMTP Shares with a Liquidation Preference of $100,000 per share.

SCHEDULE 2

1.     Aberdeen Investment Management Inc.

2.     AllianceBernstein, L.P.

3.     American Century Investment Management, Inc.

4.     BMO ▇▇▇▇▇▇ Financial Advisors, Inc.

5.     The Dreyfus Corporation

6.     BlackRock Advisors, LLC

7.     Capital Research and Management Company

8.     ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Investment Management, Inc.

9.     Columbia Management Investment Advisors, LLC

10.  Cutwater Asset Management Corp.

11.  Delaware Management Business Trust

12.  Deutsche Investment Management Americas Inc.

13.  ▇▇▇▇▇ ▇▇▇▇▇ Management

14.  Federated Investment Management Company

15.  Fidelity Management & Research Company

16.  First Investors Management Company, Inc.

17.  Franklin Advisers, Inc.

18.  GE Asset Management Incorporated

19.  ▇▇▇▇▇▇▇ ▇▇▇▇▇ Asset Management, L.P.

20.  Invesco Advisers Inc.

21.  ▇▇▇▇ ▇▇▇▇▇▇▇ Advisers, LLC

22.  ▇.▇. ▇▇▇▇▇▇ Investment Management Inc.

23.  Lord ▇▇▇▇▇▇ & Co. LLC

24.  MacKay ▇▇▇▇▇▇▇ LLC

25.  Massachusetts Financial Services Company

26.  ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Investment Management Inc.

27.  ▇▇▇▇▇▇▇▇▇ Investment Management, LLC

28.  Northern Trust Investments, Inc.

29.  Nuveen Fund Advisors, LLC

30.  OFI Global Asset Management, Inc.

31.  ▇▇▇▇▇▇ & Rygel

32.  Pacific Investment Management Company LLC

33.  Principal Management Corporation

34.  Prudential Investment Management, Inc.

35.  ▇▇▇▇▇▇ Investment Management, LLC

36.  Silvercrest Asset Management Group, LLC

37.  T ▇▇▇▇ Price Associate, Inc.

38.  UBS Global Asset Management (Americas) Inc.

39.  The Vanguard Group, Inc.

40.  ▇▇▇▇▇▇▇ & ▇▇▇▇, Inc.

41.  Western Asset Management Company

42.  ▇▇▇▇▇ Capital Management Incorporated

i.

"Municipal securities", defined as obligations of a State, the District of Columbia, a U.S. territory, or a political subdivision thereof and including general obligations, limited obligation bonds, revenue bonds, and obligations that satisfy the requirements of section 142(b)(1) of the Internal Revenue Code of 1986 issued by or on behalf of any State, the District of Columbia, any U.S. territory or any political subdivision thereof, including any municipal corporate instrumentality of 1 or more States, or any public agency or authority of any State, the District of Columbia, any U.S. territory or any political subdivision thereof. The purchase of any municipal security will be based upon the Adviser's assessment of an asset's relative value in terms of current yield, price, credit quality, and future prospects; and the Adviser will monitor the creditworthiness of the Issuer's portfolio investments and analyze economic, political and demographic trends affecting the markets for such assets.  Eligible Assets shall include any municipal securities that at the time of purchase are paying scheduled principal and interest or if at the time of purchase are in payment default, then in the sole judgment of the Adviser are expected to produce payments of principal and interest whose present value exceeds the purchase price.  For the avoidance of doubt, Municipal Securities shall include municipal variable rate demand obligations guaranteed by the Federal Home Loan Banks.

ii.

Debt obligations of the United States.

iii.

Debt obligations issued, insured, or guaranteed by a department or an agency of the U.S. Government, if the obligation, insurance, or guarantee commits the full faith and credit of the United States for the repayment of the obligation.

iv.

Debt obligations of the Washington Metropolitan Area Transit Authority guaranteed by the Secretary of Transportation under Section 9 of the National Capital Transportation Act of 1969.

v.

Debt obligations of the Federal Home Loan Banks.

vi.

Debt obligations, participations or other instruments of or issued by the Federal National Mortgage Association or the Government National Mortgage Association.

vii.

Debt obligations which are or ever have been sold by the Federal Home Loan Mortgage Corporation pursuant to sections 305 or 306 of the Federal Home Loan Mortgage Corporation Act.

viii.

Debt obligations of any agency named in 12 U.S.C. § 24(Seventh) as eligible to issue obligations that a national bank may underwrite, deal in, purchase and sell for the bank's own account, including qualified Canadian government obligations.

ix.

Debt obligations of issuers other than those specified in (i) through (viii) above that are "investment grade" and that are "marketable."  For these purposes, an obligation is:

●

it is registered under the Securities Act;

●

it is offered and sold pursuant to Securities and Exchange Commission Rule 144A; 17 CFR 230.144A; or

●

it can be sold with reasonable promptness at a price that corresponds reasonably to its fair value; and

●

the obligor had adequate capacity to meet financial commitments under the security for the projected life of the asset or exposure, which capacity is presumed if the risk of default by the obligor is low and the full and timely repayment of principal and interest is expected.

x.

Certificates or other securities evidencing ownership interests in a municipal bond trust structure (generally referred to as a tender option bond structure) that invests in (a) debt obligations of the types described in (i) above or (b) depository receipts reflecting ownership interests in accounts holding debt obligations of the types described in (i) above.

xi.

The bonds, notes and other debt securities referenced in (A) above shall be defined as Eligible Assets.  An asset shall not lose its status as an Eligible Asset solely by virtue of the fact that:

●

it provides for repayment of principal and interest in any form including fixed and floating rate, zero interest, capital appreciation, discount, leases, and payment in kind; or

●

it is for long-term or short-term financing purposes.

i.

Interest rate derivatives;

ii.

Swaps, futures, forwards, structured notes, options and swaptions related to Eligible Assets or on an index related to Eligible Assets; or

iii.

Credit default swaps.

i.

Shares of other investment companies (open- or closed-end funds and ETFs) the assets of which consist entirely of Eligible Assets based on the Adviser's assessment of the assets of each such investment company taking into account the investment company's most recent publicly available schedule of investments and publicly disclosed investment policies.

ii.

Cash.

iii.

Repurchase agreements on assets described in A above.

iv.

Taxable fixed-income securities, for the purpose of acquiring control of an issuer whose municipal bonds (a) the Issuer already owns and (b) have deteriorated or are expected shortly to deteriorate that such investment should enable the Issuer to better maximize its existing investment in such issuer, provided that the Issuer may invest no more than 0.5% of its total assets in such securities.