Proposed form of Bylaw Amendment to become effective upon shareholder approval
- -- Exhibit 1.
PUTNAM INVESTMENT GRADE MUNICIPAL TRUST II
Amendment No. 5 to By-laws
WHEREAS, Section 1 of Article III of the Agreement and Declaration of
Trust dated October 2, 1992 (the "Declaration of Trust") of Putnam Investment
Grade Municipal Trust II (the "Trust"), a copy which is on file in the Office of
the Secretary of State of The Commonwealth of Massachusetts, provides that the
Trustees may, without shareholder approval, authorize one or more classes of
shares (which classes may be divided into two or more series), shares of each
such class or series having such preferences, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption, as the Trustees may determine and as shall be set forth in the
By-laws);
WHEREAS, pursuant to Article 12, Section 12.1, Part I, paragraph 6(c)
of the By-laws of the Trust prohibits the Trust from authorizing any class or
series of shares of beneficial interest ranking prior to or on a parity with the
Trust's outstanding preferred shares without the affirmative vote or consent of
holders of at least a majority of the Trust's outstanding preferred shares; and
WHEREAS, pursuant to authority expressly vested in the Trustees of the
Trust by Section 1 of Article III of the Declaration of Trust, the Trustees
desire to authorize the issuance of Municipal Income Preferred Shares in
connection with the acquisition by the Trust of all of the assets of Putnam
Investment Grade Municipal Trust III (the "Merger").
NOW, THEREFORE, the By-laws of the Trust are hereby amended, effective
upon the approval of the Merger by the holders of at least a majority of the
Trust's outstanding preferred shares, as follows:
1. A new Section 12.2 shall be added as follows:
12.2 Statement Creating Municipal Income Preferred Shares.
PART I
DESIGNATION
MUNICIPAL INCOME PREFERRED SHARES: A class of 200 shares or preferred
shares, without par value, liquidation preference $50,000 per share plus
accumulated but unpaid dividends, if any, thereon (whether or not earned or
declared), is hereby designated "Municipal Income Preferred Shares". Each
Municipal Income Preferred Share shall be issued on a date to be determined by
the Trustees, by any duly authorized committee thereof or by any of the
President, the Vice Chairman, any Executive Vice President or the Treasurer of
the Trust; have such initial dividend rate as shall be determined in advance of
the issuance thereof by the Trustees, by any duly authorized committee thereof
or by any of the President, the Chairman, any Executive Vice President or the
Treasurer of the Trust; have an Initial Dividend Period and an Initial Dividend
Payment Date to be determined by the Trustees of the Trust, by a duly authorized
committee thereof or by any of the President, the Vice Chairman, any Executive
Vice President or the Treasurer of the Trust; be redeemed (unless such share
shall have been otherwise redeemed pursuant to paragraph 4 of Part I of this
Section 13.1 by the Trust on a date to be determined by the Trustees of the
Trust) at the option of the Trust at a redemption price of $50,000 per share
plus accumulated but unpaid dividends to the date fixed for redemption (whether
or not earned or declared) plus the premium, if any, resulting from the
designation of a Premium Call Period; and have such other preferences,
limitations and relative voting rights, in addition to those required by
applicable law or set forth in the Trust's Declaration of Trust applicable to
preferred shares of the Trust, as are set forth in Part I and Part II of this
Section 13.1.
1. Definitions. Unless the context or use indicates another or
different meaning or intent, in this Section 13.1 the following terms have the
following meanings, whether used in the singular or plural:
"'AA' Composite Commercial Paper Rate", on any date of determination,
means (i) the Interest Equivalent of the rate on commercial paper
placed on behalf of issuers whose corporate bonds are rated "AA" by S&P
or "Aa" by Moody's or the equivalent of such rating by another
nationally recognized rating agency, as such rate is made available on
a discount basis or otherwise by the Federal Reserve Bank of New York
for the Business Day immediately preceding such date, or (ii) in the
event that the Federal Reserve Bank of New York does not make available
such a rate, then the arithmetic average of the Interest Equivalent of
the rate on commercial paper placed on behalf of such issuers, as
quoted on a discount basis or otherwise by the Commercial Paper Dealers
to the Remarketing Agent for the close of business on the Business Day
immediately preceding such date. If one of the Commercial Paper Dealers
does not quote a rate required to determine the "AA" Composite
Commercial Paper Rate, the "AA" Composite Commercial Paper Rate will be
determined on the basis of the quotation or quotations furnished by any
Substitute Commercial Paper Dealer or Substitute Commercial Paper
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Dealers selected by the Trust to provide such rate or rates not being
supplied by the Commercial Paper Dealer. If the number of Dividend
Period days (in each case determined without regard to any adjustment
in the length of a Dividend Period or in the remarketing schedule in
respect of non-Business Days, as provided herein) shall be (i) 7 or
more days but fewer than 49 days, such rate shall be the Interest
Equivalent of the 30-day rate on such commercial paper; (ii) 49 or more
days but fewer than 70 days, such rate shall be the Interest Equivalent
of the 60-day rate on such commercial paper; (iii) 70 or more days but
fewer than 85 days, such rate shall be the arithmetic average of the
Interest Equivalent of the 60-day and 90-day rates on such commercial
paper; (iv) 85 or more days but fewer than 99 days, such rate shall be
the Interest Equivalent of the 90-day rate on such commercial paper;
(v) 99 or more days but fewer than 120 days, such rate shall be the
arithmetic average of the Interest Equivalent of the 90-day and 120-day
rates on such commercial paper; (vi) 120 or more days but fewer than
141 days, such rate shall be the Interest Equivalent of the 120-day
rate on such commercial paper; (vii) 141 or more days but fewer than
162 days, such rate shall be the arithmetic average of the Interest
Equivalent of the 120-day and 180-day rates on such commercial paper;
and (viii) 162 or more days but fewer than 183 days, such rate shall be
the Interest Equivalent of the 180-day rate on such commercial paper.
"Accountant's Confirmation" has the meaning set forth in paragraph 8(g)
of this Part I.
"Additional Dividend" has the meaning set forth in paragraph 3(k) of
this Part I.
"Adviser" means the Trust's investment manager which is Putnam
Investment Management, Inc.
"Agent Member" means a member of the Securities Depository that will
maintain records for a Beneficial Owner of one or more Municipal Income
Preferred Shares.
"Alternate Treasury Bill Rate" has the meaning set forth under "U.S.
Treasury Bill Rate" below.
"Alternate Treasury Note Rate: has the meaning set forth under "U.S.
Treasury Note Rate" below.
"Anticipation Notes" shall mean the following Municipal Bonds: revenue
anticipation notes, tax anticipation notes, tax and revenue anticipation notes,
grant anticipation notes and bond anticipation notes.
"Applicable Dividend Rate" means, with respect to the Initial Dividend
Period, the rate of dividends per annum established by the Trustees, by a duly
authorized committee thereof or by any of the President, the Vice Chairman, any
Executive Vice President or the Treasurer of the Trust and, for each subsequent
Dividend Period, means the rate of dividend per annum that (i) except for a
Dividend Period commencing during a Non-Payment Period, will be equal to the
lower of the rate of dividend per annum that the Remarketing Agent advises
results on the Remarketing Date immediately preceding the first day of such
Dividend Period from implementation of the remarketing procedures set forth in
Part II hereof and the Maximum
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Dividend Rate or (ii) for each Dividend Period commencing during a Non-Payment
Period, will be equal to the Non-Payment Period Rate.
"Applicable Percentage" has the meaning set forth under "Maximum
Dividend Rate" below.
"Authorized Newspaper" means a newspaper of general circulation in the
English language generally published on Business Days in The City of New York.
"Beneficial Owner" means a person that is listed as the beneficial
owner of one or more Municipal Income Preferred Shares in the records of the
Paying Agent or, with respect to any Municipal Income Preferred Share not
registered in the name of the Securities Depository on the share transfer books
of the Trust, the person in whose name such share is so registered.
"Business Day" means a day on which the New York Stock Exchange, Inc.
is open for trading, and which is not a day on which banks in The City of New
York are authorized or obligated by law to close.
"By-laws" means these By-laws of the Trust, as amended from time to
time.
"Certificate of Minimum Liquidity" has the meaning set forth in
paragraph 9(b) of this Part I.
"Closing Transactions" has the meaning set forth in paragraph 12(a) of
this Part I.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commercial Paper Dealers" means Smith Barney Shearson Inc. and such
other commercial paper dealer or dealers as the Trust may from time to time
appoint, or , in lieu of any thereof, their respective affiliates or successors.
"Common Shares" means the common shares of beneficial interest, without
par value, of the Trust.
"Date of Original Issue" means, with respect to any Municipal Income
Preferred Share or Other Preferred Shares, the date on which the Trust
originally issues such share.
"Declaration of Trust" means the Agreement and Declaration of Trust
dated September 23, 1993 of the Trust on file with the Secretary of State of The
Commonwealth of Massachusetts.
"Deposit Securities" means cash and Municipal Bonds rated at least AAA,
A-1+ or SP-1+ by S&P.
"Discounted Value" means (i) with respect to an S&P Eligible Asset, the
quotient of the Market Value thereof divided by the applicable S&P Discount
Factor and (ii) with respect to a Moody's Eligible Asset, the lower of par and
the quotient of the Market Value thereof divided by the applicable Moody's
Discount Factor.
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"Dividend Payment Date", with respect to Municipal Income Preferred
Shares, means, (i) with respect to the Initial Dividend Period for Municipal
Income Preferred Shares, each Initial Dividend Payment Date; (ii) with respect
to any 28-day Dividend Period and any Short Term Dividend Period or 35 or fewer
days, the day next succeeding the last day thereof; and (iii) with respect to
any Short Term Dividend Period of more than 35 days and with respect to any Long
Term Dividend Period, the first Business Day of each calendar month during such
Short Term Dividend Period or Long Term Dividend Period and the day next
succeeding the last day of such period (each such date referred to in clause
(i), (ii) or (iii) being herein referred to as a "Normal Dividend Payment
Date"), except that if such Normal Dividend Payment Date is not a Business Day,
then (a) the Dividend Payment Date shall be the first Business Day next
succeeding such Normal Dividend Payment Date if such Normal Dividend Payment
Date is a Monday, Tuesday, Wednesday or Thursday, or (b) the Dividend Payment
Date shall be the first Business Day next preceding such Normal Dividend Payment
Date if such Normal Dividend Payment Date is a Friday, and in each case the
length of the current Dividend Period will be adjusted accordingly, if
necessary. If, however, in the case of clause (b) in the preceding sentence, the
Securities Depository shall make available to its participants and members in
funds immediately available in New York City on dividend Payment Dates the
amount due as dividends on such Dividend Payment Dates (and the Securities
Depository shall have so advised the Trust), and if the Normal Dividend Payment
Date is not a Business Day, then the Dividend Payment Date shall be the next
succeeding Business Day and the length of the current Dividend Period will be
adjusted accordingly, if necessary. Although any particular Dividend Payment
Date may not occur on the originally scheduled date because of the exceptions
discussed above, the next succeeding Dividend Payment Date, subject to such
exceptions, will occur on the next following originally scheduled date. If for
any reason a Dividend Payment Date cannot be fixed as described above, then the
Trustees shall fix the Dividend Payment Date and the length of the current
Dividend Period will be adjusted accordingly, if necessary. The Initial Dividend
Period, 28-day Dividend Periods and Special Dividend Periods are hereinafter
sometimes referred to as "Dividend Periods". Each dividend payment date
determined as provided above is hereinafter referred to as a "Dividend Payment
Date".
"Dividend Period" means with respect to any Municipal Income Preferred
Share, the Initial Dividend Period for such share and thereafter a period which
shall commence on each (but not the final) Dividend Payment Date for such share;
provided, however, that any Dividend Payment Date occurring after commencement
of and during a Special Dividend Period of more than 35 days, other than the
last Dividend Payment Date during such Dividend Period, will not give rise to a
new Dividend Period. Subject to the adjustment of Dividend Payment Dates as
provided elsewhere herein, each such subsequent Dividend Period for such share
will be comprised of, beginning with and including the day upon which it
commences, 28 consecutive days; or in the case of a Special Dividend Period, the
number of consecutive days as shall be specified by the Trustees in accordance
with the provisions set forth in paragraph 3(j) of this Part I at the time the
Trustees designate a Special Dividend Period. Notwithstanding the foregoing, any
adjustment of the remarketing schedule or the length of a Dividend Period as
provided herein shall also cause an adjustment of the relevant Settlement Date,
if necessary, so that such Settlement Date will be the first day of the next
Dividend Period.
"First Initial Dividend Payment Date" means March 1, 1994.
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"Forward Commitments" shall have the meaning specified in paragraph
12(c) of this Part I.
"Gross-Up Tax Rate" has the meaning set forth in paragraph 3(k) of this
Part I.
"Holder" means, with respect to any Municipal Income Preferred Share,
the person whose name appears on the share transfer books of the Trust as the
registered holder of such share.
"Independent Accountant" means a nationally recognized accountant, or
firm of accountants, that is, with respect to the Trust, an independent public
accountant firm of independent public accountants under the Securities Act of
1933, as amended.
"Initial Dividend Payment Date" means each of the First Initial
Dividend Payment Date, the Last Initial Dividend Payment Date and the first day
of each calendar month during the Initial Dividend Period.
"Initial Dividend Period" means, with respect to a Municipal Income
Preferred Share, the period commencing on and including the Date of Original
Issue of such share and ending on and including the day prior to the Last
Initial Dividend Payment Date.
"Initial Margin" means the amount of cash or securities deposited with
a broker as a margin payment at the time of purchase or sale of a futures
contract or an option thereon.
"Interest Equivalent" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
"Kenny Index" has the meaning set forth under "Taxable Equivalent of
the Short-Term Municipal Bond Rate".
"Last Initial Dividend Payment Date" means February 1995.
"Long Term Dividend Period" means a Special Dividend Period consisting
of a specified period of one whole year or more but not greater than five years.
"Mandatory Redemption Price" means $50,000 per Municipal Income
Preferred Share plus an amount equal to accumulated but unpaid dividends
(whether or not earned or declared) to the date fixed for redemption.
"Marginal Tax Rate" means the maximum marginal regular Federal
individual income tax rate applicable to ordinary income (including any surtax
but without regard to any phase-out of personal exemptions on any limitation on
itemized deductions) or the maximum marginal regular Federal corporate income
tax rate (without regard to the phase-out of graduated rates), whichever is
greater.
"Market Value" of any asset of the Trust means the market value thereof
determined by the Pricing Service. The Market Value of any asset shall include
any interest accrued thereon. The Pricing Service shall value portfolio
securities at the mean between the quoted bid and asked
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price or the yield equivalent when quotations are readily available. Securities
for which quotations are not readily available shall be valued at fair value as
determined by the Pricing Service using methods which include consideration of
yields or prices of municipal bonds of comparable quality, type of issue,
coupon, maturity and rating; indications as to value from dealers; and general
market conditions. The Pricing Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. In the event the
Pricing Service is unable to value a security, the security shall be valued at
the lower of two dealer bids obtained by the Trust from dealers who are members
of the National Association of Securities Dealers, Inc. and make a market in the
security, at least one of which shall be in writing. Futures contracts and
options are valued at closing prices for such instruments established by the
exchange or board of trade on which they are traded, or if market quotations are
not readily available, are valued at fair value on a consistent basis using
methods determined in good faith by the Trustees.
"Maximum Dividend Rate" for any Dividend Period shall be the Applicable
Percentage of the Reference Rate determined as of the relevant Remarketing Date
or the Date of Original Issue, as the case may be. The Applicable Percentage on
any date will be determined based on the lower of the credit rating or ratings
assigned on such date to Municipal Income Preferred Shares by Moody's and S&P
(or if Moody's or S&P or both shall not make such rating available, the
equivalent of either of both of such ratings by a Substitute Rating Agency or
two Substitute Rating Agencies or, in the event that only one such rating shall
be available, such rating) as follows:
Applicable Percentage of
Credit Ratings S & P Reference Rate -
Moody's No Notification
"aa3" or higher AA- or higher 110%
"a3" to "a1" A- to A+ 125%
"baa3" to "baa1" BBB- to BBB+ 150%
"ba3" to "ba1" BB- to BB+ 200%
Below "ba3" Below BB- 250%
provided, however, that in the event the Trust has notified the Paying
Agent and the Remarketing Agent of its intent to allocate income taxable for
federal income tax purposes to the Municipal Income Preferred Shares prior to
the Remarketing Agent establishing the applicable Dividend Rate for such shares,
the applicable percentage in the foregoing table shall be divided by the
quantity 1 minus the Gross-Up Tax Rate. If the ratings for the Municipal Income
Preferred Shares are split between two of the foregoing credit rating
categories, the lower rating will determine the prevailing rating.
The Remarketing Agent shall round each applicable Maximum Dividend Rate
to the nearest one-thousandth (0.001) of one percent per annum, with any such
number ending in five ten-thousandths (0.0005) of one percent being rounded
upwards to the nearest one-thousandth (0.001) of one percent. The Remarketing
Agent shall not round the Reference Rate as part of its calculation of any
Maximum Dividend Rate.
"Marketing Potential Additional Dividend Liability", as of any
Valuation Date, means the aggregate amount of Additional Dividends that would be
payable with respect to the
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Municipal Income Preferred Shares if the Trust were to make Retroactive Taxable
Allocations, with respect to any fiscal year, estimated based upon dividends
paid and the amount of undistributed realized net capital gain and other income
subject to regular Federal income tax earned by the Trust, as of the end of the
calendar month immediately preceding such Valuation Date and assuming such
Additional Dividends are fully taxable.
"Moody's means Moody's Investors Service, Inc. or its successors.
"Moody's Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes a Moody's Eligible
Asset, the percentage determined by reference to (a) the rating by Moody's or
S&P on such Bond and (b) the Moody's Exposure Period, in accordance with the
table set forth below:
- ----------------------------------------------------------------------------------------------------------------------
Moody's Aaa(1) Aa(1) A(1) Baa(1) Other (2) VMIG-1(1) SPP-1(4)
Exposure
Period
- ----------------------------------------------------------------------------------------------------------------------
7 weeks or less 151% 159% 168% 202% 229% 136% 148%
- ----------------------------------------------------------------------------------------------------------------------
8 weeks or 154% 164% 173% 205% 235% 137% 149%
less but
greater than
7 weeks
- ----------------------------------------------------------------------------------------------------------------------
9 weeks or 158% 169% 179% 209% 242% 138% 150%
less but
greater than
8 weeks
- ----------------------------------------------------------------------------------------------------------------------
(1) Moody's rating
(2) Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by
S&P.
(3) Municipal Bonds rated MIG-1, VMIG-1 or P-1 by Moody's which do not
mature or have a demand feature at par exercisable within the Moody's
Exposure Period and which do not have a long-term rating. For the
purpose of the definition of Moody's Eligibility Assets, these
securities will have an assumed rating of 'A' by Moody's.
(4) Municipal Bonds rated SP-1+ or A-1+ by S&P which do not mature or have
a demand feature at par exercisable within the Moody's Exposure Period
and which do not have a long-term rating. For the purposes of the
definition of Moody's Eligible Assets, these securities will have an
assumed rating of 'A' by Moody's.
Notwithstanding the foregoing, (i) no Moody's Discount Factor will be
applied to short-term Municipal Bonds, so long as such Municipal Bonds are rated
at least MIC-1, VMIG-1 or P-1 by Moody's and mature or have a demand feature at
par exercisable within the Moody's Exposure Period, and the Moody's Discount
Factor for such Bonds will be 125% if such Bonds are not rated by Moody's but
are rated A-1+ or SP-1+ or AA by S&P and mature or have a demand feature at par
exercisable within the Moody's Exposure Period, and (ii) no Moody's Discount
Factor will be applied to cash or to Receivables for Municipal Bonds Sold.
"Receivables for Municipal Bonds Sol, for purposes of calculating Moody's
Eligible Assets as of any Valuation Date, means the aggregate of the following:
(i) the book value of receivables for
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Municipal Bonds sold as of or prior to such Valuation Date if such receivables
are due within five Business Days of such Valuation Date, and if the trades
which generates such receivables are (x) settled through clearing house firms
with respect to which the Trust has received prior written authorization from
Moody's or (y) with counterparties having a Discounted Value of Municipal Bonds
sold (applying the relevant Moody's Discount Factor to such Bonds) as of or
prior to such Valuation Date which generated such receivables, if such
receivables are due within five Business Days of such Valuation Date but do not
comply with either of conditions (x) or (y) or the preceding clause (i).
"Moody's Eligible Asset" means cash, Receivables for Municipal Bonds
Sold, a short-term Municipal Bonds Sold, a short-term Municipal Bond rated
VMIG-1, MIG-1 or P-1 by Moody's or SP-1+ or A-1+ by S&P or a Municipal Bond that
(i) pays interest in cash; (ii) is publicly rated Baa or higher by Moody's or,
if not rated by Moody's but rated by S&P, is rated at least BBB- by S&P
(provided that, for purposes of determining the Moody's Discount Factor
applicable to any such S&P-rated Municipal Bond, such Municipal Bond (excluding
any short-term Municipal Bond and any Municipal Bond rated BBB-, BBB or BBB+)
will be deemed to have a Moody's rating which is one full rating category lower
than its S&P rating); (iii) does not have its Moody's rating suspended by
Moody's; and (iv) is part of an issue of Municipal Bonds of at least
$10,000,000. In addition, Municipal Bonds in the Trust's portfolio will be
included as Moody's Eligible Assets only to the extent they meet the following
diversification requirements:
- ---------------------------------------------------------------------------------------------------------
Maximum State or Territory
Rating Minimum Issue Size Maximum Underlying Concentration
($ Millions) Obligor (%)(1) (%) (1) (3)
- ---------------------------------------------------------------------------------------------------------
Aaa 10 100 100
Aa 10 20 60
A 10 10 40
Baa 10 6 20
Other (2) 10 4 12
- ---------------------------------------------------------------------------------------------------------
(1) The referenced percentages represent maximum cumulative totals for the
related rating category and each lower rating category.
(2) Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by
S&P.
(3) Territorial bonds (other than those issued by Puerto Rico and counted
collectively) of any territory are limited to 10% of
Moody's Eligible Assets.
an issue of Municipal Bonds of at least $10,000,000. In addition,
Municipal Bonds in the Trust's portfolio will be included as Moody's Eligible
Assets only to the extent they meet the following diversification requirements:
- ----------------------------------------------------------------------------------------------------------
Minimum Maximum Maximum State
Issue Size Underlying or Territory
Rating ($Millions) Obligor (%) (1) Concentration (%) (1) (3)
- ----------------------------------------------------------------------------------------------------------
Aaa................ 10 100 100
- ----------------------------------------------------------------------------------------------------------
Aa................. 10 20 60
- ----------------------------------------------------------------------------------------------------------
A.................. 10 10 40
- ----------------------------------------------------------------------------------------------------------
Baa................ 10 6 20
- ----------------------------------------------------------------------------------------------------------
Other (2) ......... 10 4 12
- ----------------------------------------------------------------------------------------------------------
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(1) The referenced percentages represent maximum cumulative totals for the
related rating category and each lower rating category.
(2) Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by
S&P.
(3) Territorial bonds (other than those issued by Puerto Rico and counted
collectively) of any territory are limited to 10% of Moody's Eligible
Assets.
For purposes of the maximum underlying obligor requirement described
above, any such Bond backed by a guaranty, letter of credit or insurance issued
by a third party will be deemed to be issued by such third party if the issuance
of such third party credit is the sole determinant of the rating on such Bond.
When the Trust sells a Municipal Bond and agrees to repurchase it as a
future date, such Bond will constitute a Moody's Eligible Asset and the amount
the Trust is required to pay upon repurchase of such Bond will count as a
liability for purposes of calculating the Municipal Income Preferred Shares
Basic Maintenance Amount. When the Trust purchases a Municipal Bond and agrees
to sell it at a future date to another party, cash receivable by the Trust in
connection therewith will constitute a Moody's Eligible Asset if the long-term
debt of such other party is rated at least A2 by Moody's and such agreement has
a term of 30 days or less; otherwise such Bond will constitute a Moody's
Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset if it is (i) held in a margin account, (ii) subject to
any material lien, mortgage, pledge, security interest or security agreement of
any kind, (iii) held for the purchase of a security pursuant to a Forward
Commitment or (iv) irrevocably deposited by the Trust for the payment of
dividends or redemption.
"Moody's Exposure Period" means the period commencing on and including
a given Valuation Date and ending 48 days thereafter.
"Moody's Hedging Transaction" has the meaning set forth in paragraph
12(b) of this Part I.
"Moody's Volatility Factor" means 302% as long as there has not been
enacted an increase to the Marginal Tax Rate. If an increase is enacted to the
Marginal Tax Rate but not yet implemented, the Moody's Volatility Factor shall
be as follows:
% Change in Moody's Volatility
Marginal Tax Rate Factor
< 5% 323%
-
> 5% but < 10% 347%
-
> 10% but < 15% 373%
-
> 15% but < 20% 402%
-
> 20% but < 25% 436%
-
> 25% but < 30% 474%
-
> 30% but < 35% 518%
-
> 35% but < 40% 570%
-
-10-
Notwithstanding the foregoing, the Moody's Volatility Factor may mean
such other potential dividend rate increase factor as Moody's advises the Trust
in writing is applicable.
"Municipal Bonds" means obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, the interest
on which, in the opinion of bond counsel or other counsel to the issuer of such
securities, is at the time of issuance not includable in gross income for
Federal income tax purposes.
"Municipal Index" has the meaning set forth in paragraph 12(a) of this
Part I.
"1940 Act" means the Investment Company Act of 1940, as amended from
time to time.
"1940 Act Cure Date," with respect to the failure by the Trust to
maintain the 1940 Act Preferred Shares Asset Coverage (as required by paragraph
7 of this Part I) as of the last Business Day of each month, means the last
Business Day of the following month.
"1940 Act Preferred Shares Asset Coverage" means asset coverage, as
defined in section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Trust which are shares, including all
outstanding Municipal Income Preferred Shares and Other Preferred Shares (or
such other asset coverage as may in the future be specified in or under the 1940
Act as the minimum asset coverage for senior securities which are shares of a
closed-end investment company as a condition of paying dividends on its common
shares).
"Non-Call Period" has the meaning described under "Specific Redemption
Provisions" below.
"Non-Payment Period" means any period commencing on and including the
day on which the Trust shall fail to (i) declare, prior to 12:00 noon, New York
City time, on any Dividend Payment Date for Municipal Income Preferred Shares,
for payment on or (to the extent permitted below) within three Business Days
after such Dividend Payment Date to the Holders of such shares as of 12:00 noon,
New York City time, on the Business Day preceding such Dividend Payment Date,
the full amount of any dividend on such shares payable on such Dividend Payment
Date or (ii) deposit, irrevocably in trust, in same-day funds, with the Paying
Agent by 12:00 noon, New York City time, (A) on or (to the extent permitted
below) within three Business Days after any Dividend Payment Date for any
Municipal Income Preferred Shares the full amount of any dividend on such shares
(whether or not earned or declared) payable on such Dividend Payment Date or (B)
on or (to the extent permitted below) within three Business Days after any
redemption date for any Municipal Income Preferred Shares called for redemption,
the Mandatory Redemption Price or Optional Redemption Price, as the case may be,
and ending on and including the Business Day on which, by 12:00 noon, New York
City time, all unpaid dividends and unpaid redemption prices shall have been so
deposited or shall have otherwise been made available to Holders in same-day
funds; provided that a Non-Payment Period shall not end during the first seven
days thereof unless the Trust shall have given at least three days' written
notice to the Paying Agent, the Remarketing Agent and the Securities Depository
and thereafter shall not end unless the Trust shall have given at least fourteen
days' written notice to the Paying Agent, the Remarketing Agent, the Securities
Depository and all
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Holders. Any dividend on Municipal Income Preferred Shares due on any Dividend
Payment Date for such shares (if, prior to 12:00 noon, New York City time, on
such Dividend Payment Date, the Trust has declared such dividend payable on or
within three Business Days after such Dividend Payment Date to the Holders who
held such shares as of 12:00 noon, New York City time, on the Business Day
preceding such Dividend Payment Date) or redemption price with respect to
Municipal Income Preferred Shares not paid to Holders when due may (if such
non-payment occurs because the Trust is prevented from doing so by these By-laws
or applicable law) be paid pro rata to such Holders in the same form of funds by
12:00 noon, New York City time, on any of the first three Business Days after
such Dividend Payment Date or due date, as the case may be, provided that such
amount is accompanied by a late charge calculated for such period of non-payment
at the Non-Payment Period Rate applied to the amount of such non-payment based
on the actual number of days comprising such period divided by 365.
"Non-Payment Period Rate" means 250% of the applicable Reference Rate
(or 300% of such rate if the Trust has provided notification to the Remarketing
Agent prior to the Remarketing Date establishing the Applicable Dividend Rate
for the relevant dividend pursuant to paragraph 3(m) hereof that net capital
gain or other income subject to regular Federal income tax will be included in
such dividend on Municipal Income Preferred Shares), provided that the Trustees
shall have the authority to adjust, modify, alter or change from time to time
the Non-Payment Period Rate if the Trustees determine and Moody's and S&P (or
any Substitute Rating Agency in lieu of Moody's or S&P in the event either of
such parties shall not rate the Municipal Income Preferred Shares) advise the
Trust in writing that such adjustment, modification, alteration or change will
not adversely affect the then-current ratings of the Municipal Income Preferred
Shares.
"Normal Dividend Payment Date" has the meaning set forth under
"Dividend Payment Date."
"Notice of Redemption" means any notice with respect to the redemption
of Municipal Income Preferred Shares pursuant to paragraph 4 of this Part I.
"Notice of Revocation" has the meaning set forth in paragraph 3(j) of
this Part I.
"Notice of Special Dividend Period" has the meaning set forth in
paragraph 3(j) of this Part I.
"Optional Redemption Price" shall mean $50,000 per share plus an amount
equal to accumulated but unpaid dividends (whether or not earned or declared) to
the date fixed for redemption plus any applicable redemption premium per share
attributable to the designation of a Premium Call Period.
"Other Preferred Shares" means the preferred shares of the Trust which
periodically adjust their dividend rate pursuant to periodic remarketings, other
than the Municipal Income Preferred Shares.
"Paragraph 3(a) Dividend" has the meaning set forth in paragraph 3(k)
of this Part I.
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"Paying Agent" means IBJ Schroeder Bank & Trust Company, or any
successor company or entity, which has entered into a Paying Agent Agreement
with the Trust to act for the Trust, among other things, as the transfer agent,
registrar, dividend and redemption price disbursing agent, settlement agent and
agent for certain notifications in connection with the Municipal Income
Preferred Shares in accordance with such agreement.
"Paying Agent Agreement" means an agreement to be entered into between
the Trust and the Paying Agent.
"Preferred Shares Basic Maintenance Amount," as of any Valuation Date,
means the dollar amount equal to (i) the sum of (A) the product of the number of
Municipal Income Preferred Shares and Other Preferred Shares outstanding on such
Valuation Date multiplied by the sum of (a) $50,000 and (b) any applicable
redemption premium per share attributable to the designation of a Premium Call
Period; (B) the aggregate amount of cash dividends (whether or not earned or
declared) that will have accumulated for each Municipal Income Preferred Share
and Other Preferred Shares outstanding, in each case, to (but not including) the
end of the Dividend Period for Municipal Income Preferred Shares and Other
Preferred Shares in which such Valuation Date occurs or to (but not including)
the 49th day after such Valuation Date, whichever is sooner; (C) the aggregate
amount of cash dividends that would accumulate at the Maximum Dividend Rate
applicable to a Dividend Period of 28 days on any Municipal Income Preferred
Shares and Other Preferred Shares outstanding from the end of such Dividend
Period through the 49th day after such Valuation Date, multiplied by the larger
of the Moody's Volatility Factor and the S&P Volatility Factor, determined from
time to time by Moody's and S&P, respectively (except that if such Valuation
Date occurs during a Non-Payment Period, the cash dividend for purposes of
calculation would accumulate at the then current Non-Payment Period Rate); (D)
the amount of anticipated expenses of the Trust for the 90 days subsequent to
such Valuation Date; (E) the amount of the Trust's Maximum Potential Additional
Dividend Liability as of such Valuation Date; and (F) any current liabilities as
of such Valuation Date to the extent not reflected in any of (i)(A) through
(i)(E) (including, without limitation, any amounts due and payable by the Trust
pursuant to repurchase agreements and any payables for Municipal Bonds purchased
as of such Valuation Date) less (ii) either (A) the Discounted Value of any of
the Trust's assets, or (B) the face value of any of the Trust's assets if such
assets mature prior to or on the date of redemption of Municipal Income
Preferred Shares or payment of a liability and are either securities issued or
guaranteed by the United States Government or, with respect to Moody's, have a
rating assigned by Moody's of at least Aaa, P-1, VMIG-1 or MIG-1 and, with
respect to S&P, have a rating assigned by S&P of at least AAA, SP-1+ or A-1+, in
both cases irrevocably deposited by the Trust for the payment of the amount
needed to redeem Municipal Income Preferred Shares subject to redemption or any
of (i)(B) through (i)(F).
"Preferred Shares Basic Maintenance Cure Date," with respect to the
failure by the Trust to satisfy the Preferred Shares Basic Maintenance Amount
(as required by paragraph 8(a) of this Part I) as of a given Valuation Date,
means the sixth Business Day following such Valuation Date.
"Preferred Shares Basic Maintenance Report" means a report signed by
the President, Treasurer or any Executive Vice President or Vice President of
the Trust which sets forth, as of
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the related Valuation Date, the assets of the Trust, the Market Value and the
Discounted Value thereof (seriatim and in the aggregate), and the Preferred
Shares Basic Maintenance Amount.
"Premium Call Period" has the meaning specified in "Specific Redemption
Provisions," below.
"Pricing Service" means Muller Investdata Corp., or any successor
company or entity, or any other entity designated from time to time by the
Trustees. Notwithstanding the foregoing, the Trustees will not designate a new
Pricing Service unless the Trust has received a written confirmation from
Moody's and S&P that such action would not impair the ratings then assigned by
Moody's and S&P to Municipal Income Preferred Shares.
"Quarterly Valuation Date" means the last Business Day of each fiscal
quarter of the Trust in each fiscal year of the Trust, commencing April 30,
1994.
"Receivables for Municipal Bonds Sold" for Moody's has the meaning set
forth under the definition of Moody's Discount Factor, and for S&P has the
meaning set forth under the definition of S&P Discount Factor.
"Reference Rate" means: (i) with respect to a Dividend Period having 28
or fewer days, the higher of the applicable "AA" Composite Commercial Paper Rate
and the Taxable Equivalent of the Short-Term Municipal Bond Rate, (ii) with
respect to any Short Term Dividend Period having more than 28 but fewer than 183
days, the applicable "AA" Composite Commercial Paper Rate, (iii) with respect to
any Short Term Dividend Period having 183 or more but fewer than 365 days, the
U.S. Treasury Bill Rate and (iv) with respect to any Long Term Dividend Period,
the applicable U.S. Treasury Note Rate.
"Remarketing" means each periodic operation of the process for
remarketing Municipal Income Preferred Shares as described in Part II hereof.
"Remarketing Agent" means Smith Barney Shearson Inc. and any additional
or successor companies or entities, if any, which have entered into an agreement
with the Trust to follow the remarketing procedures for the purpose of
determining the Applicable Dividend Rate.
"Remarketing Agreement" means an agreement to be entered into between
the Trust and the Remarketing Agent.
"Remarketing Date" means any date on which (i) each Beneficial Owner of
Municipal Income Preferred Shares must provide to the Remarketing Agent
irrevocable telephonic notice of intent to tender shares in a Remarketing and
(ii) the Remarketing Agent (A) determines the Applicable Dividend Rate for the
ensuing Dividend Period, (B) notifies Holders, purchasers and tendering
Beneficial Owners of Municipal Income Preferred Shares by telephone, telex or
otherwise of the results of the Remarketing and (C) announces the Applicable
Dividend Rate.
"Request for Special Dividend Period" has the meaning set forth in
paragraph 3(j) of this Part I.
"Response" has the meaning set forth in paragraph 3(j) of this Part I.
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"Retroactive Taxable Allocation" has the meaning set forth in paragraph
3(k) of this Part I.
"Right" has the meaning set forth in paragraph 3(k) of this Part I.
"S&P" means Standard & Poor's Corporation or its successors.
"S&P" Discount Factor" means, for purposes of determining the
Discounted Value of any Municipal Bond which constitutes an S&P Eligible Asset,
the percentage determined by reference to (a) the rating by S&P or Moody's on
such Bond and (b) the S&P Exposure Period, in accordance with the table set
forth below:
S&P Rating Category
S&P Exposure Period AAA AA A BBB
- ------------------- --- -- - ---
40 Business Days........... 190% 195% 210% 250%
22 Business Days........... 170 175 190 230
10 Business Days........... 155 160 175 215
7 Business Days............ 150 155 170 210
3 Business Days............ 130 135 150 190
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Municipal Bonds will be 115%, so long as such Municipal Bonds are rated A-1+ or
SP-1+ by S&P and mature or have a demand feature exercisable in 30 days or less,
125% if such Municipal Bonds are not rated by S&P but are rated VMIG-1, P-1 or
MIG-1 by Moody's, and such short-term Municipal Bonds referred to in this clause
(i) shall qualify as S&P Eligible Assets; provided, however, such short-term
Municipal Bonds rated by Moody's but not rated by S&P having a demand feature
exercisable in 30 days or less must be backed by a letter of credit, liquidity
facility or guarantee from a bank or other financial institution having a
short-term rating of at least A-1+ from S&P; and further provided that such
short-term Municipal Bonds rated by Moody's but not rated by S&P may comprise no
more than 50% of short-term Municipal Bonds that qualify as S&P Eligible Assets
and (ii) no S&P Discount Factor will be applied to cash or to Receivables for
Municipal Bonds Sold. "Receivables for Municipal Bonds Sold," for purposes of
calculating S&P Eligible Assets as of any Valuation Date, means the book value
of receivables for Municipal Bonds sold as of or prior to such Valuation Date if
such receivables are due within five Business Days of such Valuation Date. For
purposes of the foregoing, Anticipation Notes rated SP-1+ or, if not rated by
S&P, rated VMIG-1 by Moody's, whether or not they mature or have a demand
feature exercisable in 30 days and which do not have a long-term rating, shall
be considered to be short-term Municipal Bonds and shall qualify as S&P Eligible
Assets.
"S&P Eligible Asset" means cash, Receivables for Municipal Bonds Sold
or a Municipal Bond that (i) is issued by any of the 50 states, any territory or
possession of the United States, the District of Columbia, and any political
subdivision, instrumentality, county, city, town, village, school district or
agency (such as authorities and special districts created by the states) of any
of
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the foregoing, and certain federally sponsored agencies such as local housing
authorities; (ii) is interest bearing and pays interest at least semi-annually;
(iii) is payable with respect to principal and interest in United States
Dollars; (iv) is publicly rated BBB or higher by S&P or, except in the case of
Anticipation Notes that are grant anticipation notes or bond anticipation notes
which must be rated by S&P to be included in S&P Eligible Assets, if not rated
by S&P but rated by Moody's, is rated at least A by Moody's (provided that such
Moody's-rated Municipal Bonds will be included in S&P Eligible Assets only to
the extent the Market Value of such Municipal Bonds does not exceed 50% of the
aggregate Market Value of the S&P Eligible Assets; and further provided that,
for purposes of determining the S&P Discount Factor applicable to any such
Moody's-rated Municipal Bond, such Municipal Bond will be deemed to have an S&P
rating which is one full rating category lower than its Moody's rating); (v) is
not of a private placement of Municipal Bonds; and (vi) is part of an issue of
Municipal Bonds with an original issue size of at least $20 million or, if of an
issue with an original issue size below $20 million (but in no event below $10
million), is issued by an issuer with a total of at least $50 million of
securities outstanding. Notwithstanding the foregoing:
(1) Municipal Bonds of any one issuer will be considered S&P
Eligible Assets only to the extent the Market Value of such Municipal
Bonds does not exceed 10% of the aggregate Market Value of the S&P
Eligible Assets, provided that 2% is added to the applicable S&P
Discount Factor for every 1% by which the Market Value of such
Municipal Bonds exceeds 5% of the aggregate Market Value of the S&P
Eligible Assets; and
(2) Municipal Bonds issued by issuers in any one state or
territory will be considered S&P Eligible Assets only to the extent the
Market Value of such Municipal Bonds does not exceed 20% of the
aggregate Market Value of S&P Eligible Assets.
"S&P Exposure Period" means the maximum period of time following a
Valuation Date, including the Valuation Date and the Preferred Shares Basic
Maintenance Cure Date, that the Trust has under this Section 12.1 to cure any
failure to maintain, as of such Valuation Date, a Discounted Value of its
portfolio at least equal to the Preferred Shares Basic Maintenance Amount (as
described in paragraph 8(a) of this Section 12.1).
"S&P Hedging Transactions" has the meaning set forth in paragraph 12(a)
of this Section 12.1
"S&P Volatility Factor" means 198% during the Initial Dividend Period.
Thereafter, "S&P Volatility Factor" means, depending on the applicable Reference
Rate, the following:
Reference Rate
Taxable Equivalent of the Short-Term Municipal Bond Rate....... 277%
30-day "AA" Composite Commercial Paper Rate.................... 228%
60-day "AA" Composite Commercial Paper Rate.................... 228%
90-day "AA" Composite Commercial Paper Rate.................... 222%
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120-day "AA" Composite Commercial Paper Rate................... 222%
180-day "AA" Composite Commercial Paper Rate................... 217%
1-year U.S. Treasury Bill Rate................................. 198%
2-year U.S. Treasury Bill Rate................................. 185%
3-year U.S. Treasury Bill Rate................................. 178%
4-year U.S. Treasury Bill Rate................................. 171%
5-year U.S. Treasury Bill Rate................................. 169%
Notwithstanding the foregoing, the S&P Volatility Factor may mean such other
potential dividend rate increase factor as S&P advises the Trust in writing is
applicable.
"Securities Depository" means The Depository Trust Company or any
successor company or other entity selected by the Trust as securities depository
of the Municipal Income Preferred Shares that agrees to follow the procedures
required to be followed by such securities depository in connection with the
Municipal Income Preferred Shares.
"Service" means the Internal Revenue Service.
"Settlement Date" means the first Business Day after a Remarketing Date
applicable to a Municipal Income Preferred Share.
"Short Term Dividend Period" means a Special Dividend Period consisting
of a specified number of days (other than 28), evenly divisible by seven or not
fewer than seven or more than 364.
"Special Dividend Period" means a Dividend Period consisting of (i) a
specified number of days (other than 28), evenly divisible by seven and not
fewer than seven nor more than 364 or (ii) a specified period of one whole year
or more but not greater than five years (in each case subject to adjustment as
provided herein).
"Specific Redemption Provisions" means, with respect to a Special
Dividend Period of 365 or more days, either, or any combination of, the
designation of (i) a period (a "Non-Call Period") determined by the Trustees,
after consultation with the Remarketing Agent, during which the Municipal Income
Preferred Shares subject to such Dividend Period shall not be subject to
redemption at the option of the Trust and (ii) a period (a "Premium Call
Period"), consisting of a number of whole years and determined by the Trustees,
after consultation with the Remarketing Agent, during each year of which the
Municipal Income Preferred Shares subject to such Dividend Period shall be
redeemable at the Trust's option at a price per share equal to $50,000 plus
accumulated but unpaid dividends plus an applicable premium, as determined by
the Trustees after consultation with the Remarketing Agent.
"Substitute Commercial Paper Dealers" means such substitute commercial
paper dealer or dealers as the Trust may from time to time appoint or, in lieu
of any thereof, their respective affiliates or successors.
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"Substitute Rating Agency" and "Substitute Rating Agencies" mean a
nationally recognized statistical rating organization or two nationally
recognized statistical rating organizations, respectively, selected by the Trust
to act as the substitute rating agency or substitute rating agencies, as the
case may be, to determine the credit ratings of the Municipal Income Preferred
Shares.
"Taxable Equivalent of the Short-Term Municipal Bond Rate" on any date
means 90% of the quotient of (A) the per annum rate expressed on an Interest
Equivalent basis equal to the Kenny S&P 30-day High Grade Index or any
comparable index based upon 30-day yield evaluations at par of bonds the
interest on which is excludable for regular Federal income tax purposes under
the Code of "high grade" component issuers selected by Kenny Information Systems
Inc. (or any successor thereto from time to time selected by the Trust in its
discretion), which component issuers shall include, without limitation, issuers
of general obligation bonds but shall exclude any bonds the interest on which
constitutes an item of tax preference under Section 57(a)(5) of the Code, or
successor provisions, for purposes of the "alternative minimum tax," (as defined
in the Code) (the "Kenny Index"), made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M., New
York City time, on such date by Kenny Information Systems Inc. (or any such
successor), divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a
decimal); provided, however, that if the Kenny Index is not made so available by
8:30 A.M., New York City time, on such date by Kenny Information Systems Inc.
(or any such successor), the Taxable Equivalent of the Short-Term Municipal Bond
Rate shall mean the quotient of (A) the per annum rate expressed on an Interest
Equivalent basis equal to the most recent Kenny Index so made available, divided
by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal). No successor
to Kenny Information Systems Inc. shall be chosen without first obtaining
written confirmation from Moody's and S&P that the choice of such successor
would not impair the rating then assigned to the Municipal Income Preferred
Shares by Moody's or S&P.
"Tender and Dividend Reset" means the process pursuant to which
Municipal Income Preferred Shares may be tendered in a Remarketing or held and
become subject to the new Applicable Dividend Rate determined by the Remarketing
Agent in such Remarketing.
"Treasury Bonds" shall have the meaning set forth in paragraph 12(a) of
this Part I.
"28-day Dividend Period" means, with respect to Municipal Income
Preferred Shares, a Dividend Period consisting of 28 days.
"Trust" means Putnam Investment Grade Municipal Trust II, a
Massachusetts business trust.
'Trustees" means the Trustees of the Trust.
"U.S. Treasury Bill Rate" on any date of determination means (i) the
Interest Equivalent of the rate on the actively traded Treasury Bill with a
maturity most nearly comparable to the length of the related Dividend Period, as
such rate is made available on a discount basis or otherwise on the Business Day
immediately preceding such date by the Federal Reserve Bank of New York in its
Composite 3:30 P.M. Quotations for U.S. Government Securities report for such
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Business Day, or (ii) if such yield as so calculated is not available, the
Alternate Treasury Bill Rate on such date. "Alternate Treasury Bill Rate" on any
date means the Interest Equivalent of the yield as calculated by reference to
the arithmetic average of the bid price quotations of the actively traded
Treasury Bill with a maturity most nearly comparable to the length of the
related Dividend Period, as determined by bid price quotations as of any time on
the Business Day immediately preceding such date, obtained from at least three
recognized primary U.S. Government securities dealers selected by the
Remarketing Agent.
"U.S. Treasury Note Rate" on any date of determination means (i) the
yield as calculated by reference to the bid price quotation of the actively
traded, current coupon Treasury Note with a maturity most nearly comparable to
the length of the related Dividend Period, as such bid price quotation is
published on the Business Day immediately preceding such date by the Federal
Reserve Bank of New York in its Composite 3:30 P.M. Quotations for U.S.
Government Securities report for such Business Day, or (ii) if such yield as so
calculated is not available, the Alternate Treasury Note Rate on such date.
"Alternate Treasury Note Rate" on any date means the yield as calculated by
reference to the arithmetic average of the bid price quotations of the actively
traded, current coupon Treasury Note with a maturity most nearly comparable to
the length of the related Dividend Period, as determined by the bid price
quotations as of any time on the Business Day immediately preceding such date,
obtained from at least three recognized primary U.S. Government securities
dealers selected by the Remarketing Agent.
"Valuation Date" means, for purposes of determining whether the Trust
is maintaining the Preferred Shares Basic Maintenance Amount and the Minimum
Liquidity Level, each Business Day commencing with the Date of Original Issue.
"Voting Period" has the meaning set forth in paragraph 6(b) of this
Part I.
"Variation Margin" means, in connection with an outstanding futures
contract or option thereon owned or sold by the Trust, the amount of cash or
securities paid to or received from a broker (subsequent to the Initial Margin
payment) from time to time as the price of such futures contract or option
fluctuates.
2. Fractional Shares. No fractional Municipal Income Preferred
Shares shall be issued.
3. Dividends.
(a) The Holders of Municipal Income Preferred Shares as of 12:00
noon, New York City time, on the Business Day preceding the applicable Dividend
Payment Date, shall be entitled to receive, when, as and if declared by the
Trustees, out of funds legally available therefor, (i) cumulative dividends, at
the Applicable Dividend Rate, (ii) a Right (as defined in paragraph 3(k)) to
receive an Additional Dividend or Additional Dividends in certain circumstances,
and (iii) any additional amounts as set forth in paragraph 3(m). Dividends on
the Municipal Income Preferred Shares so declared and payable shall be paid in
preference to and in priority over any dividends declared and payable on the
Common Shares.
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(b) Dividends on each Municipal Income Preferred Share shall
accumulate from its Date of Original Issue and will be payable, when, as and if
applicable to such Municipal Income Preferred Shares.
(c) Each declared dividend shall be payable on the applicable
Dividend payment Date to the Holder or Holders of such Municipal Income
Preferred Shares as set forth in paragraph 3(a). Dividends on Municipal Income
Preferred Shares in arrears with respect to any past Dividend Payment Date may
be declared and paid at any time, without reference to any regular Dividend
Payment Date, pro rata to the Holders of such shares as of a date not exceeding
five Business Days preceding the date of payment thereof as may be fixed by the
Trustees. Any dividend payment made on any Municipal Income Preferred Share
shall be first credited against the dividends accumulated but unpaid (whether or
not earned or declared) with respect to the earliest Dividend payment Date on
which dividends were not paid.
(d) Neither Holders nor Beneficial Owners of Municipal Income
Preferred Shares shall be entitled to any dividends on the Municipal Income
Preferred Shares, whether payable in cash, property or stock, in excess of full
cumulative dividends thereon (which include any amounts actually due and payable
pursuant to paragraph 3(k), 3(l) or 3(m) of this Part I). Except as provided in
paragraph 3(h) of this Part I, neither Holders nor Beneficial Owners of
Municipal Income Preferred Shares shall be entitled to any interest, or other
additional amount, on any dividend payment on any Municipal Income Preferred
Share which may be in arrears.
(e) Except as otherwise provided herein, the Applicable Dividend
Rate on each Municipal Income Preferred Share for each Dividend Period with
respect to such share shall be equal to the lower of the rate per annum that
results from implementation of the remarketing procedures described in Part II
hereof and the Maximum Dividend Rate.
(f) The amount of declared dividends for each Municipal Income
Preferred Share payable on each Dividend Payment Date for each 28-day Dividend
Period and the Dividend Payment Date or Dates for each Short-Term Dividend
Period shall be computed by the Trust by multiplying the Applicable Dividend
Rate in effect with respect to dividends payable on such share on such Dividend
Payment Date by a fraction the numerator of which shall be the number of days in
such Dividend Period such share was outstanding from and including its Date of
Original Issue or the preceding Dividend Payment Date, as the case may be, to
and including the day preceding such Dividend Payment Date, and the denominator
of which shall be 365, then multiplying the amount so obtained by $50,000 and
rounding the amount so obtained to the nearest cent. During the Initial Dividend
Period and any Long Term Dividend Period, the amount of dividends per share
payable on any Dividend Payment Date shall be computed by multiplying the
Applicable Dividend Period Rate by a fraction, the numerator of which shall be
the number of days from either the Date of Original Issue, with respect to the
First Initial Dividend payment Date, or otherwise from the last Dividend Payment
Date, and the denominator of which is 360, multiplying the amount so obtained by
$50,000, and rounding the amount so obtained to the nearest cent.
(g) No later than 12:00 noon, New York City time, on each
Dividend Payment Date, the Trust shall deposit in same-day funds with the Paying
Agent the full amount of any
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dividend declared and payable on such Dividend Payment Date on any Municipal
Income Preferred Share.
(h) The Applicable Dividend Rate for each Dividend Period
commencing during a Non-Payment Period shall be equal to the Non-Payment Period
Rate and any Municipal Income Preferred Share for which a Special Dividend
Period would otherwise have commenced on the first day of or during a
Non-Payment Period shall have a 28-day Dividend Period. Any amount of any
dividend due on any Dividend Payment Date for any Municipal Income Preferred
Shares (if, prior to 12:00 noon, New York City time, on such Dividend Payment
Date, the Trust has declared such dividend payable on or within three Business
Days after such Dividend Payment Date to the Holders who held such Municipal
Income Preferred Shares as of 12:00 noon, New York City time, on the Business
Day preceding such Dividend Payment Date) or redemption price with respect to
any Municipal Income Preferred Shares not paid to Holders when due but paid to
such Holders in the same form of funds by 12:00 noon, New York City time, on any
of the first three Business Days after such Dividend Payment Date or due date,
as the case may be, shall incur a late charge to be paid therewith to such
Holders and calculated for such period of non-payment at the Non-Payment Period
Rate applied to the amount of such non-payment based on the actual number of
days comprising such period divided by 365. If the Trust fails to pay a dividend
on a Dividend Payment Date or to redeem any Municipal Income Preferred Shares on
the date set for such redemption (otherwise than because it is prevented from
doing so by these By-laws or by applicable law), the preceding sentence shall
not apply and the Applicable Dividend Rate for the Dividend Period commencing
during the Non-Payment Period resulting from such failure shall be the
Non-Payment Period Rate. For the purposes of the foregoing and paragraphs 3(g)
and 4(g) of this Part I, payment to a person in New York Clearing House
(next-day) funds on any Business Day at any time shall be considered equivalent
to payment to such person in same-day funds at the same time on the next
Business Day, and any payment made after 12:00 noon, New York City time, on any
Business Day shall be considered to have been made instead in the same form of
funds and to the same person before 12:00 noon, New York City time, on the next
Business Day.
(i) Except during a Non-Payment Period, by 12:00 noon, New York
City time, on the Remarketing Date in the Remarketing at the end of the Initial
Dividend Period applicable to a Municipal Income Preferred Share, and by 12:00
noon, New York City time, on the Remarketing Date in the Remarketing at the end
of each subsequent Dividend Period applicable to a Municipal Income Preferred
Share, the Beneficial Owner of such Municipal Income Preferred Share may elect
to tender such share or hold such share for the next Dividend Period to the
extent provided in Part II hereof.
(j) The Trust may, at its sole option and to the extent permitted
by law, by telephonic or written notice (a "Request for Special Dividend
Period") to the Remarketing Agent, request that the next succeeding Dividend
Period for the Municipal Income Preferred Shares be the number of days (other
than 28) evenly divisible by seven, and not fewer than seven or more than 364 in
the case of a Short Term Dividend Period or one whole year or more but not
greater than five years in the case of a Long Term Dividend Period, specified in
such notice, provided that the Trust may not give a Request for Special Dividend
Period of greater than 28 days (and any such request shall be null and void)
unless the Trust has given written notice thereof to Moody's and S&P and unless,
with respect to the Municipal Income Preferred Shares,
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full cumulative dividends, any amounts due with respect to redemptions, and any
Additional Dividends payable prior to such date have been paid in full and, for
any Remarketing occurring after the initial Remarketing, all shares tendered
were remarketed in the last occurring Remarketing. Such Request for Special
Dividend Period, in the case of a Short Term Dividend Period, shall be given on
or prior to the fourth Business Day but not more than seven Business Days prior
to a Remarketing Date and, in the case of a Long Term Dividend Period, shall be
given on or prior to the 14th day but not more than 28 days prior to a
Remarketing Date. Upon receiving such Request for a Special Dividend Period, the
Remarketing Agent shall determine (i) whether, given the factors set forth
below, it is advisable that the Trust issue a Notice of Special Dividend Period
for Municipal Income Preferred Shares as contemplated by such Request for
Special Dividend Period, (ii) the Optional Redemption Price of the Municipal
Income Preferred Shares during such Special Dividend Period and (iii) the
Specific Redemption Provisions and shall give the Trust written notice (a
"Response") of such determination by no later than the third Business Day prior
to such Remarketing Date. In making such determination the Remarketing Agent
shall consider (1) existing short-term and long-term market rates and indices of
such short-term and long-term rates, (2) existing market supply and demand for
short-term and long-term securities, (3) existing yield curves for short-term
and long-term securities comparable to the Municipal Income Preferred Shares,
(4) industry and financial conditions which may affect the Municipal Income
Preferred Shares, (5) the investment objective of the Trust, and (6) the
Dividend Periods and dividend rates at which current and potential Beneficial
Owners of Municipal Income Preferred Shares would remain or become Beneficial
Owners. If the Remarketing Agent does not give the Trust a Response by such
third Business Day or if the Response states that given the factors set forth
above it is not advisable that the Trust give a Notice of Special Dividend
Period, the Trust may not give a Notice of Special Dividend Period in respect of
such Request for Special Dividend Period. In the event the Response indicates
that it is advisable that the Trust give a Notice of Special Dividend Period,
the Trust may by no later than the second Business Day prior to such Remarketing
Date give a notice (a "Notice of Special Dividend Period") to the Remarketing
Agent, the Paying Agent and to the Securities Depository which notice will
specify (i) the duration of the Special Dividend Period, (ii) the Optional
Redemption Price as specified in the related Response and (iii) the Specific
Redemption Provisions, if any, as specified in the related Response. The Trust
shall not give a Notice of Special Dividend Period and, if the Trust has given a
Notice of Special Dividend Period, the Trust is required to give telephonic or
written notice of its revocation (a "Notice of Revocation") to the Remarketing
Agent (in the case of clauses (x) and (y)) and the Securities Depository (in the
case of clauses (x) and (y) and (z)) on or prior to the Business Day prior to
the relevant Remarketing Date if (x) either the 1940 Act Preferred Shares Asset
Coverage is not satisfied or the Trust shall fail to maintain S&P Eligible
Assets and Moody's Eligible Assets each with an aggregate Discounted Value at
least equal to the Preferred Shares Basic Maintenance Amount, in each case on
each of the two Valuation Dates immediately preceding the Business Day prior to
the relevant Remarketing Date on an actual basis and on a pro forma basis giving
effect to the proposed Special Dividend Period (using as a pro forma dividend
rate with respect to such Special Dividend Period the dividend rate which the
Remarketing Agent shall advise the Trust is an approximately equal rate for
securities similar to the Municipal Income Preferred Shares with an equal
dividend period), provided that (unless Moody's advises the Trust to the
contrary), in calculating the aggregate Discounted Value of Moody's Eligible
Assets for this purpose, the Moody's Exposure Period shall be deemed to be one
week longer than the Moody's Exposure
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Period that would otherwise apply as of the date of the Notice of Special
Dividend Period, (y) sufficient funds for the payment of dividends payable on
the immediately succeeding Dividend Payment Date for Municipal Income Preferred
Shares have not been irrevocably deposited with the Paying Agent by the close of
business on the third Business Day preceding the relevant Remarketing Date or
(z) the Remarketing Agent advises the Trust that after consideration of the
factors listed above, it is advisable to give a Notice of Revocation. If the
Trust is prohibited from giving a Notice of Special Dividend Period as a result
of any of the factors enumerated in clause (x), (y) or (z) of the prior sentence
or if the Trust gives a Notice of Revocation with respect to a Notice of Special
Dividend Period for Municipal Income Preferred Shares, the next succeeding
Dividend Period for Municipal Income Preferred Shares will be a 28-day Dividend
Period, provided that if the then current Dividend Period for Municipal Income
Preferred Shares is a Special Dividend Period of less than 28 days, the next
succeeding Dividend Period will be the same length as the current Dividend
Period. In addition, in the event all Municipal Income Preferred Shares tendered
for which the Trust has given a Notice of Special Dividend Period are not
remarketed or a Remarketing for Municipal Income Preferred Shares is not held
for any reason, the Trust may not again give a Notice of Special Dividend Period
with respect to Municipal Income Preferred Shares (and any such attempted notice
shall be null and void) until all Municipal Income Preferred Shares tendered in
a subsequent Remarketing with respect to a 28-day Dividend Period have been
Remarketed.
(k) Simultaneously with the declaration of each dividend at the
Applicable Dividend Rate to a Holder determined as set forth in paragraph 3(a)
above (each, a "Paragraph 3(a) Dividend"), the Trustees shall also declare a
dividend to the same Holder consisting of one right (a "Right") to receive an
Additional Dividend in respect of such Paragraph 3(a) Dividend. If, after the
close of its fiscal year, the Trust characterizes all or a portion of a
Paragraph 3(a) Dividend paid on Municipal Income Preferred Shares during such
previous fiscal year as consisting of net capital gain or other income subject
to regular Federal income tax, without having either given advance notice to the
Remarketing Agent of the inclusion of such taxable income in such Paragraph 3(a)
Dividend prior to the setting of the Applicable Dividend Rate for such Paragraph
3(a) Dividend or included an additional amount in the Paragraph 3(a) Dividend to
offset the tax effect of the inclusion therein of such taxable income, in each
case as provided in paragraph 3(m) hereof, and the Trust so characterizes all or
a portion of the Paragraph 3(a) Dividend solely because (i) the Trust has
redeemed all or a portion of the outstanding Municipal Income Preferred Shares
or the Trust has liquidated and (ii) the Trust, in its judgment, believes it is
required, in order to comply with a published position of the Internal Revenue
Service concerning the allocation of different types of income between different
classes and series of shares, Rev. Rul. 89-81, 1989-1 C.B. 226, to allocate such
taxable income to the Municipal Income Preferred Shares (the amount so
characterized referred to herein as a "Retroactive Taxable Allocation"), the
Trust will, within 90 days after the end of such fiscal year, provide notice of
the Retroactive Taxable Allocation made with respect to the Paragraph 3(a)
Dividend to the Paying Agent and to each Holder who received such Paragraph 3(a)
Dividend and the corresponding Right, at such Holder's address as the same
appears or last appeared on the share books of the Trust. The Trust will, within
30 days after such notice is given to the Paying Agent, pay to the Paying Agent
(who will then distribute to such holders of Rights), out of funds legally
available therefor, an amount equal to the aggregate of the Additional Dividends
payable in respect of such Retroactive Taxable Allocation. The Trust may direct
the Paying Agent to invest any such available funds in Deposit Securities
(provided that such Deposit Securities are also
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rated at least P-1, MIG-1, or VMIG-1 by Moody's) provided that the proceeds of
any such investment will be available in The City of New York at the opening of
business on the payment date for such Additional Dividends. All such funds (to
the extent necessary to pay the full amount of such Additional Dividends) shall
be held in trust for the benefit of the holders of Rights. An Additional
Dividend or Additional Dividends declared in respect of a Right shall be paid to
the Holder that received such Right, whether or not such Holder continues to own
the Municipal Income Preferred Shares in respect of which such Right was issued.
Rights shall be nontransferable except by operation of law, and no purported
transfer of a Right will be recognized by the Trust. No certificates will be
issued evidencing Rights.
An "Additional Dividend" in respect of any Paragraph 3(a) Dividend
means payment to a present or former Holder of a Municipal Income Preferred
Share of an amount which, giving effect to the Retroactive Taxable Allocation
made with respect to such Paragraph 3(a) Dividend, would cause such Holder's
after-tax return (taking into account both the Paragraph 3(a) Dividend and the
Additional Dividend and assuming such Holder is taxable at the Gross-Up Tax
Rate) to be equal to the after-tax return which the Holder would have realized
if the retroactive allocation of taxable income had not been made. Such
Additional Dividend shall be calculated (i) without consideration being given to
the time value of money; (ii) assuming that no Holder or former Holder of
Municipal Income Preferred Shares is subject to the Federal alternative minimum
tax with respect to dividends received from the Trust; and (iii) assuming that
the Holder of the Municipal Income Preferred Share in respect of which a
Retroactive Taxable Allocation was made is taxable at the Gross-Up Tax Rate. An
Additional Dividend will not include an amount to compensate for the fact that
the Additional Dividend or the retroactive allocation of taxable income may be
subject to state and local taxes. The Gross-Up Tax Rate shall be equal to the
sum of (i) the percentage of the taxable income included in the Paragraph 3(a)
Dividend that is taxable for Federal income tax purposes as ordinary income,
multiplied by the greater of (A) the highest marginal Federal corporate income
tax rate (without regard to the phase-out of graduated rates) applicable to
ordinary income and (B) the highest marginal Federal individual income tax rate
applicable to ordinary income (including any surtax but without regard to any
phase-out of personal exemptions or any limitation on itemized deductions), and
(ii) the percentage of the taxable income included in the Paragraph 3(a)
Dividend that is taxable for Federal income tax purposes as long-term capital
gain, multiplied by the greater of (A) the highest marginal Federal corporate
income tax rate (without regard to the phase-out of graduated rates) applicable
to long-term capital gain and (B) the highest marginal Federal individual income
tax rate applicable to long-term capital gain (including any surtax but without
regard to any phase-out of personal exemptions or any limitation on itemized
deductions).
Except as provided above, no Additional Dividend shall for any reason
be payable in respect of any Paragraph 3(a) Dividend previously paid to a
Holder. In particular, and without limiting the generality of the foregoing, no
Additional Dividend shall be payable as a result of any Internal Revenue Service
Challenge to, among other things, the characterization of the Municipal Income
Preferred Shares as equity, the Trust's method of allocating various types of
income between dividends paid on different classes or series of shares or
between dividends paid on the same class or series of shares, or the
designations made by the Trust relating to distributions made with respect to an
earlier taxable year.
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(l) The Trustees may in their sole discretion from time to time
declare a special dividend (each, a "special dividend") in an amount determined
in their sole judgment to be necessary or desirable to cause the Trust to comply
with any distribution requirements of the Code and thereby to avoid the
incurrence by the Trust of any income or excise tax under the Code, provided
that the Trustees shall not declare a special dividend if the declaration
thereof causes the Trust to fail to maintain the Preferred Shares Basic
Maintenance Amount or the 1940 Act Preferred Shares Asset Coverage. Any such
special dividend shall be payable on a date specified by the Trustees to Holders
of record on a date specified by the Trustees consistent with these By-laws. The
Trust shall deposit with the Paying Agent sufficient funds for the payment of
any such special dividend not later than noon on the Business Day immediately
preceding the date on which such special dividend becomes payable and shall give
the Paying Agent irrevocable instructions to apply such funds and, if
applicable, the income and proceeds therefrom, to payment of such special
dividends. The Trust may direct the Paying Agent to invest any such available
funds in Deposit Securities (provided that such Deposit Securities are also
rated at least P-1, MIG-1 or VMIG-1 by Moody's) provided that the proceeds of
any such investment will be available in The City of New York at the opening of
business on the payment date for such special dividend. All such funds (to the
extent necessary to pay the full amount of such special dividend) shall be held
in trust for the benefit of the Holders.
(m) Whenever the Trust intends to include any net capital gain or
other income subject to regular Federal income tax in a dividend on Municipal
Income Preferred Shares solely because the Trust, in its judgment, believes it
is required, in order to comply with Rev. Rul. 89-81 described in paragraph
3(k), to allocate taxable income to Municipal Income Preferred Shares, the Trust
may notify the Remarketing Agent of the amount to be so included at least five
Business Days prior to the Remarketing Date on which the Applicable Dividend
Rate for such dividend is to be established. In the event the Trust has provided
such notice to the Remarketing Agent, yet, after giving such notice the Trust
intends to include additional income subject to regular Federal income tax
beyond the amount set forth in such Notice in such dividend because the Trust,
its sole judgment, believes it is required, in order to comply with such Rev.
Rul. 89-81, to allocate such additional income to such Municipal Income
Preferred Shares, the Trust will W increase the dividend by an amount such that
the return to a Holder of Municipal Income Preferred Shares with respect to such
dividend (as so increased and after giving effect to Federal income tax at the
Gross-Up Tax Rate) shall equal the return such Holder of Municipal Income
Preferred Shares would have received, after application of Federal income tax
(at the greater of the maximum regular Federal individual or corporate income
tax rate applicable to the character of income reflected in such notice), if
such additional amount of taxable income had not been included in such dividend
(and such dividend had not been increased to take account of any additional
amount of taxable income) and (ii) notify the Paying Agent of the additional
amount to be included in the dividend at least five Business Days prior to the
applicable Dividend Payment Date. Alternatively, if the Trust has not provided
the notice referred to in the second preceding sentence, and nevertheless
intends to include income subject to regular Federal income tax in a dividend on
Municipal Income Preferred Shares solely because the Trust, in its judgment,
believes it is required, in order to comply with such Rev. Rul. 89-81, to
allocate such income to Municipal Income Preferred Shares, the Trust will (i)
increase the dividend by an amount such that the return to a Holder of Municipal
Income Preferred Shares with respect to such dividend (as so increased and after
giving effect to tax at the Gross-Up Tax Rate) equals the Applicable Dividend
Rate and (ii) notify the Paying Agent of the additional amount to be
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included in the dividend at least five Business Days prior to the applicable
dividend Payment Date. The Trust will not be required to notify any Holder of
Municipal Income Preferred Shares of the prospective inclusion of, or to
increase any dividend as a result of the inclusion of, any taxable income in any
dividend other than as provided in this paragraph 3(m) or in paragraph 3(k) of
this Part I.
4. Redemption. Municipal Income Preferred Shares shall be
redeemable by the Trust as provided below:
(a) To the extent permitted under the 1940 Act, upon giving a
Notice of Redemption, the Trust at its option may redeem Municipal Income
Preferred Shares, in whole or in part, on the next succeeding scheduled Dividend
Payment Date applicable to those Municipal Income Preferred Shares called for
redemption, out of funds legally available therefor, at the Optional Redemption
Price per share; provided that no Municipal Income Preferred Share shall be
subject to redemption pursuant to this paragraph 4(a) on any Dividend Payment
Date during (A) the Initial Dividend Period with respect to such share or (B) a
Non-Call Period to which such share is subject; and provided further that the
Trust shall effect no redemption pursuant to this paragraph 4(a) if as a result
of such redemption the Trust shall have failed to maintain S&P Eligible Assets
and Moody's Eligible Assets with an aggregate Discounted Value at least equal to
the Preferred Shares Basic Maintenance Amount or to maintain the 1940 Act
Preferred Shares Asset Coverage. For so long as S&P rates the Municipal Income
Preferred Shares, the Trust may not give a Notice of Redemption relating to an
optional redemption as described in paragraph 4(a) unless, at the time of giving
such Notice of Redemption, the Trust has available Deposit Securities with
maturity or tender dates not later than the day preceding the applicable
redemption date and having a Discounted Value not less than the amount due to
Holders by reason of the redemption of Municipal Income Preferred Shares on such
redemption date.
(b) The Trust shall redeem, out of funds legally available
therefor, at the mandatory Redemption Price per share, certain of the Municipal
Income Preferred Shares, to the extent permitted under the 1940 Act, if the
Trust fails to maintain S&P Eligible Assets and Moody's Eligible Assets with an
aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount or to maintain the 1940 Act Preferred Shares Asset Coverage
and such failure is not cured on or before the Preferred Shares Basic
Maintenance Cure Date or the 1940 Act Cure Date (each herein referred to as a
"Cure Date"), as the case may be. The number of Municipal Income Preferred
Shares to be redeemed shall be equal to the lesser of (i) the minimum number of
Municipal Income Preferred Shares the redemption of which, if deemed to have
occurred immediately prior to the opening of business on the Cure Date, together
with all other Municipal Income Preferred Shares subject to redemption or
retirement, would result in the satisfaction of the Preferred Shares Basic
Maintenance Amount or the 1940 Act Preferred Shares Asset Coverage, as the case
may be, on such Cure Date (provided that, if there is no such minimum number of
Municipal Income Preferred Shares and Other Preferred Shares the redemption of
which would have such result, all Municipal Income Preferred Shares then
outstanding shall be redeemed), and (ii) the maximum number of Municipal Income
Preferred Shares, together with all other Municipal Income Preferred Shares
subject to redemption or retirement, that can be redeemed out of funds expected
to be legally available therefor. In determining the number of Municipal Income
Preferred Shares required to be redeemed in accordance with the foregoing, the
Trust shall allocate the number required to be redeemed to
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satisfy the Preferred Shares Basic Maintenance Amount or the 1940 Act Preferred
Shares Asset Coverage, as the case may be, pro rata among Municipal Income
Preferred Shares, Other Preferred Shares and other Preferred Shares subject to
redemption provisions similar to those contained in this paragraph 4(b). The
Trust shall effect such redemption not later than 35 days after such Cure Date,
except that if the Trust does not have funds legally available for the
redemption of all of the required number of Municipal Income Preferred Shares
and other Preferred Shares which are subject to mandatory redemption or the
Trust otherwise is unable to effect such redemption on or prior to 35 days after
such Cure Date, the Trust shall redeem those Municipal Income Preferred Shares
and other Municipal Income Preferred Shares which it was unable to redeem on the
earliest practicable date on which it is able to effect such redemption.
Any Municipal Income Preferred Share shall be subject to mandatory
redemption regardless of whether such share is subject to a Non-Call Period,
provided that Municipal Income Preferred Shares subject to a Non-Call Period
will only be subject to redemption to the extent that the other Municipal Income
Preferred Shares are not available to satisfy the number of shares required to
be redeemed. In such event, such shares subject to a Non-Call Period will be
selected for redemption in an ascending order of outstanding Non-Call Period
(with shares with the lowest number of days remaining in the period to be called
first) and by lot in the event of equal outstanding Non-Call Periods.
(c) Subject to paragraph 4(d) of this Part I, if fewer than all
the outstanding Municipal Income Preferred Shares are to be redeemed pursuant to
this paragraph 4, the number of such Municipal Income Preferred Shares so to be
redeemed shall be a whole number of shares and shall be determined by the
Trustees, and the Trust shall give a Notice of Redemption as provided in
paragraph 4(e) of this Part I, provided that no such Municipal Income Preferred
Share will be subject to optional redemption on any Dividend Payment Date during
a Non-Call Period to which it is subject and Municipal Income Preferred Shares
subject to a Non-Call Period will be subject to mandatory redemption only on the
basis described under paragraph 4(b) of this Part I. Unless certificates
representing Municipal Income Preferred Shares are held by Holders other than
the Securities Depository or its nominee, the Securities Depository, upon
receipt of such notice, shall determine by lot (or otherwise in accordance with
procedures in effect at the time which shall be consistent with the 1940 Act)
the number of Municipal Income Preferred Shares to be redeemed from the account
of each Agent Member (which may include an Agent Member, including a Remarketing
Agent, holding shares for its own account)-and notify the Paying Agent of such
determination. The Paying Agent, upon receipt of such notice, shall in turn
determine by lot the number of Municipal Income Preferred Shares to be redeemed
from the accounts of the Beneficial Owners of the Municipal Income Preferred
Shares whose Agent Members have been selected by the Securities Depository and
give notice of such determination to the Remarketing Agent. In doing so, the
Paying Agent may determine that Municipal Income Preferred Shares shall be
redeemed from the accounts of some Beneficial Owners, which may include the
Remarketing Agent, without Municipal Income Preferred Shares being redeemed from
the accounts of other Beneficial Owners.
(d) Notwithstanding paragraph 4(c) of this Part I, if any
certificates representing Municipal Income Preferred Shares are held by Holders
other than the Securities Depository or its nominee, then the Municipal Income
Preferred Shares to be redeemed shall be selected by the Paying Agent by lot.
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(e) Any Notice of Redemption with respect to Municipal Income
Preferred Shares shall be given (A) in the case of a redemption pursuant to
paragraph 4(a) of this Part I, by the Trust to the Paying Agent, the Securities
Depository (and any other Holder) and the Remarketing Agent, by telephone, not
later than 1:00 p.m. New York City time (and later confirmed in writing) not
less than 20 nor more than 30 days prior to the earliest date upon which any
such redemption may occur and (B) in the case of a mandatory redemption pursuant
to paragraph 4(b) of this Part I, by the Trust to the Paying Agent, the
Securities Depository (and any other Holder) and the Remarketing Agent, by
telephone,-not later than 1:00 p.m., New York City time (and later confirmed in
writing) not less than 20 nor more than 30 days prior to the redemption date
established by the Trustees and specified in such notice. In the case of a
partial redemption of the Municipal Income Preferred Shares, the Paying Agent
shall use its reasonable efforts to provide telephonic notice to each Beneficial
Owner of Municipal Income Preferred Shares called for redemption not later than
the close of business on the Business Day on which the Paying Agent determines
the shares to be redeemed, as described in paragraphs 4(c) and 4(d) of this Part
I (or, during a Non-Payment Period with respect to such shares, not later than
the close of business on the Business Day immediately following the day on which
the Paying Agent receives a Notice of Redemption from the Trust). Such
telephonic notice shall be confirmed promptly in writing to the Remarketing
Agent, the Securities Depository and each Beneficial Owner of Municipal Income
Preferred Shares called for redemption not later than the close of business on
the Business Day immediately following the day on which the Paying Agent
determines the shares to be redeemed. In the case of a redemption in whole of
the Municipal Income Preferred Shares, the Paying Agent shall use its reasonable
efforts to provide telephonic notice to each Beneficial Owner of Municipal
Income Preferred Shares called for redemption not later than the close of
business on the Business Day immediately following the day on which it receives
a Notice of Redemption from the Trust. Such telephonic notice shall be confirmed
promptly in writing to each Beneficial Owner of Municipal Income Preferred
Shares called for redemption, the Remarketing Agent and the Securities
Depository not later than the close of business on the second Business Day
following the day on which the Paying Agent receives a Notice of Redemption.
(f) Every Notice of Redemption and other redemption notice shall
state: (i) the redemption date; (ii) the number of Municipal Income Preferred
Shares to be redeemed; (iii) the redemption price; (iv) that dividends on the
Municipal Income Preferred Shares to be redeemed shall cease to accumulate as of
such redemption date; and (v) the provision of the Declaration of Trust or the
By-laws pursuant to which such shares are being redeemed. In addition, notice of
redemption given to a Beneficial owner by the Paying Agent shall state the CUSIP
number, if any, of the Municipal Income Preferred Shares to be redeemed and the
manner in which the Beneficial Owners of such shares may obtain payment of the
redemption price. No defect in the Notice of Redemption or other redemption
notice or in the transmittal or the mailing thereof shall affect the validity of
the redemption proceedings, except as required by applicable law. The Paying
Agent shall use its reasonable efforts to cause the publication of a Notice of
Redemption in an Authorized Newspaper within two Business Days of the date of
the Notice of Redemption, but failure so to publish such notification shall not
affect the validity or effectiveness of any such redemption proceedings.
(g) On any redemption date, the Trust shall deposit, irrevocably
in trust, in same-day funds, with the Paying Agent, by 12:00 noon, New York City
time, the Optional
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Redemption Price or Mandatory Redemption Price, as the case may be, for each
Municipal Income Preferred Share called for redemption.
(h) In connection with any redemption, upon the giving of a
Notice of Redemption and the deposit of the funds necessary for such redemption
with the Paying Agent in accordance with this paragraph 4, Municipal Income
Preferred Shares so called for redemption shall no longer be deemed outstanding
for any purpose and all rights of the Holders of Municipal Income Preferred
Shares so called for redemption shall cease and terminate, except the right of
the Holders thereof to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, but without any interest or other
additional amount (except as provided in paragraph 3(k) of this Part I). The
Trust shall be entitled to receive from the Paying Agent, promptly after the
date fixed for redemption, any cash deposited with the Paying Agent as aforesaid
in excess of the sum of (i) the aggregate redemption price of the Municipal
Income Preferred Shares called for redemption on such date and (ii) all other
amounts to which Holders of Municipal Income Preferred Shares called for
redemption may be entitled. The Trust shall be entitled to receive, from time to
time after the date fixed for redemption, any interest on any funds deposited in
respect of such redemption. Any funds so deposited with the Paying Agent which
are unclaimed at the end of ninety days from such redemption date shall, to the
extent permitted by law, be repaid to the Trust, after which time Holders of
Municipal Income Preferred Shares so called for redemption shall only to the
Trust for payment of the redemption price and all the look other amounts to
which they may be entitled. For so long as S&P rates the Municipal Income
Preferred Shares, if any such unclaimed funds are repaid to the Trust, the Trust
shall invest such unclaimed funds in Deposit Securities with a maturity of no
more than one Business Day until such time as there are no unclaimed funds.
(i) To the extent that any redemption for which Notice of
Redemption has been given is not made by reason of the absence of legally
available funds therefor, such redemption shall be made as soon as practicable
to the extent such funds become available. Failure to redeem Municipal Income
Preferred Shares shall be deemed to exist at any time after the date specified
for redemption in a Notice of Redemption when the Trust shall have failed, for
any reason whatsoever, to deposit funds with the Paying Agent pursuant to
paragraph 4(g) of this Part I with respect to any shares for which such Notice
of Redemption has been given.
(j) Notwithstanding any of the foregoing provisions of this
paragraph 4, the Remarketing Agent may, in its sole discretion, modify the
procedures set forth above with respect to notification of redemption, provided
that any such modification does not adversely affect any Holder of Municipal
Income Preferred Shares or materially alter the obligations of the Paying Agent;
and further provided that the Trust receives written confirmation from S&P that
any such modification would not impair the ratings then assigned by S&P to
Municipal Income Preferred Shares.
(k) In effecting any redemption pursuant to this paragraph 4, the
Trust shall use all reasonable efforts to satisfy all applicable procedural
conditions precedent to effecting such redemption under the 1940 Act and
Massachusetts law.
(l) Notwithstanding the foregoing, (i) no Municipal Income
Preferred Share may be redeemed pursuant to paragraph 4(a) of this Part I unless
the full amount of accumulated
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but unpaid dividends to the date fixed for redemption for each such Municipal
Income Preferred Share called for redemption shall have been declared, and (ii)
no Municipal Income Preferred Share may be redeemed unless all outstanding
Municipal Income Preferred Shares are simultaneously redeemed, nor may any
Municipal Income Preferred Shares be purchased or otherwise acquired by the
Trust except in accordance with a purchase offer made on substantially
equivalent terms by the Trust for all outstanding Municipal Income Preferred
Shares, unless, in each such instance, dividends (other than dividends, if any,
to be paid pursuant to paragraph 3(k) or 3(l) of this Part I which have not yet
become due and payable) on all outstanding Municipal Income Preferred Shares
through the most recent Dividend Payment Date shall have been paid or declared
and sufficient funds for the payment thereof deposited with the Paying Agent.
(m) Except as set forth in this paragraph 4 with respect to
redemptions and subject to paragraph 4(l) hereof, nothing contained herein shall
limit any legal right of the Trust or any affiliate to purchase or otherwise
acquire any Municipal Income Preferred Share at any price. Any Municipal Income
Preferred Shares which have been redeemed, purchased or other-wise acquired by
the Trust or any affiliate thereof may be resold if, after the resale, the Trust
has Moody's Eligible Assets with an aggregate Discounted Value equal to or
greater than the Preferred Shares Basic Maintenance Amount as provided in
Paragraph 8 (a) of this Part I. In lieu of redeeming shares called for
redemption, the Trust shall have the right to arrange for other purchasers to
purchase from Holders all Municipal Income Preferred Shares to be redeemed
pursuant to this paragraph 4, except those Municipal Income Preferred Shares to
be redeemed pursuant to paragraph 4(b) hereof, by their paying to such Holders
on or before the close of business on the redemption date an amount equal to not
less than the redemption price payable by the Trust on the redemption of such
shares, and the obligation of the Trust to pay such redemption price shall be
satisfied and discharged to the extent such payment is so made by such
purchasers. Prior to the purchase of such shares by such purchasers, the Trust
shall notify each purchaser that such shares have been called for redemption.
5. Liquidation.
(a) Upon a liquidation, dissolution or winding up of the affairs
of the Trust, whether voluntary or involuntary, the Holders shall be entitled,
whether from capital or surplus, before any assets of the Trust shall be
distributed among or paid over to holders of Common Shares or any other class or
series of shares of the Trust ranking junior to the Municipal Income Preferred
Shares as to liquidation payments, to be paid the amount of $50,000 per
Municipal Income Preferred Share, plus an amount equal to all accumulated but
unpaid dividends thereon (whether or not earned or declared) to but excluding
the date of final distribution, in same-day funds. After any such payment, the
Holders shall not be entitled to any further participation in any distribution
of assets of the Trust, except as provided in paragraph 3(k) of this Part I.
(b) If, upon any such liquidation, dissolution or winding up of
the Trust, the assets of the Trust shall be insufficient to make such full
payments to the Holders and the holders of any Preferred Shares ranking as to
liquidation, dissolution or winding up on a parity with the Municipal Income
Preferred Shares (including the Other Preferred Shares), then such assets shall
be distributed among the Holders and such parity holders ratably in accordance
with the respective amounts which would be payable on such Municipal Income
Preferred Shares and any other such Preferred Shares if all amounts thereof were
paid in full.
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(c) Neither the consolidation nor the merger of the Trust with or
into any other entity or entities nor a reorganization of the Trust alone nor
the sale, lease or transfer by the Trust of all or substantially all of its
assets shall be deemed to be a dissolution or liquidation of the Trust.
6. Voting Rights.
(a) General. Except as otherwise provided in the Declaration of
Trust or By-laws, each Holder of Municipal Income Preferred Shares and each
record holder of Common Shares shall be entitled to one vote for each share held
on each matter submitted to a vote of shareholders of the Trust, and the holders
of outstanding preferred shares, including Municipal Income Preferred Shares,
and of Common Shares shall vote together as a single class; provided that, at
any meeting of the shareholders of the Trust held for the election of Trustees,
the holders of preferred shares, including Municipal Income Preferred Shares,
present in person or represented by proxy at said meeting, shall be entitled, as
a class, to the exclusion of the holders of all other securities and classes of
capital shares of the Trust, to elect two Trustees of the Trust, each preferred
share, including Municipal Income Preferred Shares, entitling the holder thereof
to one vote. Subject to paragraph 6(b) hereof, the holders of outstanding Common
Shares and preferred shares, including Municipal Income Preferred Shares, voting
as a single class, shall elect the balance of the Trustees.
(b) Right to Elect Majority of Trustees. During any period in
which any one or more of the conditions described below shall exist (such period
being referred to herein as a "Voting Period n), the number of Trustees shall be
automatically increased by the smallest number that, when added to the two
Trustees elected exclusively by the holders of preferred shares, would
constitute a majority of the Trustees as so increased by such smallest number;
and the holders of preferred shares shall be entitled, voting as a class on a
one-vote-per-share basis (to the exclusion of the holders of all other
securities and classes of capital shares of the Trust), to elect such smallest
number of additional Trustees, together with the two Trustees that such holders
are in any event entitled to elect. A Voting Period shall commence:
(i) if at any time accumulated dividends (whether or not
earned or declared, and whether or not funds are then legally available
in an amount sufficient therefor) on the outstanding Municipal Income
Preferred Shares equal to at least two full years, dividends shall be
due and unpaid and sufficient cash or securities shall not have been
deposited with the Paying Agent for the payment of such accumulated
dividends; or
(ii) if at any time holders of any preferred shares other than
the Municipal Income Preferred Shares are entitled to elect a majority
of the Trustees of the Trust.
Upon the termination of a Voting Period, the voting rights described in
this paragraph 6(b) shall cease, subject always, however, to the revesting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this paragraph 6(b). A Voting Period shall terminate when
all dividends in arrears shall have been paid or otherwise provided for.
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(c) Other Actions. Except as otherwise provided herein, so long
as any Municipal Income Preferred Shares are outstanding, the Trust shall not,
without the affirmative vote or consent of the Holders of at least a majority of
the Municipal Income Preferred Shares outstanding at the time, in person or by
proxy, either in writing or at a meeting (voting separately as one class): (i)
authorize, create or issue, or increase or decrease the authorized or issued
amount of, any class or series of shares of beneficial interest ranking prior to
or on a parity with the Municipal Income Preferred Shares with respect to
payment of dividends or the distribution of assets on liquidation, or increase
or decrease the number of authorized Municipal Income Preferred Shares (although
the Trust may, to the extent of the amount of Municipal Income Preferred Shares
authorized from time to time, issue additional Municipal Income Preferred Shares
without such vote or consent); (ii) amend, alter or repeal the provisions of the
Declaration of Trust and the By-laws, including this Section 13.1, whether by
merger, consolidation or otherwise, so as to affect materially and adversely any
preference, right or power of such Municipal Income Preferred Shares or the
Holders thereof; or (iii) take any other action (including without limitation
bankruptcy proceedings) which pursuant to Section 18(a)(2)(D) of the 1940 Act
requires such approval by the Holders; provided that (i) the issuance of not
more than the 6,000 Municipal Income Preferred Shares presently authorized, (ii)
the authorization and issuance of preferred shares with an aggregate initial
liquidation preference of up to $60 million and (iii) the creation and issuance
of a series of Preferred Shares ranking junior to the Municipal Income Preferred
Shares with respect to payment of dividends and the distribution of assets on
liquidation, will not be deemed to affect such preferences, rights or powers
unless such issuance would, at the time thereof cause the Trust not to satisfy
the 1940 Act Preferred Shares Asset Coverage or the Preferred Shares Basic
Maintenance Amount.
The foregoing voting provisions shall not apply with respect to
Municipal Income Preferred Shares if, at or prior to the time when a vote is
required, such Municipal Income Preferred Shares shall have been (i) redeemed or
(ii) called for redemption and sufficient funds (in the form of cash or
Municipal Bonds rated at least P-1, MIG-1 or VMIG-l by Moody's and which mature
prior to the redemption date) shall have been deposited in trust to effect such
redemption.
Notwithstanding the foregoing, the Trustees may, without the vote or
consent of the Holders of Municipal Income Preferred Shares, from time to time
amend, alter or repeal any or all of the provisions of paragraphs 12(a), 12(b),
12(c), 13(a) and 13(b) of this Part I, as well as any or all of the definitions
of the terms listed below, and any such amendment, alteration or repeal will be
deemed not to affect the preferences, rights or powers of Municipal Income
Preferred Shares or the Holders thereof, provided the Trustees receive written
confirmation from Moody's, in the case of any such action with respect to
paragraphs 12(b), 12(c), 13(a) and 13(b), or from S&P, in the case of any such
action with respect to paragraphs 12(a), 13(a) and 13(b), or from both Moody's
and S&P, in the case of any such action with respect to the definitions of the
terms listed below, that any such amendment, alteration or repeal would not
impair the ratings then assigned to Municipal Income Preferred Shares by the
rating agency providing such confirmation:
Accountant's Confirmation 1940 Act Preferred Shares Asset Coverage
Anticipation Notes Municipal Bonds
Certificate of Minimum Liquidity Municipal Index
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Closing Transactions Quarterly Valuation Date
Deposit Securities Receivables for Municipal Bonds Sold
Discounted Value Preferred Shares Basic Maintenance Amount
Dividend Coverage Amount Preferred Shares Basic Maintenance Cure Date
Dividend Coverage Assets Preferred Shares Basic
Forward Commitments Maintenance Report
Independent Accountant S&P Discount Factor
Initial Margin S&P Eligible Asset
Market Value S&P Hedging Transaction
Maximum Potential Additional
Dividend Liability S&P Exposure Period
Minimum Liquidity Level S&P Volatility Factor
Moody's Discount Factor Treasury Bonds
Moody's Eligible Asset Valuation Date
Moody's Hedging Transaction Variation Margin
Moody's Exposure Period
Moody's Volatility Factor
1940 Act Cure Date
(d) Voting Procedures.
(i) As soon as practicable after the accrual of any right of
the holders of shares of preferred shares to elect additional Trustees
as described in paragraph 6(b) above, the Trust shall notify the Paying
Agent and the Paying Agent shall call a special meeting of such
holders, by mailing a notice of such special meeting to such holders,
such meeting to be held not less than 10 nor more than 20 days after
the date of mailing of such notice. If the Trust fails to send such
notice to the Paying Agent or if the Paying Agent does not call such a
special meeting, it may be called by any such holder on like notice.
The record date for determining the holders entitled to notice of and
to vote at such special meeting shall be the close of business on the
fifth Business Day preceding the day on which such notice is mailed. At
any such special meeting and at each meeting held during a Voting
Period, such holders, voting together as a class (to the exclusion of
the holders of all other securities and classes of capital shares of
the Trust), shall be entitled to elect the number of Trustees
prescribed in paragraph 6(b) above on a one-vote-per-share basis. At
any such meeting or adjournment thereof in the absence of a quorum, a
majority of such holders present in person or by proxy shall have the
power to adjourn the meeting without notice, other than an announcement
at the meeting, until a quorum is present.
(ii) For purposes of determining any rights of the Holders to
vote on any matter, whether such right is created by this Section 12.1,
by the other provisions of the Declaration of Trust or the By-laws, by
statute or otherwise, no Holder shall be entitled to vote and no
Municipal Income Preferred Share shall be deemed to be "outstanding"
for the purpose of voting or determining the number of shares required
to constitute a quorum if, prior to or concurrently with the time of
determination of shares entitled to vote or shares deemed outstanding
for quorum purposes, as the case may be, sufficient
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funds (in the form of cash or Municipal Bonds rated at least P-1, MIG-1
or VMIG-l by Moody's and which mature prior to the redemption date) for
the redemption of such shares have been deposited in trust with the
Paying Agent for that purpose and the requisite Notice of Redemption
with respect to such shares shall have been given as provided in
paragraph 4 of this Part I. No Municipal Income Preferred Share held by
the Trust or any affiliate of the Trust shall have any voting rights or
be deemed to be outstanding for voting purposes.
(iii) The terms of office of all persons who are Trustees of
the Trust at the time of a special meeting of Holders and holders of
other preferred shares to elect Trustees shall continue,
notwithstanding the election at such meeting by the Holders and such
other holders of the number of Trustees that they are entitled to
elect, and the persons so elected by the Holders and such other
holders, together with the two incumbent Trustees elected by the
Holders and such other holders of preferred shares and the remaining
incumbent Trustees elected by the holders of the Common Shares and
preferred shares, shall constitute the duly elected Trustees of the
Trust.
(iv) Simultaneously with the expiration of a Voting Period,
the terms of office of the additional Trustees elected by the Holders
and holders of other preferred shares pursuant to paragraph 6(b) above
shall terminate, the remaining Trustees shall constitute the Trustees
of the Trust and the voting rights of the Holders and such other
holders to elect additional Trustees pursuant to paragraph 6(b) above
shall cease, subject to the provisions of the penultimate sentence of
paragraph 6(b).
(e) Exclusive Remedy. Unless otherwise required by law, the
Holders of Municipal Income Preferred Shares shall not have any relative rights
or preferences or other special rights other than those specifically set forth
herein. The Holders of Municipal Income Preferred Shares shall have no
preemptive rights or rights to cumulative voting. In the event that the Trust
fails to pay any dividends-on the Municipal Income Preferred Shares, the
exclusive remedy of the Holders shall be the right to vote for Trustees pursuant
to the provisions of this paragraph 6. In no event shall the Holders of
Municipal Income Preferred Shares have any right to sue for, or bring a
proceeding with respect to, such dividends or redemptions or damages for the
failure to receive any dividends or the proceeds of a redemption.
(f) Notification to Moody's and S&P. In the event a vote of
Holders of Municipal Income Preferred Shares is required pursuant to the
provisions of Section 13(a) of the 1940 Act, the Trust shall, not later than ten
Business Days prior to the date on which such vote is to be taken, notify
Moody's and S&P that such vote is to be taken, the nature of the action with
respect to which such vote is to be taken and, not later than 10 Business Days
following the vote, the results of the vote.
7. 1940 Act Preferred Shares Asset Coverage. The Trust shall
maintain, as of the last Business Day of each month in which any Municipal
Income Preferred Share is outstanding, the 1940 Act Preferred Shares Asset
Coverage.
8. Preferred Shares Basic Maintenance Amount.
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(a) The Trust shall maintain, on each Valuation Date, and shall
verify to its satisfaction that it is maintaining on such Valuation Date, (i)
S&P Eligible Assets having an aggregate Discounted Value equal to or greater
than the Preferred Shares Basic Maintenance Amount and (ii) Moody's Eligible
Assets having an aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount. Upon any failure to maintain the
required Discounted Value, the Trust will use its best efforts to alter the
composition of its portfolio to reattain the Preferred Shares Basic Maintenance
Amount on or prior to the Preferred Shares Basic Maintenance Cure Date. If, on
any Valuation Date, the Trust shall have Moody's Eligible Assets with a
Discounted Value which exceeds the Preferred Shares Basic Maintenance Amount by
not more than 5%, the Adviser shall not alter the composition of the Trust's
portfolio unless it determines that such action will not cause the Trust to have
Moody's Eligible Assets with a Discounted Value less than the Preferred Shares
Basic Maintenance Amount.
(b) The Trust will deliver a Preferred Shares Basic Maintenance
Report to the Remarketing Agent, the Paying Agent, Moody's and S&P as of (i)
each Quarterly Valuation Date, (ii) the first day of a Special Dividend Period,
and (iii) any other time when specifically requested by either Moody's or S&P,
in each case at or before 5:00 p.m., New York City time, on the third Business
Day after such day.
(c) At or before 5:00 p.m., New York City time, on the third
Business Day after a Valuation Date on which the Trust fails to maintain Moody's
Eligible Assets or S&P Eligible Assets, as the case may be, with an aggregate
Discounted Value which exceeds the Preferred Shares Basic Maintenance Amount by
5% or more or to satisfy the Preferred Shares Basic Maintenance Amount, the
Trust shall complete and deliver to the Remarketing Agent, the Paying Agent,
Moody's and S&P an Preferred Shares -Basic Maintenance Report as of the date of
such failure.
(d) At or before 5:00 p.m., New York City time, on the third
Business Day after a Valuation Date on which the Trust cures any failure to
satisfy the Preferred Shares Basic Maintenance Amount, the Trust shall complete
and deliver to the Remarketing Agent, the Paying Agent, Moody's and S&P an
Preferred Shares Basic Maintenance Report as of the date of such cure.
(e) A Preferred Shares Basic Maintenance Report or Accountant's
Confirmation will be deemed to have been delivered to the Remarketing Agent, the
Paying Agent, Moody's and S&P if the Remarketing Agent, the Paying Agent,
Moody's and S&P receive a copy or telecopy, telex or other electronic
transcription thereof and on the same day the Trust mails to the Remarketing
Agent, the Paying Agent, Moody's and S&P for delivery on the next Business Day
the full Preferred Shares Basic Maintenance Report. A failure by the Trust to
deliver an Preferred Shares Basic Maintenance Report under subparagraph (b), (c)
or (d) of this paragraph 8 shall be deemed to be delivery of a Preferred Shares
Basic Maintenance Report indicating that the Discounted Value for all assets of
the Trust is less than the Preferred Shares Basic Maintenance Amount, as of the
relevant Valuation Date.
(f) Whenever the Trust delivers a Preferred Shares Basic
Maintenance Report to S&P pursuant to subparagraph (b) of this paragraph 8, it
shall also deliver a Certificate of Minimum Liquidity to the Remarketing Agent
and the Paying Agent.
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(g) Within ten Business Days after the date of delivery to the
Remarketing Agent, the Paying Agent, S&P and Moody's of a Preferred Shares Basic
Maintenance Report in accordance with paragraph 8(b) above relating to a
Quarterly Valuation Date, the Independent Accountant will confirm in writing to
the Remarketing Agent, the Paying Agent, S&P and Moody's (i) the mathematical
accuracy of the calculations reflected in such Report (and in any other
Preferred Shares Basic Maintenance Report, randomly selected by the Independent
Accountant, that was delivered by the Trust during the quarter ending on such
Quarterly Valuation Date); (ii) that, in such Report (and in such randomly
selected Report), (a) the Trust determined in accordance with this Section 12.1
whether the Trust had, at such Quarterly Valuation Date (and at the Valuation
Date addressed in such randomly selected Report), S&P Eligible Assets of an
aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount and Moody's Eligible Assets of an aggregate Discounted Value
at least equal to the Preferred Shares Basic Maintenance Amount and (b) it has
obtained confirmation from the Pricing Service that the Market Value of
portfolio securities as determined by the Pricing Service equals the mean
between the quoted bid and asked prices or the yield equivalent (when quotations
are readily available); (iii) that the Trust has excluded from the Preferred
Shares Basic Maintenance Report assets not qualifying as Eligible Assets; and
(iv) with respect to such confirmation to Moody's, that the Trust has satisfied
the requirements of paragraph 12(b) of this Part I as of the Quarterly Valuation
Date (and at the Valuation Date addressed in such randomly selected Report)
(such confirmation is herein called the "Accountant's Confirmation). In
preparing the Accountant's Confirmation, the Independent Accountant shall be
entitled to rely, without further investigation, on such interpretations of law
by the Trust as may have been necessary for the Trust to perform the
computations contained in the Preferred Shares Basic Maintenance Report.
(h) Within ten Business Days after the date of delivery to the
Remarketing Agent, the Paying Agent, S&P and Moody's of an Preferred Shares
Basic Maintenance Report in accordance with paragraph 8(c) above relating to any
Valuation Date on which the Trust failed to satisfy the Preferred Shares Basic
Maintenance Amount, the Independent Accountant will provide to the Remarketing
Agent, the Paying Agent, S&P and Moody's an Accountant's Confirmation as to such
Preferred Shares Basic Maintenance Report.
(i) Within ten Business Days after the date of delivery to the
Remarketing Agent, the Paying Agent, S&P and Moody's of a Preferred Shares Basic
Maintenance Report in accordance with paragraph 8(d) above relating to any
Valuation Date on which the Trust cured any failure to satisfy the Preferred
Shares Basic Maintenance Amount, the Independent Accountant will provide to the
Remarketing Agent, the Paying Agent, S&P and Moody's an Accountant's
Confirmation as to such Preferred Shares Basic Maintenance Report.
(j) If any Accountant's Confirmation delivered pursuant to
subparagraph (g), (h) or (i) of this paragraph 8 shows that an error was made in
the Preferred Shares Basic Maintenance Report for a particular Valuation Date
for which such Accountant's Confirmation was required to be delivered, or shows
that a lower aggregate Discounted Value for the aggregate of all S&P Eligible
Assets or Moody's Eligible Assets, as the case may be, of the Trust was
determined by the Independent Accountant, the calculation or determination made
by such Independent Accountant shall be final and conclusive and shall be
binding on the Trust, and the Trust shall accordingly amend and deliver the
Preferred Shares Basic Maintenance Report to the
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Remarketing Agent, the Paying Agent, S&P and Moody's promptly following receipt
by the Trust of such Accountant's Confirmation.
(k) At or before 5:00 p.m., New York City time, on the first
Business Day after the Date of Original Issue of the Municipal Income Preferred
Shares, the Trust will complete and deliver to Moody's and S&P a Preferred
Shares Basic Maintenance Report as of the close of business on such Date of
Original Issue. Within five Business Days of such Date of Original Issue, the
Independent Accountant will provide to Moody's and S&P an Accountant's
Confirmation as to such Preferred Shares Basic Maintenance Report.
(l) At or before 5:00 p.m., New York City time, on the first
Business Day following any date on which the Trust repurchases any outstanding
Common Shares, the Trust will complete and deliver to Moody's and S&P a
Preferred Shares Basic Maintenance Report as of the close of business on the
date of the repurchase.
9. Minimum Liquidity Level. Reserved.
10. Restrictions on Certain Distributions. For so long as any
Municipal Income Preferred Share is outstanding, the Trust shall not declare,
pay or set apart for payment any dividend or other distribution (other than a
dividend or distribution paid in shares of, or options, warrants or rights to
subscribe for or purchase, Common Shares or other shares, if any, ranking junior
to the Municipal Income Preferred Shares as to dividends and upon liquidation)
in respect of Common Shares or any other shares of the Trust ranking junior-to
or on a parity with the Municipal Income Preferred Shares as to dividends or
upon liquidation, or call for redemption, redeem, purchase or otherwise acquire
for consideration any Common Shares or any other such junior shares or parity
shares (except by conversion into or exchange for shares of the Trust ranking
junior to the Municipal Income Preferred Shares as to dividends and upon
liquidation), unless (i) full cumulative dividends on Municipal Income Preferred
Shares and Other Preferred Shares through the most recent Dividend Payment Date
shall have been paid or shall have been declared and sufficient funds for the
payment thereof deposited with the Paying Agent, (ii) the Trust has redeemed the
full number of Municipal Income Preferred Shares and Other Preferred Shares
required to be redeemed by any provision for mandatory redemption pertaining
thereto, (iii) immediately after such transaction the aggregate Discounted Value
of Moody's Eligible Assets and S&P Eligible Assets would at least equal the
Preferred Shares Basic Maintenance Amount and (iv) the Trust meets the
applicable requirements of Section 18(a)(2)(B) of the 1940 Act.
11. Notice. All notices or communications, unless otherwise
specified in these By-laws, shall be sufficiently given if in writing and
delivered in person or mailed by first-class mail, postage prepaid. Notice shall
be deemed given on the earlier of the date received or the date seven days after
which such notice is mailed.
12. Futures and Options Transactions; Forward Commitments.
(a) For so long as any Municipal Income Preferred Shares are
rated by S&P, the Trust will not purchase or sell futures contracts, write,
purchase or sell options on the futures contracts or write put options (except
covered put options) or call options (except covered call
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options) on portfolio securities unless it receives written confirmation from
S&P that engaging in such transactions will not impair the rating then assigned
to such Municipal Income Preferred Shares by S&P, except that the Trust may
purchase or sell futures contracts based on the Bond Buyer Municipal Bond Index
(the "Municipal Index") or on U.S. Treasury Bonds, Bills or Notes (Treasury
Futures") and write, purchase or sell put and call options on such contracts
(collectively "S&P Hedging Transactions"), subject to the following limitations:
(A) the Trust will not engage in any S&P Hedging
Transactions based on the Municipal Index (other than
transactions which terminate a futures contract or option held
by the Trust by the Trust's taking an opposition position
thereto ("Closing Transactions")), which would cause the Trust
at the time of such transaction to own or have sold (1) 1,001
or more outstanding futures contracts based on the Municipal
Index, (2) outstanding futures contracts based on the
Municipal Index exceeding in number 25% of the quotient of the
Market Value of the Trust's total assets divided by $100,000
or (3) outstanding futures contracts based on the Municipal
Index exceeding in number 10% of the average daily open
interest in futures contracts based on the Municipal Index in
the thirty days preceding the time of effecting such
transaction as reported by The Wall Street Journal;
(B) the Trust will not engage in any S&P Hedging
Transaction based on Treasury Futures ) other than Closing
Transaction) which would cause the Trust at the time of such
transaction to own or have sold (1) outstanding futures
contracts based on Treasury Futures exceeding in number 50% of
the quotient of the Market Value of the Trust's total assets
divided by $100,000 ($200,000 in the case of futures on
Treasury Bills) or (2) outstanding futures contracts based on
a particular Treasury instrument exceeding in number 10% of
the average daily open interest in such futures contracts in
the thirty days preceding the time of effecting such
transaction as reported in The Wall Street Journal;
(C) the Trust will engage in Closing Transactions to
close out any outstanding futures contracts which the Trust
owns or has sold or any outstanding option thereon owned by
the Trust in the event that (1) the Trust does not have S&P
Eligible Assets with an aggregate Discounted Value equal to or
greater than the Preferred Shares Basic Maintenance Amount on
two consecutive Valuation Dates and (2) the Trust is required
to pay Variation Margin on the second such Valuation Date; and
(D) when the Trust engages in an S&P Hedging
Transaction, it will maintain an amount of cash, cash
equivalents or short-term, money market securities or longer
term fixed income obligations rated, in the case of longer
term securities, at least A in a segregated account with the
Trust's custodian, so that the amount so segregated plus the
amount of Initial Margin and Variation Margin held in the
account of or on behalf of the Trust's broker with respect to
such futures contract or option equals the following:
Writing covered call options on futures:
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the higher of the Market Value of the instruments underlying
the options contract or the strike price of the options
contract.
Writing covered put options on futures:
the strike price of the options contract.
Buying futures:
the Trust's purchase obligation under the futures contract.
Selling futures:
the higher of the Market Value of the instruments or index
underlying the futures contract and the market price at which
the futures will settle at expiration.
For purposes of determining whether the Trust has S&P Eligible Assets
with a Discounted Value that equals or exceeds the Preferred Shares Basic
Maintenance Amount, amounts deposited as Initial Margin and, for futures
contracts only, Variation Margin shall not constitute S&P Eligible Assets and
securities held in the segregated account contemplated by paragraph 12(a)(D)
above shall have the following Discount Factors.
Type Of Contract Discounted Value
---------------- ----------------
Of Segregated Securities
------------------------
Writing covered put options on futures:
The Discounted value of segregated securities is equal to the
lower of the strike price of the option or the Discounted
Value of the segregated securities.
Writing covered put options on futures:
The Discounted Value of segregated securities is equal to the
lower of the Discounted Value of the segregated securities and
the Trust's purchase obligation.
Futures: The Discounted Value of segregated securities is determined
by reference to the S&P Exposure Period from the date of
calculation to the contract expiration date.
(b) For so long as any Municipal Income Preferred Shares are
rated by Moody's, the Trust will not buy or sell futures contracts, write,
purchase or sell put or call options on futures contracts or write put or call
options (except covered call or put options) on portfolio securities unless it
receives written confirmation from Moody's that engaging in such transactions
would not impair the rating then assigned to any Municipal Income Preferred
Shares by Moody's, except that the Trust may purchase or sell exchange-traded
futures contracts based on the Municipal Index or Treasury Futures and purchase,
write or sell exchange-traded put
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options on such futures contracts and purchase, write or sell exchange-traded
call options on such futures contracts (collectively "Moody's Hedging
Transactions"), subject to the following limitations:
(A) the Trust will not engage in any Moody's Hedging
Transaction based on the Municipal Index (other than Closing
Transactions) which would cause the Trust at the time of such
transaction to own or have sold outstanding futures contracts
based on the Municipal Index exceeding in number 10% of the
average number of daily traded futures contracts based on the
Municipal Index in the thirty days preceding the time of
effecting such transaction as reported by The Wall Street
Journal;
(B) the Trust will engage in Closing Transactions to
close out any outstanding futures contract based on the
Municipal Index if the amount of open interest in the
Municipal Index as reported by The Wall Street Journal is less
than 5,000.
(C) the Trust will not enter into an option or
futures transaction unless, after giving effect thereto, the
Trust would continue to have Moody's Eligible Assets with an
aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount; and
(D) when the Trust engages in a Moody's Hedging
Transaction, it will maintain an amount of cash, cash
equivalents or short-term, money market securities or longer
term fixed income obligations rated, in the case of longer
term obligations, at least A2 in a segregated account with the
Trust's custodian, so that the amount so segregated plus the
amount of Initial Margin and Variation Margin held in the
account of or on behalf of the Trust's broker with respect to
such futures contract or option equals the following:
Writing covered call options on futures:
the higher of the Market Value of the instruments underlying
the options contract or the strike price of the options
contract.
Writing covered put options:
the strike price of the options contract.
Buying futures:
the Trust's purchase obligation under the futures contract.
Selling futures:
the higher of the Market Value of the instruments or index
underlying the futures contract and the price at which the
futures contract will settle at expiration.
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For purposes of determining whether the Trust has Moody's Eligible Assets with
an aggregate Discounted Value that equals or exceeds the Preferred Shares Basic
Maintenance Amount, the Discounted Value of Moody's Eligible Assets which the
Trust is obligated to deliver pursuant to an outstanding futures contract or
option shall be as follows (unless the Trust receives written confirmation to
the contrary from Moody's): (i) assets subject to call options written by the
Trust which are either exchange-traded and "readily reversible" or which expire
within 48 days after the date as of which such valuation is made shall be valued
at the lesser of (a) Discounted Value and (b) the exercise price of the call
option written by the Trust; (ii) assets subject to call options written by the
Trust not meeting the requirements of clause (i) shall have no value and (iii)
assets subject to put options written by the Trust shall be valued at the lesser
of (a) the exercise price and (b) the Discounted Value of such security.
For purposes of determining whether the Trust has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the Preferred
Shares Basic Maintenance Amount, the following amounts shall be added to the
Preferred Shares Basic Maintenance Amount required to be maintained by the Trust
under paragraph 8(a) of this Part I of Section 13.1 (unless the Trust receives
written confirmation to the contrary from Moody's): (i) 10% of the exercise
price of a written call option; (ii) the exercise price of any written put
option; (iii) where the Trust is the seller under a futures contract which does
not settle in cash, 10% of the settlement price of the futures contract; (iv)
where the Trust is the purchaser under a futures contract which does not settle
in cash, 10% of the settlement price of assets to be purchased under such
futures contract; (v) the settlement price of the underlying futures contracts
if the Trust writes put options on a futures contract; and (vi) 105% of the
Market Value of the underlying futures contracts if the Trust writes call
options on futures contracts and does not own the underlying contract.
(c) For so long as any Municipal Income Preferred Shares are
rated by Moody's, the Trust will not enter into any contract to purchase
securities for a fixed price at a future date beyond customary settlement time
(other than such contracts that constitute Moody's Hedging Transaction that are
permitted under paragraph 12(b) of this Part I of Section 13.1) unless it
receives written confirmation from Moody's that engaging in such transactions
would not impair the rating then assigned to such Municipal Income Preferred
Shares by Moody's except that the Trust may enter into such contracts ("Forward
Commitments"), subject to the following limitations:
(A) the Trust will maintain in a segregated account
with its custodian cash, cash equivalents or short-term, fixed
income securities rated P-1, MIG-1 or VMIG-1 by Moody's with
face value that equals or exceeds the amount of the Trust's
obligations under any Forward Commitments to which it is from
time to time a party or longer-term fixed income securities
with a Discounted value that equals or exceeds the amount of
the Trust's obligations under any Forward Commitments to which
it is from time to time a party; and
(B) the Trust will not enter into a Forward
Commitment unless, after giving effect thereto, the Trust
would continue to have Moody's Eligible Assets
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with an aggregate Discounted Value equal to or greater than
the Preferred Shares Basic Maintenance Amount.
For purposes of determining whether the Trust has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the
Preferred Shares Basic Maintenance Amount, the Discounted Value of all
Forward Commitments to which the Trust is a party and of all securities
deliverable to the Trust pursuant to such Forward Commitments shall be
zero.
13. Certain Other Restrictions.
(a) For so long as any Municipal Income Preferred Shares are
outstanding, the Trust will not, unless it has received written confirmation
from Moody's and S&P that any such action would not impair the ratings then
assigned by Moody's and S&P to Municipal Income Preferred Shares, engage in any
one or more of the following transactions:
(i) borrow any money except as may be necessary for the clearance of
purchases and sales of portfolio securities and which borrowings shall
be repaid within 60 days and not be extended or renewed (provided that
no such borrowing will be permitted unless the Trust, after giving
effect to such borrowing, maintains Moody's Eligible Assets and S&P
Eligible Assets at least equal to the Preferred Shares Basic
Maintenance Amount);
(ii) lend portfolio securities;
(iii) designate a new Pricing Service;
(iv) engage in short sales;
(v) merge or consolidate with any other entity;
(vi) engage in reverse repurchase agreements; or
(vii) issue a class or series of shares of beneficial interest ranking prior
to or on a parity with the Municipal Income Preferred Shares with
respect to payment of dividends or the distribution of assets on
liquidation.
(b) For so long as Municipal Income Preferred Shares are rated by
Moody's or S&P, the Trust shall give to Moody's or S&P, as the case may be,
prompt written notice of the following circumstances:
(i) any change to the Declaration of Trust or Article 12 of the By-laws;
(ii) any failure to declare or pay any dividend on the Municipal Income
Preferred Shares;
(iii) any mandatory or optional redemption of the Municipal Income Preferred
Shares;
(iv) any assumption of control of the Trustees by the Holders of Municipal
Income Preferred Shares pursuant to Section 6(b) of this Part I;
(v) in the event the Trust shall not be a party to a pricing services
agreement and dealer quotes on assets are not available;
(vi) in the event that the Applicable Dividend Rate equals or exceeds 95% of
the applicable Reference Rate;
(vii) any person owning of record more than 5% of the Trust's Common Shares;
(viii) a change in Internal Revenue Service rules on Additional Dividends
relating to the
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operation of the Trust; and
(ix) Putnam Investment Management, Inc. is no longer the Trust's investment
manager.
14. Legally Available Funds. For purposes of this Section 12.1, funds
shall not be "legally available" for the payment of dividends or the redemption
price with respect to any Municipal Income Preferred Share if the Trust is
insolvent at the time such payment would be made or to the extent that such
payment cannot be made without rendering the Trust insolvent.
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PART II
REMARKETING PROCEDURES
The provisions of this Part II and other provisions of these By-laws
describe the procedures pursuant to which the Applicable Dividend Rate shall,
except as otherwise provided in these By-laws, be determined for any Dividend
Period. In the event that any of the Remarketing Agent, Paying Agent, Securities
Depository, Agent Members and Beneficial Owners fail for any reason to perform
any of the acts or obligations to be performed by him or it as described herein,
then no Holder or Beneficial Owner of any Municipal Income Preferred Shares
shall have any right in respect thereof against the Trust or any Trustee or
officer of the Trust, and the sole obligation of the Trust in respect of the
determination of the amount and the payment of any dividend shall be to pay to
the Holders of the Municipal Income Preferred Shares as shown on the share
transfer books of the Trust from time to time dividends as determined in
accordance with the terms of this Part II and any other applicable provisions of
these By-laws. Notwithstanding any provision of these By-laws, the Trust shall
have no obligation at any time to provide notice (other than to the Remarketing
Agent, the Paying Agent, the Securities Depository, S&P and Moody's), or to make
any payment (in respect of any dividend or otherwise), to any person other than
the Holders of the Municipal Income Preferred Shares shown on the share transfer
books of the Trust from time to time, and the providing of any notice or the
payment of any amount to such Holders (or to such other entities) shall
discharge in full for all purposes (including without limitation as against all
Beneficial Owners of any Municipal Income Preferred Shares) the Trust's
obligation to provide any notice or to make any payment.
1. Remarketing Schedule. Each Remarketing shall take place over a
two-Business Day period consisting of the Remarketing Date and the Settlement
Date. Such dates or the method of establishing such dates shall be determined by
the Trustees from time to time and until further action by the Trustees, a
Remarketing Date shall occur on the last Business Day of a Dividend Period
(except for the last Dividend Period for the Municipal Income Preferred Shares)
and the related Settlement Date shall occur on the first Business Day of the
succeeding Dividend Period.
2. Procedure for Tendering.
(a) Each Municipal Income Preferred Share is subject to Tender
and Dividend Reset at the end of each Dividend Period for the Municipal Income
Preferred Shares and may be tendered in the Remarketing which commences on the
Remarketing Date immediately prior to the end of the current Dividend Period. By
9:00 a.m., New York City time, on each such Remarketing Date, the Remarketing
Agent shall, after canvassing the market and considering prevailing market
conditions at the time for Municipal Income Preferred Shares and similar
securities, provide Beneficial Owners non-binding indications of the Applicable
Dividend Rate for the next succeeding 28-day Dividend Period or, if applicable,
a Special Dividend Period; provided that, if the Trust has designated the next
Dividend Period as a Special Dividend Period, the Remarketing Agent will provide
to Beneficial Owners a non-binding indication only of the Applicable Dividend
Rate for such Special Dividend Period. The actual Applicable Dividend Rate for
such Dividend Period may be greater than or less than the rate per annum,
indicated in such non-binding indications (but not greater than the applicable
Maximum Dividend Rate). By
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12:00 noon, New York City time, on such Remarketing Date, each Beneficial Owner
of a Municipal Income Preferred Share must notify a Remarketing Agent of its
desire, on a share-by-share basis, either to tender such Municipal Income
Preferred Share at a price of $50,000 per share or to continue to hold such
share for the next 28-day Dividend Period or, if applicable, the next Special
Dividend Period. Beneficial Owners who do not provide such notice shall be
deemed to have elected (i) to hold all their Municipal Income Preferred Shares
if each of the current Dividend Period and succeeding Dividend Period is a
28-day Dividend Period or a Special Dividend Period of 90 days or less, and (ii)
to tender all their Municipal Income Preferred Shares if the current Dividend
Period or succeeding Dividend Period is a Special Dividend Period of more than
90 days. Any notice given to a Remarketing Agent to tender or hold shares for a
particular Dividend Period shall be irrevocable and shall not be conditioned
upon the level at which the Applicable Dividend Rate is established. A
Remarketing Agent may, in its sole discretion, (i) at the request of a
Beneficial Owner that has tendered one or more shares to such Remarketing Agent,
waive such Beneficial Owner's tender, and thereby enable such Beneficial Owner
to continue to hold the share or shares for the next 28-day Dividend Period or,
if applicable, a designated Special Dividend Period, as agreed to by such
Beneficial Owner and such Remarketing Agent at such time, so long as such
tendering Beneficial Owner has indicated to such Remarketing Agent that it would
accept the new Applicable Dividend Rate for such Dividend Period, such waiver to
be contingent upon the Remarketing Agent's ability to remarket all Municipal
Income Preferred Shares tendered in such Remarketing, and (ii) at the request of
a Beneficial Owner that has elected to hold one or more of its Municipal Income
Preferred Shares, waive such Beneficial Owner's election with respect thereto,
such waiver to be contingent upon the Remarketing Agent's ability to remarket
all Municipal Income Preferred Shares tendered in such Remarketing.
(b) The ability of each Beneficial Owner to tender Municipal
Income Preferred Shares in a Remarketing shall be limited to the extent that (i)
the Remarketing Agent conducts a Remarketing pursuant to the terms of the
Remarketing Agreement, (ii) shares tendered have not been called for redemption
and (iii) the Remarketing Agent is able to find a purchaser or purchasers for
tendered Municipal Income Preferred Shares at an Applicable Dividend Rate for
the next applicable Dividend Period that is not in excess of the Maximum
Dividend Rate for such Dividend Period.
3. Determination of Applicable Dividend Rates.
(a) By 3:00 p.m., New York City time, on each Remarketing Date,
the Remarketing Agent shall determine the Applicable Dividend Rate to the
nearest one-thousandth (0.001) of one percent per annum for the next 28-day
Dividend Period, or, if designated, Special Dividend Period. The Applicable
Dividend Rate for each such Dividend Period, except as otherwise required
herein, shall be the dividend rate per annum which the Remarketing Agent
determines, in its sole judgment, to be the lowest rate that will enable it to
remarket on behalf of the Beneficial Owners thereof all Municipal Income
Preferred Shares subject to Tender and Dividend Reset in such Remarketing and
tendered to it on such Remarketing Date at a price of $50,000 per share.
(b) If no Applicable Dividend Rate shall have been established on
a Remarketing Date in a Remarketing for the next 28-day Dividend Period, or
Special Dividend
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Period, if any, for any reason (other than because there is no Remarketing
Agent, the Remarketing Agent is not required to conduct a Remarketing pursuant
to the terms of the Remarketing Agreement or the Remarketing Agent is unable to
remarket on the Remarketing Date all Municipal Income Preferred Shares tendered
(or deemed tendered) to it at a price of $50,000 per share), then the
Remarketing Agent, in its sole discretion, shall, if necessary and except during
a Non-Payment Period, after taking into account market conditions as reflected
in the prevailing yields on fixed and variable rate taxable and tax exempt debt
securities and the prevailing dividend yields of fixed and variable rate
preferred stock, determine the Applicable Dividend Rate that would be the rate
per annum that would be the initial dividend rate fixed in an offering on such
Remarketing Date, assuming in each case a comparable dividend period, issuer and
security. If there is no Remarketing because there is no Remarketing Agent or
the Remarketing Agent is not required to conduct a Remarketing pursuant to the
Remarketing Agreement or if the Remarketing Agent is unable to remarket on the
Remarketing Date all Municipal Income Preferred Shares tendered (or deemed
tendered) to it at a price of $50,000 per share, then, except during a
Non-Payment Period, the Applicable Dividend Rate for the subsequent Dividend
Period for Municipal Income Preferred Shares and for each subsequent Dividend
Period for Municipal Income Preferred Shares for which no Remarketing takes
place because of the foregoing shall be the applicable Maximum Dividend Rate for
a 28-day Dividend Period and the next Dividend Period for Municipal Income
Preferred Shares and each such subsequent Dividend Period shall be a 28-day
Dividend Period.
(c) In determining such Applicable Dividend Rate, the Remarketing
Agent shall, after taking into account market conditions as reflected in the
prevailing yields on fixed and variable rate taxable and tax exempt debt
securities and the prevailing dividend yields of fixed and variable rate
preferred stock determined for the purpose of providing non-binding indications
of the Applicable Dividend Rate to Beneficial Owners and potential purchasers of
Municipal Income Preferred Shares, (i) consider the number of Municipal Income
Preferred Shares tendered and the number of Municipal Income Preferred Shares
potential purchasers are willing to purchase and (ii) contact by telephone or
otherwise current and potential Beneficial Owners of Municipal Income Preferred
Shares subject to Tender and Dividend Reset to ascertain the dividend rates at
which they would be willing to hold Municipal Income Preferred Shares.
(d) The Applicable Dividend Rate shall be determined as aforesaid
by the Remarketing Agent in its sole discretion (except as otherwise provided in
this Section 12.1 with respect to an Applicable Dividend Rate that shall be the
Non-Payment Period Rate or the Maximum Dividend Rate) and shall be conclusive
and binding on Holders and Beneficial Owners.
(e) Except during a Non-Payment Period, the Applicable Dividend
Rate for any Dividend Period shall not be more than the applicable Maximum
Dividend Rate.
4. Allocation of Shares; Failure to Remarket at $50,000 Per Share.
(a) If the Remarketing Agent is unable to remarket by 3:00 p.m.,
New York City time, on a Remarketing Date all Municipal Income Preferred Shares
tendered (or deemed tendered) to it in the related Remarketing at a price of
$50,000 per share, (i) each Beneficial Owner that tendered or was deemed to have
tendered Municipal Income Preferred Shares for sale
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shall sell a number of Municipal Income Preferred Shares on a pro rata basis, to
the extent practicable, or by lot, as determined by the Remarketing Agent in its
sole discretion, based on the number of orders to purchase Preferred Merger
Shares in such Remarketing, and (ii) the Applicable Dividend Rate for the next
Dividend Period for Municipal Income Preferred Shares, which shall be a 28-day
Dividend Period, shall be the Maximum Dividend Rate for such 28-day Dividend
Period.
(b) If the allocation procedures described above-would result in
the sale of a fraction of a Municipal Income Preferred Share, the Remarketing
Agent shall, in its sole discretion, round up or down the number of Municipal
Income Preferred Shares sold by each Beneficial Owner on the applicable
Remarketing Date so that each share sold by a Beneficial Owner shall be a whole
Municipal Income Preferred Share, and the total number of shares sold equals the
total number of shares purchased on such Remarketing Date.
5. Notification of Results; Settlement.
(a) By telephone at approximately 3:30 p.m., New York City time,
on each Remarketing Date, the Remarketing Agent shall advise each Beneficial
Owner of tendered shares and each purchaser thereof (or the Agent Member
thereof) (i) of the number of shares such Beneficial Owner or purchaser is to
sell or purchase and (ii) to give instructions to its Agent Member to deliver
such shares against payment therefor or to pay the purchase price against
delivery as appropriate. The Remarketing Agent will also advise each Beneficial
Owner or purchaser that is to continue to hold, or to purchase, shares with a
Dividend Period beginning on the Business Day following such Remarketing Date of
the Applicable Dividend Rate for such shares.
(b) In accordance with the Securities Depository's normal
procedures, on the Settlement Date, the transactions described above with
respect to each Municipal Income Preferred Share shall be executed through the
Securities Depository, if the Securities Depository or its nominee holds or is
to hold the certificate relating to the shares to be purchased, and the accounts
of the respective Agent Members of the Securities Depository shall be debited
and credited and shares delivered by book entry as necessary to effect the
purchases and sales of Municipal Income Preferred Shares in the related
Remarketing. Purchasers of Municipal Income Preferred Shares shall make payment
to the Paying Agent in same-day funds against delivery to such purchasers or
their nominees of one or more certificates representing Municipal Income
Preferred Shares, or, if the Securities Depository or its nominee holds or is to
hold the certificate relating to the shares to be purchased, through their Agent
Members in same-day funds to the Securities Depository against delivery by book
entry of Municipal Income Preferred Shares through their Agent Members. The
Securities Depository shall make payment in accordance with its normal
procedures.
(c) If any Beneficial Owner selling Municipal Income Preferred
Shares in a Remarketing fails to deliver such shares, the Agent Member of such
selling Beneficial Owner and of any other person that was to have purchased
Municipal Income Preferred Shares in such Remarketing may deliver to any such
other person a number of whole Municipal Income Preferred Shares that is less
than the number of shares that otherwise was to be purchased by such person. In
such event, the number of Municipal Income Preferred Shares to be so delivered
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shall be determined by such Agent Member. Delivery of such lesser number of
Municipal Income Preferred Shares shall constitute good delivery.
(d) The Remarketing Agent, the Paying Agent and the Securities
Depository each will use its reasonable commercial efforts to meet the timing
requirements set forth in paragraphs (a) and (b) above; provided that, in the
event that there is a delay in the occurrence of any delivery or other event
connected with a Remarketing, the Remarketing Agent, the Paying Agent and the
Securities Depository each will use its reasonable commercial efforts to
accommodate such delivery in furtherance of the Remarketing.
(e) Notwithstanding any of the foregoing provisions of this
paragraph 5, the Remarketing Agent may, in its sole discretion, modify the
settlement procedures set forth above with respect to any Remarketing, provided
any such modification does not adversely affect the Beneficial Owners or the
Holders of Municipal Income Preferred Shares or the Trust.
(f) Neither the Trust, the Paying Agent nor the Remarketing Agent
shall be obligated in any case to provide funds to make payment to a Beneficial
Owner upon such Beneficial Owner's tender of its Municipal Income Preferred
Shares in a Remarketing, unless, in each case, such Municipal Income Preferred
Shares were acquired for the account of the Trust, the Paying Agent or the
Remarketing Agent, as the case may be.
6. Purchase of Municipal Income Preferred Shares by Remarketing
Agent. The Remarketing Agent may purchase for its own account Municipal Income
Preferred Shares in a Remarketing, provided that it purchases all tendered (or
deemed tendered) Municipal Income Preferred Shares not sold in such Remarketing
to other purchasers. If the Remarketing Agent holds Municipal Income Preferred
Shares for its own account upon completion of a Remarketing, it must establish
an Applicable Dividend Rate with respect to such shares in such Remarketing that
is not-higher than the Applicable Dividend Rate that would have been established
if the Remarketing Agent did not hold or had not purchased such shares. Except
as provided in the first sentence of this paragraph 6, the Remarketing Agent
shall not be obligated to purchase any Municipal Income Preferred Shares that
would otherwise remain unsold in a Remarketing. If the Remarketing Agent holds
for its own account any Municipal Income Preferred Shares subject to a
Remarketing immediately prior to such Remarketing and if all other shares
subject to such Remarketing and tendered for sale by other Beneficial Owners of
Municipal Income Preferred Shares (including circumstances where the Remarketing
Agent holds such shares as nominee) have been sold in such Remarketing, then the
Remarketing Agent may sell such number of its shares in such Remarketing as
there are outstanding orders to purchase that have not been filled by shares
tendered for sale by other Beneficial Owners.
7. Applicable Dividend Rate During a Non-Payment Period. So long
as a Non-Payment Period shall continue, paragraphs 1, 2, 3, 4, 5 and 6 of this
Part II shall not be applicable to any of the Municipal Income Preferred Shares
and the Municipal Income Preferred Shares shall not be subject to Tender and
Dividend Reset.
8. Transfers. Unless the Trust has elected, during a Non-Payment
Period, to waive this requirement, ownership of Municipal Income Preferred
Shares will be maintained in book
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entry form by the Securities Depository, for the account of a designated Agent
Member which, in turn, shall maintain records of such purchaser's beneficial
ownership.
9. Miscellaneous.
(a) To the extent permitted by applicable law, the Trustees may
interpret or adjust the provisions hereof to resolve any inconsistency or
ambiguity, or to remedy any formal defect.
(b) Notwithstanding any provision of these By-laws, (i) no
Remarketing Agent, Paying Agent, Securities Depository or Agent Member shall
have any obligation in respect of any person having any interest in any
Municipal Income Preferred Share other than the Beneficial Owner thereof, and
the Paying Agent shall have no obligation to record any transfer of beneficial
ownership in any share unless and until it shall have received proper notice and
evidence of such transfer and the right of the transferee in accordance with its
procedures in effect from time to time, and (ii) the record books of the Trust
as kept by the Paying Agent shall be conclusive as to who is the Holder of any
Municipal Income Preferred Share and as to the number of Municipal Income
Preferred Shares held from time to time by any Holder, and the Trust shall have
no obligation in respect of any Municipal Income Preferred Share to any person
other than such Holder.
10. Securities Depository; Shares Certificates.
(a) If there is a Securities Depository, one certificate for all
of the Municipal Income Preferred Shares shall be issued to the Securities
Depository and registered in the name of the Securities Depository or its
nominee. Any such certificate shall bear a legend to the effect that such
certificate is issued subject to the provisions contained in this Section 12.1.
Unless the Trust shall have elected, during a Non-Payment Period, to waive this
requirement, the Trust will also issue stop-transfer instructions to this effect
to the Paying Agent for the Municipal Income Preferred Shares. Except as
provided in paragraph (b) below, the Securities Depository or its nominee will
be the Holder, and no Beneficial Owner shall receive certificates representing
its ownership interest in such shares.
(b) If the Applicable Dividend Rate applicable to all Municipal
Income Preferred Shares shall be the Non-Payment Period Rate or there is no
Securities Depository, the Trust may at its option issue one or more new
certificates with respect to such shares (without the legend referred to in
paragraph 10(a) of this Part II) registered in the names of the Beneficial
Owners or their nominees and rescind the stop-transfer instructions referred to
in paragraph 10(a) of this Part II with respect to such shares.
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