PUTNAM INVESTMENT GRADE MUNICIPAL TRUST II
Amendment No. 1 to By-laws - - Statement
creating two series of
Remarketed Preferred Shares
WHEREAS, Section 1 of Article III of the Agreement and Declaration
of Trust dated October 2, 1992 of Putnam Investment Grade Municipal Trust II
(the "Declaration of 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); 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 have authorized, in addition to the Trust's common shares, a class
of 1,260 preferred shares of which 1,260 shares are now to be issued divided
into one series of 630 shares and one series of 630 shares of its authorized
preferred shares, without par value, liquidation preference $50,000 per share
plus accumulated but unpaid dividends thereon, if any (whether or not earned
or declared), designated respectively Remarketed Preferred Shares, Series A
and Remarketed Preferred Shares, Series B.
NOW, THEREFORE, the By-laws of Putnam Investment Grade Municipal
Trust II are hereby amended as follows:
1. ARTICLE 12 shall be redesignated as ARTICLE 13.
2. A new ARTICLE 12 shall be added as follows:
ARTICLE 12
Shares of Beneficial Interest
12. The Trust has an unlimited number of Common Shares, without par
value, which may be issued from time to time by the Trustees of the Trust.
12.1 STATEMENT CREATING TWO SERIES OF REMARKETED PREFERRED SHARES.
PART I.
DESIGNATION
SERIES A: A series of 630 shares of 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 "Remarketed Preferred Shares, Series A" and is referred to below
as "Series A RP-Registered Trademark-". Each share of Series A RP shall be
issued on a date to be determined by the Trustees of the Trust or a duly
authorized committee thereof; 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 Vice 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 12.1 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 12.1. Series A RP shall constitute a separate series of preferred
shares of the Trust, and each share of Series A RP shall be identical except
as provided in paragraph 4 of this Part I of this Section 12.1.
SERIES B: A series of 630 shares of preferred shares, without par
value, liquidation preference $50,000 per share plus accumulated but unpaid
dividends, if any, thereon (whether or 1not earned or declared), is hereby
designated "Remarketed Preferred Shares, Series B" and is referred to below,
as "Series B RP-Registered Trademark-". The Series A RP and Series B RP are
sometimes referred to below as the "RP-Registered Trademark-". Each share of
Series B RP shall be issued on a date to be determined by the Trustees of the
Trust or a duly authorized committee thereof; have such initial dividend rate
as shall be determined in advance of the issuance thereof by any of the
Trustees, by any duly authorized committee thereof or by any of the
President, the Vice Chairman, any Executive Vice (R)President or the
Treasurer of the Trust; have an Initial Dividend Period and Initial Dividend
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- -Registered Trademark-Registered trademark of Merrill Lynch & Co., Inc.
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Payment Dates 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 12.1 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 12.1. The Series B RP shall constitute a separate
series of preferred shares of the Trust, and each share of Series B RP shall
be identical except as provided in paragraph 4 of this Part I of this Section
12.1.
1. (a) DEFINITIONS. Unless the context or use indicates another or
different meaning or intent, in this Section 12.1 the following terms have
the following meanings, whether used in the singular or plural:
"AA Composite Commercial Paper Rate," on any date 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 Agents 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 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 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 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 on 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.
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"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 The Putnam
Management Company, Inc.
"Agent Member" means a member of the Securities Depository that will
maintain records for a Beneficial Owner of one or more shares of RP.
"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 dividend 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
Agents advise results on the Remarketing Date preceding the first day of such
Dividend Period from implementation of the remarketing procedures set forth
in Part II hereof and the Maximum Dividend Rate or (ii) for each Dividend
Period commencing during a Non-Payment Period, 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 shares of RP in the records of the Paying Agent or, with
respect to any share of RP 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.
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"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 Merrill Lynch, Pierce, Fenner &
Smith Incorporated and such other commercial paper dealer or dealers as the
Trust may from time to time appoint, or, in lieu of any thereof, their
respective affiliates or successors.
"Common Shares" means the common shares of beneficial interest,
without par value, of the Trust.
"Date of Original Issue" means, with respect to any share of RP or
Other RP, the date on which the Trust originally issues such share.
"Declaration of Trust" means the Agreement and Declaration of Trust
dated October 2, 1992 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.
"Dividend Coverage Amount," as of any Valuation Date, means (A)(i)
the aggregate amount of cash dividends that will accumulate on all shares of
RP and Other RP, in each case to (but not including) the Business Day
following the first Dividend Payment Date for any series of RP that follows
such Valuation Date plus (ii) the aggregate amount of all liabilities
existing on such Valuation Date which are payable on or prior to the Business
Day following such first Dividend Payment Date less (B) the sum of (i) the
combined Market Value of Deposit Securities irrevocably deposited with the
Paying Agent for the payment of cash dividends on all shares of RP and other
RP, (ii) 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 and in any event on or prior to such
Dividend Payment Date, and (iii) interest on Municipal Bonds owned by the
Trust which is scheduled to be paid on or prior to such Dividend Payment Date.
"Dividend Coverage Assets," as of any Valuation Date, means Deposit
Securities with maturity or tender payment dates not later than the day
preceding the Business Day following the first Dividend Payment Date for RP
that follows such Valuation Date.
"Dividend Payment Date," with respect to RP, means, (i) with respect
to the Initial Dividend Period for Series A RP, the Initial Dividend Payment
Date for such series and with respect to the Initial Dividend Period for
Series B RP, the Initial Dividend Payment Dates for
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such series; (ii) with respect to any 28-day Dividend Period and any Short
Term Dividend Period of 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 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 (i) 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 Saturday, Sunday, Monday, Tuesday,
Wednesday or Thursday, or (ii) 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 (ii) 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 share of RP, 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, in the case of Series B
RP, March 1, 1993.
"Forward Commitments" shall have the meaning specified in paragraph
12(c) of this Part I.
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"Gross-Up Tax Rate" has the meaning set forth in paragraph 3(k) of
this Part I.
"Holder" means, with respect to any share of RP, 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 or firm of independent public accountants under the
Securities Act of 1933, as amended.
"Initial Dividend Payment Date" means, with respect to Series A RP,
March 18, 1993, and with respect to Series B RP, 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 Series A RP, the
period commencing on and including the Date of Original Issue of such series
and ending on the day prior to the Initial Dividend Payment Date for such
series and, with respect to Series B RP, the period commencing on and
including the Date of Original Issue of such series and ending on the day
prior to the Last Initial Dividend Payment Date for such series.
"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, with respect to Series B
RP, January 5, 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 share of RP 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 or the maximum
marginal regular Federal corporate income tax rate, 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 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
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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 (i) the lower
of the credit rating or ratings assigned on such date to shares of RP 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 or 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) and (ii) whether the Trust
has provided to the Remarketing Agents prior to the Remarketing establishing
the Applicable Dividend Rate notification pursuant to paragraph 3(m) hereof
that net capital gain or other income subject to regular Federal income tax
will be included in a dividend on shares of RP during such Dividend Period as
follows:
Applicable Applicable
Percentage of Percentage of
Credit Ratings Reference Reference
- -------------------------------------------- Rate - Rate -
Moody's S & P No Notification No Notification
------- ------- --------------- ---------------
"aa3" or higher AA- or higher 110% 150%
"a3" to "a1" A- to A+ 125% 160%
"baa3" to "baa1" BBB- to BBB+ 150% 250%
Below "baa3 Below BBB- 200% 275%
The Remarketing Agents 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 Agents shall not round the Reference Rate as part of their
calculation of any Maximum Dividend Rate.
"Maximum Potential Additional Dividend Liability," as of any
Valuation Date, means the aggregate amount of Additional Dividends that would
be payable with respect to the RP 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
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month immediately preceding such Valuation Date and assuming such Additional
Dividends are fully taxable.
"Minimum Liquidity Level" means, as of any Valuation Date, an
aggregate Market Value of Dividend Coverage Assets not less than the Dividend
Coverage Amount.
"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:
Rating Category
--------------------------------------------------------------
Moody's Exposure Period Aaa* Aa* A* Baa* Other** VMIG-1*** SP-1****
- ----------------------- ---- --- -- ---- ------- --------- --------
7 weeks or less............... 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but
greater than seven weeks...... 154 164 173 205 235 137 149
9 weeks or less but
greater than eight weeks...... 158 169 179 209 242 138 150
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* Moody's rating.
** Municipal Bonds not rated by Moody's but rated BBB-, BBB or BBB+ by
S&P.
*** 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 Eligible Assets, these securities
will have an assumed rating of 'A' by Moody's.
**** 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 MIG-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-l+ or SP-l+ 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 Sold," for purposes of
calculating Moody's Eligible Assets as of any Valuation Date, means no more
than the aggregate of the following: (i) 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, and if
the trades which generated such receivables are (x) settled through clearing
house firms with respect to which the Trust has received prior written
authorization from Moody's or (y) with counterparties having a Moody's
long-term debt rating of at least Baa3; and (ii) the 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 W or (y) of the
preceding clause (i).
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"Moody's Eligible Asset" means cash, Receivables for Municipal Bonds
Sold, a short-term Municipal Bond rated VMIG-1, MIG-I or P-1 by Moody's or
SP-I+ or A-I+ 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 $10,000,000. In addition,
Municipal Bonds in the Trust's portfolio will be included as Moody's Eligible
Assets only to the extent they meet the following diversification
requirements:
Minimum Maximum Maximum State
Issue Size Underlying or Territory
Rating ($ 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
- --------------------------
(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 at
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 RP 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.
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"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 272% in the case of a Dividend
Period of 28 days or less or a Special Dividend Period of greater than 48
days, 287% in the case of a Special Dividend Period of greater than 28 days
but less than or equal to 35 days and 302% in the case of a Special Dividend
Period of greater than 35 days but less than or equal to 48 days, in each
case 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:
Dividend Period of Special Dividend
28 days or less or Period of GREATER Special Dividend
Special Dividend THAN 28 days but Period of GREATER
Period of GREATER LESS THAN OR THAN 35 days but
THAN 48 days EQUAL TO 35 days LESS THAN 48 days
% Change in Moody's Volatility Moody's Volatility Moody's Volatility
Marginal Tax Rate Factor Factor Factor
- ----------------- ---------------- ----------------- ----------------
LESS THAN OR EQUAL TO 5% 292% 307% 323%
GREATER THAN 5% but LESS THAN OR EQUAL TO 10% 313% 330% 346%
GREATER THAN 10% but LESS THAN OR EQUAL TO l5% 338% 355% 372%
GREATER THAN 15% but LESS THAN OR EQUAL TO 20% 364% 382% 402%
GREATER THAN 20% but LESS THAN OR EQUAL TO 25% 396% 416% 436%
GREATER THAN 25% but LESS THAN OR EQUAL TO 30% 432% 453% 474%
GREATER THAN 30% but LESS THAN OR EQUAL TO 35% 472% 495% 518%
GREATER THAN 35% but LESS THAN OR EQUAL TO 40% 520% 545% 569%
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 at the time of issuance, is at the time of issuance
not includible 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 RP 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 RP 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 shares of RP and Other RP (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
-11-
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 shares of RP, 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 shares of RP 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 shares of RP 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 Agents 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
Agents, the Securities Depository and all Holders. Any dividend on shares of
RP 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 shares of RP 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 200% of the applicable Reference Rate
(or 275% of such rate if the Trust has provided notification to the Remarketing
Agents 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 shares of RP), 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 RP) advise the Trust in writing that
-12-
such adjustment, modification, alteration or change will not adversely affect
the then-current ratings of the RP.
"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 shares of RP 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 RP" means the remarketed preferred shares of the Trust, other
than the RP.
"Paying Agent" means Bankers 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 shares of RP in accordance with such
agreement.
"Paying Agent Agreement" means an agreement to be entered into between
the Trust and the Paying Agent.
"Preferred Shares" means the preferred shares of the Trust, and
includes RP and Other RP.
"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 shares of RP.
"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,
1993.
"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.
-13-
"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 shares of RP as described in Part II hereof.
"Remarketing Agents" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated and any additional or successor companies or entities 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 Agents.
"Remarketing Date" means any date on which (i) each Beneficial Owner of
shares of RP must provide to the Remarketing Agents irrevocable telephonic
notice of intent to tender shares in a Remarketing and (ii) the Remarketing
Agents (A) determine the Applicable Dividend Rate for the ensuing Dividend
Period, (B) notify Holders, purchasers and tendering Beneficial Owners of shares
of RP by telephone, telex or otherwise of the results of the Remarketing and (C)
announce 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.
"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.
"RP" means, as the case may be, the Remarketed Preferred Shares, Series
A and/or the Remarketed Preferred Shares, Series B.
"RP 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 shares of
RP and Other RP 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 share of
RP and Other RP outstanding, in each case, to (but not including) the end of the
current Dividend Period for each series of RP or Other RP that follows such
Valuation Date 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 Applicable Rate
-14-
applicable to a Dividend Period of 28 days on any shares of RP and Other RP
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 RP 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 shares of RP subject to redemption or any of (i)(B)
through (i)(F).
"RP Basic Maintenance Cure Date," with respect to the failure by the
Trust to satisfy the RP 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.
"RP 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 the related Valuation Date, the assets of the Trust, the
Market Value and the Discounted Value thereof (seriatim and in the aggregate),
and the RP Basic Maintenance Amount.
"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
- ----------------------------------
-15-
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-l+ or SP-l+ by S&P and mature or have a demand feature exercisable in 30
days or less, or 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-l+ 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-l+
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 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 subject to a covered call or covered put option written by the Trust; (vi)
is not part of a private placement of Municipal Bonds; and (vii) 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
-16-
(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 RP 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 RP 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 277% during the Initial Dividend Period
for the Series A RP and 185% during the Initial Dividend Period for the Series B
RP. 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%
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
Note Rate................... 185%
3-year U.S. Treasury
Note Rate................... 178%
4-year U.S. Treasury
Note Rate................... 171%
5-year U.S. Treasury
Note Rate................... 169%
- -----------------
*If the applicable Reference Rate requires the average of two "AA"
Composite Commercial Paper Rates, then, for purposes of determining the S&P
Volatility Factor, the
-17-
applicable Reference Rate will be deemed to be the "AA"
Composite Commercial Paper Rate of such two that results in the highest
volatility factor.
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 shares of RP that agrees to follow the procedures required to be followed
by such securities depository in connection with the shares of RP.
"Series A RP" means the Remarketed Preferred Shares, Series A.
"Series B RP" means the Remarketed Preferred Shares, Series B.
"Service" means the Internal Revenue Service.
"Settlement Date" means the first Business Day after a Remarketing Date
applicable to a share of RP.
"Short Term Dividend Period" means a Special Dividend Period consisting
of a specified number of days (other than 28), evenly divisible by seven and 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 Agents, during which the shares of RP
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 Agents, during each year of which the shares of RP 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
Agents.
"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.
"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 shares of RP.
-18-
"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 shares of RP by Moody's or S&P.
"Tender and Dividend Reset" means the process pursuant to which shares
of RP may be tendered in a Remarketing or held and become subject to the new
Applicable Dividend Rate determined by the Remarketing Agents 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 RP, 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 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 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
-19-
at least three recognized primary U.S. Government securities
dealers selected by the Remarketing Agents.
"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 Agents.
"Valuation Date" means, for purposes of determining whether the Trust
is maintaining the RP 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 shares of RP shall be issued.
3. DIVIDENDS. (a) The Holders of a particular series of RP as of
5:00 p.m., New York City time, on the date 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 shares of each series of RP so declared and payable
shall be paid in preference to and in priority over any dividends declared
and payable on the Common Shares.
(b) Dividends on each share of RP shall accumulate from its Date of
Original Issue and will be payable, when, as and if declared by the Trustees, on
each Dividend Payment Date applicable to such share of RP.
(c) Each declared dividend shall be payable on the applicable
Dividend Payment Date to the Holder or Holders of such shares of RP as set
forth in paragraph 3(a). Dividends on shares of RP 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 share of
-20-
RP 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 shares of RP shall be
entitled to any dividends on the shares of RP, 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 shares of RP shall be entitled to
any interest, or other additional amount, on any dividend payment on any
share of RP which may be in arrears.
(e) Except as otherwise provided herein, the Applicable Dividend
Rate on each share of RP 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 share of RP payable on
each Dividend Payment Date of the Initial Dividend Period with respect to
Series A RP, each 28-day Dividend Period and 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 with respect to Series B RP and any Long
Term Dividend Period, the amount of dividends per share payable on any
Dividend Payment Date shall be computed by dividing the Applicable Dividend
Rate for such Dividend Period by twelve, multiplying the amount so obtained
by $50,000, and rounding the amount so obtained to the nearest cent;
provided, however, that, if the number of days from and including the 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 is less than 30
and such days do not constitute a full calendar month, then the amount of
dividends per share payable on such Dividend Payment Date shall be computed
by multiplying the Applicable Dividend Rate for such Dividend Period by a
fraction, the numerator of which will be such number of days and the
denominator of which will be 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 dividend declared and payable on such Dividend Payment
Date on any share of RP.
(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 share of RP 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 shares of RP (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
-21-
Business Days after such Dividend Payment Date to the Holders who held such
shares of RP 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 shares of RP
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 shares of RP 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 1, 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 share of RP, 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 share of RP, the Beneficial Owner of such share
of RP may elect to tender, as provided in Part II hereof, such share or hold
such share for the next Dividend Period. If the Beneficial Owner of such share
of RP elects to hold such share, such Beneficial Owner shall hold such share of
RP for a 28-day Dividend Period, or a Special Dividend Period if the succeeding
Dividend Period with respect to such share has been designated by the Trustees
as a Special Dividend Period, provided that, if (i) there are no Remarketing
Agents, (ii) the Remarketing Agents are not required to conduct a Remarketing or
(iii) the Remarketing Agents are unable to remarket on the Remarketing Date all
shares of a series of RP tendered (or deemed tendered) to them at a price of
$50,000 per share, then the next Dividend Period for all shares of such series
of RP shall be a 28-day Dividend Period and the Applicable Dividend Rate
therefor shall be the Maximum Dividend Rate. If the Beneficial Owner of such
share of RP fails to elect to tender or hold such share by 12:00 noon, New York
City time, on such Remarketing Date, such Beneficial Owner shall continue to
hold such share at the Applicable Dividend Rate detetemined in such Remarketing
for the next Dividend Period for such share; provided that, (i) if there are no
Remarketing Agents, the Remarketing Agents are not required to conduct a
Remarketing or the Remarketing Agents are unable to remarket on the Remarketing
Date all shares of a series of RP tendered (or deemed tendered) to them at a
price of $50,000 per share, then the next Dividend Period for all shares of such
series of RP shall be a 28-day Dividend Period and the Applicable Dividend Rate
therefor shall be the Maximum Dividend Rate for a 28-day Dividend Period and
(ii) if such current Dividend Period is a Special Dividend Period of more than
60 days or the succeeding Dividend Period has been designated by the Trustees as
a Special Dividend Period of more than 60 days, then such Beneficial Owner is
deemed to have elected to tender the shares. If the Remarketing Agents are
unable to remarket in such Remarketing all shares of a series of RP subject to
such
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Remarketing and tendered (or deemed tendered) to them at a price of $50,000
per share, the Beneficial owners of shares of such series of RP tendered (or
deemed tendered) but not purchased in such Remarketing shall hold such shares
at the Maximum Dividend Rate for a 28-day Dividend Period. If a share of RP
is tendered (or deemed tendered) and purchased in a Remarketing, the next
Dividend Period for such share shall be a 28-day Dividend Period or a Special
Dividend Period with respect to such share, as the case may be, at the
Applicable Dividend Rate therefor, except that, if the Remarketing Agents are
unable to remarket in such Remarketing at a price of $50,000 per share, all
shares of a series of RP tendered (or deemed tendered) to them, no purchaser
in such Remarketing shall be permitted to acquire shares having a Special
Dividend Period and the next Dividend Period for such share shall be a 28-day
Dividend Period and the Applicable Dividend Rate therefor shall be the
applicable Maximum Dividend Rate.
(j) The Trust may, at its sole option and to the extent permitted b
law, by telephonic or written notice (a "Request for Special Dividend Period")
to the Remarketing Agents, request that the next succeeding Dividend Period for
any series of RP 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 such series, 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 for the relevant series of RP 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 for such series of RP. Upon receiving
such Request for a Special Dividend Period, the Remarketing Agents shall jointly
determine (i) whether, given the factors set forth below, it is advisable that
the Trust issue a Notice of Special Dividend Period for RP as contemplated by
such Request for Special Dividend Period, (ii) the Optional Redemption Price of
the relevant series of RP 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 Agents
will 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 RP, (4) industry and financial
conditions which may affect the RP, (5) the investment objective of the Trust,
and (6) the Dividend Periods and dividend rates at which current and potential
Beneficial Owners of the relevant series of RP would remain or become Beneficial
Owners. If the Remarketing Agents shall 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
-23-
Remarketing Date give a notice (a "Notice of Special Dividend Period") to the
Remarketing Agents 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 Agents (in the case of clauses (x) and (y)) and the Securities
Depository (in the case of clauses (x) , (y) and (z) ) on or prior to the
Business Day prior to the relevant Remarketing Date if (x) either the 1940
Act RP 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 RP 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 Agents shall advise the Trust is an
approximately equal rate for securities similar to the RP with an equal
dividend period), provided that, 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 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 such series 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 Agents jointly advise the Trust that after consideration of the
factors listed above they have concluded that 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 any
series of RP, the next succeeding Dividend Period for that series will be a
28-day Dividend Period, provided that if the then current Dividend Period for
such series 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 shares tendered of the series for which
the Trust has given a Notice of Special Dividend Period are not remarketed or
a Remarketing for such series is not held for any reason, the Trust may not
again give a Notice of Special Dividend Period with respect to such series
(and any such attempted notice shall be null and void) until all shares of
such series tendered in a subsequent Remarketing with respect to a 28-day
Dividend Period have been Remarketed.
(k) Simultaneously with the declaration of each dividend to a Holder at
the Applicable Dividend Rate 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 shares of a series of RP 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 Agents 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
-24-
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 shares of such series of RP 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 that series of RP (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 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 shares of RP 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 share of RP 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
portion of the Paragraph 3(a) Dividend equal to the amount of the Retroactive
Taxable Allocation had been excludable from the gross income of such Holder
for Federal income tax purposes. 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 shares of RP is subject to the
Federal alternative minimum tax with respect to dividends received from the
Trust; and (iii) assuming that the Holder of the share of RP 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 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 (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
-25-
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 (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 RP 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.
(1) 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 RP Basic Maintenance Amount or the 1940 Act RP 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 the 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 shares of any
series of RP 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 shares of such series of RP, the Trust will, unless it chooses
to follow the procedures described in the following sentence, notify the
Remarketing Agents 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. Alternatively, if the Trust has not provided the
notice referred to in the preceding sentence, and nevertheless intends to
include income subject to regular Federal income tax in a dividend on shares of
a series of RP 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 shares of such series of RP, the Trust will (i) increase the dividend by an
amount such that the return to a Holder of that series of RP 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 included in the dividend at least five Business
Days prior to the applicable
-26-
Dividend Payment Date. The Trust will not be required to notify any Holder of
RP 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: SHARES OF RP SHALL BE REDEEMABLE BY THE TRUST AS PROVIDED BELOW:
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(a) To the extent permitted under the 1940 Act, upon giving a
Notice of Redemption, the Trust at its option may redeem shares of one or
more series of RP, in whole or in part, on the next succeeding scheduled
Dividend Payment Date applicable to those shares of RP called for redemption,
out of funds legally available therefor, at the Optional Redemption Price per
share; provided that no share of RP 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 RP
Basic Maintenance Amount or to maintain the 1940 Act RP Asset Coverage. 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 shares of RP 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 shares
of RP, 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 RP Basic Maintenance Amount or to
maintain the 1940 Act RP Asset Coverage and such failure is not cured on or
before the RP 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
shares of RP to be redeemed shall be equal to the lesser of (i) the minimum
number of shares of RP the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, together with
all other Preferred Shares subject to redemption or retirement, would result
in the satisfaction of the RP Basic Maintenance Amount or the 1940 Act RP
Asset Coverage, as the case may be, on such Cure Date (provided that, if
there is no such minimum number of shares of RP and other Preferred Shares
the redemption of which would have such result, all shares of RP then
outstanding shall be redeemed), and (ii) the maximum number of shares of RP,
together with all other Preferred Shares subject to redemption or retirement,
that can be redeemed out of funds expected to be legally available therefor.
In determining the number of shares of RP required to be redeemed in
accordance with the foregoing, the Trust shall allocate the number required
to be redeemed to satisfy the RP Basic Maintenance Amount or the 1940 Act RP
Asset Coverage, as the case may be, pro rata among shares of RP, Other RP 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 shares of RP and other Preferred Shares which are subject to mandatory
redemption or the Trust otherwise is unable to
-27-
effect such redemption on or prior to 35 days after such Cure Date, the Trust
shall redeem those shares of RP and other Preferred Shares which it was
unable to redeem on the earliest practicable date on which it is able to
effect such redemption.
Any share of RP shall be subject to mandatory redemption regardless of
whether such share is subject to a Non-Call Period, provided that shares of RP
subject to a Non-Call Period will only be subject to redemption to the extent
that the other shares of RP 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 shares of a series of RP are to be redeemed pursuant to this
paragraph 4, the number of such shares of such series of RP 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 share of RP will be subject to optional
redemption on any Dividend Payment Date during a Non-Call Period to which it
is subject and shares of RP 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 shares of the relevant series of RP
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) the
number of shares of such series of RP 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 shares of such series of RP to be
redeemed from the accounts of the Beneficial Owners of the shares of RP whose
Agent Members have been selected by the Securities Depository and give notice
of such determination to the Remarketing Agents. In doing so, the Paying
Agent may determine that shares of RP shall be redeemed from the accounts of
some Beneficial Owners, which may include the Remarketing Agents, without
shares of RP being redeemed from the accounts of other Beneficial Owners.
(d) Notwithstanding paragraph 4(c) of this Part I, if any
certificates representing shares of a series of RP are held by Holders other
than the Securities Depository or its nominee, then the shares of such series
of RP to be redeemed shall be selected by the Paying Agent by lot.
(e) Any Notice of Redemption with respect to shares of a series of
RP 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 Agents, 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 Agents, 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
-28-
the shares of a series of RP, the Paying Agent shall use its reasonable
efforts to provide telephonic notice to each Beneficial Owner of shares of RP
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 paragraph 4(c) 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 Agents, the Securities
Depository and each Beneficial Owner of shares of RP 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 shares of RP, the
Paying Agent shall use its reasonable efforts to provide telephonic notice to
each Beneficial Owner of shares of a series of RP 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 shares of RP called for redemption, the Remarketing Agents 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 shares of each series of
RP to be redeemed; (iii) the redemption price; (iv) that dividends on the
shares of RP 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 shares of RP 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 Redemption Price or Mandatory Redemption Price, as the
case may be, for each share of RP 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, shares of RP so called
for redemption shall no longer be deemed outstanding for any purpose and all
rights of the Holders of shares of RP 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) or 3(l) 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
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aggregate redemption price of the shares of RP called for redemption on such
date and (ii) all other amounts to which Holders of shares of RP 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 the Holders of shares of RP so called for redemption
shall look only to the Trust for payment of the redemption price and all
other amounts to which they may be entitled. 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.
(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 shares of RP 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 Agents may, in their 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
shares of the relevant series of RP 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 shares of RP.
(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 share of RP may be
redeemed pursuant to paragraph 4(a) of this Part I unless the full amount of
accumulated but unpaid dividends to the date fixed for redemption for each
such share of RP called for redemption shall have been declared, and (ii) no
share of RP may be redeemed unless all outstanding shares of RP are
simultaneously redeemed, nor may any shares of RP 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 shares of RP,
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 shares of RP 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 share of RP at any price. Any shares of RP which have
been redeemed, purchased or otherwise 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
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Value equal to or greater than the RP Basic Maintenance Amount as provided in
Paragraph 8(a) of this Part 1. In lieu of redeeming shares called for
redemption, the Trust shall have the right to arrange for other purchasers to
purchase from Holders all shares of RP to be redeemed pursuant to this
paragraph 4, except those shares of RP 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 RP as
to liquidation payments, to be paid the amount of $50,000 per share of RP,
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 RP (including the
Other RP), 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 shares of RP and any other such Preferred Shares if all amounts
thereof were paid in full.
(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 shares of RP 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 RP, 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 RP, 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 RP, entitling the
holder thereof to one vote. Subject to paragraph 6 (b) hereof, the holders of
outstanding Common Shares and Preferred Shares, including RP, 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"), the number of Trustees shall be
automatically increased by the smallest number that,
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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 the close of business on any Dividend Payment
Date accumulated dividends (whether or not earned or declared, and
whether or not funds are then legally available in an amount sufficient
therefor) on the outstanding shares of RP 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 RP 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 as otherwise provided for.
(c) OTHER ACTIONS. Except as otherwise provided herein, so long as any
shares of RP are outstanding, the Trust shall not, without the affirmative vote
or consent of the Holders of at least a majority of the shares of RP 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 RP with respect to
payment of dividends or the distribution of assets on liquidation, or increase
or decrease the number of authorized Preferred Shares; (ii) amend, alter or
repeal the provisions of the Declaration of Trust and the By-laws, including
this Section 12.1, whether by merger, consolidation or otherwise, so as to
affect materially and adversely any preference, right or power of such shares of
RP 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 1,260 Preferred Shares presently authorized and
(ii) the creation and issuance of series of Preferred Shares ranking junior to
the RP 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 RP Asset Coverage or the RP Basic Maintenance Amount. To the extent
permitted under the 1940 Act, the Trust shall not take any action which may
adversely affect the rights of a Holder of shares of a series of RP differently
than a Holder of shares of another series of RP, without the affirmative vote or
consent of the Holders of at least a majority of the shares of RP of such
potentially affected series outstanding at the time, in person or by proxy,
either in writing or at a meeting (voting separately as a class) . To the extent
that such an action may affect the rights of Holders of shares of series of RP
in, a substantially similar manner, the Holders of shares of such series shall
vote together as one class.
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The foregoing voting provisions shall not apply with respect to shares
of RP if, at or prior to the time when a vote is required, such shares of RP
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-1 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 RP, 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 shares of RP 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 shares of RP by the rating
agency providing such confirmation:
Accountant's Confirmation 1940 Act Cure Date
Anticipation Notes 1940 Act RP Asset Coverage
Certificate of Minimum Municipal Bonds
Liquidity Municipal Index
Closing Transactions Non-Payment Period Rate.
Deposit Securities Other Issues
Discounted Value Quarterly Valuation Date
Dividend Coverage Amount Receivables for Municipal
Dividend Coverage Assets Bonds Sold
Forward Commitments RP Basic Maintenance Amount
Independent Accountant RP Basic Maintenance Cure Date
Initial Margin RP Basic Maintenance Report
Market Value S&P Discount Factor
Maximum Potential Additional S&P Eligible Asset
Dividend Liability S&P Hedging Transaction
Minimum Liquidity Level S&P Exposure Period
Moody's Discount Factor S&P Volatility Factor
Moody's Eligible Asset Treasury Bonds
Moody's Hedging Transaction Valuation Date
Moody's Exposure Period Variation Margin
Moody's Volatility Factor
(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
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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 share of RP 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 funds (in the
form of cash or Municipal Bonds rated at least P-1, MIG-1 or VMIG-1 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 share of
RP 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 last sentence of paragraph 6(b).
(e) EXCLUSIVE REMEDY. Unless otherwise required by law, the Holders
of shares of RP shall not have any relative rights or preferences or other
special rights other than those specifically set forth herein. The Holders of
shares of RP shall have no preemptive rights or rights to cumulative voting.
In the event that the Trust fails to pay any dividends on the shares of RP,
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 shares of RP have any right to
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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 RP 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 RP ASSET COVERAGE. The Trust shall maintain, as
of the last Business Day of each month in which any share of RP is outstanding,
the 1940 Act RP Asset Coverage.
8. RP BASIC MAINTENANCE AMOUNT. (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 RP Basic Maintenance
Amount and (ii) Moody's Eligible Assets having an aggregate Discounted Value
equal to or greater than the RP 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 retain the RP Basic Maintenance
Amount on or prior to the RP Basic Maintenance Cure Date. If, on any
Valuation Date, the Trust shall have Moody's Eligible Assets with a
Discounted Value which exceeds the RP 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 RP Basic
Maintenance Amount.
(b) The Trust will deliver an RP Basic Maintenance Report to the
Remarketing Agents, 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 RP Basic Maintenance Amount by 5% or more or to satisfy
the RP Basic Maintenance Amount, the Trust shall complete and deliver to the
Remarketing Agents, the Paying Agent, Moody's and S&P an RP 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
RP Basic Maintenance Amount, the Trust shall complete and deliver to the
Remarketing Agents, the Paying Agent, Moody's and S&P an RP Basic Maintenance
Report as of the date of such cure.
(e) An RP Basic Maintenance Report or Accountant's Confirmation will be
deemed to have been delivered to the Remarketing Agents, the Paying Agent,
Moody's and S&P if the Remarketing Agents, 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
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Agents, the Paying Agent, Moody's and S&P for delivery on the next Business
Day the full RP Basic Maintenance Report. A failure by the Trust to deliver
an RP Basic Maintenance Report under subparagraph (b), (c) or (d) of this
paragraph 8 shall be deemed to be delivery of an RP Basic Maintenance Report
indicating that the Discounted Value for all assets of the Trust is less than
the RP Basic Maintenance Amount, as of the relevant Valuation Date.
(f) Whenever the Trust delivers an RP 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 Agents and the Paying
Agent.
(g) Within ten Business Days after the date of delivery to the
Remarketing Agents, the Paying Agent, S&P and Moody's of an RP 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 Agents, the Paying Agent, S&P and Moody's (i) the
mathematical accuracy of the calculations reflected in such Report (and in
any other RP 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 RP Basic
Maintenance Amount and Moody's Eligible Assets of an aggregate Discounted
Value at least equal to the RP Basic Maintenance Amount, (b) the aggregate
amount of Dividend Coverage Assets equals or exceeds the Dividend Coverage
Amount, and (c) 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 RP 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 clauses (A), (B), (C), (D), (E)
and (G) 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 RP Basic Maintenance Report.
(h) Within ten Business Days after the date of delivery to the
Remarketing Agents, the Paying Agent, S&P and Moody's of an RP Basic
Maintenance Report in accordance with paragraph 8(c) above relating to any
Valuation Date on which the Trust failed to satisfy the RP Basic Maintenance
Amount, the Independent Accountant will provide to the Remarketing Agents,
the Paying Agent, S&P and Moody's an Accountant's Confirmation as to such RP
Basic Maintenance Report.
(i) Within ten Business Days after the date of delivery to the
Remarketing Agents, the Paying Agent, S&P and Moody's of an RP 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 RP Basic
Maintenance Amount, the Independent Accountant will provide to the
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Remarketing Agents, the Paying Agent, S&P and Moody's an Accountant's
Confirmation as to such RP 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 RP 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 RP Basic
Maintenance Report to the Remarketing Agents, 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 shares of RP, the Trust
will complete and deliver to Moody's and S&P an RP 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 RP 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 an RP Basic Maintenance Report as of the close of business on the date of
the repurchase.
9. MINIMUM LIQUIDITY LEVEL. (a) For so long as any shares of
RP are rated by S&P, the Trust shall be required to maintain the Minimum
Liquidity Level.
(b) As of each Valuation Date, as long as any shares of RP are rated
by S&P, the Trust shall determine (i) the Market Value of the Dividend
Coverage Assets owned by the Trust as of that Valuation Date, (ii) the
Dividend Coverage Amount on that Valuation Date, and (iii) whether the
Minimum Liquidity Level is met as of that Valuation Date. The calculations of
the Dividend Coverage Assets, the Dividend Coverage Amount and whether the
Minimum Liquidity Level is met shall be set forth in a certificate (a
"Certificate of Minimum Liquidity") dated as of the Valuation Date and
deliverable to S&P as provided herein. The RP Basic Maintenance Report and
the Certificate of Minimum Liquidity may be combined in one certificate. The
Trust shall cause a Certificate of Minimum Liquidity to be delivered to S&P
not later than the close of business on the third Business Day after a
Valuation Date with respect to which an RP Basic Maintenance Report must be
delivered as required by paragraph 8(b). The Minimum Liquidity Level shall be
deemed to be met as of any Valuation Date if the Trust has timely delivered a
Certificate of Minimum Liquidity relating to such date which states that the
same has been met and which is not manifestly inaccurate. In the event that a
Certificate of Minimum Liquidity is not delivered to S&P when required, the
Minimum Liquidity Level shall be deemed not to have been met as of the
applicable date.
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(c) If the Minimum Liquidity Level is not met as of any Valuation
Date, then the Trust shall purchase or otherwise acquire Dividend Coverage
Assets to the extent necessary so that the Minimum Liquidity Level is met as
of the fifth Business Day following such Valuation Date. The Trust shall, by
such fifth Business Day, provide to S&P a Certificate of Minimum Liquidity
setting forth the calculations of the Dividend Coverage Assets and the
Dividend Coverage Amount and showing that the Minimum Liquidity Level is met
as of such fifth Business Day together with a report of the custodian of the
Trust's assets confirming the amount of the Trust's Dividend Coverage Assets
as of such fifth Business Day.
10. RESTRICTIONS ON CERTAIN DISTRIBUTIONS. For so long as any share
of RP is outstanding, (a) the Trust shall not declare, pay or set apart for
payment any dividend or other distribution (other than a dividend or
distribution paid in shares of, or options, warrants or rights to subscribe
for or purchase, Common Shares or other shares, if any, ranking junior to the
shares of RP as to dividends and upon liquidation) in respect of the Common
Shares or any other shares of the Trust ranking junior to or on a parity with
the shares of RP 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 shares of RP as to
dividends and upon liquidation), unless (i) full cumulative dividends on
shares of RP and Other RP 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 and (ii) the Trust has
redeemed the full number of shares of RP and Other RP required to be redeemed
by any provision for mandatory redemption pertaining thereto, and (b) the
Trust will 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 shares of RP 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 shares of RP 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 or parity shares
(except by conversion into or exchange for shares of the Trust ranking junior
to shares of RP as to dividends and upon liquidation), unless (i) immediately
after such transaction the aggregate Discounted Value of Moody's Eligible
Assets and S&P Eligible Assets would at least equal the RP Basic Maintenance
Amount and (ii) 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 shares of RP are rated by S&P, the Trust will
not purchase or sell futures contracts, write, purchase or sell options on
futures contracts or write put options (except covered put options) or call
options (except covered call options) on portfolio securities unless it receives
written confirmation from S&P that engaging in such transactions will not impair
the rating then assigned to the shares of RP by S&P, except that the Trust may
purchase
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or sell futures contracts based on the Bond Buyer Municipal Bond Index (the
"Municipal Index") or United States Treasury Bonds with remaining maturities
of ten years or more ("Treasury Bonds") 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 Transaction based
on the Municipal Index (other than transactions which terminate a futures
contract or option held by the Trust by the Trust's taking an opposite
position thereto ("Closing Transactions")), which would cause the Trust at
the time of such transaction to own or have sold (1) 1,001 or more
outstanding futures contracts based on the Municipal Index, (2)
outstanding futures contracts based on the Municipal Index and on Treasury
Bonds 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 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 not engage in any S&P Hedging Transaction
based on Treasury Bonds (other than Closing Transactions) which would
cause the Trust at the time of such transaction to own or have sold (1)
outstanding futures contracts based on Treasury Bonds and 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 (2) outstanding futures
contracts based on Treasury Bonds exceeding in number 10% of the average
number of daily traded futures contracts based on Treasury Bonds in the
thirty days preceding the time of effecting such transaction as reported
by THE WALL STREET JOURNAL;
(C) the Trust will engage in Closing Transactions to close out
any outstanding futures contract which the Trust owns or has sold or any
outstanding option thereon owned by the Trust in the event (i) the Trust
does not have S&P Eligible Assets with an aggregate Discounted Value equal
to or greater than the RP Basic Maintenance Amount on two consecutive
Valuation Dates and (ii) the Trust is required to pay Variation Margin on
the second such Valuation Date;
(D) the Trust will engage in a Closing Transaction to close out
any outstanding futures contract or option thereon in the month prior to
the delivery month under the terms of such futures contract or option
thereon unless the Trust holds the securities deliverable under such
terms; and
(E) when the Trust writes a futures contract or option thereon
(including a futures contract or option thereon which requires delivery of
an underlying security), it will either maintain an amount of cash, cash
equivalents or short-term, fixed-income securities in a segregated account
with the Trust's custodian, so that the amount so segregated plus the
amount of Initial Margin and Variation Margin held in the account of or on
behalf of the Trust's broker with respect to such futures contract or
option equals the Market Value of the futures contract or option, or, in
the event the Trust writes a futures contract or option thereon which
requires delivery of an underlying security, it shall hold such underlying
security in its portfolio.
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For purposes of determining whether the Trust has S&P Eligible
Assets with a Discounted Value that equals or exceeds the RP Basic
Maintenance Amount, such Discounted Value shall, unless the Trust receives
written confirmation from S&P to the contrary, be reduced by an amount equal
to (i) 30% of the aggregate settlement value, as marked to market, of any
outstanding futures contracts based on the Municipal Index which are owned by
the Trust plus (ii) 25% of the aggregate settlement value, as marked to
market, of any outstanding futures contracts based on Treasury Bonds which
contracts are owned by the Trust.
(b) For so long as any shares of RP 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 the shares of RP by Moody's, except that the
Trust may purchase or sell exchange-traded futures contracts based on the
Municipal Index or Treasury Bonds and purchase, write or sell exchange-traded
put 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 (1)
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 or (2) outstanding
futures contracts based on the Municipal Index having a Market Value
exceeding the Market Value of Municipal Bonds constituting Moody's
Eligible Assets owned by the Trust;
(F) the Trust will not engage in any Moody's Hedging
Transaction based on Treasury Bonds (other than Closing Transactions)
which would cause the Trust at the time of such transaction to own or have
sold in the aggregate (1) outstanding futures contracts based on Treasury
Bonds having an aggregate Market Value exceeding 10% of the aggregate
Market Value of all Moody's Eligible Assets owned by the Trust and rated
Aaa by Moody's, (2) outstanding futures contracts based on Treasury Bonds
having an aggregate Market Value exceeding 50% of the aggregate Market
Value of all Moody's Eligible Assets owned by the Trust and rated Aa by
Moody's (or, if not rated by Moody's but rated by S&P, rated AAA by S&P)
or (3) outstanding futures contracts based on Treasury Bonds having an
aggregate Market Value exceeding 90% of the aggregate Market Value of
Moody's Eligible Assets owned by the Trust and rated Baa or A by Moody's
(or, if not rated by Moody's but rated by S&P, rated A or AA by S&P) (for
purposes of the foregoing clauses (A) and (B), the Trust shall be deemed
to own the number of futures contracts that underlie any outstanding
options written by the Trust);
(G) 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;
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(H) the Trust will engage in a Closing Transaction to close out
any outstanding futures contract by no later than the fifth Business Day
of the month in which such contract expires and will engage in a Closing
Transaction to close out any outstanding option on a futures contract by
no later than the first Business Day of the month in which such option
expires;
(I) the Trust will engage in Moody's Hedging Transactions only
with respect to futures contracts or options thereon having the next
settlement date for such type of futures contract or option, or the
settlement date immediately thereafter;
(J) the Trust will not engage in options and futures transactions
for leveraging or speculative purposes unless Moody's shall advise the
Trust that to do so would not adversely affect Moody's' then current
rating of the shares of RP; provided, however, that the Trust will not be
deemed to have engaged in a futures or options transaction for leveraging
or speculative purposes so long as it has done so otherwise in accordance
with this paragraph 12; and
(K) 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 RP 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 RP Basic
Maintenance Amount, the Discounted Value of Moody's Eligible Assets which the
Trust is obligated to deliver or receive 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) of this sentence shall have no value; (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; and (iv)
futures contracts shall be valued at the lesser of (a) settlement price and
(b) the Discounted Value of the subject security, provided that, if a
contract matures within 48 days after the date as of which such valuation is
made, where the Trust is the seller the contract may be valued at the
settlement price and where the Trust is the buyer the contract may be valued
at the Discounted Value of the subject securities.
For purposes of determining whether the Trust has Moody's Eligible
Assets with an aggregate Discounted Value that equals or exceeds the RP Basic
Maintenance Amount, the following amounts shall be added to the RP Basic
Maintenance Amount required to be maintained by the Trust under paragraph
8(a) of this Part I (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, 10% of the settlement price of
the futures contract; (iv) where the Trust is the purchaser under a futures
contract, the settlement price of assets to be purchased under such futures
contract; (v) the settlement price of the underlying futures contract if the
Trust writes put
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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 shares of RP 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 Transactions that are permitted under paragraph 12(b)
of this Part I), except that the Trust may enter into such contracts to purchase
newly-issued securities on the date such securities are issued ("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 and maturing prior to the date of
the Forward Commitment with a 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 long-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
(L) the Trust will not enter into a Forward Commitment 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 RP 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 RP 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. For so long as any shares of RP are
outstanding,
(a) 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 shares of RP, 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 S&P Eligible Assets at least equal to the RP 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;
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(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 RP with respect to payment of dividends
or the distribution of assets on liquidation.
(b) For so long as shares of RP 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
shares of RP;
(iii) any mandatory or optional redemption of the shares of RP;
(iv) any assumption of control of the Trustees by the Holders
of shares of RP 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 operation of the Trust; and
(ix) The Putnam Management Company, 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 share of RP 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.
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 Agents, 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 shares of RP
shall have any right
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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
RP as shown on the share transfer books of the Trust from time to time
dividends at the Applicable Dividend Rate 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
Agents, 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 shares of RP 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 shares of RP) 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.
2. PROCEDURE FOR TENDERING. (a) Each share of a series of RP is subject
to Tender and Dividend Reset at the end of each Dividend Period for such series
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
Agents shall, after canvassing the market and considering prevailing market
conditions at the time for shares of RP 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 Agents 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 12:00 noon, New York City time, on such
Remarketing Date, each Beneficial Owner of a share of the relevant series of
RP must notify a Remarketing Agent of its desire, on a share-by-share basis,
either to tender such share of RP 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
shares of RP if each of the current Dividend Period and succeeding Dividend
Period is a 28-day Dividend Period or a Special Dividend Period of 60 days or
less, and (ii) to tender all their shares of RP if the current Dividend
Period or succeeding Dividend Period is a Special Dividend Period of more
than 60 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
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such Remarketing Agent that it would accept the new Applicable Dividend Rate
for such Dividend Period, such waiver to be contingent upon the Remarketing
Agents' ability to remarket all shares of RP tendered in such Remarketing,
and (ii) at the request of a Beneficial Owner that has elected to hold one or
more of its shares of RP, waive such Beneficial Owner's election with respect
thereto, such waiver to be contingent upon the Remarketing Agents' ability to
remarket all shares of RP tendered in such Remarketing.
(b) The ability of each Beneficial Owner to tender shares of RP in a
Remarketing shall be limited to the extent that (i) the Remarketing Agents
conduct a Remarketing pursuant to the terms of the Remarketing Agreement,
(ii) shares tendered have not been called for redemption and (iii) the
Remarketing Agents are able to find a purchaser or purchasers for tendered
shares of RP 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 Agents 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 Agents determine, in their sole
judgment, to be the lowest rate that will enable them to remarket on behalf
of the Beneficial Owners thereof all shares of RP subject to Tender and
Dividend Reset in such Remarketing and tendered to them 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 Period, if any, for any reason (other than because there are
no Remarketing Agents, the Remarketing Agents are not required to conduct a
Remarketing pursuant to the terms of the Remarketing Agreement or the
Remarketing Agents are unable to remarket on the Remarketing Date all shares
of RP tendered (or deemed tendered) to them at a price of $50,000 per share),
then the Remarketing Agents, in their 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 are no Remarketing Agents or the Remarketing Agents are not
required to conduct a Remarketing pursuant to the Remarketing Agreement or if
the Remarketing Agents are unable to remarket on the Remarketing Date all
shares of a series of RP tendered (or deemed tendered) to them 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 such series and for each
subsequent Dividend Period for such series 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 such series and
each such subsequent Dividend Period shall be a 28-day Dividend Period.
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(c) In determining such Applicable Dividend Rate, the Remarketing
Agents 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 shares of RP, (i) consider the number of shares of RP
tendered and the number of shares of RP potential purchasers are willing to
purchase and (ii) contact by telephone or otherwise current and potential
Beneficial Owners of shares of RP subject to Tender and Dividend Reset to
ascertain the dividend rates at which they would be willing to hold shares of
RP.
(d) The Applicable Dividend Rate shall be determined as aforesaid by
the Remarketing Agents in their 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 Agents are unable to remarket by 3:00 p.m., New York
City time, on a Remarketing Date all shares of RP tendered (or deemed
tendered) to them in the related Remarketing at a price of $50,000 per share,
(i) each Beneficial Owner that tendered or was deemed to have tendered shares
of RP for sale shall sell a number of shares of RP on a pro rata basis, to
the extent practicable, or by lot, as determined by the Remarketing Agents in
their sole discretion, based on the number of orders to purchase shares of RP
in such Remarketing, and (ii) the Applicable Dividend Rate for the next
Dividend Period for such series, 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 share of RP, the Remarketing Agents shall, in their
sole discretion, round up or down the number of shares of RP sold by each
Beneficial Owner on the applicable Remarketing Date so that each share sold
by a Beneficial Owner shall be a whole share of RP, 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 Agents 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 Agents 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 share of RP shall be
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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 shares of RP in the related
Remarketing. Purchasers of shares of RP 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 shares of RP, 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 shares of RP through
their Agent Members. The Securities Depository shall make payment in
accordance with its normal procedures.
(c) If any Beneficial Owner selling shares of RP 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 shares of RP in such
Remarketing may deliver to any such other person a number of whole shares of
RP that is less than the number of shares that otherwise was to be purchased
by such person. In such event, the number of shares of RP to be so delivered
shall be determined by such Agent Member. Delivery of such lesser number of
shares of RP shall constitute good delivery.
(d) The Remarketing Agents, 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 Agents, 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 Agents may, in their 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 RP or the Trust.
(f) Neither the Trust, the Paying Agent nor any of the Remarketing
Agents shall be obligated in any case to provide funds to make payment to a
Beneficial Owner upon such Beneficial Owner's tender of its shares of RP in a
Remarketing, unless, in each case, such shares of RP were acquired for the
account of the Trust, the Paying Agent or any of the Remarketing Agents.
(6) PURCHASE OF SHARES OF RP BY REMARKETING AGENTS. The Remarketing
Agents may purchase for their own account shares of RP in a Remarketing,
provided that they purchase all tendered (or deemed tendered) shares of RP
not sold in such Remarketing to other purchasers. If the Remarketing Agents
hold shares of RP for their own account upon completion of a Remarketing,
they 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 Agents did not hold or had not
purchased such shares. Except as provided in the first sentence of this
paragraph 6, the Remarketing Agents shall not be obligated to purchase any
shares of RP that would otherwise remain unsold in a Remarketing. If the
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Remarketing Agents hold for their own account any shares of RP 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 shares of RP (including circumstances where any of the Remarketing Agents
hold such shares as nominee) have been sold in such Remarketing, then the
Remarketing Agents may sell such number of their 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 shares of RP and the shares of
RP 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 shares of RP will be
maintained in book 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 share
of RP 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 share of RP and as to the number of shares of RP held from time to
time by any Holder, and the Trust shall have no obligation in respect of any
share of RP 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 shares of a series of
RP 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 shares of RP. 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 shares of RP
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
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rescind the stop-transfer instructions referred to in paragraph 10(a) of
this Part II with respect to such shares.
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