AMENDED AND RESTATED BYLAWS
OF
RMR PREFERRED DIVIDEND FUND
(Dated as of July __, 2005)
ARTICLE I
AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall be subject to
the Agreement and Declaration of Trust, as amended or restated from time to time
(the "Declaration of Trust"), of RMR PREFERRED DIVIDEND FUND, the Massachusetts
business trust established by the Declaration of Trust (the "Trust").
Capitalized terms used in these Bylaws and not otherwise defined herein shall
have the meanings given to such terms in the Declaration of Trust.
ARTICLE II
TRUSTEES
2.1 NUMBER OF TRUSTEES. The number of Trustees shall be initially set at
five. Each of the Trustees shall be designated as a Class I, Class II or Class
III Trustee as required by the Declaration of Trust. The number of Trustees may
be changed by the Trustees then in office, provided it SHALL NOT be less than
three. The Trustees shall be designated as Class I, Class II or Class III
Trustees by the Trustees.
2.2 INDEPENDENT TRUSTEES. After completion of the Trust's initial public
offering of Shares, a majority of the Trustees holding office shall at all times
be Trustees who are not "interested persons" of the Trust (as defined in the
Investment Company Act of 1940, as amended), except for the fact of their being
Trustees; and, provided, however, that less than a majority of the Trustees may
be such independent Trustees on a temporary basis by reason of the death,
resignation, removal or other vacancy in the office of one or more Trustees.
2.3 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.4 SPECIAL MEETINGS. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Trustees, the President, the Treasurer, the Secretary or by
two or more Trustees, provided notice thereof is given to each Trustee by the
Secretary or an Assistant Secretary or by the officer or the Trustees calling
the meeting.
2.5 NOTICE. It shall be sufficient notice to the Trustee of a special
meeting to send notice by mail at least seventy-two hours or by telegram, telex,
telecopy, electronic mail or other electronic facsimile transmission method at
least twenty-four hours before the meeting addressed to the Trustee at his or
her usual or last known business or residence address or to give notice to him
or her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her, before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting. Neither
notice of a meeting nor a waiver of a notice need specify the purposes of the
meeting.
2.6 QUORUM. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting of the Trustees may be
adjourned from time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held as adjourned
without further notice. Whether or not a Trustee votes on a matter at a meeting
which he attends, he will nonetheless be considered present for purposes of
establishing a quorum to consider the matter.
2.7 ATTENDANCE. Except as required by applicable law, attendance at
Trustees meetings may be in person or by a teleconference or other
communications medium by means of which all persons participating in the meeting
can hear and speak with each other.
2.8 WRITTEN CONSENT. Action by the Trustees may be taken by written
consent signed by a majority of the Trustees then in office, provided that the
form of written consent is circulated to all Trustees before or promptly after
it is signed by the majority of Trustees.
ARTICLE III
OFFICERS
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
President, a Treasurer, a Secretary, and such other officers including a
Chairman of the Trustees, if any, as the Trustees from time to time may in their
discretion elect. The Trust may also have such agents as the Trustees from time
to time may in their discretion appoint. The Chairman of the Trustees, if one is
elected, shall be a Trustee and may but need not be a Shareholder; and any other
officer may but does not need to be a Trustee or a Shareholder. Any two or more
offices may be held by the same person.
3.2 ELECTION. The President, the Treasurer, and the Secretary shall be
elected annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at any time. Vacancies in any office may be filled at
any time.
3.3 TENURE. The Chairman of the Trustees, if one is elected, the
President, the Treasurer and the Secretary shall hold office until their
respective successors are chosen and qualified, or in each case until he or she
sooner dies, resigns, is removed with or without cause or becomes disqualified.
Each other officer shall hold office and each agent of the Trust shall retain
authority at the pleasure of the Trustees.
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3.4 POWERS. Subject to the other provisions of these Bylaws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him or her as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 CHAIRMAN; PRESIDENT; VICE PRESIDENT. Unless the Trustees otherwise
provide, the Chairman of the Trustees or, if there is none or in the absence of
the Chairman, the President shall preside at all meetings of the Shareholders
and of the Trustees. Alternatively, the Trustees may designate one Trustee or
another officer to preside at such meetings. The Trustees may designate a chief
executive officer from among the Trustees or the elected officers. Any Vice
President shall have such duties and powers as may be designated from time to
time by the Trustees or the President.
3.6 TREASURER; ASSISTANT TREASURER. The Treasurer shall be the chief
financial and chief accounting officer of the Trust, and shall, subject to any
arrangement made by the Trustees with a custodian, investment adviser,
sub-adviser, manager, or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President. Any Assistant Treasurer shall
have such duties and powers as may be designated from time to time by the
Trustees, the President or the Treasurer.
3.7 SECRETARY; ASSISTANT SECRETARY. The Secretary shall record all
proceedings of the Shareholders and the Trustees in books to be kept therefor,
which books or a copy thereof shall be kept at the principal office of the
Trust. In the absence of the Secretary from any meeting of the Shareholders or
Trustees, an Assistant Secretary, or if there be none or if he or she is absent,
a temporary secretary chosen at such meeting shall record the proceedings
thereof in the aforesaid books. Any Assistant Secretary shall have such duties
and powers as may be designated from time to time by the Trustees, the President
or the Secretary.
3.8 RESIGNATIONS. Any Trustee or officer may resign at any time by
written instrument signed by him or her and delivered to the Chairman, the
President or the Secretary, or to a meeting of the Trustees. Such resignation
shall be effective upon receipt unless specified to be effective at some other
time. Except to the extent expressly provided in a written agreement with the
Trust, no officer resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or removal, or any
right to damages on account of such removal.
ARTICLE IV
COMMITTEES
4.1 APPOINTMENT. The powers, duties and responsibilities of the Trustees
maybe delegated to one or more Committees. Trustees, officers or agents of the
Trust may serve on Committees, but all Committees shall have at least one
Trustee who will serve as Chairman of the Committee. Committees shall have the
powers, duties and responsibilities as may be assigned to them by the Trustees.
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4.2 MEETINGS; NOTICE. Except as specifically provided in resolutions
constituting a Committee or providing for the conduct of its meetings: (i)
Committee meetings may be called by the Chairman or any two Committee members;
(ii) notice of Committee meetings may be given by the person calling the
meeting, the Secretary or any Assistant Secretary; and (iii) notice of Committee
meetings shall be given in the manner and within the times provided for Trustees
meetings.
4.3 QUORUM; VOTING. Except as provided below or as otherwise
specifically provided in the resolutions constituting a Committee and providing
for the conduct of its meetings, a majority of the members of any Committee
shall constitute a quorum for the transaction of business, and any action of
such a Committee may be taken at a meeting by a vote of a majority of the
members present (so long as a quorum is present) or evidenced by one or more
writings signed by such a majority. Members of a Committee may participate in a
meeting of such Committee by means of a conference telephone or other
communications medium by means of which all persons participating in the meeting
can hear and speak to each other.
ARTICLE V
FISCAL YEAR
5.1 GENERAL. Except as from time to time otherwise provided by the
Trustees, the fiscal year of the Trust shall be a calendar year.
ARTICLE VI
SEAL
6.1 GENERAL. The seal of the Trust shall, subject to alteration by the
Trustees, consist of a flat-faced die with the word "Massachusetts", together
with the name of the Trust and the year of its organization cut or engraved
thereon; provided, however, that unless otherwise required by the Trustees, the
seal shall not be necessary to be placed on, and its absence shall not impair
the validity of, any document, instrument or other document executed and
delivered by or on behalf of the Trust.
ARTICLE VII
EXECUTION OF PAPERS
7.1 GENERAL. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts and other obligations made,
accepted or endorsed by the Trust shall be executed by the President, any Vice
President, the Treasurer or by whomever else shall be designated for that
purpose by vote of the Trustees, and need not bear the seal of the Trust.
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ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
8.1 REGULAR AND SPECIAL MEETINGS. Except as provided in the next
sentence, regular meetings of the Shareholders for the election of Trustees and
the transaction of such other business as may properly come before the meeting
shall be held, so long as Shares are listed for trading on the American Stock
Exchange, on at least an annual basis, on such day and at such place as shall be
designated by the Trustees. Such regular meetings of the Shareholders shall only
be called by the Board of Trustees. In the event that such a meeting is not held
in any annual period if so required, whether the omission be by oversight or
otherwise, a subsequent special meeting may be called by the Trustees and held
in lieu of such meeting with the same effect as if held within such annual
period. Special meetings of the Shareholders or any or all classes or series of
Shares may also be called by the Trustees from time to time for such other
purposes as may be prescribed by law, by the Declaration of Trust or by these
Bylaws, or for the purpose of taking action upon any other matter deemed by the
Trustees to be necessary or desirable. A special meeting of Shareholders may be
held at any such time, day and place as is designated by the Trustees. Written
notice of any meeting of Shareholders, stating the time, place and purpose of
the meeting, shall be given or caused to be given by the Trustees at least ten
days before such meeting to each Shareholder entitled to vote thereat by leaving
such notice with the Shareholder at his or her residence or usual place of
business or by mailing such notice, postage prepaid, to the Shareholder's
address as it appears on the records of the Trust. Such notice may be given by
the Secretary or an Assistant Secretary or by any other officer designated by
the Trustees. Whenever notice of a meeting is required to be given to a
Shareholder under the Declaration of Trust or these Bylaws, a written waiver
thereof, executed before or after the meeting by such Shareholder or his or her
attorney thereunto authorized and filed with the records of the meeting, shall
be deemed equivalent to such notice. Notice of a meeting need not be given to
any Shareholder who attends the meeting.
8.2 VOTING POWER. Each whole Share shall be entitled to one vote as to
any matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except as otherwise provided in the
notice of the meeting forwarded to the Shareholders by the Trustees, the
Declaration of Trust, these Bylaws, or required by applicable law. Except as
otherwise provided in the notice of the meeting forwarded to the Shareholders by
the Trustees, the Declaration of Trust, these Bylaws or required by applicable
law, all Shares of the Trust then entitled to vote shall be voted in the
aggregate as a single class without regard to classes or series of Shares. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. The placing of a Shareholder's name on a proxy
pursuant to telephonic or electronically transmitted instructions obtained
pursuant to procedures reasonably designed to verify that such instructions have
been authorized by such Shareholder shall constitute execution of such proxy by
or on behalf of such Shareholder. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
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8.3 RECORD DATES. For the purpose of determining the Shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, the
Trustees may from time to time fix a time and date, which shall be not more than
90 days before the date of any meeting of Shareholders, as the record date for
determining the Shareholders having the right to notice of and to vote at such
meeting and any adjournment thereof and only Shareholders of record on such
record date shall have the right notwithstanding any transfer of Shares on the
books of the Trust after the record date; or without fixing such record date the
Trustees may for any of such purposes close the register or transfer books for
all or any part of such period.
ARTICLE IX
AMENDMENT TO THE BYLAWS
9.1 GENERAL. These Bylaws may be amended, changed, altered or repealed,
in whole or part, only by resolution of the Trustees at any meeting of the
Trustees at which a quorum is present, or by a written consent signed by a
majority of the Trustees then in office.
ARTICLE X
PREFERRED SHARES OF BENEFICIAL INTEREST
10.1 STATEMENT CREATING ONE SERIES OF PREFERRED SHARES.
DESIGNATION
SERIES M: ___ preferred shares, par value $.0001 per share, liquidation
preference $25,000 per share plus an amount equal to accumulated but unpaid
distributions thereon (whether or not earned or declared), are hereby designated
auction preferred shares, Series M (the "Series" or "Preferred Shares"). Each
share of the Series shall have an Applicable Rate for its Initial Rate Period
determined pursuant to a resolution of the Board of Trustees and an initial
Distribution Payment Date of July __, 2005.
Preferred Shares may be marketed under the name "auction preferred shares"
or "Preferred Shares" or such other name as the Board of Trustees may approve
from time to time.
Each Preferred Share shall have such other preferences, rights, voting
powers, restrictions, limitations as to distributions, qualifications and terms
and conditions of redemption, in addition to those required by applicable law,
as are set forth in Parts I and II of Article X of these Bylaws. Subject to the
provisions of Section 5(c) of Part I hereof, the Board of Trustees of the Trust
may, in the future, reclassify additional shares of the Trust's capital shares
as Preferred Shares, with the same preferences, rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms and
conditions of redemption and other terms herein described, except that the
Applicable Rate for the Initial Rate Period, its initial Payment Date and any
other changes in the terms herein set forth shall be as set forth in the Bylaws
reclassifying such shares as Preferred Shares.
Capitalized terms used in Parts I and II of Article X of these Bylaws shall
have the meanings (with the terms defined in the singular having comparable
meanings when used in the
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plural and vice versa) provided in the "Definitions" section immediately
following, unless the context otherwise requires.
DEFINITIONS
As used in Parts I and II of Article X of these Bylaws, the following terms
shall have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
(a) "APPROVED PRICE" means the "fair value" as determined by the Trust in
accordance with the valuation procedures adopted from time to time by the Board
of Trustees of the Trust and for which the Trust receives a xxxx-to-market price
(which, for the purpose of clarity, shall not mean Market Value) from an
independent source at least semi-annually.
(b) "AUDITOR'S CONFIRMATION" shall have the meaning specified in paragraph (c)
of Section 7 of Part I of these Bylaws.
(c) "AFFILIATE" shall mean, for purposes of the definition of "Outstanding," any
Person known to the Auction Agent to be controlled by, in control of or under
common control with the Trust; PROVIDED, HOWEVER, that for purposes of these
Bylaws no Broker-Dealer controlled by, in control of or under common control
with the Trust shall be deemed to be an Affiliate nor shall any corporation or
any Person controlled by, in control of or under common control with such
corporation, one of the trustees, directors, or executive officers of which is a
Trustee of the Trust, be deemed to be an Affiliate solely because such trustee,
director or executive officer is also a Trustee of the Trust.
(d) "AGENT MEMBER" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder.
(e) "ALL HOLD RATE" shall mean 80% of the Reference Rate.
(f) "ANNUAL VALUATION DATE" shall mean the last Business Day of December of each
year.
(g) "APPLICABLE PERCENTAGE" shall mean the percentage determined based on the
lower of the credit ratings assigned to the Preferred Shares on such date by
Moody's and Fitch as follows:
Credit Ratings
------------------------------------------------ Applicable
Xxxxx'x Fitch Percentage
--------------------- ------------------------ ----------
Aa3 or higher AA- or higher 150%
A3 to A1 A- to A+ 200%
Baa3 to Baa1 BBB- to BBB+ 225%
Ba 1 and lower BB+ and lower 275%
For purposes of this definition, the "prevailing rating" of the Preferred
Shares shall be (i) Aaa/AAA if such shares have a rating of Aaa by Moody's and
AAA by Fitch and the equivalent
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of such ratings by such agencies or a substitute rating agency or substitute
rating agencies; (ii) if not Aaa/AAA, then Aa3/AA- if such shares have a rating
of Aa3 or better by Moody's and AA- or better by Fitch or the equivalent of such
rating by such agencies or a substitute rating agency or substitute rating
agencies, (iii) if not Aa3/AA- or higher, then A3/A- if such shares have a
rating of A3 or better by Moody's and A- or better by Fitch or the equivalent of
such ratings by such agencies or a substitute rating agency or substitute rating
agencies, (iv) if not A3/A- or higher, then Baa3/BBB- if such shares have a
rating of Baa3 or better by Moody's and BBB- or better by Fitch or the
equivalent of such ratings by such agencies or substitute rating agency or
substitute rating agencies, (v) if not Baa3/BBB- or higher, then below
Baa3/BBB-.
The Applicable Percentage as so determined shall be further subject to
upward but not downward adjustment in the discretion of the Board of Trustees of
the Trust after consultation with the Broker-Dealers, provided that immediately
following any such increase the Trust would be in compliance with the Preferred
Shares Basic Maintenance Amount. The Trust shall take all reasonable action
necessary to enable Moody's and Fitch to provide a rating for the Preferred
Shares. If Moody's or Fitch shall not make such a rating available, the Trust
shall select another rating agency to act as a substitute rating agency.
Notwithstanding the foregoing, the Trust shall not be required to have more than
one rating agency provide a rating for the Preferred Shares.
(h) "APPLICABLE RATE" shall mean, for each Rate Period (i) if Sufficient
Clearing Orders exist for the Auction in respect thereof, the Winning Bid Rate,
(ii) if Sufficient Clearing Orders do not exist for the Auction in respect
thereof, the Maximum Rate, and (iii) in the case of any Distribution Period if
all the Preferred Shares are the subject of Submitted Hold Orders for the
Auction in respect thereof, the All Hold Rate.
(i) "APPLICABLE SPREAD" means the spread determined based on the lower of the
credit ratings assigned to Preferred Shares on such date by Xxxxx'x (if Xxxxx'x
is then rating the Preferred Shares) and Fitch (if Fitch is then rating the
Preferred Shares) as follows:
Credit Ratings
----------------------------------------------- Applicable
Xxxxx'x Fitch Spread
--------------------- ------------------------ ----------
Aa3 or higher AA- or higher 150 bps
A3 to A1 A- to A+ 200 bps
Baa3 to Baa1 BBB- to BBB+ 225 bps
Ba 1 and lower BB+ and lower 275 bps
For purposes of this definition, the "prevailing rating" of the Preferred
Shares shall be (i) Aaa/AAA if such shares have a rating of Aaa by Moody's and
AAA by Fitch or the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies; (ii) if not Aaa/AAA, then Aa3/AA-
if such shares have a rating of Aa3 or better by Moody's and AA- or better by
Fitch or the equivalent of such rating by such agencies or a substitute rating
agency or substitute rating agencies, (iii) if not Aa3/AA- or higher, then A3/A-
if such shares have a rating of A3 or better by Moody's and A- or better by
Fitch or the equivalent of such ratings by such agencies or a substitute rating
agency or substitute rating agencies, (iv) if not A3/A- or higher, then
Baa3/BBB- if such shares have a rating of Baa3 or better by Moody's and BBB- or
better by
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Fitch or the equivalent of such ratings by such agencies or substitute
rating agency or substitute rating agencies, (v) if not Baa3/BBB- or higher,
then below Baa3/BBB-.
The Applicable Spread as so determined shall be further subject to upward
but not downward adjustment in the discretion of the Board of Trustees after
consultation with the Broker-Dealers, provided that immediately following any
such increase the Trust would be in compliance with the Preferred Shares Basic
Maintenance Amount.
(j) "AUCTION" shall mean each periodic implementation of the Auction Procedures.
(k) "AUCTION AGENCY AGREEMENT" shall mean the agreement between the Trust and
the Auction Agent which provides, among other things, that the Auction Agent
will follow the Auction Procedures for purposes of determining the Applicable
Rate for the Preferred Shares so long as the Applicable Rate for such Preferred
Shares is to be based on the results of an Auction.
(l) "AUCTION AGENT" shall mean the entity appointed as such by a resolution of
the Board of Trustees in accordance with Section 6 of Part II of Article X of
these Bylaws.
(m) "AUCTION DATE" with respect to any Rate Period, shall mean the Business Day
next preceding the first day of such Rate Period.
(n) "AUCTION PROCEDURES" shall mean the procedures for conducting Auctions set
forth in Part II of Article X of these Bylaws.
(o) "AVAILABLE PREFERRED SHARES" shall have the meaning specified in paragraph
(a) of Section 3 of Part II of Article X of these Bylaws.
(p) "BANK LOANS" means direct purchases of, assignments of, participations in
and other interests in (a) any bank loan or (b) any loan made by an investment
bank, investment fund or other financial institution, provided that such loan
under this clause (b) is similar to those typically made, syndicated, purchased
or participated by a commercial bank or institutional loan investor in the
ordinary course of business.
(q) "BENEFICIAL OWNER" with respect to shares of Preferred Shares, means a
customer (including broker dealers that are not Broker Dealers) of a
Broker-Dealer who is listed on the records of that Broker-Dealer (or, if
applicable, the Auction Agent) as a holder of Preferred Shares.
(r) "BID" and "BIDS" shall have the respective meanings specified in paragraph
(a) of Section 1 of Part II of Article X of these Bylaws.
(s) "BIDDER" and "BIDDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of Article X of these Bylaws; PROVIDED,
HOWEVER, that neither the Trust nor any affiliate thereof shall be permitted to
be a Bidder in an Auction, except that any Broker-Dealer that is an affiliate of
the Trust may be a Bidder in an Auction, but only if the Orders placed by such
Broker-Dealer are not for its own account.
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(t) "BOARD OF TRUSTEES" shall mean the Board of Trustees of the Trust or any
duly authorized committee thereof.
(u) "BROKER-DEALER" shall mean any broker-dealer, commercial bank or other
entity permitted by law to perform the functions required of a Broker-Dealer in
Part II of Article X of these Bylaws, that is a member of, or a participant in,
the Securities Depository or is an affiliate of such member or participant, has
been selected by the Trust and has entered into a Broker-Dealer Agreement that
remains effective.
(v) "BROKER-DEALER AGREEMENT" shall mean an agreement between the Auction Agent
and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the
procedures specified in Part II of Article X of these Bylaws.
(w) "BUSINESS DAY" shall mean a day on which the New York Stock Exchange is open
for trading and which is neither a Saturday, Sunday nor any other day on which
banks in New York, New York, are authorized or obligated by law to close.
(x) "CLOSING TRANSACTION" shall have the meaning specified in paragraph
(a)(i)(A) of Section 13 of Part I of Article X of these Bylaws.
(y) "CODE" means the Internal Revenue Code of 1986, as amended.
(z) "COMMON SHARES" shall mean the outstanding common shares, par value $.001
per share, of the Trust.
(aa) "CURE DATE" shall mean the Preferred Shares Basic Maintenance Cure Date or
the 1940 Act Cure Date, as the case may be.
(bb) "DATE OF ORIGINAL ISSUE" with respect to the Preferred Shares, shall mean
the date on which the Trust initially issued such shares.
(cc) "DECLARATION OF TRUST" shall have the meaning specified on the first page
of these Bylaws.
(dd) "DEPOSIT SECURITIES" shall mean cash and any obligations or securities,
including Short Term Money Market Instruments that are Eligible Assets, rated at
least AAA or F-1 by Fitch, X-0, XXX-0 xx XXXX-0 by Moody's or AAA or A-1 by S&P.
(ee) "DISCOUNTED VALUE" as of any Valuation Date, shall mean, (i) with respect
to a Fitch Eligible Asset or Xxxxx'x Eligible Asset that is not currently
callable or prepayable as of such Valuation Date at the option of the issuer
thereof, the quotient of the Market Value thereof divided by the Fitch Discount
Factor for a Fitch Eligible Asset or Moody's Discount Factor for a Moody's
Eligible Asset, (ii) with respect to a Fitch Eligible Asset or Moody's Eligible
Asset that is currently callable as of such Valuation Date at the option of the
issuer thereof, the quotient as calculated above or the call price, plus accrued
interest or distributions, as applicable, whichever is lower, and (iii) with
respect to a Fitch Eligible Asset or Moody's Eligible Asset that is prepayable,
the quotient as calculated above or the par value, plus accrued interest or
distribution, as applicable, whichever is lower.
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(ff) "DISTRIBUTION PAYMENT DATE" with respect to the Preferred Shares, shall
mean any date on which distributions are payable on the Preferred Shares
pursuant to the provisions of paragraph (d) of Section 2 of Part I of Article X
of these Bylaws.
(gg) "DISTRIBUTION PERIOD," with respect to the Preferred Shares, shall mean the
period from and including the Date of Original Issue of shares of a series of
Preferred Shares to but excluding the initial Distribution Payment Date for
shares of the Series and thereafter any period from and including one
Distribution Payment Date for shares of the Series to but excluding the next
succeeding Distribution Payment Date for shares of the Series.
(hh) "EXISTING HOLDER," with respect to shares of Preferred Shares, shall mean a
Broker-Dealer (or any such other Person as may be permitted by the Trust) that
is listed on the records of the Auction Agent as a holder of shares of the
Series.
(ii) "EXPOSURE PERIOD" shall mean the period commencing on a given Valuation
Date and ending 41 days thereafter for Fitch and 49 days thereafter for Xxxxx'x.
(jj) "FAILURE TO DEPOSIT," with respect to shares of a series of Preferred
Shares, shall mean a failure by the Trust to pay to the Auction Agent, not later
than 12:00 noon, Eastern time, (A) on any Distribution Payment Date for shares
of the Series, in funds available on such Distribution Payment Date in New York,
New York, the full amount of any distribution (whether or not earned or
declared) to be paid on such Distribution Payment Date on any share of the
Series or (B) on any redemption date in funds available on such redemption date
for shares of the Series in New York, New York, the Redemption Price to be paid
on such redemption date for any share of the Series after notice of redemption
is mailed pursuant to paragraph (c) of Section 11 of Part I of Article X of
these Bylaws; PROVIDED, HOWEVER, that the foregoing clause (B) shall not apply
to the Trust's failure to pay the Redemption Price in respect of Preferred
Shares when the related Notice of Redemption provides that redemption of such
shares is subject to one or more conditions precedent and any such condition
precedent shall not have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.
(kk) "FITCH" means Fitch Ratings and its successors.
(ll) "FITCH DISCOUNT FACTOR" means, for purposes of determining the Discounted
Value of any Fitch Eligible Asset, the percentage determined as follows. The
Fitch Discount Factor for any Fitch Eligible Asset other than the securities set
forth below will be the percentage provided in writing by Fitch.
(i) Municipal Obligations: the Fitch Discount Factor for Municipal
Obligations is the percentage determined by reference to the rating on
such asset and the shortest Exposure Period set forth opposite such
rating that is the same length as or is longer than the Exposure
Period, in accordance with the table set forth below.
-11-
RATING CATEGORY
Exposure Period AAA* AA* A* BBB* F1** Unrated***
--------------- --- --- --- ---- ---- ----------
7 weeks 151% 159% 166% 173% 136% 225%
8 weeks or less but
greater than 7 weeks 154% 161% 168% 176% 137% 231%
9 weeks or less but
greater than 8 weeks 158% 163% 170% 177% 138% 240%
----------
*Fitch rating (or, if not rated by Fitch, see the definition of "Fitch
Eligible Asset" below).
**Municipal Obligations rated F1 by Fitch (or, if not rated by Fitch, see
the definition of "Fitch Eligible Asset" below), which do not mature or
have a demand feature at par exercisable in 30 days and which do not have a
long-term rating.
***Includes Municipal Obligations rated less than BBB by Fitch (or, if not
rated by Fitch, see the definition of "Fitch Eligible Asset" below) and
unrated securities.
Notwithstanding the foregoing, (i) the Fitch Discount Factor for
short-term Municipal Obligations will be 115%, so long as such
Municipal Obligations are rated at least F2 by Fitch (or, if not rated
by Fitch, rated XXX-0, XXXX-0 or P-1 by Xxxxx'x or at least A-1+ or
SP-1+ by S&P) and mature or have a demand feature at par exercisable
in 30 days or less, and (ii) no Fitch Discount Factor will be applied
to cash or to Receivables for Municipal Obligations Sold.
(ii) Corporate Debt Securities: the Fitch Discount Factor for
corporate debt securities is the percentage determined by reference to
the rating on such asset with reference to the remaining term to
maturity of such asset, in accordance with the table set forth below.
FITCH DISCOUNT FACTORS FOR CORPORATE DEBT SECURITIES INCLUDING NON-INVESTMENT
GRADE BONDS
Terms to Maturity Aaa AA A BBB BB Unrated(1)
----------------- --- --- --- --- -- ----------
1 year or less 106% 108% 110% 112% 130% 152%
2 years or less (but longer than 1 year) 106% 108% 110% 112% 130% 152%
3 years or less (but longer than 2 years) 106% 108% 110% 112% 130% 152%
4 years or less (but longer than 3 years) 111% 113% 115% 117% 134% 152%
5 years or less (but longer than 4 years) 111% 113% 115% 117% 134% 152%
7 years or less (but longer than 5 years) 114% 116% 118% 120% 136% 152%
-12-
10 years or less (but longer than 7 years) 116% 118% 120% 122% 137% 152%
15 years or less (but longer than 10 years) 120% 122% 124% 124% 139% 152%
30 years or less (but longer than 15 years) 124% 127% 129% 129% 145% 152%
Greater than 30 years 124% 127% 129% 129% 145% 152%
(1) If a security is not rated by Fitch but is rated by two other Rating
Agencies, then the lower of the ratings on the security from the two other
Rating Agencies will be used to determine the Fitch Discount Factor (e.g., where
the S&P rating is A and the Xxxxx'x rating is Baa, a Fitch rating of BBB will be
used). If a security is not rated by Fitch but is rated by only one other Rating
Agency, then the rating on the security from the other Rating Agency will be
used to determine the Fitch Discount Factor (e.g., where the only rating on a
security is an S&P rating of AAA, a Fitch rating of AAA will be used, and where
the only rating on a security is a Xxxxx'x rating of Ba, a Fitch rating of BB
will be used). If a security is either not rated by any Rating Agency or is
rated below BB, the Trust will use the percent set forth under "Unrated" in the
table above.
The Fitch Discount Factors presented in the immediately preceding
table apply to corporate debt securities that are performing and
have a Market Value determined by a Pricing Service of an
Approved Price. The Fitch Discount Factor noted in the table
above for a debt security rated B by Fitch shall apply to any
non-performing debt security with a price equal to or greater
than 90% of par. The Fitch Discount Factor noted in the table
above for a debt security rated below B by Fitch shall apply to
any non-performing debt security with a price less than 90% of
par but equal to or greater than 20% of par. If a debt security
does not have a Market Value det an Approved Price, a rating two
rating categories below the actual rating on the debt security
will be used (e.g., where the actual rating is A-, the rating for
debt securities rated BB- will be used). The Fitch Discount
Factor for a debt security issued by a limited partnership that
is not a Rule 144A Security shall be the Discount Factor
determined in accordance with the table set forth above
multiplied by 105%.
The Fitch Discount Factors presented in the immediately preceding
table will also apply to corporate obligations backed by a
guarantee, a letter of credit or insurance issued by a third
party. If the third-party credit rating is the basis for the
rating on the obligation, then the rating on the third party will
be used to determine the Fitch Discount Factor in the table.
(iii) Common stock and warrants: The Fitch Discount Factor
applied to common stock will be:
Large-cap stocks: 200%
Mid-cap stocks: 233%
Small-cap stocks: 286%
Others: 370%
-13-
Small-cap stocks refer to stocks with a market capitalization
between $300 million to $2 billion. Mid-cap stocks refer to
stocks with a market capitalization between $2 billion to $10
billion. Large-cap stocks are companies having a market
capitalization greater than $10 billion.
(iv) Preferred stock: The Fitch Discount Factor applied to preferred
stock is the percentage determined by reference to the rating in
accordance with the table set forth below.
DISCOUNT
PREFERRED STOCK (1) FACTOR
------------------- --------
AAA 130%
AA 133%
A 135%
BBB 139%
BB 154%
Not rated or below BB 161%
Investment grade Dividends Received Deduction ("DRD") 164%
Not rated or below investment grade DRD 200%
(1) If a security is not rated by Fitch but is rated by two other Rating
Agencies, then the lower of the ratings on the security from the two other
Rating Agencies will be used to determine the Fitch Discount Factor (e.g.,
where the S&P rating is A and the Xxxxx'x rating is Baa, a Fitch rating of
BBB will be used). If a security is not rated by Fitch but is rated by only
one other Rating Agency, then the rating on the security from the other
Rating Agency will be used to determine the Fitch Discount Factor (e.g.,
where the only rating on a security is an S&P rating of AAA, a Fitch rating
of AAA will be used, and where the only rating on a security is a Xxxxx'x
rating of Ba, a Fitch rating of BB will be used). If a security is either
not rated by any Rating Agency or is rated below BB, the Trust will use the
percent set forth under "Not rated or below BB" in the table above.
(v) Convertible securities: The Fitch Discount Factor applied to
convertible securities is (A) 200% for investment grade convertibles
and (B) 222% for below investment grade convertibles so long as such
convertible debt securities have neither (x) conversion premiums
greater than 100% nor (y) have a yield to maturity or yield to worse
of greater than 15% above the relevant Treasury curve.
The Fitch Discount Factor applied to convertible debt securities which
have conversion premiums of greater than 100% is (A) 152% for
investment grade convertibles and (B) 179% for below investment grade
convertibles so long as such
-14-
convertible debt securities do not have a yield to maturity or yield
to worse of greater than 15% above the relevant Treasury curve.
The Fitch Discount Factor applied to convertible debt securities which
have a yield to maturity or yield to worse of greater than 15% above
the relevant Treasury curve is 370%.
If a security is not rated by Fitch but is rated by two other Rating
Agencies, then the lower of the ratings on the security from the two
other Rating Agencies will be used to determine the Fitch Discount
Factor (e.g., where the S&P rating is A and the Xxxxx'x rating is Baa,
a Fitch rating of BBB will be used). If a security is not rated by
Fitch but is rated by only one other Rating Agency, then the rating on
the security from the other Rating Agency will be used to determine
the Fitch Discount Factor (e.g., where the only rating on a security
is an S&P rating of AAA, a Fitch rating of AAA will be used, and where
the only rating on a security is a Xxxxx'x rating of Ba, a Fitch
rating of BB will be used). If a security is not rated by any Rating
Agency, the Trust will treat the security as if it were below
investment grade.
(vi) U.S. Government Securities:
DISCOUNT
TIME REMAINING TO MATURITY FACTOR
------------------- --------
1 year or less 101.5%
2 years or less (but longer than 1 year) 103%
3 years or less (but longer than 2 years) 105%
4 years or less (but longer than 3 years) 107%
5 years or less (but longer than 4 years) 109%
7 years or less (but longer than 5 years) 112%
10 years or less (but longer than 7 years) 114%
15 years or less (but longer than 10 years) 122%
20 years or less (but longer than 15 years) 130%
25 years or less (but longer than 20 years) 146%
Greater than 25 years 154%
(vii) Short-Term Investments and Cash: The Fitch Discount Factor
applied to short-term portfolio securities, including without
limitation Debt Securities, Short Term Money Market Instruments and
municipal debt obligations, will be (A) 100%, so long as such
portfolio securities mature or have a demand feature at par
exercisable within the Fitch Exposure Period; (B) 115%, so long as
such portfolio securities mature or have a demand feature at par not
exercisable within the Fitch Exposure Period; and (C) 125%, so long as
such portfolio securities neither mature nor have a demand
-15-
feature at part exercisable within the Fitch Exposure Period. A Fitch
Discount Factor of 100% will be applied to cash.
(viii) Rule 144A Securities: The Fitch Discount Factor applied to Rule
144A Securities shall be the Discount Factor determined in accordance
with the table above under "Corporate Debt Securities" in subsection
(ii), multiplied by 110% until such securities are registered under
the Securities Act.
(ix) Asset-backed and mortgage-backed securities: The percentage
determined by reference to the asset type in accordance with the table
set forth below.
Asset Type (with time remaining to maturity, if applicable) Discount Factor
----------------------------------------------------------- ---------------
U.S. Treasury/agency securities (10 years or less) 118%
U.S. Treasury/agency securities (greater than 10 years) 127%
U.S. agency sequentials (10 years or less) 128%
U.S. agency sequentials (greater than 10 years) 142%
U.S. agency principal only securities 236%
U.S. agency interest only securities (with Market Value greater than 40% of par) 696%
U.S. agency interest only securities (with Market Value less than or equal to
40% of par) 214%
AAA LockOut securities, interest only 236%
U.S. agency planned amortization class bonds (10 years or less) 115%
U.S. agency planned amortization class bonds (greater than 10 years) 136%
AAA sequentials (10 years or less) 118%
AAA sequentials (greater than 10 years) 135%
AAA planned amortization class bonds (10 years or less) 115%
AAA planned amortization class bonds (greater than 10 years) 140%
Jumbo mortgage rated AAA(1) 123%
Jumbo mortgage rated AA(1) 130%
Jumbo mortgage rated A(1) 136%
Jumbo mortgage rated BBB(1) 159%
Commercial mortgage-backed securities rated AAA 131%
Commercial mortgage-backed securities rated AA 139%
Commercial mortgage-backed securities rated A 148%
Commercial mortgage-backed securities rated BBB 177%
Commercial mortgage-backed securities rated BB 283%
Commercial mortgage-backed securities rated B 379%
Commercial mortgage-backed securities rated CCC or not rated 950%
(1) Applies to jumbo mortgages, credit cards, auto loans, home equity loans,
manufactured housing and prime mortgage-backed securities not issued by a U.S.
agency or instrumentality.
(x) Real Estate Investment Trusts:
-16-
(a) For common stock and preferred stock of REITs and other
real estate companies, the Fitch Discount Factor applied shall
be:
REIT or other real estate company preferred stock 154%
REIT or other real estate company common stock 196%
(b) For corporate debt securities of REITs, Real Estate
Companies, and Lodging Companies, the Fitch Discount Factor
applied shall be:
Terms to Maturity AAA AA A BBB BB B Unrated
----------------- --- ---- --- --- ---- --- -------
1 year or less 111% 114% 117% 120% 121% 127% 127%
2 years or less (but longer than 1 year) 116% 123% 125% 127% 132% 137% 137%
3 years or less (but longer than 2 years) 121% 125% 127% 131% 133% 140% 152%
4 years or less (but longer than 3 years) 126% 126% 129% 132% 136% 140% 164%
5 year or less (but longer than 4 years) 131% 132% 135% 139% 144% 149% 185%
7 years or less (but longer than 5 years) 140% 143% 146% 152% 159% 167% 228%
10 years or less (but longer than 7 years) 141% 143% 147% 153% 160% 168% 232%
12 years or less (but longer than 10 years) 144% 144% 150% 157% 165% 174% 249%
15 years or less (but longer than 12 years) 148% 151% 155% 163% 172% 182% 274%
30 years or less (but longer than 15 years) 152% 156% 160% 169% 180% 191% 306%
If a security is not rated by Fitch but is rated by two other
Rating Agencies, then the lower of the ratings on the security
from the two other Rating Agencies will be used to determine the
Fitch Discount Factor (e.g., where the S&P rating is A and the
Xxxxx'x rating is Baa, a Fitch rating of BBB will be used). If a
security is not rated by Fitch but is rated by only one other
Rating Agency, then the rating on the security from the other
Rating Agency will be used to determine the Fitch Discount Factor
(e.g., where the only rating on a security is an S&P rating of
AAA, a Fitch rating of AAA will be used, and where the only
rating on a security is a Xxxxx'x rating of Ba, a Fitch rating of
BB will be used). Securities rated either below B or not rated by
any Rating Agency shall be treated as "Unrated" in the table
above.
(xi) Futures and call options: For purposes of the Preferred Shares
Basic Maintenance Amount, futures held by the Trust and call options
sold by the Trust shall not be included as Fitch Eligible Assets.
However, such assets shall be valued
-17-
at Market Value by subtracting the good faith margin and the maximum
daily trading variance as of the Valuation Date. For call options
purchased by the Trust, the Market Value of the call option will be
included as a Fitch Eligible Asset subject to a Fitch Discount Factor
mutually agreed to between the Trust and Fitch based on the
characteristics of the option contract such as its maturity and the
underlying security of the contract.
(xii) Securities lending: The Trust may engage in securities lending
in an amount not to exceed 10% of the Trust's total gross assets. For
purposes of calculating the Preferred Shares Basic Maintenance Amount,
such securities lent shall be included as Fitch Eligible Assets with
the appropriate Fitch Discount Factor applied to such lent security.
The obligation to return such collateral shall not be included as an
obligation/liability for purposes of calculating the Preferred Shares
Basic Maintenance Amount. However, the Trust may reinvest cash
collateral for securities lent in conformity with its investment
objectives and policies and the provisions of these Bylaws. In such
event, to the extent that securities lending collateral received is
invested by the Trust in assets that otherwise would be Fitch Eligible
Assets and the value of such assets exceeds the amount of the Trust's
obligation to return the collateral on a Valuation Date, such excess
amount shall be included in the calculation of Fitch Eligible Assets
by applying the applicable Fitch Discount Factor to this amount and
adding the product to total Fitch Eligible Assets. Conversely, if the
value of assets in which securities lending collateral has been
invested is less then the amount of the Trust's obligation to return
the collateral on a Valuation Date, such difference shall be included
as an obligation/liability of the Trust for purposes of calculating
the Preferred Shares Basic Maintenance Amount. Collateral received by
the Trust in a securities lending transaction and maintained by the
Trust in the form received shall not be included as a Fitch Eligible
Asset for purposes of calculating the Preferred Shares Basic
Maintenance Amount.
(xiii) Swaps (including Total Return Swaps and Interest Rate Swaps):
Total Return and Interest Rate Swaps are subject to the following
provisions:
If the Trust has an outstanding gain from a swap transaction on a
Valuation Date, the gain will be included as a Fitch Eligible
Asset subject to the Fitch Discount Factor on the counterparty to
the swap transaction. At the time a swap is executed, the Trust
will only enter into swap transactions where the counterparty has
at least a Fitch rating of A- or Xxxxx'x rating of A3.
(a) Only the cumulative unsettled profit and loss from a
Total Return Swap transaction will be calculated when determining
the Preferred Shares Basic Maintenance Amount. If the Trust has
an outstanding liability from a swap transaction on a Valuation
Date, the Trust will count such liability as an outstanding
liability from the total Fitch Eligible Assets in calculating the
Preferred Shares Basic Maintenance Amount.
(b) In addition, for swaps other than Total Return Swaps,
the Market Value of the position (positive or negative) will be
included as a Fitch Eligible
-18-
Asset. The aggregate notional value of all swaps will not exceed
the Liquidation Preference of the Outstanding Preferred Shares.
(c) (1) The underlying securities subject to a credit
default swap sold by the Trust will be subject to the applicable
Fitch Discount Factor for each security subject to the swap; (2)
If the Trust purchases a credit default swap and holds the
underlying security, the Market Value of the credit default swap
and the underlying security will be included as a Fitch Eligible
Asset subject to the Fitch Discount Factor assessed based on the
counterparty risk; and (3) the Trust will not include a credit
default swap as a Fitch Eligible Asset purchase by the Trust
without the Trust holding the underlying security or when the
Trust busy a credit default swap for a basket of securities
without holding all the securities in the basket.
(xiv) Senior Loans: The Fitch Discount Factor applied to senior,
secured floating rate Loans made to corporate and other business
entities ("Senior Loans") shall be the percentage specified in the
table below opposite such Fitch Loan Category:
Fitch Loan Category Discount Factor
------------------- ---------------
A 115%
B 130%
C 152%
D 370%
Notwithstanding any other provision contained above, for purposes of
determining whether a Fitch Eligible Asset falls within a specific
Fitch Loan Category, to the extent that any Fitch Eligible Asset would
fall within more than one of the Fitch Loan Categories, such Fitch
Eligible Asset shall be deemed to fall into the Fitch Loan Category
with the lowest applicable Fitch Discount Factor.
(xv) GNMAs, FNMAs, FHLMCs, etc.
(xvi) MBS, asset-backed and other mortgage-backed securities:
MBS: U.S. Government Agency (FNMA, FHLMC or GNMA) conforming
mortgage-backed securities with a stated maturity of 30 years shall
have a discount factor of 114% and conforming mortgage-backed
securities with a stated maturity of 15 years shall have a discount
factor of 111%.
Asset-backed and other mortgage-backed securities: The percentage
determined by reference to the asset type in accordance with the table
set forth below.
Asset Type (with time remaining to maturity, if applicable) Discount Factor
----------------------------------------------------------- ---------------
U.S. Treasury/agency securities (10 years or less) 118%
U.S. Treasury/agency securities (greater than 10 years) 127%
U.S. agency sequentials (10 years or less) 120%
-19-
U.S. agency sequentials (greater than 10 years) 142%
U.S. agency principal only securities 236%
U.S. agency interest only securities (with Market Value greater than
40% of par) 696%
U.S. agency interest only securities (with Market Value less than or equal to
40% of par) 271%
AAA Lock-Out securities, interest only 236%
U.S. agency planned amortization class bonds (10 years or less) 115%
U.S. agency planned amortization class bonds (greater than 10 years) 136%
AAA sequentials (10 years or less) 118%
AAA sequentials (greater than 10 years) 135%
AAA planned amortization class bonds (10 years or less) 115%
AAA planned amortization class bonds (greater than 10 years) 140%
Jumbo mortgage rated AAA(1) 123%
Jumbo mortgage rated AA(1) 130%
Jumbo mortgage rated A(1) 136%
Jumbo mortgage rated BBB(1) 159%
Commercial mortgage-backed securities rated AAA 131%
Commercial mortgage-backed securities rated AA 139%
Commercial mortgage-backed securities rated A 148%
Commercial mortgage-backed securities rated BBB 177%
Commercial mortgage-backed securities rated BB 283%
Commercial mortgage-backed securities rated B 379%
Commercial mortgage-backed securities rated CCC or not rated 950%
(1) Applies to jumbo mortgages, credit cards, auto loans, home equity loans,
manufactured housing and prime mortgage-backed securities not issued by a U.S.
agency or instrumentality.
(mm) "FITCH ELIGIBLE ASSETS" means:
(i) Cash (including interest and dividends due on assets rated (a) BBB
or higher by Fitch or the equivalent by another Rating Agency if the
payment date is within five (5) Business Days of the Valuation Date,
(b) A or higher by Fitch or the equivalent by another Rating Agency if
the payment date is within thirty (30) days of the Valuation Date, and
(c) A+ or higher by Fitch or the equivalent by another Rating Agency
if the payment date is within the Fitch Exposure Period) and
receivables for Fitch Eligible Assets sold if the receivable is due
within five (5) Business Days of the Valuation Date, and if the trades
which generated such receivables are settled within five (5) Business
Days;
-20-
(ii) Short Term Money Market Instruments so long as (a) such
securities are rated at least F1+ by Fitch or the equivalent by
another Rating Agency, (b) in the case of demand deposits, time
deposits and overnight funds, the supporting entity is rated at least
A by Fitch or the equivalent by another Rating Agency, or (c) in all
other case, the supporting entity (1) is rated at least A by Fitch or
the equivalent by another Rating Agency and the security matures
within one month, (2) is rated at least A by Fitch or the equivalent
by another Rating Agency and the security matures within three months
or (3) is rated at least AA by Fitch or the equivalent by another
Rating Agency and the security matures within six months;
(iii) Municipal Obligations that (i) pay interest in cash, (ii) do not
have their Fitch rating, as applicable, suspended by Fitch, and (iii)
are part of an issue of Municipal Obligations of at least $10,000,000.
In Addition, Municipal Obligations in the Trust's portfolio must be
within the following investment guidelines to be Fitch Eligible
Assets.
Minimum Maximum Single Maximum State
Issue Size Underlying Obligor Allowed
Rating ($ Millions)(1) Issuer(%)(2) (%)(2)(3)
---------- --------------- ------------------ -------------
AAA 10 100 100
AA 10 20 60
A 10 10 40
BBB 10 6 20
BB 10 4 12
B 10 3 12
CCC 10 2 12
----------
(1) Preferred stock has a minimum issue size of $50 million.
(2) The referenced percentage represents maximum cumulation total for the
related rating category and each lower rating category.
(3) Territorial bonds (other than those issued by Puerto Rico and counted
collectively) are each limited to 10% of Fitch Eligible Assets. For
diversification purposes, Puerto Rico will be treated as a state.
For purposes of applying the foregoing requirements and applying the
applicable Fitch Discount Factor, if a Municipal Obligation is not
rated by Fitch but is rated by Moody's and S&P, such Municipal
Obligation (excluding short-term Municipal Obligations) will be deemed
to have the Fitch rating which is the lower of the Moody's and S&P
rating. If a Municipal Obligation is not rated by Fitch but is rated
by Moody's or S&P, such Municipal Obligation (excluding short-term
Municipal Obligations) will be deemed to have such rating. Eligible
Assets shall be calculated without including cash; and Municipal
Obligations rated F1 by Fitch or, if not rated
-21-
by Fitch, rated XXX-0, XXXX-0 or P-1 by Moody's; or, if not rated by
Moody's, rated A-1+/AA or SP-1+/AA by S&P shall be considered to have
a long-term rating of A. When the Trust sells a Municipal Obligation
and agrees to repurchase such Municipal Obligation at a future date,
such Municipal Obligation shall be valued at its Discounted Value for
purposes of determining Fitch Eligible Assets, and the amount of the
repurchase price of such Municipal Obligation shall be included as a
liability for purposes of calculating the Preferred Shares Basic
Maintenance Amount. When the Trust purchases a Fitch Eligible Asset
and agrees to sell it at a future date, such Fitch Eligible Asset
shall be valued at the amount of cash to be received by the Trust upon
such future date, provided that the counterparty to the transaction
has a long-term debt rating of at least A by Fitch and the transaction
has a term of no more than 30 days; otherwise, such Fitch Eligible
Asset shall be valued at the Discounted Value of such Fitch Eligible
Asset.
Notwithstanding the foregoing, an asset will not be considered a Fitch
Eligible Asset for purposes of determining the Preferred Shares Basic
Maintenance Amount to the extent it is (i) subject to any material
lien, mortgage, pledge, security interest or security agreement of any
kind (collectively, "Liens"), except for (a) Liens which are being
contested in good faith by appropriate proceedings and which Fitch (if
Fitch is then rating the Preferred Shares) has indicated to the Trust
will not affect the status of such asset as a Fitch Eligible Asset,
(b) Liens for taxes that are not then due and payable or that can be
paid thereafter without penalty, (c) Liens to secure payment for
services rendered or cash advanced to the Trust by the investment
adviser, custodian or the Auction Agent, (d) Liens by virtue of any
repurchase agreement, and (e) Liens in connection with any futures
margin account; or (ii) deposited irrevocably for the payment of any
liabilities for purposes of determining the Preferred Shares Basic
Maintenance Amount.
(iv) U.S. Government Securities;
(v) Debt securities, if such securities have been registered under the
Securities Act or are restricted as to resale under federal securities
laws but are eligible for resale pursuant to Rule 144A under the
Securities Act as determined by the Trust's investment manager or
portfolio manager acting pursuant to procedures approved by the Board
of Trustees of the Trust; and such securities are issued by (1) a U.S.
corporation, limited liability company or limited partnership, (2) a
corporation, limited liability company or limited partnership
domiciled in a member of the European Union, Argentina, Australia,
Brazil, Chile, Japan, Korea, and Mexico or other country if Fitch does
not inform the Trust that including debt securities from such foreign
country will adversely impact Fitch's rating of the Preferred Shares
(the "Approved Foreign Nations"), (3) the government of any Approved
Foreign Nation or any of its agencies, instrumentalities or political
subdivisions (the debt securities of Approved Foreign Nation issuers
being referred to collectively as "Foreign Bonds"), (4) a corporation,
limited liability company or limited partnership domiciled in Canada
or (5) the Canadian government or any of its agencies,
instrumentalities or political subdivisions (the debt securities of
Canadian issuers being referred to collectively as "Canadian Bonds").
Foreign Bonds held by the Trust will qualify as
-22-
Fitch Eligible Assets only up to a maximum of 20% of the aggregate
Market Value of all assets constituting Fitch Eligible Assets.
Similarly, Canadian Bonds held by the Trust will qualify as Fitch
Eligible Assets only up to a maximum of 20% of the aggregate Market
Value of all assets constituting Fitch Eligible Assets.
Notwithstanding the limitations in the two preceding sentences,
Foreign Bonds and Canadian Bonds held by the Trust will qualify as
Fitch Eligible Assets only up to a maximum of 30% of the aggregate
Market Value of all assets constituting Fitch Eligible Assets. All
debt securities satisfying the foregoing requirements and restriction
of this paragraph are herein referred to as "Debt Securities."
(vi) Preferred stocks if (1) such securities provide for the periodic
payment of dividends thereon in cash in U.S. dollars or euros and do
not provide for conversion or exchange into, or have warrants attached
entitling the holder to receive equity capital at any time over the
respective lives of such securities, (2) the issuer or such a
preferred stock has common stock listed on either the New York Stock
Exchange, the American Stock Exchange or in the over-the-counter
market, and (3) the issuer of such a preferred stock has a senior debt
rating or preferred stock rating from Fitch of BBB- or higher or the
equivalent rating by another Rating Agency. In addition, the preferred
stocks issue must be at least $50 million;
(vii) Common stocks (1)(a) which are traded on the New York Stock
Exchange, the American Stock Exchange or in the over-the-counter
market, (b) which, if cash dividend paying, pay cash dividends in U.S.
dollars, and (c) which may be sold without restriction by the Trust;
provided, however, that (i) common stock which, while a Fitch Eligible
Asset owned by the Trust, ceases paying any regular cash dividend will
no longer be considered a Fitch Eligible Assets until 60 calendar days
after the date of the announcement of such cessation, unless the
issuer of the common stock has senior debt securities rated at least
A- by Fitch and (ii) the aggregate Market Value of the Trust's
holdings of the common stock of any issuer in excess of 5% per U.S.
issuer of the number of Outstanding shares time the Market Value of
such common stock shall not be a Fitch's Eligible Asset; and (2)
securities denominated in any currency other than the U.S. dollar and
securities of issuers formed under the laws of jurisdictions other
than the United States, its states and the District of Columbia for
which there are dollar-denominated American Depository Receipts
("ADRs") which are traded in the United States on exchanges or
over-the-counter and are issued by banks formed under the laws of the
United States, its states or the District of Columbia; provided,
however, that the aggregate Market Value of the Trust's holdings of
securities denominated in currencies other than the U.S. dollar and
ADRs in excess of 3% of the aggregate Market Value of the Outstanding
shares of common stock of such issuer or in excess of 10% of the
Market Value of the Trust's Fitch Eligible Assets with respect to
issuers formed under the laws of any single such non-U.S. jurisdiction
other than Approved Foreign Nations shall not be a Fitch Eligible
Asset;
(viii) Rule 144A Securities;
(ix) Warrants on common stocks described in (vii) above;
-23-
(x) any common stock, preferred stock or any debt securities of REITs
or real estate companies;
(xi) Interest Rate Swaps or Interest Rate Caps entered into according
to International Swap Dealers Association ("ISDA") standards if (1)
the counterparty to the swap transaction has a short-term rating of
not less than F1 by Fitch or the equivalent by another Rating Agency,
or, if the swap counterparty does not have a short-term rating, the
counterparty's senior unsecured long-term debt rating is AA or higher
by Fitch or the equivalent by another Rating Agency and (2) the
original aggregate notional amount of the Interest Rate Swap or
Interest Rate Cap transaction or transactions is not greater than the
Liquidation Preference of the Preferred Shares originally issued;
(xii) Swaps, including Total Return Swaps entered into according to
ISDA;
(xiii) Financial contracts, as such term is defined in Section
3(c)(2)(B)(ii) of the 1940 Act, not otherwise provided for in this
definition may be included in Fitch Eligible Assets, but, with respect
to any financial contract, only upon receipt by the Trust of a writing
from Fitch specifying any conditions on including such financial
contract in Fitch Eligible Assets and assuring the Trust that
including such financial contract in the manner so specified would not
affect the credit rating assigned by Fitch to the Preferred Shares;
(xiv) asset-backed and mortgage-backed securities;
(xv) senior loans; and
(xvi) Fitch Hedging Transactions.
Where the Trust sells an asset and agrees to repurchase such asset in
the future, the Discounted Value of such asset will constitute a Fitch
Eligible Asset and the amount the Trust is required to pay upon
repurchase of such asset will count as a liability for the purposes of
the Preferred Shares Basic Maintenance Amount. Where the Trust
purchases an asset and agrees to sell it to a third party in the
future, cash receivable by the Trust thereby will constitute a Fitch
Eligible Asset if the long-term debt of such other party is rated at
least A- by Fitch or the equivalent by another Rating Agency and such
agreement has a term of 30 days or less; otherwise the Discounted
Value of such purchased asset will constitute a Fitch Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a Fitch
Eligible Asset to the extent that it has been irrevocably deposited
for the payment of (i)(a) through (i)(e) under the definition of
Preferred Shares Basic Maintenance Amount or to the extent it is
subject to any Liens, except for (a) Liens which are being contested
in good faith by appropriate proceedings and which Fitch has indicated
to the Trust will not affect the status of such asset as a Fitch
Eligible Asset, (b) Liens for taxes that are not then due and payable
or that can be paid thereafter without penalty, (c) Liens to secure
payment for services rendered or cash advanced to the Trust by its
investment manager or portfolio manager, the Trust's custodian,
transfer agent or registrar or the Auction Agent and (d) Liens arising
by virtue of any repurchase agreement.
-24-
Fitch diversification limitations: portfolio holdings as
described below must be within the following diversification and issue
size requirements in order to be included in Fitch's Eligible Assets:
EQUITY SECURITIES Maximum Single Issuer(1)
----------------- ------------------------
Large-cap 5%
Mid-cap 5%
Small-cap 5%
(1) Percentages represent both a portion of the aggregate Market Value and
number of outstanding shares of the common stock portfolio.
Maximum Minimum Issue
DEBT SECURITIES Single Issuer Maximum Single Size ($ in million)
RATED AT LEAST(1) (2) Industry(2)(3) (4)
----------------- ------------- --------------- -------------------
AAA 100% 100% $ 100
AA- 20% 75% $ 100
A- 10% 50% $ 100
BBB- 6% 25% $ 100
BB- 4% 16% $ 50
B- 3% 12% $ 50
CCC 2% 8% $ 50
(1) Not applicable to corporate debt securities of REITs, Real Estate Companies,
and Lodging Companies.
(2) Percentages represent a portion of the aggregate Market Value of corporate
debt securities.
(3) Industries are determined according to Fitch's Industry Classifications, as
defined herein.
(4) Preferred stock has a minimum issue size of $50 million, and mortgage pass
through issued by Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal
National Mortgage Association ("FNMA") or the Government National Mortgage
Association ("GNMA"), which has no minimum issue size.
If a security is not rated by Fitch but is rated by two other Rating Agencies,
then the lower of the ratings on the security from the two other Rating Agencies
will be used to determine the Fitch Discount Factor (e.g., where the S&P rating
is A and the Xxxxx'x rating is Baa, a Fitch rating of BBB will be used). If a
security is not rated by Fitch but is rated by only one other Rating Agency,
then the rating on the security from the other Rating Agency will be used to
determine the Fitch Discount Factor (e.g., where the only rating on a security
is an S&P rating of AAA, a Fitch rating of AAA will be used, and where the only
rating on a security is a Xxxxx'x rating of Ba, a Fitch rating of BB will be
used). If a security is either rated below
-25-
CCC or not rated by any Rating Agency, the Trust will treat the security as if
it were "CCC" in the table above.
REIT AND OTHER REAL ESTATE COMPANY SECURITIES
5% issuer limitation (including common, preferred, debt and other
securities)
(nn) "FITCH HEDGING TRANSACTIONS" has the meaning set forth in paragraph
(b)(1) of Section 13 of Part I of Article X of these Bylaws.
(oo) "FITCH INDUSTRY CLASSIFICATIONS" means, for the purposes of
determining Fitch Eligible Assets, each of the following industry
classifications:
Aerospace & Defense Industrial/Manufacturing
Automobiles Insurance
Banking, Finance & Real Estate Leisure & Entertainment
Broadcasting & Media Metals & Mining
Building & Materials Miscellaneous
Cable Packaging and Containers
Chemicals Paper & Forest Products
Computers & Electronics Retail
Consumer Products Sovereign
Energy Structured Finance Obligations
Environmental Services Supermarkets & Drugstores
Farming & Agriculture Telecommunications
Food, Beverage & Tobacco Textiles & Furniture
Gaming & Restaurants Transportation
Healthcare & Pharmaceuticals Utilities
The Trust shall use its discretion in determining which industry
classification is applicable to a particular investment.
(pp) "FITCH LOAN CATEGORY" means the following four categories (and, for
purposes of this categorization, the Market Value of a Fitch Eligible Asset
trading at par is equal to $1.00):
(i) "FITCH LOAN CATEGORY A" means Performing Bank Loans, which have a
Market Value or an Approved Price greater than or equal to 90% of par.
(ii) "FITCH LOAN CATEGORY B" means: (A) Performing Bank Loans which
have a Market Value or an Approved Price of greater than or equal to
80% of par but less than 90% of par; (B) non-Performing Bank Loans
which have a Market Value or an Approved Price greater than or equal
to 85% of par.
-26-
(iii) "FITCH LOAN CATEGORY C" means: (A) Performing Bank Loans which
have a Market Value or an Approved Price of greater than or equal to
70% of par but less than 80% of par; (B) non-Performing Bank Loans
which have a Market Value or an Approved Price of greater than or
equal to 75% of par but less than 85% of par; and (C) Performing Bank
Loans without an Approved Price rated BB- or higher by Fitch. If a
security is not rated by Fitch but is rated by two other Rating
Agencies, then the lower of the ratings on the security from the two
other Rating Agencies will be used to determine the Fitch Discount
Factor (e.g., where the S&P rating is A- and the Xxxxx 's rating is
Baa1, a Fitch rating of BBB+ will be used). If a security is not rated
by Fitch but is rated by only one other Rating Agency, then the rating
on the security from the other Rating Agency will be used to determine
the Fitch Discount Factor (e.g., where the only rating on a security
is an S&P rating of AAA, a Fitch rating of AAA will be used, and where
the only rating on a security is a Xxxxx'x rating of Ba3, a Fitch
rating of BB- will be used).
(iv) "FITCH LOAN CATEGORY D" means Bank Loans not described in any of
the foregoing categories.
Notwithstanding any other provision contained above, for purposes of
determining whether a Fitch Eligible Asset falls within a specific Fitch
Loan Category, to the extent that any Fitch Eligible Asset would fall
within more than one of the Fitch Loan Categories, such Fitch Eligible
Asset shall be deemed to fall into the Fitch Loan Category with the lowest
applicable Fitch Discount Factor.
(qq) "FORWARD COMMITMENTS" shall have the meaning specified in paragraph
(a)(iv) of Section 13 of Part I of Article X of these Bylaws.
(rr) "HOLDER" with respect to shares of a series of Preferred Shares, shall
mean the registered holder of such shares as the same appears on the record
books of the Trust.
(ss) "HOLD ORDER" and "HOLD ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of Article X of these
Bylaws.
(tt) "INDEPENDENT ACCOUNTANT" shall mean 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 from time to time.
(uu) "INITIAL RATE PERIOD" shall be the period from and including the Date
of Original Issue to but excluding July __, 2005 with respect to the
Series.
(vv) "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.
(ww) "INTEREST RATE CAP" means an options contract which puts an upper
limit on a floating exchange rate. The contract protects the holder from
rises in short-term interest rates by making a payment to the holder when
an underlying interest rate (the index or reference interest rate) exceed a
specified strike rate (the cap rate).
-27-
(xx) "LATE CHARGE" shall have the meaning specified in subparagraph
(e)(1)(B) of Section 2 of Part I of Article X of these Bylaws.
(yy) "LIBOR Dealers" means RBC Xxxx Xxxxxxxx Inc. and such other dealer or
dealers as the Trust may from time to time appoint, or, in lieu of any
thereof, their respective affiliates or successors.
(zz) "LIBOR Rate" on any Auction Date, means (i) the rate for deposits in
U.S. dollars for the designated Distribution Period, which appears on
display page 3750 of Moneyline's Telerate Service ("Telerate Page 3750")
(or such other page as may replace that page on that service, or such other
service as may be selected by the LIBOR Dealer or its successors that are
LIBOR Dealers) as of 11:00 a.m., London time, on the day that is the London
Business Day preceding the Auction Date (the "LIBOR Determination Date"),
or (ii) if such rate does not appear on Telerate Page 3750 or such other
page as may replace such Telerate Page 3750, (A) the LIBOR Dealer shall
determine the arithmetic mean of the offered quotations of the Reference
Banks to leading banks in the London interbank market for deposits in U.S.
dollars for the designated Distribution Period in an amount determined by
such LIBOR Dealer by reference to requests for quotations as of
approximately 11:00 a.m. (London time) on such date made by such LIBOR
Dealer to the Reference Banks, (B) if at least two of the Reference Banks
provide such quotations, LIBOR Rate shall equal such arithmetic mean of
such quotations, (C) if only one or none of the Reference Banks provide
such quotations, LIBOR Rate shall be deemed to be the arithmetic mean of
the offered quotations that leading banks in The City of New York selected
by the LIBOR Dealer (after obtaining the Trust's approval) are quoting on
the relevant LIBOR Determination Date for deposits in U.S. dollars for the
designated Distribution Period in an amount determined by the LIBOR Dealer
(after obtaining the Trust's approval) that is representative of a single
transaction in such market at such time by reference to the principal
London offices of leading banks in the London interbank market; provided,
however, that if one of the LIBOR Dealers does not quote a rate required to
determine the LIBOR Rate, the LIBOR Rate will be determined on the basis of
the quotation or quotations furnished by any substitute LIBOR Dealer or
substitute LIBOR Dealers selected by the Trust to provide such rate or
rates not being supplied by the LIBOR Dealer; provided further, that if the
LIBOR Dealer and substitute LIBOR Dealers are required but unable to
determine a rate in accordance with at least one of the procedures provided
above, LIBOR Rate shall be LIBOR Rate as determined on the previous Auction
Date. If the number of Distribution Period days shall be (i) 7 or more but
fewer than 21 days, such rate shall be the seven-day LIBOR rate; (ii) 21 or
more but fewer than 49 days, such rate shall be the one-month LIBOR rate;
(iii) 49 or more but fewer than 77 days, such rate shall be the two-month
LIBOR rate; (iv) 77 or more but fewer than 112 days, such rate shall be the
three-month LIBOR rate; (v) 112 or more but fewer than 140 days, such rate
shall be the four-month LIBOR rate; (vi) 140 or more but fewer that 168
days, such rate shall be the five-month LIBOR rate; (vii) 168 or more but
fewer 189 days, such rate shall be the six-month LIBOR rate; (viii) 189 or
more but fewer than 217 days, such rate shall be the seven-month LIBOR
rate; (ix) 217 or more but fewer than 252 days, such rate shall be the
eight-month LIBOR rate; (x) 252 or more but fewer than 287 days, such rate
shall be the nine-month LIBOR rate; (xi) 287 or more but fewer than 315
days, such rate shall be the ten-month LIBOR rate; (xii) 315 or more
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but fewer than 343 days, such rate shall be the eleven-month LIBOR rate;
and (xiii) 343 or more but fewer than 365 days, such rate shall be the
twelve-month LIBOR rate.
(aaa) "LIQUIDATION PREFERENCE" with respect to a given number of Preferred
Shares, means $25,000 times that number.
(bbb) "LONDON BUSINESS DAY" means any day on which commercial banks are
generally open for business in London.
(ccc) "MARKET VALUE" of any asset of the Trust shall mean the market value
thereof determined in accordance with the pricing procedures of the Trust.
(ddd) "MAXIMUM RATE" shall mean, with respect to Preferred Shares for any
Distribution Period, the greater of (A) the Applicable Percentage of the
Reference Rate or (B) the Applicable Spread plus the Reference Rate on the
Auction Date. The Auction Agent will round each applicable Maximum Rate to
the nearest one-thousandth (0.001) of one percent per annum, with any such
number ending in five ten-thousandths of one percent being rounded upwards
to the nearest one-thousandth (0.001) of one percent. Generally, the
applicable distribution rate for any Distribution Period for the Preferred
Shares will not be more than the Maximum Rate attributable to such shares.
The Maximum Rate for the Preferred Shares will depend on the credit rating
assigned to such shares and on the length of the Distribution Period.
(eee) "MINIMUM RATE PERIOD" shall mean any Rate Period consisting of 7 Rate
Period Days for the Preferred Shares.
(fff) "MOODY'S" shall mean Xxxxx'x Investors Service, Inc., a Delaware
corporation, and its successors.
(ggg) "MOODY'S DISCOUNT FACTOR" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined
as follows. The Moody's Discount Factor for any Moody's Eligible Asset
other than the securities set forth below will be the percentage provided
in writing by Moody's.
(i) CORPORATE DEBT SECURITIES: The percentage determined by reference
to the rating on such asset with reference to the remaining term to
maturity of such asset, in accordance with the table set forth below (NON
CONVERTIBLES).
Xxxxx'x Rating Category
Term to Maturity of
Corporate Debt Security(2) Aaa Aa A Baa Ba B Unrated(1)
--------------------------- --- -- --- ---- ---- --- ----------
1 year or less 109% 112% 115% 118% 137% 150% 250%
2 years or less (but longer than 1 year) 115 118 122 125 146 160 250
3 years or less (but longer than 2 years) 120 123 127 131 153 168 250
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4 years or less (but longer than 3 years) 126 129 133 138 161 176 250
5 years or less (but longer than 4 years) 132 135 139 144 168 185 250
7 years or less (but longer than 5 years) 139 143 147 152 179 197 250
10 years or less (but longer than 7 years) 145 150 155 160 189 208 250
15 years or less (but longer than 10 years) 150 155 160 165 196 216 250
20 years or less (but longer than 15 years) 150 155 160 165 196 228 250
30 years or less (but longer than 20 years) 150 155 160 165 196 229 250
Greater than 30 years 165 173 181 189 205 240 250
----------
(1) Unless conclusions regarding liquidity risk as well as estimates of
both the probability and severity of default for the Trust's assets
can be derived from other sources, securities rated below B by Xxxxx'x
and unrated securities covered by this section (i), which are
securities rated by neither Xxxxx'x, S&P nor Fitch, are limited to 10%
of Xxxxx'x Eligible Assets. If a corporate debt security is unrated by
Xxxxx'x, S&P or Fitch, the Fund will use the percentage set forth
under "Unrated" in this table. Ratings assigned by S&P or Fitch are
generally accepted by Xxxxx'x at face value. However, adjustments to
face value may be made to particular categories of credits for which
the S&P and/or Fitch rating does not seem to approximate a Xxxxx'x
rating equivalent. Split rated securities assigned by S&P and Fitch
will be accepted at the lower of the two ratings.
(2) The Xxxxx'x Discount Factors for debt securities shall also be applied
to any derivative transaction, in which case the rating of the
counterparty shall determine the appropriate rating category.
For corporate debt securities that do not pay interest in U.S. dollars, the fund
sponsor will use the applicable currency conversion rates.
PREFERRED STOCK: The Xxxxx'x Discount Factor for taxable preferred stock shall
be(1):
Aaa 150%
Aa 155%
A 160%
Baa 165%
Ba 196%
B 216%
LESS THAN B or Not Rated 250%
(1) Rule 144A securities' Discount Factor will be increased by an
additional 20%.
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COMMON STOCK
Large-Cap Mid-Cap Small-Cap
--------- ------ ---------
Common Stocks (1)
Discount Factor 200% 205% 220%
(1) Market cap for Large-cap stocks are $10 billion and up, Mid-cap
stocks range between $2 billion and $10 billion, and Small-cap
stocks are $2 billion and below.
CONVERTIBLE SECURITIES: (INCLUDING CONVERTIBLE PREFERRED)
Equity- the convertibles is this group would have a delta that ranges between
1-.8. For investment grade bonds the discount factor would be 195% and for below
investment grade securities the discount factor would be 229%.
Total Return- the convertibles in this group would have a delta that ranges
between .8-.4. For investment grade bonds the discount factor would be 192% and
for below investment grade securities the discount factor would be 226%.
Yield Alternative- the convertibles in this group would have a delta that ranges
between .4-0. For this category the discount factors used are based on Xxxxx'x
rating for corporate debt securities table.
Any unrated convertible bonds would receive a discount factor of 250%.
UPON CONVERSION TO COMMON STOCK, THE DISCOUNT FACTORS APPLICABLE TO COMMON STOCK
WILL APPLY.
(i) Common Shares and Preferred Shares of REITs and Other Real Estate
Companies:
COMMON STOCK AND PREFERRED STOCK OF REITS AND OTHER REAL ESTATE COMPANIES:
Discount
Factor(1)(2)(3)
---------------
common stock of REITs 154%
preferred stock of REITs 154%
(1) A Discount Factor of 250% will be applied to those assets in a single
Xxxxx'x Real Estate Industry/ Property Sector Classification which
exceeds 30% of Xxxxx'x Eligible Assets but are not greater than 35% of
Xxxxx'x Eligible Assets.
(2) A Discount Factor of 250% will be applied if dividends on such
securities have not been paid consistently (either quarterly or
annually) over the previous three years, or for such shorter time
period that such securities have been outstanding.
(3) A Discount Factor of 250% will be applied if the market capitalization
(including common stock and preferred stock) of an issuer is below
$500 million.
(ii) Debt Securities of REITs and Other Real Estate Companies(1):
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Xxxxx'x Rating Category
Term to Maturity of
Corporate Debt Security Aaa Aa A Baa Ba B Unrated(2)
----------------------- --- --- --- --- --- --- ----------
1 year or less 109% 112% 115% 118% 137% 150% 250%
2 years or less (but longer than 1 year) 115% 118% 122% 125% 146% 160% 250%
3 years or less (but longer than 2 years) 120% 123% 127% 131% 153% 168% 250%
4 years or less (but longer than 3 years) 126% 129% 133% 138% 161% 176% 250%
5 years or less (but longer than 4 years) 132% 135% 139% 144% 168% 185% 250%
7 years or less (but longer than 5 years) 139% 143% 147% 152% 179% 197% 250%
10 years or less (but longer than 7 years) 145% 150% 155% 160% 189% 208% 250%
15 years or less (but longer than 10 years) 150% 155% 160% 165% 196% 216% 250%
20 years or less (but longer than 15 years) 150% 155% 160% 165% 196% 228% 250%
30 years or less (but longer than 20 years) 150% 155% 160% 165% 196% 229% 250%
Greater than 30 years 165% 173% 181% 189% 205% 240% 250%
(1) The Xxxxx'x Discount Factors for debt securities shall also be applied
to any interest rate swap or cap, in which case the rating of the
counterparty shall determine the appropriate rating category.
(2) Unless conclusions regarding liquidity risk as well as estimates of
both the probability and severity of default for the Trust's assets can be
derived from other sources, securities rated below B by Xxxxx'x and unrated
securities, which are securities rated by neither Xxxxx'x, S&P nor Fitch,
are limited to 10% of Xxxxx'x Eligible Assets. If a corporate, municipal or
other debt security is unrated by Xxxxx'x, S&P or Fitch, the Trust will use
the percentage set forth under "Unrated" in this table. Ratings assigned by
S&P or Fitch are generally accepted by Xxxxx'x at face value. However,
adjustments to face value may be made to particular categories of credits
for which the S&P and/or Fitch rating does not seem to approximate a
Xxxxx'x rating equivalent. Split rated securities assigned by S&P and Fitch
will be accepted at the lower of the two ratings.
(iii) U.S. Treasury Securities and U.S. Treasury Strips:
U.S. Government
Securities Discount U.S. Treasury Strips
Remaining Term to Maturity Factor Discount Factor
-------------------------- ------------------- --------------------
1 year or less 107% 107%
2 years or less (but longer than 1 year) 113% 115%
3 years or less (but longer than 2 years) 118% 121%
4 years or less (but longer than 3 years) 123% 128%
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5 years or less (but longer than 4 years) 128% 135%
7 years or less (but longer than 5 years) 135% 147%
10 years or less (but longer than 7 years) 141% 163%
15 years or less (but longer than 10 years) 146% 191%
20 years or less (but longer than 15 years) 154% 218%
30 years or less (but longer than 20 years) 154% 244%
(iv) Short-term instruments: The Xxxxx'x Discount Factor applied to
short-term portfolio securities, including without limitation
corporate debt securities, Short Term Money Market Instruments and
municipal debt obligations, will be (A) 100%, so long as such
portfolio securities mature or have a demand feature at par
exercisable within 49 days of the relevant valuation date; (B) 115%,
so long as such portfolio securities do not mature within the Xxxxx'x
Exposure Period or have a demand feature at par not exercisable within
49 days of the relevant valuation date; and (C) 125%, if such
securities are not rated by Xxxxx'x, so long as such portfolio
securities are rated at least A-1+/AA or SP-1+/AA by S&P and mature or
have a demand feature at par exercisable within 49 days of the
relevant valuation date. The Xxxxx'x Discount Factor applied to 2a-7
Money Market Funds will be 110%. A Xxxxx'x Discount Factor of 100%
will be applied to cash.
(hhh) "XXXXX'X ELIGIBLE ASSETS" shall mean the following:
Corporate debt securities if (A) such securities are rated B3 or
higher by Xxxxx'x; (B) such securities provide for the periodic payment of
interest in cash in U.S. dollars or euros, except that such securities that
do not pay interest in U.S. dollars or euros shall be considered Xxxxx'x
Eligible Assets if they are rated by Xxxxx'x or S&P or Fitch; (C) for debt
securities rated Ba1 and below, no more than 10% of the original amount of
such issue may constitute Xxxxx'x Eligible Assets; (D) such securities have
been registered under the Securities Act or are restricted as to resale
under federal securities laws but are eligible for resale pursuant to Rule
144A under the Securities Act as determined by the Fund's investment
manager or portfolio manager acting pursuant to procedures approved by the
Board of Trustees, except that such securities that are not subject to U.S.
federal securities laws shall be considered Xxxxx'x Eligible Assets if they
are publicly traded; and (E) such securities are not subject to extended
settlement.
Notwithstanding the foregoing limitations, (x) corporate debt
securities not rated at least B3 by Xxxxx'x or not rated by Xxxxx'x shall
be considered to be Xxxxx'x Eligible Assets only to the extent the Market
Value of such corporate debt securities does not exceed 10% of the
aggregate Market Value of all Xxxxx'x Eligible Assets; provided, however,
that if the Market Value of such corporate debt securities exceeds 10% of
the aggregate Market Value of all Xxxxx'x Eligible Assets, a portion of
such corporate debt securities (selected by the Trust) shall not be
considered Xxxxx'x Eligible Assets, so that the Market Value of such
corporate debt securities (excluding such portion) does not exceed 10% of
the aggregate Market Value of all Xxxxx'x Eligible Assets; and (y)
corporate debt securities rated by neither Xxxxx'x nor S&P nor Fitch shall
be considered to be Xxxxx'x Eligible Assets only to the extent such
securities are issued by entities which (i) have not filed for bankruptcy
within the past three years, (ii) are current on all
-33-
principal and interest in their fixed income obligations, (iii) are current
on all preferred stock dividends, and (iv) possess a current, unqualified
auditor's report without qualified, explanatory language.
Preferred stocks if (A) dividends on such preferred stock are
cumulative, (B) such securities provide for the periodic payment of
dividends thereon in cash in U.S. dollars or euros and do not provide
for conversion or exchange into, or have warrants attached entitling
the holder to receive, equity capital at any time over the respective
lives of such securities, (C) the issuer of such a preferred stock has
common stock listed on either the New York Stock Exchange or the
American Stock Exchange, or NASDAQ and (D) such preferred stock has
paid consistent cash dividends in U.S. dollars or euros over the last
three years or has a minimum rating of A1 (if the issuer of such
preferred stock has other preferred issues outstanding that have been
paying dividends consistently for the last three years, then a
preferred stock without such a dividend history would also be
eligible). In addition, the preferred stocks must have the following
diversification requirements: (X) the preferred stock issue must be
greater than $50 million and (Y) the maximum holding of preferred
stock of each issue is $5 million. In addition, preferred stocks
issued by transportation companies will not be considered Xxxxx'x
Eligible Assets;
common stocks (i) which (A) are traded on a nationally recognized stock
exchange or in the over-the-counter market, (B) if cash dividend paying, pay
cash dividends in US dollars and (C) may be sold without restriction by the
Corporation; PROVIDED, HOWEVER, that (y) common stock which, while a Xxxxx'x
Eligible Asset owned by the Corporation, ceases paying any regular cash dividend
will no longer be considered a Xxxxx'x Eligible Asset until 71 days after the
date of the announcement of such cessation, unless the issuer of the common
stock has senior debt securities rated at least A3 by Xxxxx'x and (z) the
aggregate Market Value of the Corporation's holdings of the common stock of any
issuer in excess of 4% in the case of utility common stock and 6% in the case of
non-utility common stock of the aggregate Market Value of the Corporation's
holdings shall not be Xxxxx'x Eligible Assets, (ii) which are securities
denominated in any currency other than the US dollar or securities of issuers
formed under the laws of jurisdictions other than the United States, its states
and the District of Columbia for which there are dollar-denominated American
Depository Receipts ("ADRS") or their equivalents which are traded in the United
States on exchanges or over-the-counter and are issued by banks formed under the
laws of the United States, its states or the District of Columbia or (iii) which
are securities of issuers formed under the laws of jurisdictions other than the
United States (and in existence for at least five years) for which no ADRs are
traded; PROVIDED, HOWEVER, that the aggregate Market Value of the Corporation's
holdings of securities denominated in currencies other than the US dollar and
ADRs in excess of (A) 6% of the aggregate Market Value of the Outstanding shares
of common stock of such issuer thereof or (B) 10% of the Market Value of the
Corporation's Xxxxx'x Eligible Assets with respect to issuers formed under the
laws of any single such non-U.S. jurisdiction other than Australia, Belgium,
Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland and the United
Kingdom, shall not be a Xxxxx'x Eligible Asset
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(i) Common shares, preferred shares and any debt security of REITs and
Real Estate Companies.
(a) Common shares of REITs and preferred shares and any debt
security of REITs and Other Real Estate Companies: (A) which
comprise at least 7 of the 14 Xxxxx'x Real Estate
Industry/Property Sector Classifications ("Xxxxx'x Sector
Classifications") listed below and of which no more than 35% may
constitute a single such classification; (B) which in the
aggregate constitute at least 40 separate classes of common
shares, preferred shares, and debt securities, issued by at least
20 issuers; (C) issued by a single issuer which in the aggregate
constitute no more than 50% of the Market Value of Xxxxx'x
Eligible Assets, (D) issued by a single issuer which, with
respect to 50% of the Market Value of Xxxxx'x Eligible Assets,
constitute in the aggregate no more than 5% of Market Value of
Xxxxx'x Eligible Assets; and
(b) Unrated debt securities or preferred securities issued
by an issuer which: (A) has not filed for bankruptcy within the
past three years; (B) is current on all principal and interest on
such debt security; (C) is current on such preferred security
distributions; (D) possesses a current, unqualified auditor's
report without qualified, explanatory language and (E) in the
aggregate, do not exceed 10% of the discounted Xxxxx'x Eligible
Assets;
(ii) Interest rate swaps or caps entered into according to
International Swap Dealers Association ("ISDA") standards if (a) the
counterparty to the swap transaction has a short-term rating of not
less than P-1 or, if the counterparty does not have a short-term
rating, the counterparty's senior unsecured long-term debt rating is
A3 or higher and (b) the original aggregate notional amount of the
interest rate swap or cap transaction or transactions is not to be
greater than the liquidation preference of the Preferred Shares
originally issued. The interest rate swap or cap transaction will be
marked-to-market daily;
(iii) U.S. Treasury Securities and Treasury Strips;
(iv) Short-Term Money Market Instruments so long as (A) such
securities are rated at least P-1, (B) in the case of demand deposits,
time deposits and overnight funds, the depository institution is rated
at least A2, (C) such securities are of 2a-7 Money Market Funds, (D)
such securities are repurchase agreements, or (E) in all other cases,
the supporting entity (1) is rated A2 and the security matures within
one month, (2) is rated A1 and the security matures within three
months or (3) is rated at least Aa3 and the security matures within
six months; PROVIDED, HOWEVER, that for purposes of this definition,
such instruments (other than commercial paper rated by Fitch and not
rated by Xxxxx'x) need not meet any otherwise applicable Xxxxx'x
rating criteria; and
(v) Cash (including, for this purpose, interest and dividends due on
assets rated (A) Baa3 or higher by Xxxxx'x if the payment date is
within five Business Days of the Valuation Date, (B) A2 or higher if
the payment date is within thirty days of the Valuation Date, and (C)
A1 or higher if the payment date is within 49 days of the
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relevant valuation date; PROVIDED, HOWEVER, that such interest
and dividends may, at the Trust's discretion, be discounted at the
same rate as the related security or on such other basis as Xxxxx'x
and the Trust may agree from time to time) and receivables for Xxxxx'x
Eligible Assets sold if the receivable is due within five Business
Days of the Valuation Date.
Additionally, in order to merit consideration as an eligible asset, securities
should be issued by entities which:
- Have not filed for bankruptcy within the past year
- Are current on all principal and interest in their fixed income
obligations
- Are current on all preferred stock dividends
- Possess a current, unqualified auditor's report without
qualified, explanatory language.
In addition, portfolio holdings as described below must be within the
following diversification and issue size requirements in order to be included in
Xxxxx'x Eligible Assets:
Maximum Single Maximum Single Minimum Issue Size
Ratings(1) Issuer(2),(3) Industry(3),(4) ($ In Million)(5)
---------- -------------- --------------- ------------------
Aaa 100% 100% $100
Aa 20 60 100
A 10 40 100
Baa 6 20 100
Ba 4 12 50(6)
B1-B2 3 8 50(6)
B3 or below 2 5 50(6)
----------
(1) Refers to the preferred stock and senior debt rating of the
portfolio holding.
(2) Companies subject to common ownership of 25% or more are
considered as one issuer.
(3) Percentages represent a portion of the aggregate Market Value of
corporate debt securities.
(4) Industries are determined according to Xxxxx'x Industry
Classifications, as defined herein.
(5) Except for preferred stock, which has a minimum issue size of $50
million.
(6) Portfolio holdings from issues ranging from $50 million to $100
million are limited to 20% of the Fund's total assets.
Equity Securities:
Maximum Single Maximum Single Minimum Single
Industry Category Issuer(%)(1) Industry(%)(1) State(%)(1)
----------------- ------------- -------------- --------------
Utility 4 50 7(2)
Industrial 4 45 7
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Financial 5 N/A 6
Other 6 20 N/A
(iii) "XXXXX'X HEDGING TRANSACTION" shall have the meaning specified in
paragraph (a)(i) of Section 13 of Part I of Article X of these Bylaws.
"Xxxxx'x Industry Classification" means, for the purposes of determining
Xxxxx'x Eligible Assets, each of the following industry classifications (or such
other classifications as Xxxxx'x may from time to time approve for application
to the Preferred Shares):
1. Aerospace and Defense: Major Contractor, Subsystems, Research,
Aircraft Manufacturing, Arms, and Ammunition
2. Automobile: Automobile Equipment, Auto-Manufacturing, Auto Parts
Manufacturing, Personal Use Trailers, Motor Homes, Dealers
3. Banking: Bank Holding, Savings and Loans, Consumer Credit, Small Loan,
Agency, Factoring, Receivables
4. Beverage, Food and Tobacco: Beer and Ale, Distillers, Wines and
Liquors, Distributors, Soft Drink Syrup, Bottlers, Bakery, Mill Sugar,
Canned Foods, Corn Refiners, Dairy Products, Meat Products, Poultry
Products, Snacks, Packaged Foods, Candy, Gum, Seafood, Frozen Food,
Cigarettes, Cigars, Leaf/Snuff, Vegetable Oil
5. Buildings and Real Estate: Brick, Cement, Climate Controls,
Contracting, Engineering, Construction, Hardware, Forest Products
(building-related only), Plumbing, Roofing, Wallboard, Real Estate,
Real Estate Development, REITs, Land Development
6. Chemicals, Plastics and Rubber: Chemicals (non-agricultural),
Industrial Gases, Sulfur, Plastics, Plastic Products, Abrasives,
Coatings, Paints, Varnish, Fabricating
7. Containers, Packaging and Glass: Glass, Fiberglass, Containers made
of: Glass, Metal, Paper, Plastic, Wood or Fiberglass
8. Personal and Non-Durable Consumer Products (Manufacturing Only):
Soaps, Perfumes, Cosmetics, Toiletries, Cleaning Supplies, School
Supplies
9. Diversified/Conglomerate Manufacturing
10. Diversified/Conglomerate Service
11. Diversified Natural Resources, Precious Metals and Minerals:
Fabricating, Distribution
12. Ecological: Pollution Control, Waste Removal, Waste Treatment and
Waste Disposal
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13. Electronics: Computer Hardware, Electric Equipment, Components,
Controllers, Motors, Household Appliances, Information Service
Communicating Systems, Radios, TVs, Tape Machines, Speakers, Printers,
Drivers, Technology
14. Finance: Investment Brokerage, Leasing, Syndication, Securities
15. Farming and Agriculture: Livestock, Grains, Produce, Agriculture
Chemicals, Agricultural Equipment, Fertilizers
16. Grocery: Grocery Stores, Convenience Food Stores
17. Healthcare, Education and Childcare: Ethical Drugs, Proprietary Drugs,
Research, Health Care Centers, Nursing Homes, HMOs, Hospitals,
Hospital Supplies, Medical Equipment
18. Home and Office Furnishings, House wares, and Durable Consumer
Products: Carpets, Floor Coverings, Furniture, Cooking, Ranges
19. Hotels, Motels, Inns and Gaming
20. Insurance: Life, Property and Casualty, Broker, Agent, Surety
21. Leisure, Amusement, Motion Pictures, Entertainment: Boating, Bowling,
Billiards, Musical Instruments, Fishing, Photo Equipment, Records,
Tapes, Sports, Outdoor Equipment (Camping), Tourism, Resorts, Games,
Toy Manufacturing, Motion Picture Production Theaters, Motion Picture
Distribution
22. Machinery (Non-Agricultural, Non-Construction, Non-Electronic):
Industrial, Machine Tools, and Steam Generators
23. Mining, Steel, Iron and Non-Precious Metals: Coal, Copper, Lead,
Uranium, Zinc, Aluminum, Stainless Steel, Integrated Steel, Ore
Production, Refractories, Steel Mill Machinery, Mini-Xxxxx,
Fabricating, Distribution and Sales of the foregoing
24. Oil and Gas: Crude Producer, Retailer, Well Supply, Service and
Drilling
25. Printing, Publishing, and Broadcasting: Graphic Arts, Paper, Paper
Products, Business Forms, Magazines, Books, Periodicals, Newspapers,
Textbooks, Radio, T.V., Cable Broadcasting Equipment
26. Cargo Transport: Rail, Shipping, Railroads, Rail-car Builders, Ship
Builders, Containers, Container Builders, Parts, Overnight Mail,
Trucking, Truck Manufacturing, Trailer Manufacturing, Air Cargo,
Transport
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27. Retail Stores: Apparel, Toy, Variety, Drugs, Department, Mail Order
Catalog, Showroom
28. Telecommunications: Local, Long Distance, Independent, Telephone,
Telegraph, Satellite, Equipment, Research, Cellular
29. Textiles and Leather: Producer, Synthetic Fiber, Apparel Manufacturer,
Leather Shoes
30. Personal Transportation: Air, Bus, Rail, Car Rental
31. Utilities: Electric, Water, Hydro Power, Gas
32. Diversified Sovereigns: Semi-sovereigns, Canadian Provinces,
Supra-national Agencies
(jjj) "XXXXX'X REAL ESTATE INDUSTRY/PROPERTY SECTOR CLASSIFICATION" means,
for the purposes of determining Xxxxx'x Eligible Assets, each of the
following Industry Classifications (as defined by the National Association
of Real Estate Investment Trusts, "NAREIT"):
1. Office 8. Manufactured Homes
2. Industrial 9. Diversified
3. Mixed 10. Lodging/Resorts
4. Shopping Centers 11. Health Care
5. Regional Malls 12. Home Financing
6. Free Standing 13. Commercial Financing
7. Apartments 14. Self Storage
The Trust will use its discretion in determining which NAREIT Industry
Classification is applicable to a particular investment in consultation
with the independent auditor and/or Xxxxx'x, as necessary.
(kkk) "1940 ACT" shall mean the Investment Company Act of 1940, as amended
from time to time.
(lll) "1940 ACT CURE DATE," with respect to the failure by the Trust to
maintain the 1940 Act Preferred Shares Asset Coverage (as required by
Section 6 of Part I of Article X of these Bylaws) as of the last Business
Day of each month, shall mean the last Business Day of the following month.
(mmm) "1940 ACT PREFERRED SHARES ASSET COVERAGE" shall mean 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 Preferred Shares (or such other asset coverage as
may in the future be specified in or under the 1940 Act as the minimum
asset coverage for senior securities which are shares
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or stock of a closed-end investment company as a condition of declaring
dividends on its common shares or stock).
(nnn) "NOTICE OF REDEMPTION" shall mean any notice with respect to the
redemption of Preferred Shares pursuant to paragraph (c) of Section 11 of
Part I of Article X of these Bylaws.
(ooo) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice with respect to
a Special Rate Period of shares of a series of Preferred Shares pursuant to
subparagraph (d)(i) of Section 4 of Part I of Article X of these Bylaws.
(ppp) "ORDER" and "ORDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of Article X of these Bylaws.
(qqq) "OTHER REAL ESTATE COMPANIES" shall mean companies that generally
derive at least 50% of their revenue from real estate or have at least 50%
of their assets in real estate, but not including REITs.
(rrr) "OUTSTANDING" shall mean, as of any Auction Date with respect to
shares of a series of Preferred Shares, the number of shares theretofore
issued by the Trust except, without duplication, (i) any shares of the
Series theretofore cancelled or delivered to the Auction Agent for
cancellation or redeemed by the Trust, (ii) any shares of the Series as to
which the Trust or any Affiliate thereof shall be an Existing Holder and
(iii) any shares of the Series represented by any certificate in lieu of
which a new certificate has been executed and delivered by the Trust.
(sss) "PERFORMING" means with respect to any asset that is a Bank Loan or
other debt, the issuer of such investment is not in default of any payment
obligations in respect thereof.
(ttt) "PERSON" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or
other entity or a government or any agency or political subdivision
thereof.
(uuu) "POTENTIAL BENEFICIAL OWNER," with respect to shares of a series of
Preferred Shares, shall mean a customer (including broker dealers which are
not Broker Dealers) of a Broker-Dealer that is not a Beneficial Owner of
shares of the Series but that wishes to purchase shares of the Series, or
that is a Beneficial Owner of shares of the Series that wishes to purchase
additional shares of the Series.
(vvv) "POTENTIAL HOLDER," with respect to Preferred Shares, shall mean a
Broker-Dealer (or any such other person as may be permitted by the Trust)
that is not an Existing Holder of Preferred Shares or that is an Existing
Holder of Preferred Shares that wishes to become the Existing Holder of
additional Preferred Shares.
(www) "PREFERRED SHARES" shall have the meaning set forth in the first
paragraph of Article X of these Bylaws.
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(xxx) "PREFERRED SHARES BASIC MAINTENANCE AMOUNT" as of any Valuation Date,
shall mean the dollar amount equal to the sum of (i)(A) the product of the
number of Preferred Shares outstanding on such date (including Preferred
Shares held by an Affiliate of the Trust but not Preferred Shares held by
the Trust) multiplied by $25,000 (plus the product of the number of shares
of any other series of preferred shares outstanding on such date multiplied
by the liquidation preference of such shares) plus any redemption premium
applicable to Preferred Shares (or other preferred shares) then subject to
redemption; (B) the aggregate amount of distributions that will have
accumulated at the respective Applicable Rates (whether or not earned or
declared) to (but not including) the first respective Distribution Payment
Dates for the Preferred Shares outstanding that follows such Valuation
Date; (C) the aggregate amount of distributions that would accumulate on
Preferred Shares outstanding from such first Distribution Payment Dates
therefor referenced in (B) of this paragraph through the 45th day after
such Valuation Date at the respective Applicable Rates referenced in (B) of
this paragraph; (D) the amount of anticipated non-interest expenses of the
Trust for the 90 days subsequent to such Valuation Date; (E) the amount of
the current outstanding balances of any indebtedness or obligations of the
Trust senior in right of payment to the Preferred Shares plus distributions
accrued together with 30 days additional distributions on the current
outstanding balances calculated at the current rate; and (F) any other
current liabilities payable during the 30 days subsequent to such Valuation
Date, including, without limitation, indebtedness due within one year and
any redemption premium due with respect to the Preferred Shares for which a
Notice of Redemption has been sent, as of such Valuation Date, to the
extent not reflected in any of (i)(A) through (i)(E) (including, without
limitation, any liabilities incurred for the purpose of clearing securities
transactions) less (ii) the sum of any cash plus the value of any of the
Trust's assets irrevocably deposited by the Trust for the payment of any of
(i)(A) through (i)(F) ("value," for purposes of this clause (ii), means the
Discounted Value of the security, except that if the security matures prior
to the relevant redemption payment date and is either fully guaranteed by
the U.S. Government or is rated at least P-1 by Moody's, it will be valued
at its face value). Any documents to be provided to Fitch pursuant to this
section shall be delivered to Fitch electronically at the following email
address: xxxxx.xxxxxxxxxxxx@xxxxxxxxxxxx.xxx.
(yyy) "PREFERRED SHARES BASIC MAINTENANCE CURE DATE," with respect to the
failure by the Trust to satisfy the Preferred Shares Basic Maintenance
Amount (as required by paragraph (a) of Section 7 of Part I of Article X of
these Bylaws) as of a given Valuation Date, shall mean the seventh Business
Day following such Valuation Date.
(zzz) "PREFERRED SHARES BASIC MAINTENANCE REPORT" shall mean a report
signed by the President, Treasurer, Assistant Treasurer, Controller,
Assistant Controller or any Senior 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
aggregate), and the Preferred Shares Basic Maintenance Amount.
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(aaaa) "PRICING SERVICE" shall mean any pricing service designated from
time to time in accordance with the Trust's pricing procedures.
(bbbb) "QUARTERLY VALUATION DATE" shall mean the last Business Day of each
March, June, September and December of each year, commencing on September
30, 2005.
(cccc) "RATE PERIOD," with respect to shares of a series of Preferred
Shares, shall mean the Initial Rate Period and any Subsequent Rate Period,
including any Special Rate Period.
(dddd) "RATE PERIOD DAYS" for any Rate Period or Distribution Period, means
the number of days that would constitute such Rate Period or Distribution
Period but for the application of paragraph (d) of Section 2 of Part I of
Article X of these Bylaws or paragraph (b) of Section 4 of Part I of
Article X of these Bylaws.
(eeee) "RATING AGENCY" means a nationally recognized statistical rating
organization, including Xxxxx'x, S&P, or Fitch.
(ffff) "REFERENCE BANKS" means four major banks in the London interbank
market selected by RBC Xxxx Xxxxxxxx Inc. or its affiliates or successors
or such other party as the Trust may from time to time appoint.
(gggg) "REIT," or real estate investment trust, means a company dedicated
to owning, operating or financing real estate.
(hhhh) "REDEMPTION PRICE" shall mean the applicable redemption price
specified in Section 11 of Part I of Article X of these Bylaws.
(iiii) "REFERENCE RATE" shall mean, with respect to the determination of
the Maximum Rate, the applicable LIBOR Rate (for a distribution period or a
special distribution period of fewer than 365 days), and the applicable
Treasury Index Rate (for a special distribution period of 365 days or
more).
(jjjj) "S&P" shall mean Standard & Poor's Ratings Services and its
successors.
(kkkk) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
(llll) "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
its successors and assigns or any other securities depository selected by
the Trust that agrees to follow the procedures required to be followed by
such securities depository in connection with the Preferred Shares.
(mmmm) "SELL ORDER" and "SELL ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of Article X of these
Bylaws.
(nnnn) "SERIES" shall have the meaning given in the first paragraph of
Article X of these Bylaws.
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(oooo) "SHORT-TERM MONEY MARKET INSTRUMENTS" shall mean the following types
of instruments if, on the date of purchase or other acquisition thereof by
the Trust, the remaining term to maturity thereof is not in excess of 180
days:
(i) commercial paper rated A-1 or the equivalent if such commercial
paper matures in 30 days or A-1+ or the equivalent if such commercial
paper matures in over 30 days;
(ii) demand or time deposits in, and banker's acceptances and
certificates of deposit of (A) a depository institution or trust
company incorporated under the laws of the United States of America or
any state thereof or the District of Columbia or (B) a United States
branch office or agency of a foreign depository institution (provided
that such branch office or agency is subject to banking regulation
under the laws of the United States, any state thereof or the District
of Columbia);
(iii) overnight funds;
(iv) U.S. Government Securities;
(v) registered investment companies that are money market funds in
compliance with Rule 2a-7 under the 1940 Act ("2a-7 Money Market
Funds"); and
(vi) overnight repurchase agreements.
(pppp) "SPECIAL RATE PERIOD," with respect to Preferred Shares, shall have
the meaning specified in paragraph (a) of Section 4 of Part I of Article X
of these Bylaws.
(qqqq) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning specified in
subparagraph (a)(i) of Section 11 of Part I of Article X of these Bylaws.
(rrrr) "SUBMISSION DEADLINE" shall mean 1:00 P.M., Eastern time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers
are required to submit Orders to the Auction Agent as specified by the
Auction Agent from time to time.
(ssss) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of Article X of
these Bylaws.
(tttt) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of
Article X of these Bylaws.
(uuuu) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of Article X of
these Bylaws.
(vvvv) "SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of
Article X of these Bylaws.
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(wwww) "SUBSEQUENT RATE PERIOD," with respect to Preferred Shares, shall
mean the period from and including the first day following the Initial Rate
Period of Preferred Shares to but excluding the next Distribution Payment
Date for Preferred Shares and any period thereafter from and including one
Distribution Payment Date for Preferred Shares to but excluding the next
succeeding Distribution Payment Date for Preferred Shares; PROVIDED,
HOWEVER, that if any Subsequent Rate Period is also a Special Rate Period,
such term shall mean the period commencing on the first day of such Special
Rate Period and ending on the last day of the last Distribution Period
thereof.
(xxxx) "SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER" shall mean Credit
Suisse First Boston or Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
or their respective affiliates or successors, if such entity is a U.S.
Government securities dealer or such other entity designated by the Trust;
PROVIDED, HOWEVER, that none of such entities shall be a U.S. Government
Securities Dealer.
(yyyy) "SWAP" means a derivative transaction between two parties who
contractually agree to exchange the returns (or differentials in rates of
return) to be exchanges or "swapped" between the parties, which returns are
calculated with respect to a "notional amount," i.e., a particular dollar
amount invested at a particular interest rate or in a "basket" of
securities representing a particular index.
(i) "INTEREST RATE SWAP" means an arrangement whereby two parties
(called counterparties) enter into an agreement to exchange periodic
interest payments. The dollar amount the counterparties pay to each
other is an agreed-upon periodic interest rate multiplied by some
predetermined dollar principal, called the notional principal amount.
No principal is exchanged between parties to the transaction; only
interest is exchanged.
(ii) "TOTAL RETURN SWAP" means an agreement between counterparties in
which one party agrees to make payments of the total return from
underlying asset(s), which may include securities, baskets of
securities, or securities indices during the specified period, in
return for payments equal to a fixed or floating rate of interest or
the total return from other underlying asset(s).
(zzzz) "TREASURY XXXX" shall mean a direct obligation of the U.S.
Government having a maturity at the time of issuance of 364 days or less.
(aaaaa) "TREASURY FUTURES" shall have the meaning specified in paragraph
(a)(i) of Section 13 of Part I of Article X of these Bylaws.
(bbbbb) "TREASURY INDEX RATE" means the average yield to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
having the same number of 30-day periods to maturity as the length of the
applicable Distribution Period, determined, to the extent necessary, by
linear interpolation based upon the yield for such securities having the
next shorter and next longer number of 30-day periods to maturity treating
all Distribution Periods with a length greater than the longest maturity
for such securities as having a length equal to such longest maturity, in
all cases based upon data
-44-
set forth in the most recent weekly statistical release published by the
Board of Governors of the Federal Reserve System (currently in H.15 (519));
PROVIDED, HOWEVER, if the most recent such statistical release shall not
have been published during the 15 days preceding the date of computation,
the foregoing computations shall be based upon the average of comparable
data as quoted to the Trust by at least three recognized dealers in U.S.
Government Securities selected by the Trust.
(ccccc) "TREASURY NOTE" shall mean a direct obligation of the U.S.
Government having a maturity at the time of issuance of five years or less
but more than 364 days.
(ddddd) "TREASURY NOTE RATE," on any date for any Rate Period, shall mean
(i) the yield on the most recently auctioned Treasury Note with a remaining
maturity closest to the length of such Rate Period, as quoted in The Wall
Street Journal on such date for the Business Day next preceding such date;
or (ii) in the event that any such rate is not published in The Wall Street
Journal, then the yield as calculated by reference to the arithmetic
average of the bid price quotations of the most recently auctioned Treasury
Note with a remaining maturity closest to the length of such Rate Period,
as determined by bid price quotations as of the close of business on the
Business Day immediately preceding such date obtained from the U.S.
Government Securities Dealers to the Auction Agent. If any U.S. Government
Securities Dealer does not quote a rate required to determine the Treasury
Note Rate, the Treasury Note Rate shall be determined on the basis of the
quotation or quotations furnished by the remaining U.S. Government
Securities Dealer or U.S. Government Securities Dealers and any Substitute
U.S. Government Securities Dealers selected by the Trust to provide such
rate or rates not being supplied by any U.S. Government Securities Dealer
or U.S. Government Securities Dealers, as the case may be, or, if the Trust
does not select any such Substitute U.S. Government Securities Dealer or
Substitute U.S. Government Securities Dealers, by the remaining U.S.
Government Securities Dealer or U.S. Government Securities Dealers.
(eeeee) "TRUST" shall mean the entity named on the first page of these
Bylaws, which is the issuer of the Preferred Shares.
(fffff) "U.S. GOVERNMENT SECURITIES DEALER" shall mean Xxxxxx Government
Securities Incorporated, Xxxxxxx, Sachs & Co., Salomon Brothers Inc.,
Xxxxxx Guaranty Trust Company of New York and any other U.S. Government
Securities Dealer selected by the Trust as to which Moody's (if Xxxxx'x is
then rating the Preferred Shares) or Fitch (if Fitch is then rating the
Preferred Shares) shall not have objected or their respective affiliates or
successors, if such entity is a U.S. Government Securities Dealer.
(ggggg) "U.S. TREASURY SECURITIES" means direct obligations of the United
States Treasury that are entitled to the full faith and credit of the
United States.
(hhhhh) "U.S. TREASURY STRIPS" means securities based on U.S. Treasury
Securities created through the Separate Trading of Registered Interest and
Principal of Securities program.
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(iiiii) "VALUATION DATE" shall mean, for purposes of determining whether
the Trust is maintaining the Preferred Shares Basic Maintenance Amount, the
last Business Day of each week.
(jjjjj) "VOTING PERIOD" shall have the meaning specified in paragraph (b)
of Section 5 of Part I of Article X of these Bylaws.
(kkkkk) "WINNING BID RATE" shall have the meaning specified in paragraph
(a) of Section 3 of Part II of Article X of these Bylaws.
PART I
1. NUMBER OF AUTHORIZED SHARES. The number of authorized shares
constituting the Series is 15,000 of which ___ shares will be issued on
July __, 2005 or on such other date as the officers of the Trust may
determine.
2. DISTRIBUTIONS.
(a) RANKING. The Preferred Shares shall rank on a parity with each
other and with any other series of preferred shares as to the payment
of distributions by the Trust.
(b) CUMULATIVE CASH DISTRIBUTIONS. The Holders of Preferred Shares
shall be entitled to receive, when, as and if declared by the Board of
Trustees, out of funds legally available therefor in accordance with
the Declaration of Trust and applicable law, cumulative cash
distributions at the Applicable Rate for shares of the Series,
determined as set forth in paragraph (e) of this Section 2, and no
more (except to the extent set forth in Section 3 of this Part I),
payable on the Distribution Payment Dates with respect to shares of
the Series determined pursuant to paragraph (d) of this Section 2.
Holders of Preferred Shares shall not be entitled to any distribution,
whether payable in cash, property or shares, in excess of full
cumulative distributions, as herein provided, on Preferred Shares. No
interest, or sum of money in lieu of interest, shall be payable in
respect of any distribution payment or payments on Preferred Shares
which may be in arrears, and, except to the extent set forth in
subparagraph (e)(i) of this Section 2, no additional sum of money
shall be payable in respect of any such arrearage.
(c) DISTRIBUTIONS CUMULATIVE FROM DATE OF ORIGINAL ISSUE.
Distributions on Preferred Shares shall accumulate at the Applicable
Rate from the Date of Original Issue thereof.
(d) DISTRIBUTION PAYMENT DATES AND ADJUSTMENT THEREOF. Distributions
on Preferred Shares shall be payable for the Initial Rate Period on
July __, 2005, and, if declared by the Board of Trustees (which
declaration may be by a single resolution for multiple such dates), on
each seventh day thereafter (or after the Distribution Payment Date
with respect to an intervening Special Rate Period), with respect to
the Preferred Share (each date being a "Distribution Payment Date");
PROVIDED, HOWEVER, that:
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(i) if the day on which distributions would otherwise be
payable on Preferred Shares is not a Business Day, then such
distributions shall be payable on such Preferred Shares on
the first Business Day that falls after such day, and
(ii) notwithstanding this paragraph (d) of Section 2, the
Trust in its discretion may establish the Distribution
Payment Dates in respect of any Special Rate Period of
Preferred Shares consisting of more than 7 Rate Period Days,
with respect to the Series; PROVIDED, HOWEVER, that such
dates shall be set forth in the Notice of Special Rate
Period relating to such Special Rate Period, as delivered to
the Auction Agent, which Notice of Special Rate Period shall
be filed with the Secretary of the Trust; and further
provided that (1) any such Distribution Payment Date shall
be a Business Day and (2) the last Distribution Payment Date
in respect of such Special Rate Period shall be the Business
Day immediately following the last day thereof, as such last
day is determined in accordance with paragraph (b) of
Section 4 of this Part I.
(e) DISTRIBUTION RATES AND CALCULATION OF DISTRIBUTIONS.
(i) DISTRIBUTION RATES. The distribution rate on Preferred
Shares during the period from and after the Date of Original
Issue of Preferred Shares to and including the last day of
the Initial Rate Period of such Preferred Shares shall be
equal to the rate per annum determined with respect to such
Preferred Shares pursuant to a resolution of the Board of
Trustees, as set forth under "Designation." The initial
distribution rate on any series of preferred shares
subsequently established by the Trust shall be the rate set
forth in or determined in accordance with the resolutions of
the Board of Trustees establishing such series. For each
Subsequent Rate Period of Preferred Shares, the distribution
rate on such Preferred Shares shall be equal to the rate per
annum that results from an Auction for shares of the Series
on the Auction Date next preceding such Subsequent Rate
Period (but the rate set at the Auction will not exceed the
Maximum Rate); PROVIDED, HOWEVER, that if:
(A) subject to Section 9 of Part II, an Auction for any
Subsequent Rate Period of Preferred Shares is not held
for any reason other than as described below or if
Sufficient Clearing Orders have not been made in an
Auction (other than as a result of all Preferred Shares
being the subject of Submitted Hold Orders), then the
distribution rate on the shares of the Series for such
Subsequent Rate Period will be the Maximum Rate of the
Series on the Auction Date therefor;
(B) any Failure to Deposit shall have occurred with
respect to shares of the Series during any Rate Period
thereof (other than any Special Rate Period consisting
of more than 364 Rate Period Days
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or any Rate Period succeeding any Special Rate Period
consisting of more than 364 Rate Period Days during
which a Failure to Deposit occurred that has not been
cured), but, prior to 12:00 Noon, Eastern time, on the
third Business Day next succeeding the date on which
such Failure to Deposit occurred, such Failure to
Deposit shall have been cured in accordance with
paragraph (f) of this Section 2 and the Trust shall
have paid to the Auction Agent a late charge ("Late
Charge") equal to the sum of (1) if such Failure to
Deposit consisted of the failure timely to pay to the
Auction Agent the full amount of distributions with
respect to any Distribution Period of shares of the
Series, an amount computed by multiplying (x) 200% of
the Reference Rate for the Rate Period during which
such Failure to Deposit occurs on the Distribution
Payment Date for such Distribution Period by (y) a
fraction, the numerator of which shall be the number of
days for which such Failure to Deposit has not been
cured in accordance with paragraph (f) of this Section
2 (including the day such Failure to Deposit occurs and
excluding the day such Failure to Deposit is cured) and
the denominator of which shall be 360, and applying the
rate obtained against the aggregate Liquidation
Preference of the outstanding shares of the Series and
(2) if such Failure to Deposit consisted of the failure
timely to pay to the Auction Agent the Redemption Price
of the shares, if any, of the Series for which Notice
of Redemption has been mailed by the Trust pursuant to
paragraph (c) of Section 11 of this Part I, an amount
computed by multiplying (x) 200% of the Reference Rate
for the Rate Period during which such Failure to
Deposit occurs on the redemption date by (y) a
fraction, the numerator of which shall be the number of
days for which such Failure to Deposit is not cured in
accordance with paragraph (f) of this Section 2
(including the day such Failure to Deposit occurs and
excluding the day such Failure to Deposit is cured) and
the denominator of which shall be 360, and applying the
rate obtained against the aggregate Liquidation
Preference of the outstanding shares of the Series to
be redeemed, then no Auction will be held, in respect
of shares of the Series for the Subsequent Rate Period
thereof and the distribution rate for shares of the
Series for such Subsequent Rate Period will be the
Maximum Rate on the Auction Date for such Subsequent
Rate Period;
(C) any Failure to Deposit shall have occurred with
respect to shares of the Series during any Rate Period
thereof (other than any Special Rate Period consisting
of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period consisting of more
than 364 Rate Period Days during which a Failure to
Deposit occurred that has not been cured), and, prior
to 12:00 Noon, Eastern time, on the third Business Day
next succeeding the
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date on which such Failure to Deposit occurred, such
Failure to Deposit shall not have been cured in
accordance with paragraph (f) of this Section 2 or the
Trust shall not have paid the applicable Late Charge to
the Auction Agent, then no Auction will be held in
respect of shares of the Series for the first
Subsequent Rate Period thereof thereafter (or for any
Rate Period thereof thereafter to and including the
Rate Period during which (1) such Failure to Deposit is
cured in accordance with paragraph (f) of this Section
2 and (2) the Trust pays the applicable Late Charge to
the Auction Agent (the condition set forth in this
clause (2) to apply only in the event Xxxxx'x is rating
such shares at the time the Trust cures such Failure to
Deposit), in each case no later than 12:00 Noon,
Eastern time, on the fourth Business Day prior to the
end of such Rate Period), and the distribution rate for
shares of the Series for each such Subsequent Rate
Period for shares of the Series shall be a rate per
annum equal to the Maximum Rate on the Auction Date for
such Subsequent Rate Period (but with the prevailing
rating for shares of the Series, for purposes of
determining such Maximum Rate, being deemed to be
"Below "Baa3"/BBB-"); or
(D) any Failure to Deposit shall have occurred with
respect to shares of the Series during a Special Rate
Period thereof consisting of more than 364 Rate Period
Days, or during any Rate Period thereof succeeding any
Special Rate Period consisting of more than 364 Rate
Period Days during which a Failure to Deposit occurred
that has not been cured, and, prior to 12:00 Noon,
Eastern time, on the fourth Business Day preceding the
Auction Date for the Rate Period subsequent to such
Rate Period, such Failure to Deposit shall not have
been cured in accordance with paragraph (f) of this
Section 2 or, in the event Xxxxx'x is then rating such
shares, the Trust shall not have paid the applicable
Late Charge to the Auction Agent (such Late Charge, for
purposes of this subparagraph (D), to be calculated by
using, as the Reference Rate, the Reference Rate
applicable to a Rate Period (x) consisting of more than
270 Rate Period Days and (y) commencing on the date on
which the Rate Period during which Failure to Deposit
occurs commenced), then no Auction will be held with
respect to shares of the Series for such Subsequent
Rate Period (or for any Rate Period thereof thereafter
to and including the Rate Period during which (1) such
Failure to Deposit is cured in accordance with
paragraph (f) of this Section 2 and (2) the Trust pays
the applicable Late Charge to the Auction Agent (the
condition set forth in this clause (2) to apply only in
the event Xxxxx'x is rating such shares at the time the
Trust cures such Failure to Deposit), in each case no
later than 12:00 Noon, Eastern time, on the fourth
Business Day prior to the end of such Rate Period), and
the distribution rate for shares of the Series for each
such Subsequent Rate Period shall be
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a rate per annum equal to the Maximum Rate for shares
of the Series on the Auction Date for such Subsequent
Rate Period (but with the prevailing rating for shares
of the Series, for purposes of determining such Maximum
Rate, being deemed to be "Below "Baa3"/BBB-").
(ii) CALCULATION OF DISTRIBUTIONS. The amount of distributions
per share payable on Preferred Shares on any date on which
distributions on shares of the Series shall be payable shall be
computed by multiplying the Applicable Rate for shares of the
Series in effect for such Distribution Period or Distribution
Periods or part thereof for which distributions have not been
paid by a fraction, the numerator of which shall be the number of
days in such Distribution Period or Distribution Periods or part
thereof and the denominator of which shall be 360, and applying
the rate obtained against $25,000.
(f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with respect to
Preferred Shares shall have been cured (if such Failure to Deposit is
not solely due to the willful failure of the Trust to make the
required payment to the Auction Agent) with respect to any Rate Period
of shares of the Series if, within the respective time periods
described in subparagraph (e)(i) of this Section 2, the Trust shall
have paid to the Auction Agent (A) all accumulated and unpaid
distributions on shares of the Series and (B) without duplication, the
Redemption Price for shares, if any, of the Series for which Notice of
Redemption has been mailed by the Trust pursuant to paragraph (c) of
Section 11 of Part I of Article X of these Bylaws; PROVIDED, HOWEVER,
that the foregoing clause (B) shall not apply to the Trust's failure
to pay the Redemption Price in respect of Preferred Shares when the
related Redemption Notice provides that redemption of such Preferred
Shares is subject to one or more conditions precedent and any such
condition precedent shall not have been satisfied at the time or times
and in the manner specified in such Notice of Redemption.
(g) DISTRIBUTION PAYMENTS BY TRUST TO AUCTION AGENT. The Trust shall
pay to the Auction Agent, not later than 12:00 Noon, Eastern time, on
each Distribution Payment Date for Preferred Shares, an aggregate
amount of funds available in The City of New York, New York, equal to
the distributions to be paid to all Holders of shares of the Series on
such Distribution Payment Date.
(h) AUCTION AGENT AS TRUSTEE OF DISTRIBUTION PAYMENTS BY TRUST. All
moneys paid to the Auction Agent for the payment of distributions
shall be held in trust for the payment of such distributions by the
Auction Agent for the benefit of the Holders specified in paragraph
(i) of this Section 2. Any moneys paid to the Auction Agent in
accordance with the foregoing but not applied by the Auction Agent to
the payment of distributions will, to the extent permitted by law, be
repaid to the Trust at the end of 90 days from the date on which such
moneys were so to have been applied.
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(i) DISTRIBUTIONS PAID TO HOLDERS. Each distribution on Preferred
Shares shall be paid on the Distribution Payment Date therefor to the
Holders thereof as their names appear on the record books of the Trust
on the Business Day next preceding such Distribution Payment Date.
(j) DISTRIBUTIONS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID
DISTRIBUTIONS. Any distribution payment made on Preferred Shares shall
first be credited against the earliest accumulated but unpaid
distributions due with respect to such Preferred Shares. Distributions
in arrears for any past Distribution Period may be declared and paid
at any time, without reference to any regular Distribution Payment
Date, to the Holders as their names appear on the record books of the
Trust on such date, not exceeding 15 days preceding the payment date
thereof, as may be fixed by the Board of Trustees.
3. RESERVED.
4. DESIGNATION OF SPECIAL RATE PERIODS.
(a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The Trust,
at its option, may designate any succeeding Subsequent Rate Period of
Preferred Shares as a special rate period consisting of a specified
number of Rate Period Days, other than the number of Rate Period Days
comprising a Minimum Rate Period, that is evenly divisible by seven,
subject to adjustment as provided in paragraph (b) of this Section 4
(each such period, a "Special Rate Period"). A designation of a
Special Rate Period shall be effective only if (A) notice thereof
shall have been given in accordance with paragraph (c) and
subparagraph (d)(i) of this Section 4, (B) an Auction for shares of
the Series shall have been held on the Auction Date immediately
preceding the first day of such proposed Special Rate Period and
Sufficient Clearing Bids for shares of the Series shall have existed
in such Auction, and (C) if any Notice of Redemption shall have been
mailed by the Trust pursuant to paragraph (c) of Section 11 of this
Part I with respect to any shares of the Series, the Redemption Price
with respect to such shares shall have been deposited with the Auction
Agent. In the event the Trust wishes to designate any succeeding
Subsequent Rate Period for Preferred Shares as a Special Rate Period
consisting of more than 28 Rate Period Days, the Trust shall notify
Fitch (if Fitch is then rating the Preferred Shares) and Xxxxx'x (if
Xxxxx'x is then rating the Preferred Shares) in advance of the
commencement of such Subsequent Rate Period that the Trust wishes to
designate such Subsequent Rate Period as a Special Rate Period and
shall provide Fitch (if Fitch is then rating the Preferred Shares) and
Xxxxx'x (if Xxxxx'x is then rating the Preferred Shares) with such
documents as either may request. In addition, full cumulative
distributions, any amounts due with respect to mandatory redemptions
and any additional distributions payable prior to such date must be
paid in full or deposited with the Auction Agent. The Trust also must
have portfolio securities with a discounted value at least equal to
the Preferred Shares Basic Maintenance Amount.
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(b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. In the event the
Trust wishes to designate a Subsequent Rate Period as a Special Rate
Period, but the day following what would otherwise be the last day of
such Special Rate Period is not a Tuesday that is a Business Day in
case of the Series, then the Trust shall designate such Subsequent
Rate Period as a Special Rate Period consisting of the period
commencing on the first day following the end of the immediately
preceding Rate Period and ending on the first Monday that is followed
by a Tuesday that is a Business Day preceding what would otherwise be
such last day in the case of the Series.
(c) NOTICE OF PROPOSED SPECIAL RATE PERIOD. If the Trust proposes to
designate any succeeding Subsequent Rate Period of Preferred Shares as
a Special Rate Period pursuant to paragraph (a) of this Section 4, not
less than 7 (or such lesser number of days as determined by the Trust
with appropriate consultation with the Auction Agent and
Broker-Dealers) nor more than 30 days prior to the date the Trust
proposes to designate as the first day of such Special Rate Period
(which shall be such day that would otherwise be the first day of a
Minimum Rate Period), notice shall be mailed by the Trust by
first-class mail, postage prepaid, to the Holders of shares of the
Series. Each such notice shall state (A) that the Trust may exercise
its option to designate a succeeding Subsequent Rate Period of shares
of the Series as a Special Rate Period, specifying the first day
thereof and (B) that the Trust will, by 11:00 A.M., Eastern time, on
the second Business Day next preceding such date (or by such later
time or date, or both, as determined by the Trust with appropriate
consultation with the Auction Agent and Broker-Dealers) notify the
Auction Agent of either (x) its determination, subject to certain
conditions, to exercise such option, in which case the Trust shall
specify the Special Rate Period designated, or (y) its determination
not to exercise such option.
(d) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M., Eastern
time, on the second Business Day next preceding the first day of any
proposed Special Rate Period of shares of a series of Preferred Shares
as to which notice has been given as set forth in paragraph (c) of
this Section 4 (or such later time or date, or both, as determined by
the Trust with appropriate consultation with the Auction Agent and
Broker-Dealers), the Trust shall deliver to the Auction Agent either:
(i) a notice ("Notice of Special Rate Period") stating (A) that
the Trust has determined to designate the next succeeding Rate
Period of shares of the Series as a Special Rate Period,
specifying the same and the first day thereof, (B) the Auction
Date immediately prior to the first day of such Special Rate
Period, (C) that such Special Rate Period shall not commence if
(1) an Auction for shares of the Series shall not be held on such
Auction Date for any reason or (2) an Auction for shares of the
Series shall be held on such Auction Date but Sufficient Clearing
Bids for shares of the Series shall not exist in such Auction
(other than because all Outstanding shares of the Series are
subject to Submitted Hold Orders), (D) the scheduled
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Distribution Payment Dates for shares of the Series during such
Special Rate Period and (E) the Special Redemption Provisions, if
any, applicable to shares of the Series in respect of such
Special Rate Period, such notice to be accompanied by a Preferred
Shares Basic Maintenance Report showing that, as of the third
Business Day next preceding such proposed Special Rate Period,
Xxxxx'x Eligible Assets (if Xxxxx'x is then rating the series in
question) and Fitch Eligible Assets (if Fitch is then rating the
series in question) each have an aggregate Discounted Value at
least equal to the Preferred Shares Basic Maintenance Amount as
of such Business Day (assuming for purposes of the foregoing
calculation that (a) the Maximum Rate is the Maximum Rate on such
Business Day as if such Business Day were the Auction Date for
the proposed Special Rate Period, and (b) if applicable, the
Moody's Discount Factors applicable to Moody's Eligible Assets
and the Fitch Discount Factors applicable to Fitch Eligible
Assets are determined by reference to the first Exposure Period
longer than the Exposure Period then applicable to the Trust, as
described in the definitions of Moody's Discount Factor and Fitch
Discount Factor herein); or
(ii) a notice stating that the Trust has determined not to
exercise its option to designate a Special Rate Period of shares
of the Series and that the next succeeding Rate Period of shares
of the Series shall be a Minimum Rate Period.
(e) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the Trust
fails to deliver either of the notices described in subparagraphs
(d)(i) or (d)(ii) of this Section 4 (and, in the case of the notice
described in subparagraph (d)(i) of this Section 4, a Preferred Shares
Basic Maintenance Report to the effect set forth in such subparagraph
(if either Moody's or Fitch is then rating the series in question))
with respect to any designation of any proposed Special Rate Period to
the Auction Agent by 11:00 A.M., Eastern time, on the second Business
Day next preceding the first day of such proposed Special Rate Period
(or by such later time or date, or both, as determined by the Trust
with appropriate consultation with the Auction Agent and
Broker-Dealers), the Trust shall be deemed to have delivered a notice
to the Auction Agent with respect to such Special Rate Period to the
effect set forth in subparagraph (d)(ii) of this Section 4. In the
event the Trust delivers to the Auction Agent a notice described in
subparagraph (d)(i) of this Section 4, it shall file a copy of such
notice with the Secretary of the Trust, and the contents of such
notice shall be binding on the Trust. In the event the Trust delivers
to the Auction Agent a notice described in subparagraph (d)(ii) of
this Section 4, the Trust will provide Moody's (if Xxxxx'x is then
rating the series in question) and Fitch (if Fitch is then rating the
series in question) a copy of such notice.
5. VOTING RIGHTS.
(a) ONE VOTE PER PREFERRED SHARE. Except as otherwise provided in the
Declaration of Trust or as otherwise required by law, (i) each Holder
of
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Preferred Shares shall be entitled to one vote for each Preferred
Share held by such Holder on each matter submitted to a vote of
Shareholders of the Trust, and (ii) the holders of outstanding shares
of preferred shares, including Preferred Shares, and of Common Shares
shall vote together as a single class; PROVIDED, HOWEVER, that, at any
meeting of the Shareholders of the Trust held for the election of
Trustees, the holders of outstanding shares of preferred shares,
including Preferred Shares, represented in person or by proxy at said
meeting, shall be entitled, as a class, to the exclusion of the
holders of all other securities and classes of shares of the Trust, to
elect two Trustees of the Trust (regardless of the total number of
Trustees serving on the Trust's Board of Trustees), each share of
preferred shares, including each Preferred Share, entitling the holder
thereof to one vote; provided, further, that if the Board of Trustees
shall be divided into one or more classes, the Board of Trustees shall
determine to which class or classes the Trustees elected by the
holders of preferred shares shall be assigned and the holders of the
preferred shares shall only be entitled to elect the Trustees so
designated as being elected by the holders of the preferred shares
when their term shall have expired; provided, finally, that such
Trustees appointed by the holders of preferred shares shall be
allocated as evenly as possible among the classes of Trustees. Subject
to paragraph (b) of this Section 5, the holders of outstanding Common
Shares and preferred shares, including Preferred Shares, voting
together as a single class, shall elect the balance of the Trustees.
(b) VOTING FOR ADDITIONAL TRUSTEES.
(i) VOTING PERIOD. Except as otherwise provided in the
Declaration of Trust or as otherwise required by law, during any
period in which any one or more of the conditions described in
subparagraphs (A) or (B) of this subparagraph (b)(i) shall exist
(such period being referred to herein as a "Voting Period"), the
number of Trustees constituting the Board of Trustees shall be
automatically increased by the smallest number that, when added
to the two Trustees elected exclusively by the holders of
preferred shares, including Preferred Shares, would constitute a
majority of the Board of Trustees as so increased by such
smallest number; and the holders of preferred shares, including
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 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:
(A) if at the close of business on any distribution payment
date accumulated distributions (whether or not earned or
declared) on any outstanding preferred shares, including
Preferred Shares, equal to at least two full years'
distributions shall be due and unpaid and sufficient cash or
specified securities shall not have been deposited with the
Auction Agent for the payment of such accumulated
distributions; or
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(B) if at any time holders of Preferred Shares are entitled
under the 1940 Act to elect a majority of the Trustees of
the Trust.
Upon the termination of a Voting Period, the voting rights
described in this subparagraph (b)(i) 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
subparagraph (b)(i).
(ii) NOTICE OF SPECIAL MEETING. As soon as practicable after the
accrual of any right of the holders of preferred shares,
including Preferred Shares, to elect additional Trustees as
described in subparagraph (b)(i) of this Section 5, the Trust
shall notify the Auction Agent and the Auction Agent shall call a
special meeting of such registered holders, by mailing a notice
of such special meeting to such holders, such meeting to be held
not less than 10 nor more than 30 days after the date of mailing
of such notice. If the Trust fails to send such notice to the
Auction Agent or if the Auction 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 registered 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 or on such other date as the
Trust may determine. At any such special meeting and at each
meeting of holders of preferred shares, including Preferred
Shares, held during a Voting Period at which Trustees are to be
elected, such holders, voting together as a class (to the
exclusion of the holders of all other securities and classes of
shares of the Trust), shall be entitled to elect the number of
Trustees prescribed in subparagraph (b)(i) of this Section 5 on a
one-vote-per-share basis.
(iii) TERMS OF OFFICE OF EXISTING TRUSTEES. 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 shares of
preferred shares of the Trust 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
of the Trust and the remaining incumbent Trustees elected by the
holders of the Common Shares and preferred shares, including
Preferred Shares, shall constitute the duly elected Trustees of
the Trust.
(iv) TERMS OF OFFICE OF CERTAIN TRUSTEES TO TERMINATE UPON
TERMINATION OF VOTING PERIOD. Simultaneously with the termination
of a Voting Period, the terms of office of the additional
Trustees elected by the Holders and holders of other preferred
shares of the Trust pursuant to subparagraph (b)(i) of this
Section 5 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
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pursuant to subparagraph (b)(i) of this Section 5 shall cease,
subject to the provisions of the last sentence of subparagraph
(b)(i) of this Section 5.
(c) HOLDERS OF PREFERRED SHARES TO VOTE ON CERTAIN OTHER MATTERS.
(i) INCREASES IN CAPITALIZATION. So long as any Preferred Shares
are outstanding, the Trust shall not, without the affirmative
vote or consent of the Holders of at least a majority of the
Preferred Shares outstanding at the time, in person or by proxy,
either in writing or at a meeting, voting as a separate class:
(a) authorize, create or issue any class or series of shares
ranking prior to or on a parity with Preferred Shares with
respect to the payment of distributions or the distribution of
assets upon dissolution, liquidation or winding up of the affairs
of the Trust, or authorize, create or issue additional shares of
any series of Preferred Shares (except that, notwithstanding the
foregoing, but subject to the provisions of paragraph (c) of
Section 13 of this Part I, the Board of Trustees, without the
vote or consent of the Holders of Preferred Shares, may from time
to time authorize and create, and the Trust may from time to time
issue additional shares of Preferred Shares, or classes or series
of preferred shares ranking on a parity with Preferred Shares
with respect to the payment of distributions and the distribution
of assets upon dissolution, liquidation or winding up of the
affairs of the Trust; PROVIDED, HOWEVER, that if Xxxxx'x and
Fitch (or other NRSRO) is not then rating the Preferred Shares,
the aggregate liquidation preference of all Preferred Shares of
the Trust outstanding after any such issuance, exclusive of
accumulated and unpaid distributions, may not exceed
$200,000,000) or (b) amend, alter or repeal the provisions of the
Declaration of Trust, or these Bylaws, whether by merger,
consolidation or otherwise, so as to affect any preference, right
or power of such Preferred Shares or the Holders thereof;
PROVIDED, HOWEVER, that (i) none of the actions permitted by the
exception to (a) above will be deemed to affect such preferences,
rights or powers, (ii) a division or split of a Preferred Share
will be deemed to affect such preferences, rights or powers only
if the terms of such division adversely affect the Holders of
Preferred Shares and (iii) the authorization, creation and
issuance of classes or series of shares ranking junior to
Preferred Shares with respect to the payment of distributions and
the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Trust, will be deemed to affect
such preferences, rights or powers only if Xxxxx'x or Fitch is
then rating Preferred Shares and such issuance would, at the time
thereof, cause the Trust not to satisfy the 1940 Act Preferred
Shares Asset Coverage or the Preferred Shares Basic Maintenance
Amount. So long as any Preferred Shares are outstanding, the
Trust shall not, without the affirmative vote or consent of the
Holders of at least a majority of the Preferred Shares
outstanding at the time, in person or by proxy, either in writing
or at a meeting, voting as a separate class, file a voluntary
application for relief
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under Federal bankruptcy law or any similar application under
state law for so long as the Trust is solvent and does not
foresee becoming insolvent.
(ii) 1940 ACT MATTERS. Unless a higher percentage is provided for
in the Declaration of Trust, (A) the affirmative vote of the
Holders a "majority of the outstanding" (as such term is defined
in the 1940 Act) preferred shares of the Trust, including
Preferred Shares, voting as a separate class, shall be required
to approve (A) any plan of reorganization (as such term is used
in the 1940 Act) adversely affecting such shares and (B) any
action requiring a vote of security holders of the Trust under
Section 13(a) of the 1940 Act. In the event a vote of Holders of
Preferred Shares is required pursuant to the provisions of
Section 13(a) of the 1940 Act, the Trust shall, not later than
ten Business Days prior to the date on which such vote is to be
taken, notify Xxxxx'x (if Xxxxx'x is then rating the Preferred
Shares) and Fitch (if Fitch is then rating the Preferred Shares)
that such vote is to be taken and the nature of the action with
respect to which such vote is to be taken. The Trust shall, not
later than ten Business Days after the date on which such vote is
taken, notify Xxxxx'x (if Xxxxx'x is then rating the Preferred
Shares) and Fitch (if Fitch is then rating the Preferred Shares)
of the results of such vote.
(d) BOARD MAY TAKE ACTIONS WITHOUT SHAREHOLDER APPROVAL. The Board of
Trustees may, without the vote or consent of the Holders of the
Preferred Shares, or any other shareholder of the Trust, from time to
time amend, alter or repeal any or all of the definitions of the terms
listed herein, or any provision of the Bylaws viewed by Moody's or
Fitch as a predicate for any such definition, and any such amendment,
alteration or repeal will not be deemed to affect the preferences,
rights or powers of the Preferred Shares or the Holders thereof,
provided the Board of Trustees receives confirmation from Xxxxx'x (if
Xxxxx'x is then rating the Preferred Shares) and Fitch (if Fitch is
then rating the Preferred Shares), that any such amendment, alteration
or repeal would not impair the ratings then assigned to the Preferred
Shares by Xxxxx'x (if Xxxxx'x is then rating the Preferred Shares) or
Fitch (if Fitch is then rating the Preferred Shares).
In addition, subject to compliance with applicable law, the Board of
Trustees may amend the definition of Maximum Rate to increase the
percentage amount by which the Reference Rate is multiplied to determine
the Maximum Rate shown therein without the vote or consent of the holders
of preferred shares, including Preferred Shares, or any other shareholder
of the Trust, and without receiving any confirmation from any rating
agency, after consultation with the Broker-Dealers, provided that
immediately following any such increase the Trust would meet the Preferred
Shares Basic Maintenance Amount Test.
(e) RELATIVE RIGHTS AND PREFERENCES. Unless otherwise required by law
or provided elsewhere in the Declaration of Trust, the Holders of
Preferred
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Shares shall not have any relative rights or preferences or other
special rights other than those specifically set forth herein.
(f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of
Preferred Shares shall have no preemptive rights or rights to
cumulative voting.
(g) VOTING FOR TRUSTEES SOLE REMEDY FOR TRUST'S FAILURE TO PAY
DISTRIBUTIONS. In the event that the Trust fails to pay any
distributions on the Preferred Shares, the exclusive remedy of the
Holders shall be the right to vote for Trustees pursuant to the
provisions of this Section 5.
(h) HOLDERS ENTITLED TO VOTE. For purposes of determining any rights
of the Holders to vote on any matter, whether such right is created by
these Bylaws, by the Declaration of Trust, by statute or otherwise, no
Holder shall be entitled to vote Preferred Shares and no Preferred
Shares 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, the requisite Notice of Redemption with respect to
such shares shall have been mailed as provided in paragraph (c) of
Section 11 of this Part I and the Redemption Price for the redemption
of such shares shall have been deposited in trust with the Auction
Agent for that purpose. No Preferred Shares held by the Trust or any
affiliate of the Trust (except for shares held by a Broker-Dealer that
is an affiliate of the Trust for the account of its customers) shall
have any voting rights or be deemed to be outstanding for voting or
other purposes.
6. 1940 ACT PREFERRED SHARES ASSET COVERAGE. THE TRUST SHALL MAINTAIN, AS
OF THE LAST BUSINESS DAY OF EACH MONTH IN WHICH ANY SHARE OF A SERIES OF
PREFERRED SHARES IS OUTSTANDING, THE 1940 ACT PREFERRED SHARES ASSET
COVERAGE; PROVIDED, HOWEVER, THAT THE REDEMPTION PURSUANT TO SECTION 11(b)
OF THIS PART I SHALL BE THE SOLE REMEDY IN THE EVENT THE TRUST FAILS TO DO
SO.
7. PREFERRED SHARES BASIC MAINTENANCE AMOUNT.
(a) So long as Preferred Shares are outstanding, the Trust shall
maintain, on each Valuation Date, and shall verify to its satisfaction
that it is maintaining on such Valuation Date, (i) Fitch Eligible
Assets having an aggregate Discounted Value equal to or greater than
the Preferred Shares Basic Maintenance Amount (if Fitch is then rating
the Preferred Shares) and (ii) Moody's Eligible Assets having an
aggregate Discounted Value equal to or greater than the Preferred
Shares Basic Maintenance Amount (if Xxxxx'x is then rating the
Preferred Shares); PROVIDED, HOWEVER, that the redemption pursuant to
Section 11(b) of this Part I shall be the sole remedy in the event the
Trust fails to do so.
(b) On or before 5:00 P.M., Eastern time, on the third Business Day
after a Valuation Date on which the Trust fails to satisfy the
Preferred Shares Basic
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Maintenance Amount, and on the third Business Day after the Preferred
Shares Basic Maintenance Cure Date with respect to such Valuation
Date, the Trust shall complete and deliver to Fitch (if Fitch is then
rating the Preferred Shares) and Xxxxx'x (if Xxxxx'x is then rating
the Preferred Shares) a Preferred Shares Basic Maintenance Report as
of the date of such failure or such Preferred Shares Basic Maintenance
Cure Date, as the case may be. The Trust shall also deliver a
Preferred Shares Basic Maintenance Report to Moody's (if Xxxxx'x is
then rating the Preferred Shares) and Fitch (if Fitch is then rating
the Preferred Shares), in each case on or before the seventh Business
Day after the last Business Day of each month. A failure by the Trust
to deliver a Preferred Shares Basic Maintenance Report pursuant to the
preceding sentence shall be deemed to be delivery of a Preferred
Shares Basic Maintenance Report indicating the Discounted Value for
all assets of the Trust is less than the Preferred Shares Basic
Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of a
Preferred Shares Basic Maintenance Report in accordance with paragraph
(b) of this Section 7 relating to a Quarterly Valuation Date that is
also an Annual Valuation Date, the Trust shall cause the Independent
Accountant to confirm in writing to Fitch (if Fitch is then rating the
Preferred Shares) and Moody's (if Xxxxx'x is then rating the Preferred
Shares) (i) the mathematical accuracy of the calculations reflected in
such Report (and in any other Preferred Shares Basic Maintenance
Report, randomly selected by the Independent Accountant, that was
delivered by the Trust during the quarter ending on such Annual
Valuation Date), (ii) that, in such Report (and in such randomly
selected Report), the Trust correctly determined in accordance with
these Bylaws whether the Trust had, at such Annual Valuation Date (and
at the Valuation Date addressed in such randomly-selected Report),
Fitch Eligible Assets (if Fitch is then rating the Preferred Shares)
of an aggregate Discounted Value at least equal to the Preferred
Shares Basic Maintenance Amount and Moody's Eligible Assets (if
Xxxxx'x is then rating the Preferred Shares) of an aggregate
Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount, (iii) that, in such Report (and in such randomly
selected Report), the Trust determined whether the Trust had, at such
Annual Valuation Date (and at the Valuation Date addressed in such
randomly selected Report) in accordance with these Bylaws, with
respect to the Fitch ratings, the issuer name and issue size and
coupon rate listed in such Report, verified by the Independent
Accountant by reference to Bloomberg Financial Services or another
independent source approved by Moody's (if Xxxxx'x is then rating the
Preferred Shares) and Fitch (if Fitch is then rating the Preferred
Shares) and the Independent Accountant shall provide a listing in its
letter of any differences, (iv) with respect to the Moody's ratings,
the issuer name, issue size and coupon rate listed in such Report,
that such information has been verified by the Independent Accountant
by reference to Bloomberg Financial Services or another independent
source approved by Moody's (if Xxxxx'x is then rating the Preferred
Shares) and Fitch (if Fitch is then rating the Preferred Shares) and
the Independent Accountant shall provide a listing in its letter of
any differences, (v) with respect to the bid or mean price (or such
alternative permissible factor used in calculating the Market
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Value) provided by the custodian of the Trust's assets to the Trust
for purposes of valuing securities in the Trust's portfolio, that the
Independent Accountant has traced the price used in such Report to the
bid or mean price listed in such Report as provided to the Trust and
verified that such information agrees (in the event such information
does not agree, the Independent Accountant will provide a listing in
its letter of such differences) and (vi) with respect to such
confirmation to Moody's (if Xxxxx'x is then rating the Preferred
Shares) and Fitch (if Fitch is then rating the Preferred Shares), that
the Trust has satisfied the requirements of Section 13 of this Part I
with respect to portfolio holdings as of the date of such Report (such
confirmation is herein called the "Auditor's Confirmation"); PROVIDED,
HOWEVER, that the Independent Accountant may base the conclusions
related to (ii) through (vi) above on a sample of at least 25
securities (or such other number of securities as the Independent
Accountant and Moody's (if Xxxxx'x is then rating the Preferred
Shares) and Fitch (if Fitch is then rating the Preferred Shares) may
agree from time to time).
(d) Within ten Business Days after the date of delivery of a Preferred
Shares Basic Maintenance Report in accordance with paragraph (b) of
this Section 7 relating to any Valuation Date on which the Trust
failed to satisfy the Preferred Shares Basic Maintenance Amount, and
relating to the Preferred Shares Basic Maintenance Cure Date with
respect to such failure to satisfy the Preferred Shares Basic
Maintenance Amount, the Trust shall cause the Independent Accountant
to provide to Fitch (if Fitch is then rating the Preferred Shares) and
Moody's (if Xxxxx'x is then rating the Preferred Shares) an Auditor's
Confirmation as to such Preferred Shares Basic Maintenance Report.
(e) If any Auditor's Confirmation delivered pursuant to paragraph (c)
or (d) of this Section 7 shows that an error was made in the Preferred
Shares Basic Maintenance Report for a particular Valuation Date for
which such Auditor's Confirmation was required to be delivered, or
shows that a lower aggregate Discounted Value for the aggregate of all
Fitch Eligible Assets (if Fitch is then rating the Preferred Shares)
or Moody's Eligible Assets (if Xxxxx'x is then rating the Preferred
Shares), as the case may be, of the Trust was determined by the
Independent Accountant, then in the absence of manifest error the
calculation or determination made by such Independent Accountant shall
be final and conclusive and shall be binding on the Trust, and the
Trust shall accordingly amend and deliver the Preferred Shares Basic
Maintenance Report to Fitch (if Fitch is then rating the Preferred
Shares) and Moody's (if Xxxxx'x is then rating the Preferred Shares)
promptly following receipt by the Trust of such Auditor's
Confirmation.
(f) On or before 5:00 p.m., Eastern time, on the first Business Day
after the Date of Original Issue of any Preferred Shares, the Trust
shall complete and deliver to Fitch (if Fitch is then rating the
Preferred Shares) and Moody's (if Xxxxx'x is then rating the Preferred
Shares) a Preferred Shares Basic Maintenance Report as of the close of
business on such Date of Original Issue.
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(g) On or before 5:00 p.m., Eastern time, on the seventh Business Day
after either (i) the Trust shall have redeemed Common Shares or (ii)
the ratio of the Discounted Value of Fitch Eligible Assets or the
Discounted Value of Xxxxx'x Eligible Assets to the Preferred Shares
Basic Maintenance Amount on any valuation date is less than or equal
to 105% or (iii) whenever requested by Moody's or Fitch, the Trust
shall complete and deliver to Fitch (if Fitch is then rating the
Preferred Shares) or Moody's (if Xxxxx'x is then rating the Preferred
Shares), as the case may be, a Preferred Shares Basic Maintenance
Report as of the date of such request.
8. RESERVED.
9. RESTRICTIONS ON DISTRIBUTIONS AND OTHER DISTRIBUTIONS.
(a) DISTRIBUTIONS ON SHARES OTHER THAN PREFERRED SHARES. Except as set
forth in the next sentence, no distributions shall be declared or paid
or set apart for payment on the shares of any class or series of
shares of the Trust ranking, as to the payment of distributions, on a
parity with Preferred Shares for any period unless full cumulative
distributions have been or contemporaneously are declared and paid on
the Preferred Shares through its most recent Distribution Payment
Date. When distributions are not paid in full upon the Preferred
Shares through its most recent Distribution Payment Date or upon the
shares of any other class or series of shares of the Trust ranking on
a parity as to the payment of distributions with Preferred Shares
through their most recent respective distribution payment dates, all
distributions declared upon Preferred Shares and any other such class
or series of shares ranking on a parity as to the payment of
distributions with Preferred Shares shall be declared pro rata so that
the amount of distributions declared per share on Preferred Shares and
such other class or series of shares shall in all cases bear to each
other the same ratio that accumulated distributions per share on the
Preferred Shares and such other class or series of shares bear to each
other (for purposes of this sentence, the amount of distributions
declared per share of Preferred Shares shall be based on the
Applicable Rate for such share for the Distribution Periods during
which distributions were not paid in full).
(b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON SHARES
UNDER THE 1940 ACT. The Board of Trustees shall not declare any
dividend (except a dividend payable in Common Shares), or declare any
other distribution, upon the Common Shares, or purchase Common Shares,
unless in every such case the Preferred Shares have, at the time of
any such declaration or purchase, an asset coverage (as defined in and
determined pursuant to the 0000 Xxx) of at least 200% (or such other
asset coverage as may in the future be specified in or under the 1940
Act as the minimum asset coverage for senior securities which are
shares or stock of a closed-end investment company as a condition of
declaring dividends on its common shares or stock) after deducting the
amount of such dividend, distribution or purchase price, as the case
may be.
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(c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. For so
long as any Preferred Shares are outstanding, and except as set forth
in paragraph (a) of this Section 9 and paragraph (c) of Section 12 of
this Part I, (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 in options, warrants or rights to
subscribe for or purchase, Common Shares or other shares, if any,
ranking junior to the Preferred Shares as to the payment of dividends
and the distribution of assets upon dissolution, liquidation or
winding up) in respect of the Common Shares or any other shares of the
Trust ranking junior to or on a parity with the Preferred Shares as to
the payment of dividends or other distributions, including the
distribution of assets upon dissolution, liquidation or winding up, or
call for redemption, redeem, purchase or otherwise acquire for
consideration any Common Shares or any other such junior shares
(except by conversion into or exchange for shares of the Trust ranking
junior to the Preferred Shares as to the payment of dividends and
other distributions, including the distribution of assets upon
dissolution, liquidation or winding up), or any such parity shares
(except by conversion into or exchange for shares of the Trust ranking
junior to or on a parity with Preferred Shares as to the payment of
dividends and other distributions, including the distribution of
assets upon dissolution, liquidation or winding up), unless (i) full
cumulative distributions on Preferred Shares through its most recently
ended Distribution Period shall have been paid or shall have been
declared and sufficient funds for the payment thereof are reasonably
expected by the Trust to be available for payment on the date payment
is due to the Auction Agent and (ii) the Trust has redeemed the full
number of Preferred Shares required to be redeemed by any provision
for mandatory redemption pertaining thereto, and (B) 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 in options, warrants or rights to subscribe for or purchase, Common
Shares or other shares, if any, ranking junior to Preferred Shares as
to the payment of dividends and other distributions, including the
distribution of assets upon dissolution, liquidation or winding up) in
respect of Common Shares or any other shares of the Trust ranking
junior to Preferred Shares as to the payment of dividends or other
distributions, including the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase or
otherwise acquire for consideration any Common Shares or any other
such junior shares (except by conversion into or exchange for shares
of the Trust ranking junior to Preferred Shares as to the payment of
dividends and other distributions, including the distribution of
assets upon dissolution, liquidation or winding up), unless
immediately after such transaction the Discounted Value of Moody's
Eligible Assets (if Xxxxx'x is then rating the Preferred Shares) and
Fitch Eligible Assets (if Fitch is then rating the Preferred Shares)
would each at least equal the Preferred Shares Basic Maintenance
Amount.
10. RESERVED.
11. REDEMPTION.
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(a) OPTIONAL REDEMPTION.
(i) Subject to the provisions of subparagraph (v) of this
paragraph (a), Preferred Shares may be redeemed, at the option of
the Trust, as a whole or from time to time in part, on the second
Business Day preceding any Distribution Payment Date for shares
of the Series, out of funds legally available therefor, at a
redemption price per share equal to the sum of $25,000 plus an
amount equal to accumulated but unpaid distributions thereon
(whether or not earned or declared) to (but not including) the
date fixed for redemption; PROVIDED, HOWEVER, that (1) Preferred
Shares are redeemable by the Trust during the Initial Rate Period
only on the second Business Day next preceding the last
Distribution Payment Date for such Initial Rate Period; and (2)
subject to subparagraph (ii) of this paragraph (a), the Notice of
Special Rate Period relating to a Special Rate Period of
Preferred Shares, as delivered to the Auction Agent and filed
with the Secretary of the Trust, may provide that shares of the
Series shall not be redeemable during the whole or any part of
such Special Rate Period (except as provided in subparagraph (iv)
of this paragraph (a)) or shall be redeemable during the whole or
any part of such Special Rate Period only upon payment of such
redemption premium or premiums as shall be specified therein
("Special Redemption Provisions").
(ii) A Notice of Special Rate Period relating to Preferred Shares
for a Special Rate Period thereof may contain Special Redemption
Provisions only if the Trust's Board of Trustees, after
consultation with the Broker-Dealer or Broker-Dealers for such
Special Rate Period of shares of the Series, determines that such
Special Redemption Provisions are in the best interest of the
Trust.
(iii) If fewer than all of the outstanding Preferred Shares are
to be redeemed pursuant to subparagraph (i) of this paragraph
(a), the number of shares of the Series to be redeemed shall be
determined by the Board of Trustees, and such shares shall be
redeemed pro rata from the Holders of shares of the Series in
proportion to the number of shares of the Series held by such
Holders or by such other method that the Board of Trustees deems
fair and equitable.
(iv) Subject to the provisions of subparagraph (v) of this
paragraph (a), Preferred Shares may be redeemed, at the option of
the Trust, as a whole but not in part, out of funds legally
available therefor, on the first day following any Distribution
Period thereof included in a Rate Period consisting of more than
364 Rate Period Days if, on the date of determination of the
Applicable Rate for shares of the Series for such Rate Period,
such Applicable Rate equaled or exceeded on such date of
determination the Treasury Note Rate for such Rate Period, at a
redemption price per share equal to the sum of $25,000 plus an
amount equal to
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accumulated but unpaid distributions thereon (whether or not
earned or declared) to (but not including) the date fixed for
redemption.
(v) The Trust may not on any date mail a Notice of Redemption
pursuant to paragraph (c) of this Section 11 in respect of a
redemption contemplated to be effected pursuant to this paragraph
(a) unless on such date (a) the Trust has available Deposit
Securities with maturity or tender dates not later than the day
preceding the applicable redemption date and having a value not
less than the amount (including any applicable premium) due to
Holders of Preferred Shares by reason of the redemption of such
shares on such redemption date and (b) the Discounted Value of
Moody's Eligible Assets (if Xxxxx'x is then rating the Preferred
Shares) and the Discounted Value of Fitch Eligible Assets (if
Fitch is then rating the Preferred Shares) each at least equal
the Preferred Shares Basic Maintenance Amount, and would at least
equal the Preferred Shares Basic Maintenance Amount immediately
subsequent to such redemption if such redemption were to occur on
such date. The Trust shall not be required to have available
Deposit Securities as described in clause (a) of this
subparagraph (v) in respect of a redemption of any Preferred
Shares, as a whole or in part, contemplated to be effected
pursuant to paragraph 11(a) where such redemption is subject to
the issuance of shares of any other series of preferred shares or
debt or other leverage of the Trust. For purposes of determining
in clause (b) of the second preceding sentence whether the
Discounted Value of Moody's Eligible Assets and Fitch Eligible
Assets each at least equal the Preferred Shares Basic Maintenance
Amount, and would at least equal the Preferred Shares Basic
Maintenance Amount immediately subsequent to such redemption, the
Moody's Discount Factor applicable to Moody's Eligible Assets and
the Fitch Discount Factor applicable to Fitch Discount Assets
shall be determined by reference, if applicable, to the first
Exposure Period longer than the Exposure Period then applicable
to the Trust, as described in the definition of Moody's Discount
Factor and Fitch Discount Factor herein.
(b) MANDATORY REDEMPTION. The Trust shall redeem, at a redemption
price equal to $25,000 per share plus accumulated but unpaid
distributions thereon (whether or not earned or declared) to (but not
including) the date fixed by the Board of Trustees for redemption,
certain of the Preferred Shares, if the Trust fails to have either
Moody's Eligible Assets with a Discounted Value or Fitch Eligible
Assets with a Discounted Value greater than or equal to the Preferred
Shares Basic Maintenance Amount, in accordance with the requirements
of the rating agency or agencies then rating the Preferred Shares, or
fails to maintain the 1940 Act Preferred Shares Asset Coverage and
such failure is not cured on or before the Preferred Shares Basic
Maintenance Cure Date or the 1940 Act Cure Date, as the case may be.
The number of Preferred Shares to be redeemed shall be equal to the
lesser of (i) the minimum number of Preferred Shares, together with
all other preferred shares subject to redemption or retirement, the
redemption of which, if deemed to have occurred immediately
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prior to the opening of business on the Cure Date, would have resulted
in the Trust's having both Moody's Eligible Assets with a Discounted
Value and Fitch Eligible Assets with a Discounted Value greater than
or equal to the Preferred Shares Basic Maintenance Amount or
maintaining the 1940 Act Preferred Shares Asset Coverage, as the case
may be, on such Cure Date (PROVIDED, HOWEVER, that if there is no such
minimum number of Preferred Shares and other preferred shares the
redemption or retirement of which would have had such result, all
Preferred Shares and other preferred shares then outstanding shall be
redeemed), and (ii) the maximum number of Preferred Shares, together
with all other preferred shares subject to redemption or retirement,
that can be redeemed out of funds expected to be legally available
therefore in accordance with the Declaration of Trust and applicable
law. In determining the Preferred Shares required to be redeemed in
accordance with the foregoing, the Trust shall allocate the number
required to be redeemed to satisfy the Preferred Shares Basic
Maintenance Amount or the 1940 Act Preferred Shares Asset Coverage, as
the case may be, pro rata among Preferred Shares and other preferred
shares (and, then, pro rata among the Preferred Shares) subject to
redemption or retirement. The Trust shall effect such redemption on
the date fixed by the Trust therefore, which date shall not be earlier
than 20 days (or such lesser number of days as determined by the Trust
with appropriate consultation with the Auction Agent and
Broker-Dealers) nor later than 40 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 Preferred Shares and other
preferred shares that are subject to redemption or retirement or the
Trust otherwise is unable to effect such redemption on or prior to 40
days after such Cure Date, the Trust shall redeem those Preferred
Shares and other preferred shares which it was unable to redeem on the
earliest practicable date on which it is able to effect such
redemption. If fewer than all of the outstanding shares Preferred
Shares are to be redeemed pursuant to this paragraph (b), the number
of Preferred Shares to be redeemed shall be redeemed pro rata from the
Holders of Preferred Shares in proportion to the number of Preferred
Shares held by such Holders or by such other method that the Board of
Trustees deems fair and equitable.
(c) NOTICE OF REDEMPTION. If the Trust shall determine or be required
to redeem Preferred Shares pursuant to paragraph (a) or (b) of this
Section 11, it shall mail a Notice of Redemption with respect to such
redemption by first class mail, postage prepaid, to each Holder of the
Preferred Shares to be redeemed, at such Holder's address as the same
appears on the record books of the Trust on the record date
established by the Board of Trustees. Such Notice of Redemption shall
be so mailed not less than 20 (or such lesser number of days as
determined by the Trust with appropriate consultation with the Auction
Agent and Broker-Dealers) nor more than 45 days prior to the date
fixed for redemption. Each such Notice of Redemption shall state: (i)
the redemption date; (ii) the number of Preferred Shares to be
redeemed; (iii) the CUSIP number for the shares of the Series; (iv)
the Redemption Price; (v) the place or places where the certificate(s)
for such shares (properly endorsed or assigned for transfer, if the
Board of Trustees shall so require and the Notice of Redemption shall
so state) are to be
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surrendered for payment of the Redemption Price; (vi) that
distributions on the shares to be redeemed will cease to accumulate on
such redemption date; and (vii) the provisions of this Section 11
under which such redemption is made. If fewer than all Preferred
Shares held by any Holder are to be redeemed, the Notice of Redemption
mailed to such Holder shall also specify the number of shares of the
Series to be redeemed from such Holder. The Trust may provide in any
Notice of Redemption relating to a redemption contemplated to be
effected pursuant to paragraph (a) of this Section 11 that such
redemption is subject to one or more conditions precedent and that the
Trust shall not be required to effect such redemption unless each such
condition shall have been satisfied at the time or times and in the
manner specified in such Notice of Redemption.
(d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding the
provisions of paragraphs (a) or (b) of this Section 11, if any
distributions on Preferred Shares (whether or not earned or declared)
are in arrears, no Preferred Shares shall be redeemed unless all
outstanding shares of the Series are simultaneously redeemed, and the
Trust shall not purchase or otherwise acquire any shares of the
Series; PROVIDED, HOWEVER, that the foregoing shall not prevent the
purchase or acquisition of all outstanding shares of the Series
pursuant to the successful completion of an otherwise lawful purchase
or exchange offer made on the same terms to, and accepted by, Holders
of all outstanding shares of the Series.
(e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent that any
redemption for which Notice of Redemption has been mailed is not made
by reason of the absence of legally available funds therefor in
accordance with the Declaration of Trust and applicable law, such
redemption shall be made as soon as practicable to the extent such
funds become available. Failure to redeem Preferred Shares shall be
deemed to exist at any time after the date specified for redemption in
a Notice of Redemption when the Trust shall have failed, for any
reason whatsoever, to deposit in trust with the Auction Agent the
Redemption Price with respect to any shares for which such Notice of
Redemption has been mailed; PROVIDED, HOWEVER, that the foregoing
shall not apply in the case of the Trust's failure to deposit in trust
with the Auction Agent the Redemption Price with respect to any shares
where (1) the Notice of Redemption relating to such redemption
provided that such redemption was subject to one or more conditions
precedent and (2) any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such
Notice of Redemption. Notwithstanding the fact that the Trust may not
have redeemed Preferred Shares for which a Notice of Redemption has
been mailed, distributions may be declared and paid on Preferred
Shares and shall include those Preferred Shares for which a Notice of
Redemption has been mailed.
(f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY TRUST. All
moneys paid to the Auction Agent for payment of the Redemption Price
of Preferred Shares called for redemption shall be held in trust by
the Auction Agent for the benefit of Holders of shares so to be
redeemed.
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(g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE NO LONGER
OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant
to paragraph (c) of this Section 11, upon the deposit with the Auction
Agent (on the Business Day fixed for redemption thereby, in funds
available on that Business Day in The City of New York, New York) of
funds sufficient to redeem the Preferred Shares that are the subject
of such notice, distributions on such shares shall cease to accumulate
and such shares shall no longer be deemed to be outstanding for any
purpose, and all rights of the Holders of the shares so called for
redemption shall cease and terminate, except the right of such Holders
to receive the Redemption Price, but without any interest or other
additional amount, except as provided in subparagraph (e)(i) of
Section 2 of this Part I and in Section 3 of this Part I. The Trust
shall be entitled to receive from the Auction Agent, promptly after
the date fixed for redemption, any cash deposited with the Auction
Agent in excess of (i) the aggregate Redemption Price of the Preferred
Shares called for redemption on such date and (ii) all other amounts
to which Holders of Preferred Shares called for redemption may be
entitled. Any funds so deposited that are unclaimed at the end of 90
days from such redemption date shall, to the extent permitted by law,
be repaid to the Trust, after which time the Holders of Preferred
Shares so called for redemption may look only to the Trust for payment
of the Redemption Price and all other amounts to which they may be
entitled.
(h) COMPLIANCE WITH APPLICABLE LAW. In effecting any redemption
pursuant to this Section 11, the Trust shall use its best efforts to
comply with all applicable conditions precedent to effecting such
redemption under the 1940 Act and any applicable Massachusetts law,
but shall effect no redemption except in accordance with the 1940 Act
and any applicable Massachusetts law.
(i) ONLY WHOLE PREFERRED SHARES MAY BE REDEEMED. In the case of any
redemption pursuant to this Section 11, only whole Preferred Shares
shall be redeemed, and in the event that any provision of the
Declaration of Trust would require redemption of a fractional share,
the Auction Agent shall be authorized to round up so that only whole
shares are redeemed.
(j) MODIFICATION OF REDEMPTION PROCEDURES. Notwithstanding any of the
foregoing provisions of this Section 11, the Trust may modify any or
all of the requirements relating to the Notice of Redemption provided
that (i) any such modification does not materially and adversely
affect any holder of Preferred Shares, and (ii) the Trust receives
notice from Xxxxx'x (if Xxxxx'x is then rating the Preferred Shares)
and Fitch (if Fitch is then rating the Preferred Shares) that such
modification would not impair the ratings assigned by Moody's and
Fitch to the Preferred Shares.
(k) PURCHASE OR OTHER ACQUISITION OF PREFERRED SHARES OUTSIDE OF AN
AUCTION. Except for the provisions described above, nothing contained
in these Bylaws limits any right of the Trust to purchase or otherwise
acquire any Preferred Shares outside of an Auction at any price,
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whether higher or lower than the price that would be paid in
connection with an optional or mandatory redemption, so long as, at
the time of any such purchase, there is no arrearage in the payment of
distributions on, or the mandatory or optional redemption price with
respect to, any Preferred Shares for which Notice of Redemption has
been given and the Trust meets the 1940 Act Preferred Shares Asset
Coverage and the Preferred Shares Basic Maintenance Amount Test after
giving effect to such purchase or acquisition on the date thereof. Any
shares that are purchased, redeemed or otherwise acquired by the Trust
shall have no voting rights. If fewer than all the Outstanding
Preferred Shares are redeemed or otherwise acquired by the Trust, the
Trust shall give notice of such transaction to the Auction Agent, in
accordance with the procedures agreed upon by the Board of Trustees.
12. LIQUIDATION RIGHTS.
(a) RANKING. The Preferred Shares shall rank on a parity with each
other and with shares of any other series of preferred shares as to
the distribution of assets upon dissolution, liquidation or winding up
of the affairs of the Trust.
(b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution, liquidation
or winding up of the affairs of the Trust, whether voluntary or
involuntary, the Holders of Preferred Shares then outstanding shall be
entitled to receive and to be paid out of the assets of the Trust
available for distribution to its Shareholders, before any payment or
distribution shall be made on the Common Shares or on any other class
of shares of the Trust ranking junior to the Preferred Shares upon
dissolution, liquidation or winding up, an amount equal to the
Liquidation Preference with respect to such shares plus an amount
equal to all distributions thereon (whether or not earned or declared
but excluding interest thereon) accumulated but unpaid to (but not
including) the date of final distribution in same day funds. After the
payment to the Holders of the Preferred Shares of the full
preferential amounts provided for in this paragraph (b), the Holders
of Preferred Shares as such shall have no right or claim to any of the
remaining assets of the Trust.
(c) PRO RATA DISTRIBUTIONS. In the event the assets of the Trust
available for distribution to the Holders of Preferred Shares upon any
dissolution, liquidation, or winding up of the affairs of the Trust,
whether voluntary or involuntary, shall be insufficient to pay in full
all amounts to which such Holders are entitled pursuant to paragraph
(b) of this Section 12, no such distribution shall be made on account
of any shares of any other class or series of preferred shares ranking
on a parity with the Preferred Shares with respect to the distribution
of assets upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the
Preferred Shares, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively
entitled upon such dissolution, liquidation or winding up.
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(d) RIGHTS OF JUNIOR SHARES. Subject to the rights of the holders of
shares of any series or class or classes of shares ranking on a parity
with the Preferred Shares with respect to the distribution of assets
upon dissolution, liquidation or winding up of the affairs of the
Trust, after payment shall have been made in full to the Holders of
the Preferred Shares as provided in paragraph (b) of this Section 12,
but not prior thereto, any other series or class or classes of shares
ranking junior to the Preferred Shares with respect to the
distribution of assets upon dissolution, liquidation or winding up of
the affairs of the Trust shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and
all assets remaining to be paid or distributed, and the Holders of the
Preferred Shares shall not be entitled to share therein.
(e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the sale of
all or substantially all the property or business of the Trust, nor
the merger or consolidation of the Trust into or with any corporation
nor the merger or consolidation of any corporation into or with the
Trust shall be a dissolution, liquidation or winding up, whether
voluntary or involuntary, for the purposes of this Section 12.
13. FUTURES AND OPTIONS TRANSACTIONS; FORWARD COMMITMENTS.
(a) If Xxxxx'x is rating any Preferred Shares, then:
(i) For so long as any Preferred Shares are rated by Xxxxx'x, the
Trust will not buy or sell futures contracts, write, purchase or
sell call options on futures contracts or purchase put options on
futures contracts or write call options (except covered call
options) on portfolio securities unless it receives confirmation
from Moody's that engaging in such transactions would not impair
the ratings then assigned to such Preferred Shares by Moody's,
except that the Trust may purchase or sell exchange-traded
futures contracts based on the NAREIT Index (the "Real Estate
Index") or United States Treasury Bonds, Bills or Notes
("Treasury Futures"), 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 Real Estate 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
outstanding futures contracts based on the Real Estate Index
exceeding in number 10% of the average number of daily
traded futures contracts based on the Real Estate Index in
the 30 days preceding the time of effecting such transaction
as reported by The Wall Street Journal;
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(B) the Trust will not engage in any Moody's Hedging
Transaction based on Treasury Futures (other than Closing
Transactions) which would cause the Trust at the time of
such transaction to own or have sold (i) outstanding futures
contracts based on Treasury Futures having an aggregate
Market Value exceeding 20% of the aggregate Market Value of
Moody's Eligible Assets owned by the Trust and rated at
least Aa by Moody's (or, if not rated by Moody's, rated AA
by S&P or Fitch), or (ii) outstanding futures contracts
based on Treasury Futures having an aggregate Market Value
exceeding 40% of the aggregate Market Value of all
securities of REITs and Other Real Estate Companies
constituting Moody's Eligible Assets owned by the Trust
(other than Moody's Eligible Assets already subject to a
Moody's Hedging Transaction) and rated Baa or A by Moody's
(or, if not rated by Moody's, rated Baa or A by S&P or
Fitch) (for purpose of the foregoing clauses (I) and (II),
the Trust shall be deemed to own futures contracts that
underlie any outstanding options written by the Trust);
(C) the Trust will engage in Closing Transactions to close
out any outstanding futures contract based on the Real
Estate Index if the amount of open interest in the Real
Estate Index as reported by The Wall Street Journal is less
than 100; and
(D) the Trust will not enter into an option on futures
transaction unless, after giving effect thereto, the Trust
would continue to have Moody's Eligible Assets with an
aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount.
(ii) For purposes of determining whether the Trust has Xxxxx'x
Eligible Assets with an aggregate Discounted Value that equals or
exceeds the Preferred Shares Basic Maintenance Amount, the
Discounted Value of Moody's Eligible Assets which the Trust is
obligated to deliver or receive pursuant to an outstanding
futures contract or option shall be as follows:
(A) assets subject to call options written by the Trust
which are either exchange-traded and "readily reversible" or
which expire within 49 days after the date as of which such
valuation is made shall be valued at the lesser of: (i)
Discounted Value and (ii) the exercise price of the call
option written by the Trust;
(B) assets subject to call options written by the Trust not
meeting the requirements of clause (A) of this sentence
shall have no value;
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(C) assets subject to put options written by the Trust shall
be valued at the lesser of: (i) the exercise price and (ii)
the Discounted Value of the subject security.
(iii) For purposes of determining whether the Trust has Moody's
Eligible Assets with an aggregate Discounted Value that equals or
exceeds the Preferred Shares Basic Maintenance Amount, the
following amounts shall be subtracted from the aggregate
Discounted Value of the Moody's Eligible Assets held by the
Trust:
(A) 10% of the exercise price of a written call option;
(B) the exercise price of any written put option;
(C) where the Trust is the seller under a futures contract,
10% of the settlement price of the futures contract;
(D) where the Trust is the purchaser under a futures
contract, the settlement price of assets purchased under
such futures contract;
(E) the settlement price of the underlying futures contract
if the Trust writes put options on a futures contract and
does not own the underlying contract; and
(F) 105% of the Market Value of the underlying futures
contracts if the Trust writes call options on a futures
contract and does not own the underlying contract.
(iv) For so long as any Preferred Shares are rated by Moody's,
the Trust will not enter into any contract to purchase securities
for a fixed price at a future date beyond customary settlement
time (other than such contracts that constitute Moody's Hedging
Transactions that are permitted under Section 13(a)(ii) 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
limitation:
(A) the Trust will maintain in a segregated account with its
custodian cash, cash equivalents or short-term, fixed-income
securities rated X-0, XXX-0 or MIG-1 by Moody's and maturing
prior to the date of the Forward Commitment with a Market
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
Commitment to which it is from time to time a party; and
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(B) the Trust will not enter into a Forward Commitment
unless, after giving effect thereto, the Trust would
continue to have Moody's Eligible Assets with an aggregate
Discounted Value equal to or greater than the Preferred
Shares Basic Maintenance Amount.
For purposes of determining whether the Trust has Xxxxx'x
Eligible Assets with an aggregate Discounted Value that equals or exceeds
the Preferred Shares Basic Maintenance Amount, the Discounted Value of
all Forward Commitments to which the Trust is a party and of all
securities deliverable to the Trust pursuant to such Forward Commitments
shall be zero.
(b) If Fitch is rating any Preferred Shares, then:
(i) For so long as any Preferred Shares are rated by Fitch, the
Trust will not buy or sell futures contracts, write, purchase or
sell call options on futures contracts or purchase put options on
futures contracts or write call options (except covered call
options) on portfolio securities unless it receives confirmation
from Fitch that engaging in such transactions would not impair
the ratings then assigned to such Preferred Shares by Fitch,
except that the Trust may purchase or sell exchange-traded
futures contracts based on the Real Estate Index or Treasury
Futures, 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, "Fitch Hedging Transactions"), subject to the
following limitations:
(A) the Trust will not engage in any Fitch Hedging
Transaction based on the Real Estate Index (other than
Closing Transactions) which would cause the Trust at the
time of such transactions to own or have sold outstanding
futures contracts based on the Real Estate Index exceeding
in number 10% of the average number of daily traded futures
contracts based on the Real Estate Index in the 30 days
preceding the time of effecting such transaction (as
reported by The Wall Street Journal);
(B) the Trust will not engage in any Fitch Hedging
Transaction based on Treasury Futures (other than Closing
Transactions) which would cause the Trust at the time of
such transaction to own or have sold (i) outstanding futures
contracts based on Treasury Futures having an aggregate
Market Value exceeding 20% of the aggregate Market Value of
Fitch Eligible Assets owned by the Trust and rated at least
AA by Fitch (or, if not rated by Fitch, rated at least Aa by
Moody's; or, if not rated by Moody's, rated at least AA by
S&P), or (ii) outstanding futures contracts based on
Treasury Futures having an aggregate Market Value exceeding
40% of the aggregate Market Value of all Fitch Eligible
Assets
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owned by the Trust (other than Fitch Eligible Assets already
subject to a Fitch Hedging Transaction) and rated at least
BBB by Fitch (or, if not rated by Fitch, rated at least Baa
by Moody's, or, if not rated by Moody's, rated at least A by
S&P) (for purposes of the foregoing clauses (i) and (ii),
the Trust shall be deemed to own futures contracts that
underlie any outstanding options written by the Trust);
(C) the Trust will engage in Closing Transactions to close
any outstanding futures contract based on the Real Estate
Index if the amount of open interest in the Real Estate
Index as reported by The Wall Street Journal is less than
100; and
(D) the Trust will not enter into an option on future
transaction unless, after giving effect thereto, the Trust
would continue to have Fitch Eligible Assets with an
aggregate Discounted Value equal to or greater than the
Preferred Shares Basic Maintenance Amount.
(ii) For purposes of determining whether the Trust has Fitch
Eligible Assets with an aggregate Discounted Value that equals or
exceeds the Preferred Shares Basic Maintenance Amount, the
Discounted Value of Fitch Eligible Assets which the Trust is
obligated to deliver or receive pursuant to an outstanding
futures contract or option shall be as follows:
(A) assets subject to call options written by the Trust
which are either exchange-traded and "readily reversible" or
which expire within 49 days after the date as of which such
valuation is made shall be valued at the lesser of: (i)
Discounted Value and (ii) the exercise price of the call
option written by the Trust;
(B) assets subject to call options written by the Trust not
meeting the requirements of clause (A) of this sentence
shall have no value;
(C) assets subject to put options written by the Trust shall
be valued at the lesser of: (i) the exercise price and (ii)
the Discounted Value of the subject security.
(iii) For purposes of determining whether the Trust has Fitch
Eligible Assets with an aggregate Discounted Value that equals or
exceeds the Preferred Shares Basic Maintenance Amount, the
following amounts shall be subtracted from the aggregate
Discounted Value of the Fitch Eligible Assets held by the Trust:
(A) 10% of the exercise price of a written call option;
(B) the exercise price of any written put option;
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(C) where the Trust is the seller under a futures contract,
10% of the settlement price of the futures contract;
(D) where the Trust is the purchaser under a futures
contract, the settlement price of assets purchased under
such futures contract;
(E) the settlement price of the underlying futures contract
if the Trust writes put options on a futures contract and
does not own the underlying contract; and
(F) 105% of the Market Value of the underlying futures
contracts if the Trust writes call options on a futures
contract and does not own the underlying contract.
(iv) For so long as any Preferred Shares are rated by Fitch, 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 Fitch Hedging
Transactions that are permitted under Section 13(b)(ii) of this
Part I), except that the Trust may enter into Forward
Commitments, subject to the following limitation:
(A) the Trust will maintain in a segregated account with its
custodian cash, cash equivalents or short-term, fixed-income
securities rated F-1 by Fitch (or, if not rated by Fitch,
rated X-0, XXX-0 or MIG-1 by Moody's) and maturing prior to
the date of the Forward Commitment with a Market 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 Commitment to which it
is from time to time a party; and
(B) the Trust will not enter into a Forward Commitment
unless, after giving effect thereto, the Trust would
continue to have Fitch Eligible Assets with an aggregate
Discounted Value equal to or greater than the Preferred
Shares Basic Maintenance Amount.
For purposes of determining whether the Trust has Fitch Eligible
Assets with an aggregate Discounted Value that equals or exceeds the
Preferred Shares Basic Maintenance Amount, the Discounted Value of all
Forward Commitments to which the Trust is a party and of all
securities deliverable to the Trust pursuant to such Forward
Commitments shall be zero.
(c) For so long as any Preferred Shares are outstanding and Moody's or
Fitch or both is rating such shares, the Trust will not, unless it has
received confirmation from Moody's or Fitch or both, as applicable,
that any such action would not
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impair the rating then assigned by such rating agency to such shares,
engage in any one or more of the following transactions:
(i) borrow money, except that the Trust may, without obtaining
the confirmation described above, borrow money for the purpose of
clearing securities transactions if
(A) the Preferred Shares Basic Maintenance Amount would
continue to be satisfied after giving effect to such
borrowing and
(B) such borrowing (i) is privately arranged with a bank or
other person and is evidenced by a promissory note or other
evidence of indebtedness that is not intended to be publicly
distributed or (ii) is for "temporary purposes," is
evidenced by a promissory note or other evidence of
indebtedness and is in an amount not exceeding 5% of the
value of the total assets of the Trust at the time of the
borrowing (for purposes of the foregoing, "temporary
purposes" means that the borrowing is to be repaid within
sixty days and is not to be extended or renewed);
(ii) except as provided in Section 5 of this Part I, issue
additional Preferred Shares or any class or series of shares
ranking prior to or on a parity with Preferred Shares with
respect to the payment of dividends or other distributions,
including the distribution of assets upon dissolution,
liquidation or winding up of the Trust, or reissue any Preferred
Shares previously purchased or redeemed by the Trust;
(iii) engage in any short sales of securities;
(iv) lend securities;
(v) merge or consolidate into or with any other corporation or
entity;
(vi) for purposes of valuation of Moody's Eligible Assets: (A) if
the Trust writes a call option, the underlying asset will be
valued as follows:(1) if the option is exchange-traded and may be
offset readily or if the option expires before the earliest
possible redemption of the Series, at the lower of the Discounted
Value of the underlying security of the option and the exercise
price of the option or (2) otherwise, it has no value; (B) if the
Trust writes a put option, the underlying asset will be valued as
follows: the lesser of (1) exercise price and (2) the Discounted
Value of the underlying security; and (C) call or put option
contracts which the Trust buys have no value. For so long as the
Series is rated by Moody's: (A) the Trust will not engage in
options transactions for leveraging or speculative purposes; (B)
the Trust will not write or sell any anticipatory contracts
pursuant to which the Trust xxxxxx the anticipated purchase of an
asset prior to completion of such purchase; (C) the Trust will
not enter into an option transaction with respect to portfolio
securities unless, after giving effect thereto, the Trust
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would continue to have Eligible Assets with an aggregate
Discounted Value equal to or greater than the Preferred Shares
Basic Maintenance Amount; (D) the Trust will not enter into an
option transaction with respect to portfolio securities unless
after giving effect to such transaction the Trust would continue
to be in compliance with the provisions relating to the Preferred
Shares Basic Maintenance Amount; (E) for purposes of the
Preferred Shares Basic Maintenance Amount assets in margin
accounts are not Eligible Assets; (F) the Trust will write only
exchange-traded options on exchanges approved by Moody's (if
Xxxxx'x is then rating the Series); (G) where delivery may be
made to the Trust with any of a class of securities, the Trust
will assume for purposes of the Preferred Shares Basic
Maintenance Amount that it takes delivery of that security which
yields it the least value; (H) the Trust will not engage in
forward contracts; and (I) there will be a quarterly audit made
of the Trust's options transactions by the Trust's independent
auditors to confirm that the Trust is in compliance with these
standards;
(vii) change a pricing service (which has been designated by
management or the Board of Trustees); and
(viii) enter into reverse repurchase agreements.
In the event any Preferred Shares are outstanding and another
nationally-recognized statistical rating organization is rating such shares
in addition to or in lieu of Moody's or Fitch, the Trust shall comply with
any restrictions imposed by such rating agency, which restrictions may be
more restrictive than those imposed by Moody's or Fitch.
14. MISCELLANEOUS.
(a) AMENDMENT OF BYLAWS TO ADD ADDITIONAL SERIES. Subject to the
provisions of paragraph (c) of Section 10 of this Part I, the Board of
Trustees may, by resolution duly adopted, without shareholder approval
(except as otherwise provided by these Bylaws or required by
applicable law), approving an annex hereto, (1) reflect any amendments
hereto which the Board of Trustees is entitled to adopt pursuant to
the terms of these Bylaws without shareholder approval or (2) add
additional series of Preferred Shares or additional shares of a series
of Preferred Shares (and terms relating thereto) to the series and
Preferred Shares described herein. Each such additional series and all
such additional shares shall be governed by the terms of these Bylaws.
(b) NO FRACTIONAL SHARES. No fractional Preferred Shares shall be
issued.
(c) STATUS OF PREFERRED SHARES REDEEMED, EXCHANGED OR OTHERWISE
ACQUIRED BY THE TRUST. Preferred Shares that are redeemed, exchanged
or otherwise acquired by the Trust shall return to the status of
authorized and unissued Preferred Shares.
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(d) BOARD MAY RESOLVE AMBIGUITIES. To the extent permitted by
applicable law, the Board of Trustees may interpret or adjust the
provisions of these Bylaws to resolve any inconsistency or ambiguity
or to remedy any formal defect, and may amend these Bylaws with
respect to Preferred Shares prior to the issuance of shares of the
Series.
(e) HEADINGS NOT DETERMINATIVE. The headings contained in these Bylaws
are for convenience of reference only and shall not affect the meaning
or interpretation of these Bylaws.
(f) NOTICES. All notices or communications, unless otherwise specified
in these Bylaws, shall be sufficiently given if in writing and
delivered in person or by facsimile or mailed by first-class mail,
postage prepaid. Notices delivered pursuant to this Section 14 shall
be deemed given on the earlier of the date received or the date five
days after which such notice is mailed, except as otherwise provided
in these Bylaws or by the Massachusetts Business Corporation Law for
notices of shareholders' meetings.
(g) EXEMPTION FROM OWNERSHIP RESTRICTIONS. Pursuant to Article V,
Sections 2.7(a)-(b) of the Declaration of Trust, for any Person who
holds Preferred Shares, the share ownership restrictions contained in
Article V, Sections 2.1(a)(i)-(ii) of the Declaration of Trust shall
be computed as though all Preferred Shares were not issued and
outstanding.
PART II
1. ORDERS.
(a) Prior to the Submission Deadline on each Auction Date for
Preferred Shares:
(i) each Beneficial Owner of shares of the Series may submit to
its Broker-Dealer by telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of the Series
held by such Beneficial Owner which such Beneficial Owner
desires to continue to hold without regard to the Applicable
Rate for shares of the Series for the next succeeding Rate
Period of the Series;
(B) the number of Outstanding shares, if any, of the Series
held by such Beneficial Owner which such Beneficial Owner
offers to sell if the Applicable Rate for shares of the
Series for the next succeeding Rate Period of shares of the
Series shall be less than the rate per annum specified by
such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of the Series
held by such Beneficial Owner which such Beneficial Owner
offers to
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sell without regard to the Applicable Rate for shares of the
Series for the next succeeding Rate Period of shares of the
Series; and
(ii) one or more Broker-Dealers, using lists of Potential
Beneficial Owners, shall in good faith for the purpose of
conducting a competitive Auction in a commercially reasonable
manner, contact Potential Beneficial Owners (by telephone or
otherwise), including Persons that are not Beneficial Owners, on
such lists to determine the number of shares, if any, of the
Series which each such Potential Beneficial Owner offers to
purchase if the Applicable Rate for shares of the Series for the
next succeeding Rate Period of shares of the Series shall not be
less than the rate per annum specified by such Potential
Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, of information referred to in clause (i)(A), (i)(B), (i)(C)
or (ii) of this paragraph (a) is hereinafter referred to as an "Order" and
collectively as "Orders" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order with a Broker-Dealer, and such
Broker-Dealer placing an Order with the Auction Agent, is hereinafter
referred to as a "Bidder" and collectively as "Bidders"; an Order
containing the information referred to in clause (i)(A) of this paragraph
(a) is hereinafter referred to as a "Hold Order" and collectively as "Hold
Orders"; an Order containing the information referred to in clause (i)(B)
or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and
collectively as "Bids"; and an Order containing the information referred to
in clause (i)(C) of this paragraph (a) is hereinafter referred to as a
"Sell Order" and collectively as "Sell Orders."
(b)
(i) A Bid by a Beneficial Owner or an Existing Holder of
Preferred Shares subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of the Series specified
in such Bid if the Applicable Rate for shares of the Series
determined on such Auction Date shall be less than the rate
specified therein;
(B) such number or a lesser number of Outstanding shares of
the Series to be determined as set forth in clause (iv) of
paragraph (a) of Section 4 of this Part II if the Applicable
Rate for shares of the Series determined on such Auction
Date shall be equal to the rate specified therein; or
(C) the number of Outstanding shares of the Series specified
in such Bid if the rate specified therein shall be higher
than the Maximum Rate for shares of the Series, or such
number or a lesser number of Outstanding shares of the
Series to be determined as set forth in clause (iii) of
paragraph (b) of Section 4 of this Part II if
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the rate specified therein shall be higher than the Maximum
Rate for shares of the Series and Sufficient Clearing Bids
for shares of the Series do not exist.
(ii) A Sell Order by a Beneficial Owner or an Existing Holder of
Preferred Shares subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of the Series specified
in such Sell Order; or
(B) such number or a lesser number of Outstanding shares of
the Series as set forth in clause (iii) of paragraph (b) of
Section 4 of this Part II if Sufficient Clearing Bids for
shares of the Series do not exist; PROVIDED, HOWEVER, that a
Broker-Dealer that is an Existing Holder with respect to
shares of a series of Preferred Shares shall not be liable
to any Person for failing to sell such shares pursuant to a
Sell Order described in the proviso to paragraph (c) of
Section 2 of this Part II if (1) such shares were
transferred by the Beneficial Owner thereof without
compliance by such Beneficial Owner or its transferee
Broker-Dealer (or other transferee person, if permitted by
the Trust) with the provisions of Section 7 of this Part II
or (2) such Broker-Dealer has informed the Auction Agent
pursuant to the terms of its Broker-Dealer Agreement that,
according to such Broker-Dealer's records, such
Broker-Dealer believes it is not the Existing Holder of such
shares.
(iii) A Bid by a Potential Beneficial Holder or a Potential
Holder of Preferred Shares subject to an Auction on any Auction
Date shall constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of the Series specified
in such Bid if the Applicable Rate for shares of the Series
determined on such Auction Date shall be higher than the
rate specified therein; or
(B) such number or a lesser number of Outstanding shares of
the Series as set forth in clause (v) of paragraph (a) of
Section 4 of this Part II if the Applicable Rate for shares
of the Series determined on such Auction Date shall be equal
to the rate specified therein.
(c) No Order for any number of Preferred Shares other than whole
shares shall be valid.
2. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
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(a) Each Broker-Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date all Orders for
Preferred Shares subject to an Auction on such Auction Date obtained
by such Broker-Dealer, designating itself (unless otherwise permitted
by the Trust) as an Existing Holder in respect of shares subject to
Orders submitted or deemed submitted to it by Beneficial Owners and as
a Potential Holder in respect of shares subject to Orders submitted to
it by Potential Beneficial Owners, and shall specify with respect to
each Order for such shares:
(i) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Trust);
(ii) the aggregate number of shares of the Series that are the
subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder of
shares of the Series:
(A) the number of shares, if any, of the Series subject to
any Hold Order of such Existing Holder;
(B) the number of shares, if any, of the Series subject to
any Bid of such Existing Holder and the rate specified in
such Bid; and
(C) the number of shares, if any, of the Series subject to
any Sell Order of such Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder of shares of
the Series, the rate and number of shares of the Series specified
in such Potential Holder's Bid.
(b) If any rate specified in any Bid contains more than three figures
to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one thousandth (.001) of 1%.
(c) If an Order or Orders covering all of the Outstanding Preferred
Shares held by any Existing Holder is not submitted to the Auction
Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted by or on behalf of such Existing
Holder covering the number of Outstanding shares of the Series held by
such Existing Holder and not subject to Orders submitted to the
Auction Agent; PROVIDED, HOWEVER, that if an Order or Orders covering
all of the Outstanding shares of the Series held by any Existing
Holder is not submitted to the Auction Agent prior to the Submission
Deadline for an Auction relating to a Special Rate Period consisting
of more than 28 Rate Period Days, the Auction Agent shall deem a Sell
Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of the Series held by such
Existing Holder and not subject to Orders submitted to the Auction
Agent.
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(d) If one or more Orders of an Existing Holder is submitted to the
Auction Agent covering in the aggregate more than the number of
Outstanding Preferred Shares subject to an Auction held by such
Existing Holder, such Orders shall be considered valid in the
following order of priority:
(i) all Hold Orders for shares of the Series shall be considered
valid, but only up to and including in the aggregate the number
of Outstanding shares of the Series held by such Existing Holder,
and if the number of shares of the Series subject to such Hold
Orders exceeds the number of Outstanding shares of the Series
held by such Existing Holder, the number of shares subject to
each such Hold Order shall be reduced pro rata to cover the
number of Outstanding shares of the Series held by such Existing
Holder;
(ii) (A) any Bid for shares of the Series shall be considered
valid up to and including the excess of the number of Outstanding
shares of the Series held by such Existing Holder over the number
of shares of the Series subject to any Hold Orders referred to in
clause (i) above;
(B) subject to subclause (A), if more than one Bid of an Existing
Holder for shares of the Series is submitted to the Auction Agent
with the same rate and the number of Outstanding shares of the
Series subject to such Bids is greater than such excess, such
Bids shall be considered valid up to and including the amount of
such excess, and the number of shares of the Series subject to
each Bid with the same rate shall be reduced pro rata to cover
the number of shares of the Series equal to such excess;
(C) subject to subclauses (A) and (B), if more than one Bid of an
Existing Holder for shares of the Series is submitted to the
Auction Agent with different rates, such Bids shall be considered
valid in the ascending order of their respective rates up to and
including the amount of such excess; and
(D) in any such event, the number, if any, of such Outstanding
shares of the Series subject to any portion of Bids considered
not valid in whole or in part under this clause (ii) shall be
treated as the subject of a Bid for shares of the Series by or on
behalf of a Potential Holder at the rate therein specified; and
(iii) all Sell Orders for shares of the Series shall be
considered valid up to and including the excess of the number of
Outstanding shares of the Series held by such Existing Holder
over the sum of shares of the Series subject to valid Hold Orders
referred to in clause (i) above and valid Bids referred to in
clause (ii) above.
(e) If more than one Bid for one or more Preferred Shares is submitted
to the Auction Agent by or on behalf of any Potential Holder, each
such Bid submitted shall be a separate Bid with the rate and number of
shares therein specified.
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(f) Any Order submitted by a Beneficial Owner or a Potential
Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, prior to the Submission Deadline on any Auction Date,
shall be irrevocable.
3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE.
(a) Not earlier than the Submission Deadline on each Auction Date for
Preferred Shares, the Auction Agent shall assemble all valid Orders
submitted or deemed submitted to it by the Broker-Dealers in respect
of shares of the Series (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to
individually as a "Submitted Hold Order," a "Submitted Bid" or a
"Submitted Sell Order," as the case may be, or as a "Submitted Order"
and collectively as "Submitted Hold Orders," "Submitted Bids" or
"Submitted Sell Orders," as the case may be, or as "Submitted Orders")
and shall determine for the Series:
(i) the excess of the number of Outstanding Preferred Shares of
the Series over the number of Outstanding shares of the Series
subject to Submitted Hold Orders (such excess being hereinafter
referred to as the "Available Preferred Shares" of the Series);
(ii) from the Submitted Orders for shares of the Series whether:
(A) the number of Outstanding shares of the Series subject
to Submitted Bids of Potential Holders specifying one or
more rates equal to or lower than the Maximum Rate for
shares of the Series exceeds or is equal to the sum of:
(B) the number of Outstanding shares of the Series subject
to Submitted Bids of Existing Holders specifying one or more
rates higher than the Maximum Rate for shares of the Series;
and
(C) the number of Outstanding shares of the Series subject
to Submitted Sell Orders (in the event such excess or such
equality exists (other than because the number of shares of
the Series in subclauses (B) and (C) above is zero because
all of the Outstanding shares of the Series are subject to
Submitted Hold Orders), such Submitted Bids in subclause (A)
above being hereinafter referred to collectively as
"Sufficient Clearing Bids" for shares of the Series); and
(iii) if Sufficient Clearing Bids for shares of the Series exist,
the lowest rate specified in such Submitted Bids (the "Winning
Bid Rate" for shares of the Series) which if:
(A) (I) each such Submitted Bid of Existing Holders
specifying such lowest rate and (II) all other such
Submitted Bids of Existing
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Holders specifying lower rates were rejected, thus entitling
such Existing Holders to continue to hold the shares of the
Series that are subject to such Submitted Bids; and
(B) (I) each such Submitted Bid of Potential Holders
specifying such lowest rate and (II) all other such
Submitted Bids of Potential Holders specifying lower rates
were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of the
Series which, when added to the number of Outstanding shares of the
Series to be purchased by such Potential Holders described in
subclause (B) above, would equal not less than the Available Preferred
Shares of the Series.
(b) Promptly after the Auction Agent has made the determinations
pursuant to paragraph (a) of this Section 3, the Auction Agent shall
advise the Trust of the Maximum Rate for Preferred Shares for which an
Auction is being held on the Auction Date and, based on such
determination, the Applicable Rate for shares of the Series for the
next succeeding Rate Period thereof as follows:
(i) if Sufficient Clearing Bids for shares of the Series exist,
the Applicable Rate for all shares of the Series for the next
succeeding Rate Period thereof shall be equal to the Winning Bid
Rate for shares of the Series so determined;
(ii) if Sufficient Clearing Bids for shares of the Series do not
exist (other than because all of the Outstanding shares of the
Series are subject to Submitted Hold Orders), the Applicable Rate
for all shares of the Series for the next succeeding Rate Period
thereof shall be equal to the Maximum Rate for shares of the
Series; or
(iii) if all of the Outstanding shares of the Series are subject
to Submitted Hold Orders, the Applicable Rate for all shares of
the Series for the next succeeding Rate Period thereof shall be
the All Hold Rate.
4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS
AND ALLOCATION OF SHARES. Existing Holders shall continue to hold the
Preferred Shares that are subject to Submitted Hold Orders, and, based on
the determinations made pursuant to paragraph (a) of Section 3 of this Part
II, the Submitted Bids and Submitted Sell Orders shall be accepted or
rejected by the Auction Agent and the Auction Agent shall take such other
action as set forth below:
(a) If Sufficient Clearing Bids for Preferred Shares have been made,
all Submitted Sell Orders with respect to shares of the Series shall
be accepted and, subject to the provisions of paragraphs (d) and (e)
of this Section 4, Submitted Bids with respect to shares of the Series
shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids with respect to shares of the
Series shall be rejected:
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(i) Existing Holders' Submitted Bids for shares of the Series
specifying any rate that is higher than the Winning Bid Rate for
shares of the Series shall be accepted, thus requiring each such
Existing Holder to sell the Preferred Shares subject to such
Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of the Series
specifying any rate that is lower than the Winning Bid Rate for
shares of the Series shall be rejected, thus entitling each such
Existing Holder to continue to hold the Preferred Shares subject
to such Submitted Bids;
(iii) Potential Holders' Submitted Bids for shares of the Series
specifying any rate that is lower than the Winning Bid Rate for
shares of the Series shall be accepted;
(iv) each Existing Holder's Submitted Bid for shares of the
Series specifying a rate that is equal to the Winning Bid Rate
for shares of the Series shall be rejected, thus entitling such
Existing Holder to continue to hold the Preferred Shares subject
to such Submitted Bid, unless the number of Outstanding Preferred
Shares subject to all such Submitted Bids shall be greater than
the number of Preferred Shares ("remaining shares") in the excess
of the Available Preferred Shares of the Series over the number
of Preferred Shares subject to Submitted Bids described in
clauses (ii) and (iii) of this paragraph (a), in which event such
Submitted Bid of such Existing Holder shall be rejected in part,
and such Existing Holder shall be entitled to continue to hold
Preferred Shares subject to such Submitted Bid, but only in an
amount equal to the number of Preferred Shares of the Series
obtained by multiplying the number of remaining shares by a
fraction, the numerator of which shall be the number of
Outstanding Preferred Shares held by such Existing Holder subject
to such Submitted Bid and the denominator of which shall be the
aggregate number of Outstanding Preferred Shares subject to such
Submitted Bids made by all such Existing Holders that specified a
rate equal to the Winning Bid Rate for shares of the Series; and
(v) each Potential Holder's Submitted Bid for shares of the
Series specifying a rate that is equal to the Winning Bid Rate
for shares of the Series shall be accepted but only in an amount
equal to the number of shares of the Series obtained by
multiplying the number of shares in the excess of the Available
Preferred Shares of the Series over the number of Preferred
Shares subject to Submitted Bids described in clauses (ii)
through (iv) of this paragraph (a) by a fraction, the numerator
of which shall be the number of Outstanding Preferred Shares
subject to such Submitted Bid and the denominator of which shall
be the aggregate number of Outstanding Preferred Shares subject
to such Submitted Bids made by all such Potential Holders that
specified a rate equal to the Winning Bid Rate for shares of the
Series.
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(b) If Sufficient Clearing Bids for shares of a series of Preferred
Shares have not been made (other than because all of the Outstanding
shares of the Series are subject to Submitted Hold Orders), subject to
the provisions of paragraph (d) of this Section 4, Submitted Orders
for shares of the Series shall be accepted or rejected as follows in
the following order of priority and all other Submitted Bids for
shares of the Series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of the Series
specifying any rate that is equal to or lower than the Maximum
Rate for shares of the Series shall be rejected, thus entitling
such Existing Holders to continue to hold the Preferred Shares
subject to such Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of the Series
specifying any rate that is equal to or lower than the Maximum
Rate for shares of the Series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of the
Series specifying any rate that is higher than the Maximum Rate
for shares of the Series and the Submitted Sell Orders for shares
of the Series of each Existing Holder shall be accepted, thus
entitling each Existing Holder that submitted or on whose behalf
was submitted any such Submitted Bid or Submitted Sell Order to
sell the shares of the Series subject to such Submitted Bid or
Submitted Sell Order, but in both cases only in an amount equal
to the number of shares of the Series obtained by multiplying the
number of shares of the Series subject to Submitted Bids
described in clause (ii) of this paragraph (b) by a fraction, the
numerator of which shall be the number of Outstanding shares of
the Series held by such Existing Holder subject to such Submitted
Bid or Submitted Sell Order and the denominator of which shall be
the aggregate number of Outstanding shares of the Series subject
to all such Submitted Bids and Submitted Sell Orders.
(c) If all of the Outstanding Preferred Shares are subject to
Submitted Hold Orders, all Submitted Bids for shares of the Series
shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v)
of paragraph (a) or clause (iii) of paragraph (b) of this Section 4,
any Existing Holder would be entitled or required to sell, or any
Potential Holder would be entitled or required to purchase, a fraction
of a Preferred Share on any Auction Date, the Auction Agent shall, in
such manner as it shall determine in its sole discretion, round up or
down the number of Preferred Shares of the Series to be purchased or
sold by any Existing Holder or Potential Holder on such Auction Date
as a result of such procedures so that the number of shares so
purchased or sold by each Existing Holder or Potential Holder on such
Auction Date shall be whole Preferred Shares.
(e) If, as a result of the procedures described in clause (v) of
paragraph (a) of this Section 4, any Potential Holder would be
entitled or required to purchase less than a whole share of a series
of Preferred Shares on any Auction Date, the Auction
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Agent shall, in such manner as it shall determine in its sole
discretion, allocate Preferred Shares of the Series for purchase among
Potential Holders so that only whole Preferred Shares of the Series
are purchased on such Auction Date as a result of such procedures by
any Potential Holder, even if such allocation results in one or more
Potential Holders not purchasing Preferred Shares of the Series on
such Auction Date.
(f) Based on the results of each Auction for Preferred Shares, the
Auction Agent shall determine the aggregate number of shares of the
Series to be purchased and the aggregate number of shares of the
Series to be sold by Potential Holders and Existing Holders and, with
respect to each Potential Holder and Existing Holder, to the extent
that such aggregate number of shares to be purchased and such
aggregate number of shares to be sold differ, determine to which other
Potential Holder(s) or Existing Holder(s) they shall deliver, or from
which other Potential Holder(s) or Existing Holder(s) they shall
receive, as the case may be, Preferred Shares of the Series.
Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of Preferred Shares with respect to whom a Broker-Dealer
submitted a Bid to the Auction Agent for such shares that was accepted in
whole or in part, or submitted or is deemed to have submitted a Sell Order
for such shares that was accepted in whole or in part, fails to instruct
its Agent Member to deliver such shares against payment therefor, partial
deliveries of Preferred Shares that have been made in respect of Potential
Holders' or Potential Beneficial Owners' Submitted Bids for shares of the
Series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial Owners.
(g) Neither the Trust nor the Auction Agent nor any affiliate of
either shall have any responsibility or liability with respect to the
failure of an Existing Holder, a Potential Holder, a Beneficial Owner,
a Potential Beneficial Owner or its respective Agent Member to deliver
Preferred Shares or to pay for Preferred Shares sold or purchased
pursuant to the Auction Procedures or otherwise.
5. RESERVED.
6. AUCTION AGENT.
For so long as any Preferred Shares are outstanding, the Auction Agent,
duly appointed by the Trust to so act, shall be in each case a commercial bank,
trust company or other financial institution independent of the Trust and its
affiliates (which however, may engage or have engaged in business transactions
with the Trust or its affiliates) and at no time shall the Trust or any of its
affiliates act as the Auction Agent in connection with the Auction Procedures.
If the Auction Agent resigns or for any reason its appointment is terminated
during any period that any Preferred Shares are outstanding, the Board of
Trustees shall use its best efforts promptly thereafter to appoint another
qualified commercial bank, trust company or financial institution to act as the
Auction Agent. The Auction Agent's registry of Existing Holders of Preferred
Shares
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shall be conclusive and binding on the Broker-Dealers. A Broker-Dealer
may inquire of the Auction Agent between 3:00 p.m. Eastern time on the Business
Day preceding an Auction for shares of a series of Preferred Shares and 9:30
a.m. Eastern time on the Auction Date for such Auction to ascertain the number
of shares in respect of which the Auction Agent has determined such
Broker-Dealer to be an Existing Holder. If such Broker-Dealer believes it is the
Existing Holder of fewer shares of the Series than specified by the Auction
Agent in response to such Broker-Dealer's inquiry, such Broker-Dealer may so
inform the Auction Agent of that belief. Such Broker-Dealer shall not, in its
capacity as Existing Holder of shares of the Series, submit Orders in such
Auction in respect of shares of the Series covering in the aggregate more than
the number of shares of the Series specified by the Auction Agent in response to
such Broker-Dealer's inquiry.
7. TRANSFER OF PREFERRED SHARES.
Unless otherwise permitted by the Trust, a Beneficial Owner or an Existing
Holder may sell, transfer or otherwise dispose of Preferred Shares only in whole
shares and only pursuant to a Bid or Sell Order placed with the Auction Agent in
accordance with the procedures described in this Part II or to a Broker-Dealer,
PROVIDED, HOWEVER, that (a) a sale, transfer or other disposition of Preferred
Shares from a customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer as the holder of such shares to that Broker-Dealer or another
customer of that Broker-Dealer shall not be deemed to be a sale, transfer or
other disposition for purposes of this Section 7 if such Broker-Dealer remains
the Existing Holder of the shares so sold, transferred or disposed of
immediately after such sale, transfer or disposition and (b) in the case of all
transfers other than pursuant to Auctions, the Broker-Dealer (or other Person,
if permitted by the Trust) to whom such transfer is made shall advise the
Auction Agent of such transfer.
8. GLOBAL CERTIFICATE.
Prior to the commencement of a Voting Period, (i) all of the Preferred
Shares outstanding from time to time shall be represented by one global
certificate registered in the name of the Securities Depository or its nominee
and (ii) no registration of transfer of Preferred Shares shall be made on the
books of the Trust to any Person other than the Securities Depository or its
nominee.
9. FORCE MAJEURE.
(a) Notwithstanding anything else set forth herein, if an Auction Date
is not a Business Day because the New York Stock Exchange is closed
for business for more than three consecutive business days due to an
act of God, natural disaster, act of war, civil or military
disturbance, act of terrorism, sabotage, riots or a loss or
malfunction of utilities or communications services or the Auction
Agent is not able to conduct an Auction in accordance with the Auction
Procedures for any such reason, then the Auction Rate for the next
Distribution Period shall be the Auction Rate determined on the
previous Auction Date.
(b) Notwithstanding anything else set forth herein, if a Distribution
Payment Date is not a Business Day because the New York Stock Exchange
is closed for
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business for more than three consecutive business days due to an act
of God, natural disaster, act of war, civil or military disturbance,
act of terrorism, sabotage, riots or a loss or malfunction of
utilities or communications services or the distribution payable on
such date cannot be paid for any such reason, then:
(i) the Distribution Payment Date for the affected Distribution
Period shall be the next Business Day on which the Trust and its
paying agent, if any, are able to cause the distribution to be
paid using their reasonable best efforts;
(ii) the affected Distribution Period shall end on the day it
would have ended had such event not occurred and the Distribution
Payment Date had remained the scheduled date; and
(iii) the next Distribution Period will begin and end on the
dates on which it would have begun and ended had such event not
occurred and the Distribution Payment Date remained the scheduled
date.
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