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SIGNATURE ARTHUR S. FILEAN
TITLE V. PRES. & SECRETARY
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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Report of Independent Auditors
The Board of Directors and Shareholders
Principal Tax-Exempt Bond Fund, Inc.
In planning and performing our audit of the financial statements of Principal
Tax-Exempt Bond Fund, Inc. (formerly known as Princor Tax-Exempt Bond Fund,
Inc.) for the year ended October 31, 1998, we considered its internal control,
including control activities for safeguarding securities, in order to determine
our auditing procedures for the purpose of expressing our opinion on the
financial statements and to comply with the requirements of Form N-SAR, not to
provide assurance on internal control.
The management of Principal Tax-Exempt Bond Fund, Inc. is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of controls. Generally, controls that are
relevant to an audit pertain to the entity's objective of preparing financial
statements for external purposes that are fairly presented in conformity with
generally accepted accounting principles. These controls include the
safeguarding of assets against unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or instances of
fraud may occur and not be detected. Also, projection of any evaluation of
internal control to future periods is subject to the risk that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of one or more
of the specific internal control components does not reduce to a relatively low
level the risk that errors or instances of fraud in amounts that would be
material in relation to the financial statements being audited may occur and not
be detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters involving
internal control and its operation, including control for safeguarding
securities, that we consider to be material weaknesses as defined above as of
October 31, 1998.
This report is intended solely for the information and use of management and the
Board of Directors of Principal Tax-Exempt Bond Fund, Inc. and the Securities
and Exchange Commission and is not intended to be and should not be used by
anyone other than these specified parties.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
November 25, 1998
BYLAWS
of
PRINCIPAL TAX-EXEMPT BOND FUND, INC.
ARTICLE 1
Name, Fiscal Year
1.01 The name of this Corporation shall be Principal Tax-Exempt Bond
Fund, Inc. Except as otherwise from time to time provided by the Board of
Directors, the fiscal year of the Corporation shall begin November 1 and end
October 31.
ARTICLE 2
Stockholders Meetings
2.01 Place of Meetings. All meetings of the stockholders shall be held
at such place within or without the State of Maryland, as is stated in the
notice of meeting.
2.02 Annual Meetings. The Board of Directors of the Fund shall determine
whether or not an annual meeting of stockholders shall be held. In the event
that an annual meeting of stockholders is held, such meeting shall be held on
the first Tuesday after the first Monday of February in the year or on such
other day during the 31-day period following the first Tuesday after the first
Monday of February as the directors may determine.
2.03 Special Meetings. Special meetings of the stockholders shall be
held whenever called by the chairman of the board, the president or the Board of
Directors.
2.04 Notice of Shareholders' Meetings. Notice of each shareholders'
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given by mailing such notice
to each shareholder of record at his address as it appears on the records of the
Corporation not less than 10 nor more than 90 days prior to the date of the
meeting. Any meeting at which all shareholders entitled to vote are present
either in person or by proxy or of which those not present have waived notice in
writing shall be a legal meeting for the transaction of business notwithstanding
that notice has not been given as herein provided.
2.05 Quorum. Except as otherwise expressly required by law, these bylaws
or the Articles of Incorporation, as from time to time amended, at any meeting
of the stockholders the presence in person or by proxy of the holders of
one-third of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote, shall constitute a quorum, but a lesser
interest may adjourn any meeting from time to time and the meeting may be held
as adjourned without further notice. When a quorum is present at any meeting a
majority of the stock represented thereat shall decide any question brought
before such meeting unless the question is one upon which by express provision
of law or of these bylaws or the Articles of Incorporation a larger or different
vote is required, in which case such express provision shall govern.
2.06 Proxies and Voting. Stockholders of record may vote at any meeting
either in person or by written proxy signed by the stockholder or by the
stockholder's duly authorized attorney-in-fact dated not more than eleven months
before the date of exercise, which shall be filed with the Secretary of the
meeting before being voted. Each stockholder shall be entitled to one vote for
each share of stock held, and to a fraction of a vote equal to any fractional
share held.
2.07 Stock Ledger. The Corporation shall maintain at the office of the
stock transfer agent of the Corporation, or at the office of any successor
thereto as stock transfer agent of the Corporation, an original stock ledger
containing the names and addresses of all stockholders and the number of shares
of each class held by each stockholder. Such stock ledger may be in written form
or any other form capable of being converted into written form within a
reasonable time for visual inspection.
ARTICLE 3
Board of Directors
3.01 Number, Service. The Corporation shall have a Board of Directors
consisting of not less than three and no more than fifteen members. The number
of Directors to constitute the whole board within the limits above-stated shall
be fixed by the Board of Directors. The Directors may be chosen (i) by
stockholders at any annual meeting of stockholders held for the purpose of
electing directors or at any meeting held in lieu thereof, or at any special
meeting called for such purpose, or (ii) by the Directors at any regular or
special meeting of the Board to fill a vacancy on the Board as provided in these
bylaws and Maryland General Corporation Law. Each director should serve until
the next annual meeting of shareholders and until a successor is duly qualified
and elected, unless sooner displaced.
3.02 Powers. The Board of Directors shall be responsible for the entire
management of the business of the Corporation. In the management and control of
the property, business and affairs of the Corporation the Board of Directors is
hereby vested with all the powers possessed by the Corporation itself so far as
this designation of authority is not inconsistent with the laws of the State of
Maryland, but subject to the limitations and qualifications contained in the
Articles of Incorporation and in these bylaws.
3.03 Executive Committee and Other Committees. The Board of Directors
may elect from its members an executive committee of not less than three which
may exercise certain powers of the Board of Directors when the board is not in
session pursuant to Maryland Law. The executive committee may make rules for the
holding and conduct of its meetings and keeping the records thereof, and shall
report its action to the Board of Directors.
The Board of Directors may elect from its members such other
committees from time to time as it may desire. The number composing such
committees and the powers conferred upon them shall be determined by the Board
of Directors at its own discretion.
3.04 Meetings. Regular meetings of the Board of Directors may be held in
such places within or without the State of Maryland, and at such times as the
board may from time to time determine, and if so determined, notices thereof
need not be given. Special meetings of the Board of Directors may be held at any
time or place whenever called by the president or a majority of the directors,
notice thereof being given by the secretary or the president, or the directors
calling the meeting, to each director. Special meetings of the Board of
Directors may also be held without formal notice provided all directors are
present or those not present have waived notice thereof.
3.05 Quorum. A majority of the members of the Board of Directors from
time to time in office but in no event not less than one-third of the number
constituting the whole board shall constitute a quorum for the transaction of
business provided, however, that where the Investment Company Act requires a
different quorum to transact business of a specific nature, the number of
directors so required shall constitute a quorum for the transaction of such
business.
A lesser number may adjourn a meeting from time to time and the
meeting may be held without further notice. When a quorum is present at any
meeting a majority of the members present thereat shall decide any question
brought before such meeting except as otherwise expressly required by law, the
Articles of Incorporation or these bylaws.
3.06 Action by Directors Other than at a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if a written consent to such
action is signed by all members of the Board of Directors or such committee, as
the case may be, and such written consent is filed with the minutes of
proceedings of the Board of Directors or committee.
3.07 Holding of Meetings by Conference Telephone Call. At any regular or
special meeting, members of the Board of Directors or any committee thereof may
participate by conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section shall constitute presence in
person at such meeting.
ARTICLE 4
Officers
4.01 Selection. The officers of the Corporation shall be a president,
one or more vice-presidents, a secretary and a treasurer. The Board of Directors
may, if it so determines, also elect a chairman of the board. All officers shall
be elected by the Board of Directors and shall serve at the pleasure of the
board. The same person may hold more than one office except the offices of
president and vice-president.
4.02 Eligibility. The chairman of the board, if any, and the president
shall be directors of the Corporation. Other officers need not be directors.
4.03 Additional Officers and Agents. The Board of Directors may appoint
one or more assistant treasurers, one or more assistant secretaries and such
other officers or agents as it may deem advisable, and may prescribe the duties
thereof.
4.04 Chairman of the Board of Directors. The chairman of the board, if
any, shall preside at all meetings of the Board of Directors at which he is
present. He shall have such other authority and duties as the Board of Directors
shall from time to time determine.
4.05 The President. The president shall be the chief executive officer
of the Corporation; he shall have general and active management of the business,
affairs and property of the Corporation, and shall see that all orders and
resolutions of the Board of Directors are carried into effect. He shall preside
at meetings of stockholders, and of the Board of Directors unless a chairman of
the board has been elected and is present.
4.06 The Vice-Presidents. The vice-presidents shall respectively have
such powers and perform such duties as may be assigned to them by the Board of
Directors or the president. In the absence or disability of the president, the
vice-presidents, in the order determined by the Board of Directors, shall
perform the duties and exercise the powers of the president.
4.07 The Secretary. The secretary shall keep accurate minutes of all
meetings of the stockholders and directors, and shall perform all duties
commonly incident to his office and as provided by law and shall perform such
other duties and have such other powers as the Board of Directors shall from
time to time designate. In his absence an assistant secretary or secretary pro
tempore shall perform his duties.
4.08 The Treasurer. The treasurer shall, subject to the order of the
Board of Directors and in accordance with any arrangements for performance of
services as custodian, transfer agent or disbursing agent approved by the board,
have the care and custody of the money, funds, securities, valuable papers and
documents of the Corporation, and shall have and exercise under the supervision
of the Board of Directors all powers and duties commonly incident to his office
and as provided by law. He shall keep or cause to be kept accurate books of
account of the Corporation's transactions which shall be subject at all times to
the inspection and control of the Board of Directors. He shall deposit all funds
of the Corporation in such bank or banks, trust company or trust companies or
such firm or firms doing a banking business as the Board of Directors shall
designate. In his absence, an assistant treasurer shall perform his duties.
ARTICLE 5
Vacancies
5.01 Removals. The stockholders may at any meeting called for the
purpose, by vote of the holders of a majority of the capital stock issued and
outstanding and entitled to vote, remove from office any director and, unless
the number of directors constituting the whole board is accordingly decreased,
elect a successor.
5.02 Vacancies. If the office of any director becomes or is vacant by
reason of death, resignation, removal, disqualification, an increase in the
authorized number of directors or otherwise, the remaining directors may by vote
of a majority of said directors choose a successor or successors who shall hold
office for the unexpired term; provided that vacancies on the Board of Directors
may be so filled only if, after the filling of the same, at least two-thirds of
the directors then holding office would be directors elected to such office by
the stockholders at a meeting or meetings called for the purpose. In the event
that at any time less than a majority of the directors were so elected by the
stockholders, a special meeting of the stockholders shall be called forthwith
and held as promptly as possible and in any event within sixty days for the
purpose of electing directors to fill any existing vacancies in the Board of
Directors.
ARTICLE 6
Certificates of Stock
6.01 Certificates. The Board of Directors may adopt a policy of not
issuing certificates except in extraordinary situations as may be authorized
form time to time by an officer of the Corporation. If such a policy is adopted,
a stockholder may obtain a certificate or certificates of the capital stock of
the Corporation owned by such stockholder only if the stockholder demonstrates a
specific reason for needing a certificate. If issued, the certificate shall be
in such form as shall, in conformity to law, be prescribed from time to time by
the Board of Directors. Such certificates shall be singed by the chairman of the
Board of Directors or the president or a vice-president and by the treasurer or
an assistant treasurer or the secretary or an assistant secretary. If such
certificates are countersigned by a transfer agent or registrar other than the
Corporation or an employee of the Corporation, the signatures of the
aforementioned officers upon such certificates may be facsimile. In case any
officer or officers who have signed, or whose facsimile signature or signatures
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates have been delivered by the
Corporation, such certificate or certificates may nevertheless be adopted by the
Corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature or
signatures have been used thereon had not ceased to be such officer or officers
of the Corporation.
6.02 Replacement of Certificates. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost or destroyed certificate or
certificates, or its legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost or destroyed.
6.03 Stockholder Open Accounts. The Corporation may maintain or cause to
be maintained for each stockholder a stockholder open account in which shall be
recorded such stockholder's ownership of stock and all changes therein, and
certificates need not be issued for shares so recorded in a stockholder open
account unless requested by the stockholder and such request is approved by an
officer.
6.04 Transfers. Transfers of stock for which certificates have been
issued will be made only upon surrender to the Corporation or the transfer agent
of the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, whereupon
the Corporation will issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction on its books. Transfers of
stock evidenced by open account authorized by Section 6.03 will be made upon
delivery to the Corporation or the transfer agent of the Corporation of
instructions for transfer or evidence of assignment or succession, in each case
executed in such manner and with such supporting evidence as the Corporation or
transfer agent may reasonably require.
6.05 Closing Transfer Books. The transfer books of the stock of the
Corporation may be closed for such period (not to exceed 20 days) from time to
time in anticipation of stockholders' meetings or the declaration of dividends
as the directors may from time to time determine.
6.06 Record Dates. The Board of Directors may fix in advance a date, not
exceeding sixty days preceding the date of any meeting of stockholders, or the
date for the payment of any dividend, or the date for the allotment of rights,
or the date when any change or conversion or exchange of capital stock shall go
into effect, or a date in connection with obtaining any consent or for any other
lawful purpose, as a record date for the determination of the stockholders
entitled to notice of, and to vote at, any such meeting, and any adjournment
thereof, or entitled to receive payment of any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, or to give such consent, and in such
case such stockholders and only such stockholders as shall be stockholders of
record on the date as fixed shall be entitled to such notice of, and to vote at,
such meeting, and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, or
to give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
6.07 Registered Ownership. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner and shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
ARTICLE 7
Notices
7.01 Manner of Giving. Whenever under the provisions of the statutes or
of the Articles of Incorporation or of these bylaws notice is required to be
given to any director, committee member, officer or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in the case of
stockholders, in writing, by mail, by depositing the same in a United State post
office or letter box, in a postpaid sealed wrapper, addressed to each
stockholder, at such address as it appears on the books of the Corporation, or,
in default to other address, to such stockholder at the General Post Office in
the City of Baltimore, Maryland, and, in the case of directors, committee
members and officers, by telephone, or by mail or by telegram to the last
business address known to the secretary of the Corporation, and such notice
shall be deemed to be given at the time when the same shall be thus mailed or
telegraphed or telephoned.
7.02 Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the Articles of Incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE 8
General Provisions
8.01 Disbursement of Funds. All checks, drafts, orders or instructions
for the payment of money and all notes of the Corporation shall be signed by
such officer or officers or such other person or persons as the Board of
Directors may from time to time designate.
8.02 Voting of Stock in Other Corporations. Unless otherwise ordered by
the board of directors, any officer or, at the direction of any such officer,
any Manager shall have full power and authority to attend and act and vote at
any meeting of stockholders of any corporation in which this Corporation may
hold stock, at of any such meeting may exercise any and all the rights and
powers incident to the ownership of such stock. Any officer of this corporation
or, at the direction of any such officer, any Manager may execute proxies to
vote shares of stock of other corporations standing in the name of this
Corporation."
8.03 Execution of Instruments. Except as otherwise provided in these
bylaws, all deeds, mortgages, bonds, contracts, stock powers and other
instruments of transfer, reports and other instruments may be executed on behalf
of the Corporation by the president or any vice-president or by any other
officer or agent authorized to act in such matters, whether by law, the Articles
of Incorporation, these bylaws, or any general or special authorization of the
Board of Directors. If the corporate seal is required, it shall be affixed by
the secretary or an assistant secretary.
8.04 Seal. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its incorporation and the words "Corporate Seal,
Maryland." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE 9
Regulations
9.01 Investment and Related Matters. The Corporation shall not purchase
or hold securities in violation of the investment restrictions enumerated in its
then current prospectus and the registration statement or statements filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933
and the Investment Company Act of 1940, as amended, nor shall the Corporation
invest in securities the purchase of which would cause the Corporation to
forfeit its rights to continue to publicly offer its shares under the laws,
rules or regulations of any state in which it may become authorized to so offer
its shares unless, by specific resolution of the board of directors, the
Corporation shall elect to discontinue the sale of its shares in such state.
9.02 Other Matters. When used in this section the following words shall
have the following meanings: "Sponsor" shall mean any one or more corporations,
firms or associations which have distributor's contracts in effect with this
Corporation. "Manager" shall mean any corporation, firm or association which may
at the time have an investment advisory contract with this Corporation.
(a) Limitation of Holdings by this Corporation of Certain
Securities and of Dealings with Officers or Directors. This Corporation shall
not purchase or retain securities of any issuer if those officers and directors
of the Fund or its Manager owning beneficially more than one-half of one per
cent (0.5%) of the shares or securities of such issuer together own beneficially
more than five per cent (5%) of such shares or securities; and each officer and
director of this Corporation shall keep the treasurer of this Corporation
informed of the names of all issurers (securities of which are held in the
portfolio of this Corporation) in which such officer or director owns as much as
one-half of one percent (1/2 of 1%) of the outstanding shares or securities and
(except in the case of a holding by the treasurer) this Corporation shall not be
charged with knowledge of any such security holding in the absence of notice
given if as aforesaid if this Corporation has requested such information not
less often than quarterly. The Corporation will not lend any of its assets to
the Sponsor or Manager or to any officer or director of the Sponsor or Manager
or of this Corporation and shall not permit any officer or director, or any
officer or director of the Sponsor or Manager, to deal for or on behalf of the
Corporation with himself as principal agent, or with any partnership,
association or corporation in which he has a financial interest. Nothing
contained herein shall prevent (1) officers and directors of the Corporation
from buying, holding or selling shares in the Corporation, or from being
partners, officers or directors of or otherwise financially interested in the
Sponsor or the Manager or any company controlling the Sponsor or the Manager;
(2) employment of legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian who is, or has a partner shareholder, officer or director who
is, an officer or director of the Corporation, if only customary fees are
charged for services to the Corporation; (3) sharing statistical and research
expenses and office hire and expenses with any other investment company in which
an officer or director of the Corporation is an officer or director or otherwise
financially interested.
(b) Limitation Concerning Participating by Interested Persons
in Investment Decisions. In any case where an officer or director of the
Corporation or of the Manager, or a member of an advisory committee or portfolio
committee of the Corporation, is also an officer or a director of another
corporation, and the purchase or sale of shares issued by that other corporation
is under consideration, the officer or director or committee member concerned
will abstain from participating in any decision made on behalf of the
Corporation to purchase or sell any securities issued by such other corporation.
(c) Limitation on Dealing in Securities of this Corporation by
Certain Officers, Directors, Sponsor or Manager. Neither the Sponsor nor
Manager, nor any officer or director of this Corporation or of the Sponsor or
Manager shall take long or short positions in securities issued by this
Corporation, provided, however, that:
(1) The Sponsor may purchase from this Corporation shares
issued by this Corporation if the orders to purchase from this Corporation are
entered with this Corporation by the Sponsor upon receipt by the Sponsor of
purchase orders for shares of this Corporation and such purchases are not in
excess of purchase orders received by the Sponsor.
(2) The Sponsor may in the capacity of agent for this
Corporation buy securities issued by this Corporation offered for sale by other
persons.
(3) Any officer or director of this Corporation or of the
Sponsor or Manager or any Company controlling the Sponsor or Manager may at
any time, or from time to time, purchase from this Corporation or from the
Sponsor shares issued by this Corporation at a price not lower than the net
asset value of the shares, no such purchase to be in contravention of any
applicable state or federal requirement.
(d) Securities and Cash of this Corporation to be Held by
Custodian Subject to Certain Terms and Conditions.
(1) All securities and cash owned by this Corporation
shall as hereinafter provided, be held by or deposited with a bank or trust
company having (according to its last published report) not less than two
million dollars ($2,000,000) aggregate capital, surplus and undivided profits
(which bank or trust company is hereby designated as "Custodian"), provided
such a Custodian can be found ready and willing to act.
(2) This Corporation shall enter into a written contract
with the Custodian regarding the powers, duties and compensation of the
Custodian with respect to the cash and securities of this Corporation held by
the Custodian. Said contract and all amendments thereto shall be approved
by the board of directors of this Corporation.
(3) This Corporation shall upon the resignation or
inability to serve of its Custodian or upon change of the Custodian:
(aa) in case of such resignation or inability to
serve, use its best efforts to obtain a successor Custodian;
(bb) require that the cash and securities owned
by this Corporation be delivered directly to the successor Custodian; and
(cc) in the event that no successor Custodian
can be found, submit to the stockholders, before permitting delivery of the cash
and securities owned by this Corporation otherwise than to a successor
Custodian, the question whether or not this Corporation shall be liquidated
or shall function without a Custodian.
(e) Amendment of Investment Advisory Contract. Any investment
advisory contract entered into by this Corporation shall not be subject to
amendment except by (1) affirmative vote at a shareholders meeting, of the
holders of a majority of the outstanding stock of this Corporation, and (2) a
majority of such directors who are not interested persons (as the term is
defined in the Investment Company Act of 1940) of the parties to such
agreements, cast in person at a board meeting called for the purpose of voting
on such amendment.
(f) Reports Relating to Certain Dividends. Dividends paid from
net profits from the sale of securities shall be clearly revealed by this
Corporation to its shareholders and the basis of calculation shall be set forth.
(g) Maximum Sales Commission. The Corporation shall, in any
distribution contract with respect to its shares of common stock entered into by
it, provide that the maximum sales commission to be charged upon any sales of
such shares shall be not more than nine per cent (9%) of the offering price to
the public of such shares. As used herein, "offering price to the public" shall
mean net asset value per share plus the commission charged adjusted to the
nearest cent.
ARTICLE 10
Purchases and Redemption of Shares:
Suspension of Sales
10.01 Purchase by Agreement. The Corporation may purchase its shares by
agreement with the owner at a price not exceeding the net asset value next
computed following the time when the purchase or contract to purchase is made.
10.02 Redemption. The Corporation shall redeem such shares as are
offered by any stockholder for redemption upon the presentation of a written
request therefor, duly executed by the record owner, to the office or agency
designated by the Corporation. If the shareholder has received stock
certificates the request must be accompanied by the certificates, duly endorsed
for transfer, in acceptable form; and the Corporation will pay therefor the net
asset value of the shares next effective following the time at which the
request, in acceptable form, is so presented. Payment for said shares shall
ordinarily be made by the Corporation to the stockholder within seven days after
the date on which the shares are presented.
10.03 Suspension of Redemption. The obligations set out in Section 10.02
may be suspended (i) for any period during which the New York Stock Exchange,
Inc. is closed other than customary weekend and holiday closings or during which
trading on the New York Stock Exchange, Inc. is restricted, as determined by the
rules and regulations of the Securities and Exchange Commission or any successor
thereto; (ii) for any period during which an emergency, as determined by the
rules and regulations of the Securities and Exchange Commission or any successor
thereto, exists as a result of which disposal by the Corporation of securities
owned by it is not reasonably practicable or as a result of which it is not
reasonably practicable for the Corporation to fairly determine the value of its
net assets; or (iii) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the protection of
security holders of the Corporation. Payment of the redemption or purchase price
may be made in cash or, at the option of the Corporation, wholly or partly in
such portfolio securities of the Corporation as the Corporation may select.
10.04 Suspension of Sales. The Corporation reserves the right to suspend
sales of its shares if, in the judgment of the majority of the Board of
Directors or a majority of the executive committee of its board, if such
committee exists, it is in the best interest of the Corporation to do so, such
suspension to continue for such period as may be determined by such majority.
ARTICLE 11
Fractional Shares
11.01 The Board of Directors may authorize the issue from time to time
of shares of the capital stock of the Corporation in fractional denominations,
provided that the transactions in which and the terms upon which shares in
fractional denominations may be issued may from time to time be determined and
limited by or under authority of the Board of Directors.
ARTICLE 12
Indemnification
12.01 (a) Every person who is or was a director, officer or employee of
this Corporation or of any other corporation which he served at the request of
this Corporation and in which this Corporation owns or owned shares of capital
stock or of which it is or was a creditor shall have a right to be indemnified
by this Corporation against all liability and reasonable expenses incurred by
him in connection with or resulting from any claim, action, suit or proceeding
in which he may become involved as a party or otherwise by reason of his being
or having been a director, officer of employee of this Corporation or such other
corporation, provided (1) said claim, action, suit or proceeding shall be
prosecuted to a final determination and he shall be vindicated on the merits, or
(2) in the absence of such a final determination vindicating him on the merits,
the Board of Directors shall determine that he acted in good faith and in a
manner he reasonably believed to be in the best interests of the Corporation in
the case of conduct in the director's, officers or employees official capacity
with the Corporation and in all other cases, that the conduct was at least not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful; said determination to be made by the Board of Directors acting
through a quorum of disinterested directors, or in its absence on the opinion of
counsel.
(b) For purposes of the preceding subsection: (1) "liability
and reasonable expenses" shall include but not be limited to reasonable counsel
fees and disbursements, amounts of any judgment, fine or penalty, and reasonable
amounts paid in settlement; (2) "claim, action, suit or proceeding" shall
include every such claim, action, suit or proceeding, whether civil or criminal,
derivative or otherwise, administrative, judicial or legislative, any appeal
relating thereto, and shall include any reasonable apprehension or threat of
such a claim, action, suit or proceeding; (3) the termination or any proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent creates a rebuttable presumption that the director did not meet
the standard of conduct set forth in subsection (a)(2), supra.
(c) Notwithstanding the foregoing, the following limitations
shall apply with respect to any action by or in the right of the Corporation:
(1) no indemnification shall be made in respect of claim, issue or matter as to
which the person seeking indemnification shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Maryland or the court in which such action or suit was brought shall determine
upon application that despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper; and (2) indemnification shall extend only to reasonable
expenses, including reasonable counsel's fees and disbursements.
(d) The right of indemnification shall extend to any person
otherwise entitled to it under this bylaw whether or not that person continues
to be a director, officer or employee of this Corporation or such other
corporation at the time such liability or expense shall be incurred. The right
of indemnification shall extend to the legal representative and heirs of any
person otherwise entitled to indemnification. If a person meets the requirements
of this bylaw with respect to some matters in a claim, action suit, or
proceeding, but not with respect to others, he shall be entitled to
indemnification as to the former. Advances against liability and expenses may be
made by the Corporation on terms fixed by the board of directors subject to an
obligation to repay if indemnification proves unwarranted.
(e) This bylaw shall not exclude any other rights of
indemnification or other rights to which any director, officer or employee may
be entitled to by contract, vote of the stockholders or as a matter of law.
If any clause, provision or application of this Section
shall be determined to be invalid, the other clauses, provisions or
applications of this Section shall not be affected but shall remain in full
force and effect. The provisions of this bylaw shall be applicable to claims,
actions, suits or proceedings made or commenced after the adoption hereof,
whether arising from acts or omissions to act occurring before or after the
adoption hereof.
(f) Nothing contained in this bylaw shall be construed to
protect any director or officer of the Corporation against any liability to the
Corporation or its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
ARTICLE 13
Amendments
13.01 These bylaws may be amended or added to, altered or repealed at
any annual or special meeting of the stockholders by the affirmative vote of the
holders of a majority of the shares of capital stock issued and outstanding and
entitled to vote, provided notice of the general purport of the proposed
amendment, addition, alteration or repeal is given in the notice of said
meeting, or, at any meeting of the Board of Directors by vote of a majority of
the directors then in office, except that the Board of Directors cannot amend
Article 5 to permit removal by said Board without cause of any director elected
by the stockholders.
